<PAGE>
===============================================================================
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 Per-
[X] Definitive Proxy Statement mitted 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)
- -------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------------
(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):
-----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------------
<PAGE>
(5) Total fee paid:
-----------------------------------------------------------------------------
[ ] 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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===============================================================================
<PAGE>
[FOREMOST LOGO]
5600 BEECH TREE LANE
CALEDONIA TOWNSHIP, MICHIGAN 49316
March 24, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Foremost Corporation of America on Thursday, April 29,
1999, at 10:30 a.m., local time. The meeting will be held at the
Company's Corporate Headquarters located at 5600 Beech Tree Lane,
Caledonia Township, Michigan 49316.
The proxy statement and enclosed form of proxy are being
furnished to shareholders on or about March 24, 1999. 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.
Richard L. Antonini
Chairman, President and Chief
Executive Officer
- ------------------------------------------------------------------------------
IMPORTANT
SHAREHOLDERS 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.
- -------------------------------------------------------------------------------
<PAGE>
[FOREMOST LOGO]
5600 BEECH TREE LANE
CALEDONIA TOWNSHIP, MICHIGAN 49316
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1999
Notice is hereby given that the Annual Meeting of Shareholders of
Foremost Corporation of America (the "Company") will be held at the
Company's Corporate Headquarters located at 5600 Beech Tree Lane,
Caledonia Township, Michigan 49316, on Thursday, April 29, 1999, at
10:30 a.m., local time, for the following purposes:
(1) To elect three directors for three-year terms expiring in 2002;
(2) To ratify the appointment of BDO Seidman, LLP, as
independent auditors for the Company for the year ending
December 31, 1999; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record as shown by the transfer books of the
Company at the close of business on March 12, 1999, are entitled to
notice of and to vote at the Annual Meeting of Shareholders or any
adjournment of the Annual Meeting.
A copy of the Annual Report to Shareholders for the year ended
December 31, 1998 is enclosed with this Notice. The following Proxy
Statement and enclosed form of proxy are being furnished to
shareholders on or about March 24, 1999.
By Order of the Board of Directors
FOREMOST CORPORATION OF AMERICA
Paul D. Yared
SENIOR VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
Caledonia Township, Michigan
March 24, 1999
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
- -------------------------------------------------------------------------------
<PAGE>
FOREMOST CORPORATION OF AMERICA
5600 Beech Tree Lane
Caledonia Township, Michigan 49316
April 29, 1999
_______________
ANNUAL MEETING OF SHAREHOLDERS
_______________
PROXY STATEMENT
This Proxy Statement and the enclosed form of proxy are being
furnished to holders of Common Stock, $1.00 par value, of Foremost
Corporation of America (the "Company") on and after March 24, 1999, in
connection with the solicitation of proxies by the Company's Board of
Directors for use at the Annual Meeting of Shareholders to be held on
Thursday, April 29, 1999, at 10:30 a.m., local time, and any
adjournment thereof. The Annual Meeting will be held at the Company's
Corporate Headquarters located at 5600 Beech Tree Lane, Caledonia
Township, Michigan 49316.
The purposes of the Annual Meeting are to consider and vote upon:
(i) the election of three directors for three-year terms expiring in 2002;
and (ii) ratification of the appointment of BDO Seidman, LLP, as independent
auditors for the Company for the year ending December 31, 1999. 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 ratification of BDO Seidman, LLP as the Company's
independent auditors for the year ending December 31, 1999, 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 Shareholders 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.
The Company's management does not know of any matter to be presented for
consideration at the Annual Meeting other than the matters stated in the
Notice of Annual Meeting of Shareholders. If any other matters are
presented, the persons named as proxies will have discretionary authority
to vote in accordance with their judgment.
<PAGE>
RECORD DATE AND VOTING RIGHTS
Holders of record of Common Stock, $1.00 par value, at the close
of business on March 12, 1999, are entitled to notice of and to vote
at the Annual Meeting of Shareholders and any adjournment of the
meeting. As of March 12, 1999, 26,830,110 shares of Common Stock were
outstanding, with each share entitled to one vote. Shares cannot be
voted unless the shareholder is present at the meeting or represented
by proxy.
ELECTION OF DIRECTORS
(Proposal Number 1 on the Enclosed Proxy Card)
The Board of Directors has nominated the following individuals
for election as directors to serve for terms expiring at the Annual
Meeting of Shareholders to be held in 2002:
Richard L. Antonini
Larry J. Orange
Joseph A. Parini
All of the nominees are presently directors of the Company whose
terms will expire at the Annual Meeting of Shareholders. The persons
named as proxies intend to vote for the election of each of the named
nominees. The proposed nominees are willing to be elected and to
serve. In the event that a nominee is 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.
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.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
-2-
<PAGE>
BOARD OF DIRECTORS
The Board of Directors currently consists of 10 directors, three
of whom are standing for reelection. The Company's Articles of
Incorporation provide 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 shareholders in each successive year.
Biographical information is presented below for each person who
either is nominated for election as a director at the Annual Meeting
of Shareholders 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 AS DIRECTORS TO TERMS EXPIRING IN 2002
RICHARD L. ANTONINI (age 56) 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, Chairman of the
Board of the Mackinac Center for Public Policy and a member of the
Board of Trustees of Cornerstone College. Mr. Antonini resides near
Grand Rapids, Michigan.
LARRY J. ORANGE (age 56) 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 67) 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 has served 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.
-3-
<PAGE>
INCUMBENT DIRECTORS - TERMS EXPIRING IN 2000
JOHN C. CANEPA (age 68) 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 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 60) 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 53) 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.
INCUMBENT DIRECTORS - TERMS EXPIRING IN 2001
MICHAEL DE HAVENON (age 58) has been a director of the Company
since May 8, 1997. Mr. de Havenon has served since January 1997 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 72) 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
-4-
<PAGE>
Holding Company of America and the American Guarantee & Liability
Insurance Company. Mr. Raives resides in New York City.
MICHAEL B. TARGOFF (age 54) has been a director of the Company
since August 7, 1997. Mr. Targoff has served as Chairman and Chief
Executive Officer of CineComm, a company involved in the satellite
transmission of digital video, since May 1998. Mr. Targoff has served
as Chief Executive Officer of Michael Targoff and Co., a company
seeking to acquire operating control of telecommunication companies,
since May 1998. From April 1996 to January 1998, 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 1993 to April 1996, Mr. Targoff
served as Senior Vice President of Loral Corporation, a defense
electronics and telecommunications contractor. Mr. Targoff is also
Director of Globalstar Telecommunications, Ltd., a worldwide
satellite-based telecommunications company, and Leap Wireless
International, an operator of wireless telephone systems. Mr. Targoff
resides in New York City.
F. ROBERT WOUDSTRA (age 53) has been a director of the Company
since 1988. Mr. Woudstra was elected as Chief Operating Officer and
Chief Financial Officer of the Company on February 25, 1999. Prior to
that date, Mr. Woudstra 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998 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 (held during the
period that each has been a director) 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 held in 1998 were:
-5-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS
COMMITTEE FUNCTION MEMBERS IN 1998
- --------- -------- ------- ---------
<S> <C> <C> <C>
AUDIT. . . . . The Audit Committee reviews the work of the Messrs. 2
independent and internal auditors and the accounting Parini,
principles and methods used in presenting financial Targoff,
results. In addition, the Audit Committee recommends Raives
the independent auditors to be nominated by the Board
for shareholder approval at the Annual Meeting of
Shareholders.
COMPENSATION . The Committee on Executive Management and Messrs. 1
Compensation (the "Compensation Committee") Canepa,
makes recommendations to the Board of Directors de Havenon,
regarding management incentives and employee Hall,
retirement plans and recommends salary levels for Parini
the executive officers. The Compensation Committee
also reviews employee benefit programs for the Company.
EXECUTIVE. . . The Executive Committee is authorized by the Messrs. 0
Company's Bylaws to exercise all powers and authority Antonini,
of the Board of Directors in the management and affairs Canepa,
of the Company except to the extent that delegation is Kayne,
prohibited by law. The Executive Committee may Parini,
consider or act upon matters requiring Board action Woudstra
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.
INVESTMENT . . The Investment Committee recommends the Investment Messrs. 4
Policy of the Company and reviews management's Antonini,
implementation of the policy. Canepa,
Hall,
Kayne,
Woudstra
NOMINATING . . The Nominating Committee considers and proposes Messrs. 0
to the Board of Directors suggestions as to qualified Canepa,
candidates for nomination to the Board and also Hall,
proposes to the Board the slate of directors for Kayne,
submission to the shareholders at each Annual Meeting. Targoff
</TABLE>
The Nominating Committee will consider nominees for election to
the Board of Directors submitted by shareholders. The Company's
-6-
<PAGE>
Articles of Incorporation provides that any shareholder 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 is delivered to or mailed and received at the principal
executive offices of the Company not less than 120 days before the
date of notice in the case of an annual meeting of shareholders, and
not more than seven days following the date of notice in the case of a
special meeting. Each such notice to the Secretary shall set forth:
(i) the name, age, business address and residence address of each
nominee proposed in such notice; (ii) the principal occupation or
employment of each such nominee; (iii) the number of shares of capital
stock of the Company which are beneficially owned by each such
nominee; (iv) a statement that the nominee is willing to be nominated;
and (v) 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 proxies for the election of such
nominees.
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.
In 1995, the Company adopted and the shareholders approved a
restricted stock plan for the Company's non-employee directors. Under
the plan, the non-employee directors may elect to receive shares of
the Company's common stock in lieu of their annual retainer fees. The
shares are issued at market value and are registered in the name of
the non-employee director, who has all of the rights of a shareholder,
subject to transfer restrictions until the shares vest. Vesting
occurs upon the completion of the non-employee director's term.
-7-
<PAGE>
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 12, 1999 (except as noted in the footnotes):
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP
-----------------
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS<Fa>
- ------------------- ----------------- --------
<S> <C> <C>
Richard A. Kayne 3,756,035<Fb> 14.00%
Kayne Anderson Investment
Management, Inc.
1800 Avenue of the Stars
Suite 200
Los Angeles, California 90067
Albert O. Nicholas 3,087,331<Fc> 11.52%
Nicholas Company, Inc.
Nicholas Fund, Inc.
700 North Water Street
Milwaukee, Wisconsin 53202
Cortland Associates, Inc. 2,458,671<Fd> 9.16%
8000 Maryland Avenue, Suite 730
St. Louis, Missouri 63105
Arthur E. Hall 2,089,350<Fe> 7.79%
1726 Cedar Wood Drive
Minden, Nevada 89428
Bank One Corporation 1,400,578<Ff> 5.22%
One First National Plaza
Chicago, Illinois 60670
________________
<FN>
<Fa> The percent of class is based upon 26,830,110 shares of the
Company's Common Stock outstanding on March 12, 1999.
<Fb> According to information provided to the Company by Richard A.
Kayne, the shares are held as follows: 997,494 shares are held
-8-
<PAGE>
by Richard A. Kayne; 4,500 shares are held by KA Associates,
Inc., a Nevada corporation ("KA"); 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");
2,692,583 shares are held by investment partnerships and other
accounts managed by KAIM N-T, LP, as investment adviser; and 858
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 and
the majority stockholder, President, Chief Executive Officer and
a director of KA, a registered broker/dealer. 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 2,738,858 shares; with KAIM, LLC, over 858 shares;
and with KA over 4,500 shares. Mr. Kayne claims beneficial
ownership of the shares held by him directly, 10,743 of the
shares held by KAIM, Inc., 2,912 of the shares held by KA, and
88,335 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. 7 to Schedule 13G dated January 25,
1999, of Nicholas Company, Inc., an investment adviser registered
under the Investment Advisers Act of 1940, Nicholas Company, Inc.
claims sole dispositive power over 3,087,331 shares. Nicholas
Fund, Inc., an open-end management investment company registered
under the Investment Company Act of 1940, claims sole voting
power over 2,741,131 of such shares, and Albert O. Nicholas,
Chief Executive Officer, Chairman, director and majority
shareholder of Nicholas Company, Inc., claims sole voting and
dispositive power over 46,500 of such shares. Mr. Nicholas may be
deemed to be the beneficial owner of the other reported shares.
<Fd> According to Schedule 13G dated February 23, 1999, Cortland
Associates, Inc. ("Cortland"), an investment advisory firm
registered under the Investment Advisers Act of 1940, claims sole
dispositive power over 2,251,833 shares held by investment
advisory clients and sole voting power over 31,525 of such
shares. Cortland claims shared voting power over 415,125 of such
shares with Cortland's clients who beneficially own the 2,251,833
shares. Various principals of Cortland own directly or
beneficially 206,838 additional shares.
-9-
<PAGE>
<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 shares. 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. 11 to Schedule 13G, dated February 1,
1999, Bank One Corporation beneficially owns 1,400,578 shares,
claiming sole voting power over 1,400,578 shares, sole
dispositive power over 1,382,086 shares and shared dispositive
power over 2,667 shares.
</FN>
</TABLE>
-10-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common
Stock of the Company beneficially owned as of March 12, 1999, 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:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP <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>
- ---------------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Richard L. Antonini 950,110 5,385 955,495 3.40%
John C. Canepa 3,642 -- 3,642 *
Michael de Havenon 10,000 -- 10,000 *
Arthur E. Hall 2,089,350 -- 2,089,350 7.44%
Jack J. Hannigan 216,478 -- 216,478 *
David A. Heatherly 107,820 -- 107,820 *
Richard A. Kayne 997,494 2,758,541 3,756,035 13.37%
Larry J. Orange 156,187 6,049 162,236 *
Joseph A. Parini 6,378 -- 6,378 *
Robert M. Raives -- -- -- --
Michael B. Targoff 243,384 -- 243,384 *
F. Robert Woudstra 87,686 -- 87,686 *
All directors and
executive officers
as a group 4,950,683 2,770,155 7,720,838 27.49%
______________________
<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 person and shares which, under applicable regulations, may
be considered to be otherwise beneficially owned by the person.
<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 12, 1999.
The number of shares subject to stock options for each person is
shown below:
-11-
<PAGE>
Mr. Antonini . . . . . . . . . . . . 691,800
Mr. Hannigan. . . . . . . . . . . . . 188,250
Mr. Heatherly . . . . . . . . . . . . 90,650
Mr. Orange . . . . . . . . . . . . . 149,250
Mr. Woudstra . . . . . . . . . . . . 69,250
All directors and executive
officers as a group. . . . . . . . . 1,254,400
<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 property 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 26,830,110 shares of the
Company's Common Stock outstanding on March 12, 1999, plus the
1,254,400 shares represented by options which may be exercised
within 60 days of that date.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
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, 1998, 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.
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
---------- ------- ALL
SECURITIES OTHER
NAME AND UNDERLYING LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY<Fa> BONUS<Fa> OPTIONS PAYOUTS<Fb> SATION<Fc>
- ------------------ ---- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Antonini 1998 $ 604,866 $ 267,975 750,000 $ 318,161 $ 60,838
President and Chief 1997 563,196 302,324 -- 408,318 71,283
Executive Officer 1996 563,196 74,342 -- 168,960 71,083
F. Robert Woudstra 1998 $ 229,512 $ 85,837 25,000 $ 97,768 $ 27,056
Chief Operating Officer and 1997 218,544 99,722 -- 126,756 32,594
Chief Financial Officer 1996 218,544 24,521 -- 59,007 32,394
John J. Hannigan 1998 $ 227,580 $ 85,115 15,000 $ 98,713 $ 26,882
Executive Vice President 1997 222,732 101,633 -- 129,185 31,891
1996 222,732 24,991 -- 60,138 31,691
David A. Heatherly 1998 $ 256,668 $ 95,994 25,000 $ 106,545 $ 29,500
Executive Vice President 1997 249,996 104,198 -- 133,314 34,341
1996 219,780 24,659 -- 59,340 30,817
Larry J. Orange 1998 $ 200,724 $ 75,071 15,000 $ 86,397 $ 24,465
Executive Vice President 1997 194,172 88,601 -- 112,619 30,361
1996 194,172 21,786 -- 5 2,426 30,161
_________________________
<FN>
<Fa> Includes any amounts the named executive officer may have
deferred under the Company's 401(k) Savings Plan and non-
qualified deferred compensation plans.
<Fb> 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 cash awarded. The Employment Agreements covering the named
executive officers provide for guaranteed payouts under the LTIP
at certain 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.
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<PAGE>
<Fc> The compensation listed in this column for 1998 consisted of:
(i) Company contributions to the accounts of the named executive
officers under the Company's 401(k) Savings Plan as follows:
$6,400 each for Messrs. Antonini, Hannigan, Woudstra, Heatherly
and Orange; and (ii) Company contributions to the accounts of the
named executive officers under the Company's defined contribution
plans as follows: $54,438 for Mr. Antonini, $20,482 for Mr.
Hannigan, $20,656 for Mr. Woudstra, $23,100 for Mr. Heatherly and
$18,065 for Mr. Orange.
</FN>
</TABLE>
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.
The following table sets forth information regarding stock
options granted to the Chief Executive Officer and the named executive
officers during the fiscal year ended December 31, 1998:
<TABLE>
OPTIONS GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION GRANT DATE
NAME GRANTED YEAR SHARE DATE PRESENT VALUE<Fa>
- -------------------- ---------- ---------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Richard L. Antonini 750,000<Fb> 88.86% $ 24.00 February 23, 2008 $ 830,546
F. Robert Woudstra 25,000<Fc> 2.96% 24.25 April 30, 2008 226,500
John J. Hannigan 15,000<Fc> 1.78% 24.25 April 30, 2008 135,900
David A. Heatherly 25,000<Fc> 2.96% 24.25 April 30, 2008 226,500
Larry J. Orange 15,000<Fc> 1.78% 24.25 April 30, 2008 135,900
_____________________
<FN>
<Fa>A variation of the Black-Scholes method was used for Mr.
Antonini's grant to account for the $48.00 stock price condition
described in footnote (b) below. The following assumptions were
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<PAGE>
used for the value of Mr. Antonini's grant: time of exercise of
five years, volatility of 17.96% and a risk-free rate of return
of 5.59%. For the other grants, the Black-Scholes method was
used and the following assumptions were used for the value of the
grants: time of exercise of eight years, volatility of 26.77%, a
risk-free rate of return of 5.82% and a 1.48% dividend yield.
<Fb> On February 23, 1998, the Company granted Mr. Antonini an option to
purchase 750,000 shares of Common Stock pursuant to the Stock
Option Plan of 1998. The option price is $24.00 per share.
Except for certain limited circumstances described below, Mr.
Antonini cannot exercise the option unless the closing price of
the Company's Common Stock equals or exceeds $48.00 per share for
at least 10 trading days on or before February 23, 2003. Mr.
Antonini also may exercise the option, regardless of whether the
$48.00 per share stock price condition is met, if the Company
terminates Mr. Antonini's employment without "cause," if Mr.
Antonini terminates his employment "for good reason" or in the
event of a "change in control" of the Company.
<Fc> On April 30, 1998, the Company granted options to purchase shares
of the Company's Common Stock over a 10-year period. Executive
officers of the Company are entitled to exercise their options at
a price determined by the Compensation Committee, which was the
fair market value of Common Stock on April 30, 1998. Options
terminate, subject to certain limited exercise provisions, in the
event of death or termination of employment.
</FN>
</TABLE>
The following table sets forth information regarding stock
options exercised by the named executive officers during the fiscal
year ended December 31, 1998:
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<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
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
- ------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Antonini 63,300 $864,911 691,800 750,000 $ 7,462,083 $ 0
F. Robert Woudstra 13,500 187,880 76,500 25,000 659,120 0
John J. Hannigan 25,800 359,059 184,500 15,000 2,227,887 0
David A. Heatherly 31,325 451,501 84,400 25,000 837,090 0
Larry J. Orange -- -- 165,300 15,000 1,919,714 0
_____________________
<FN>
<Fa> The Company's Non-Qualified Stock Option Plans authorize grants for a
total of 3,900,000 shares, of which 399,915 shares remain available
for grants under the plans. As of March 12, 1999, the aggregate
number of options granted and outstanding was 2,449,300. The
exercisable column includes all options vested as of December 31, 1998.
<Fb> Value of Unexercised In-the-Money Options is based on $20.50, the fair
market value of the Company's Common Stock on December 31, 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 options, in which case such
options shall be exercisable in accordance with the terms of such agreement.
</FN>
</TABLE>
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<PAGE>
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:
<TABLE>
LONG-TERM INCENTIVE PLAN-AWARDS
IN LAST FISCAL YEAR
<CAPTION>
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
- ------------------- --------- ------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard L. Antonini 10,864 3 years $ 153,300 $ 306,600 $ 459,900
F. Robert Woudstra 3,338 3 years 47,000 94,000 141,000
John J. Hannigan 3,371 3 years 46,000 92,000 138,000
David A. Heatherly 3,638 3 years 52,000 104,000 156,000
Larry J. Orange 2,950 3 years 40,800 81,600 122,400
__________________
<FN>
<Fa> The LTIP provides for awards based on the Company's return on
shareholders' 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 1999 for the
three-year plan 1996 through 1998. The value of the LTIP awards,
including the value of the shares based on the market value of
the Company's Common Stock at year-end 1998 as well as amounts
paid in cash, are included in the Summary Compensation Table.
<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 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
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<PAGE>
three-year performance period. The above estimate is based on
1998 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 a minimum
payout.
</FN>
</TABLE>
MONEY PURCHASE PENSION AND 401(K) 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 1998 was equal to 9%, 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 1998, the Savings Plan provided for a Company-paid
matching contribution of $1.00 for each $1.00 of employee elective
contributions of the first 3% of the employee's eligible compensation
and $0.50 for each $1.00 of employee elective contribution, for the
next 2% of the employees' eligible compensation. Elective
contributions also are limited by the Internal Revenue Code of 1986,
as amended (the "Code"), to an annual limit (indexed), which was
$9,600 for 1998. The funds in the Pension Plan and Savings Plan are
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<PAGE>
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 (c) 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:
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<PAGE>
<TABLE>
RETIREMENT SUPPLEMENT PLAN TABLE
<CAPTION>
YEARS OF SERVICE
-----------------------------
FINAL AVERAGE EARNINGS 10 YEARS 15 YEARS 20 OR MORE
- ---------------------- -------- -------- ----------
<S> <C> <C> <C> <C>
$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
</TABLE>
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 - 29
years; Mr. Woudstra - 26 years; Mr. Hannigan - 15 years; Mr. Heatherly
- - 15 years; and Mr. Orange - 29 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
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<PAGE>
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 shareholders 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 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
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<PAGE>
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 CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL 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 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 certain levels 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
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<PAGE>
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 shareholders. 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
four directors, none of whom is a current or former employee of the
Company or its subsidiaries.
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);
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<PAGE>
(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 shareholder
interests.
SALARY AND BONUS
To attract and retain well-qualified executives, it is the
Compensation 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 Compensation
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 shareholder 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
Compensation 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 Compensation Committee are
the executive's performance, the executive's current compensation and
the Company's performance. Although the Compensation 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 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
Compensation 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 Compensation 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.
-24-
<PAGE>
The LTIP provides awards based on achievement of performance
goals measuring return on shareholders' equity over a three-year
period. For the three-year period 1996-1998, the Company's ROE
exceeded the target goal and the awards were paid accordingly. In
December 1994, to more closely link executive compensation with
shareholder interests, the Committee amended the LTIP, and awards are
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 1998 were
weighted against actual Company performance with 15% based on written
premium, 35% based on combined loss and expense ratio and 50% based on
earnings per share. For 1998, the Company's result for written premium
was below the minimum goal, while the Company achieved the maximum
goal for the combined loss and expense ratio and exceeded the target
goal for the 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
shareholder interests and reward executives and other key employees
for building shareholder value. The Compensation Committee believes
stock ownership by management has been proven to be beneficial, and
stock awards have been 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.
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.
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<PAGE>
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
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 February 1998 the Compensation Committee increased Mr.
Antonini's base salary by $50,000 to $613,200. Since 1994, Mr.
Antonini's salary was frozen at $563,200. 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 for
the period 1995 through 1997 under the Employment Agreement, unless a
change in control or termination occurs which would reinstate the
guarantee.
Mr. Antonini's cash bonus of $267,975 for 1998 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
$318,161 under the LTIP in 1998. 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 the performance of the Company and future
earnings of the executives, and provides linkage with the incentive
programs for all employees.
As approved by the Company's shareholders on April 30, 1998, the
Company granted Mr. Antonini an option to purchase 750,000 shares of
Common Stock on February 23, 1998 pursuant to the Company's Stock
Option Plan of 1998. The option price is $24.00 per share. Except
for limited circumstances described below, Mr. Antonini cannot
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exercise the option unless the closing price of the Company's Common
Stock equals or exceeds $48.00 per share for at least 10 trading days
on or before February 23, 2003. The option also is exercisable,
regardless if the $48.00 per share stock price condition is met, if
the Company terminates Mr. Antonini's employment without "cause," if
Mr. Antonini terminates his employment for "good reason" or in the
event of a "change in control" of the Company.
All actions and recommendations of the Compensation Committee
attributable to 1998 compensation were unanimous and all
recommendations were approved and adopted by the Board of Directors
without modification.
Respectfully submitted,
Joseph A. Parini
John C. Canepa
Arthur E. Hall
Michael de Havenon
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 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 1998, Kayne Anderson
earned $961,727 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 1998, the Company paid K.A.
Associates, Inc., approximately $114,908 as commissions for executing
certain securities transactions for the Company.
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<PAGE>
STOCK PERFORMANCE GRAPH<Fa><Fb>
The following graph below summarizes the cumulative total
shareholder return on the Company's Common Stock compared to the
Standard & Poor's 500 Index and the Standard & Poor's Insurance (PPTY-
CAS) as of December 31 of the applicable year. The graph assumes an
investment of $100 on December 31, 1993. 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 Standard &
Poor's and consists of the companies listed in footnote (a) 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.
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN
[CHART]
_____________________
<Fa> The new index of peer companies consists of: Allstate Corp.; Chubb
Corp.; Cincinnati Financial Corp.; Loews Corp.; MGIC Investment
Corp.; Progressive Corp.-Ohio; Safeco Corp.; and St. Paul
Companies.
<Fb> The old index of peer companies consisted 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 Companies; Transatlantic Holdings, Inc.; and USF&G Corp.
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<PAGE>
The dollar values for total shareholder return plotted in the
graph above are shown in the table below:
<TABLE>
<CAPTION>
S&P
FOREMOST S&P INSURANCE
FISCAL YEAR-END CORPORATION 500 INDEX (PPTY-CAS)
- --------------- ----------- --------- ---------
<S> <C> <C> <C>
December 31, 1993. . . . . $100.00 $100.00 $100.00
December 31, 1994. . . . . 107.09 101.32 104.90
December 31, 1995. . . . . 156.00 139.40 142.02
December 31, 1996. . . . . 187.99 171.40 172.58
December 31, 1997. . . . . 222.64 228.59 251.04
December 31, 1998. . . . . 204.53 293.91 233.59
</TABLE>
RATIFICATION OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS FOR 1999
(PROPOSAL NUMBER 2 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, 1999.
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 Shareholders, 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
shareholders. 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 1999 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, 2000.
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%
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<PAGE>
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 on its review of the
copies of such reports furnished to the Company or written
representations from certain reporting persons, the Company believes
that its officers and directors complied with all applicable filing
requirements during the Company's last fiscal year.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2000 Annual
Meeting of Shareholders and that a shareholder would like to have
included in the proxy statement and form of proxy relating to that
meeting must be received by the Company for consideration not later
than November 25, 1999, to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. Such proposals
of shareholders 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. All other proposals of shareholders that are
intended to be presented at the Annual Meeting of Shareholders in the
Year 2000 must be received by the Company not later than December 31,
1999 or they will be considered untimely.
AVAILABILITY OF FORM 10-K
The Company will furnish without charge to each shareholder
receiving a proxy statement, upon the written request of such person,
a copy of the Company's Annual Report for 1998 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
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<PAGE>
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.
By Order of the Board of Directors
Paul D. Yared
Senior Vice President, Secretary
and General Counsel
March 24, 1999
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