-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SrXyJdTfIwiqS+SNyGRynhITh8DCq8tkQ6TOsJd0F7brYP+0l+KMtNXTSrLAC1+l G8xx6BzhiVG0opoggUT9qw== 0000905729-98-000218.txt : 19981116 0000905729-98-000218.hdr.sgml : 19981116 ACCESSION NUMBER: 0000905729-98-000218 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREMOST CORP OF AMERICA CENTRAL INDEX KEY: 0000018508 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 381863522 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11687 FILM NUMBER: 98749261 BUSINESS ADDRESS: STREET 1: 5600 BEECH TREE LN CITY: CALEDONIA STATE: MI ZIP: 49316 BUSINESS PHONE: 6169423000 MAIL ADDRESS: STREET 1: P O BOX 2450 CITY: GRAND RAPIDS STATE: MI ZIP: 49501 FORMER COMPANY: FORMER CONFORMED NAME: CENTENNIAL CORP DATE OF NAME CHANGE: 19790320 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 =========================================================================== FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number SEPTEMBER 30, 1998 0-6478 FOREMOST CORPORATION OF AMERICA (Exact name of Registrant as specified in its charter) MICHIGAN 38-1863522 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5600 BEECH TREE LANE CALEDONIA, MICHIGAN 49316 (Address of Principal Executive Offices) (Zip Code) Mailing address: P.O. BOX 2450, GRAND RAPIDS, MICHIGAN 49501 Registrant's telephone number, including area code (616) 942-3000 Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report.
OUTSTANDING AT CLASS SEPTEMBER 30, 1998 ----- ------------------ Common Stock, $1.00 par value, 27,232,940 shares
=========================================================================== FOREMOST CORPORATION OF AMERICA INDEX PAGE NO. -------- PART I. FINANCIAL INFORMATION: Item 1. - Financial Statements: Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 1-2 Consolidated Statements of Income - Nine Months Ended September 30, 1998 and 1997 3-4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997 5 Condensed Notes to Consolidated Financial Statements 6-8 Item 2. - Management's Discussion and Analysis 9-13 PART II. OTHER INFORMATION: Item 5. - Other Information 14 Item 6. - Exhibits and Reports on Form 8-K 15 Signatures 16 i PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FOREMOST CORPORATION OF AMERICA CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ (In thousands, except share data) ASSETS: Investments: Fixed maturities held to maturity $ 982 $ 1,974 Securities available for sale: Fixed maturities 363,965 376,868 Equity securities 79,506 83,677 Mortgage loans and land contracts on real estate 12,137 12,350 Investment real estate 12,340 11,920 Short-term investments 32,806 26,656 -------- -------- Total investments 501,736 513,445 Cash 1,610 2,409 Accrued investment income 6,035 6,293 Premiums receivable 79,315 71,541 Due from reinsurance companies 23,377 20,645 Other receivables 1,907 2,568 Prepaid policy acquisition costs 77,386 74,179 Prepaid reinsurance premiums 803 979 Real estate and equipment 52,749 38,341 Other assets 15,957 14,380 -------- -------- Total assets $760,875 $744,780 ======== ======== LIABILITIES: Unearned premium $262,794 $246,429 Insurance losses and loss adjustment expenses 89,065 82,722 Accounts payable and accrued expenses 33,197 33,022 Notes and other obligations payable 91,649 92,201 Income taxes 14,253 20,853 Other liabilities 14,432 14,102 -------- -------- Total liabilities 505,390 489,329 ======== ======== Shareholders' Equity: Preferred stock - 10,000,000 shares authorized, none issued - - Common stock, $1 par - 70,000,000 and 35,000,000 shares authorized, 27,232,940 and 27,700,872 shares issued and outstanding at September 30, 1998 and December 31, 1997, respectively 27,233 27,701 Other shareholders' equity 228,252 227,750 -------- -------- Total shareholders' equity 255,485 255,451 -------- -------- Total liabilities and shareholders' equity $760,875 $744,780 ======== ========
See accompanying condensed notes to consolidated financial statements. -2- FOREMOST CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1998 1997 1998 1997 ---- ---- ---- ---- (In thousands except per share data) Income: Property and casualty premium earned $109,673 $108,014 $326,483 $321,550 Net investment income 6,129 6,689 18,283 19,292 Realized gains 1,828 1,844 5,871 8,794 Other 503 609 1,792 1,831 -------- -------- -------- -------- Total income 118,133 117,156 352,429 351,467 -------- -------- -------- -------- Expense: Insurance losses and loss expenses 63,064 58,229 192,467 191,628 Amortization of prepaid policy acquisition costs 31,981 31,221 96,193 93,084 Operating 4,989 5,106 14,711 15,360 Interest 1,760 2,004 5,423 6,307 -------- -------- -------- -------- Total expense 101,794 96,560 308,794 306,379 -------- -------- -------- -------- Income before taxes 16,339 20,596 43,635 45,088 Income tax provision (4,492) (6,173) (11,113) (12,396) -------- -------- -------- -------- Net income - continuing operations 11,847 14,423 32,522 32,692 Net income - discontinued operations - 20 - 110 -------- -------- -------- -------- Net income - before extraordinary item 11,847 14,443 32,522 32,802 Extraordinary loss on early extinguishment of debt (net of $1,782 of federal income tax) - - (3,310) - -------- -------- -------- -------- Consolidated net income $ 11,847 $ 14,443 $ 29,212 $ 32,802 ======== ======== ======== ======== -3- Per share of common stock: Net income - continuing operations $ 0.43 $ 0.52 $ 1.19 $ 1.17 Net income - discontinued operations - - $ - $ - Extraordinary loss - net of tax benefit - - $ (0.12) $ - -------- -------- -------- -------- Net income $ 0.43 $ 0.52 $ 1.07 $ 1.17 ======== ======== ======== ======== Average shares outstanding 27,240 27,701 27,391 27,955 ======== ======== ======== ======== Cash dividends per share $ 0.09 $ 0.09 $ 0.27 $ 0.27 ======== ======== ======== ======== Per share of common stock - diluted Net income - continuing operations $ 0.43 $ 0.51 $ 1.16 $ 1.15 Net income - discontinued operations - - $ - $ - Extraordinary loss - net of tax benefit - - $ (0.12) $ - -------- -------- -------- -------- Net income $ 0.43 $ 0.51 $ 1.04 $ 1.15 ======== ======== ======== ======== Average shares outstanding 27,753 28,318 27,963 28,543 ======== ======== ======== ========
See accompanying condensed notes to consolidated financial statements. -4- FOREMOST CORPORATION OF AMERICA CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1998 1997 ---- ---- (In thousands) Operating Activities: Net cash from operating activities $ 37,640 $ 25,315 -------- -------- Investing Activities: Purchases of securities and loans made (82,768) (100,026) Purchases of real estate and equipment (16,586) (1,243) Sales of securities 78,781 61,757 Maturities of securities and receipts from repayments of loans 13,476 35,417 Sales of real estate and equipment 934 798 (Increase) decrease in short-term investments (6,150) 5,870 -------- -------- Net cash from (for) investing activities (12,313) 2,573 -------- -------- Financing Activities: Prepayment of mortgage (30,781) - Extraordinary loss on early extinguishment of debt (3,310) - Repayment of debt (7,271) (1,753) Proceeds from borrowings 37,500 2,000 Reacquisition of common stock (12,094) (19,367) Dividends paid (7,391) (7,570) Exercise of stock options: Receipts 2,100 3,345 Exercise of stock options: Repurchases (4,879) (5,952) -------- -------- Net cash for financing activities (26,126) (29,297) -------- -------- -5- Cash increase (decrease) (799) (1,409) Cash at beginning of year 2,409 5,141 -------- -------- Cash at end of period $ 1,610 $ 3,732 ======== ========
See accompanying condensed notes to consolidated financial statements. -6- FOREMOST CORPORATION OF AMERICA CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The notes to the consolidated financial statements are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. 2. All information is unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) have been made which are necessary to present fairly the results shown. All significant intercompany balance and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of the results to be expected in any other period. 3. During the first quarter of 1998, Foremost Corporation of America adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income," which requires that all components of comprehensive income and total comprehensive income be reported on one of the following: a statement of income and comprehensive income, a statement of comprehensive income or a statement of stockholder's equity. Comprehensive income is comprised of net income and all changes to stockholder's equity, except those due to investments by owners (changes in paid in capital) and distributions to owners (dividends). For interim reporting purposes, SFAS 130 requires disclosure of total comprehensive income. Comprehensive income and its components consist of the following:
FOR THE THREE MONTHS ENDED SEPTEMBER 30, ----------------------- 1998 1997 ---- ---- (In thousands) Net Income $11,847 $14,443 Other Comprehensive Income: Unrealized Gain (Loss) on Securities Available for Sale, (Net of Tax of ($3,321) and $3,295) $(6,169) $ 6,119 ------- ------- Comprehensive Income $ 5,678 $20,562 ======= =======
-7- FOREMOST CORPORATION OF AMERICA CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ----------------------- 1998 1997 ---- ---- (In thousands) Net Income $29,212 $32,802 Other Comprehensive Income: Unrealized Gain (Loss) on Securities Available for Sale, (Net of Tax of ($4,739) and $2,891) $(8,802) $ 5,370 ------- ------- Comprehensive Income $20,410 $38,172 ======= =======
4. Earnings per share amounts are computed based on the weighted average number of common shares outstanding during each quarter. The reconciliation of basic to diluted earnings per share amounts is as follows:
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 ----------------------------------------- NET OUTSTANDING PER SHARE INCOME SHARES AMOUNT ------- ----------- --------- (In thousands, except per share amounts) Basic EPS $11,847 27,240 $ .43 O/S Stock Options - 513 - ------- ------- ------- Diluted EPS $11,847 27,753 $ .43 ======= ======= =======
-8- FOREMOST CORPORATION OF AMERICA CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 ----------------------------------------- NET OUTSTANDING PER SHARE INCOME SHARES AMOUNT ------- ----------- --------- (In thousands, except per share amounts) Basic EPS $14,443 27,701 $ .52 O/S Stock Options - 617 - ------- ------- ------- Diluted EPS $14,443 28,318 $ .51 ======= ======= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ----------------------------------------- NET OUTSTANDING PER SHARE INCOME SHARES AMOUNT ------- ----------- --------- (In thousands, except per share amounts) Basic EPS $29,212 27,391 $ 1.07 O/S Stock Options - 572 - ------- ------- ------- Diluted EPS $29,212 27,963 $ 1.04 ======= ======= =======
-9- FOREMOST CORPORATION OF AMERICA CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 ----------------------------------------- NET OUTSTANDING PER SHARE INCOME SHARES AMOUNT ------- ----------- --------- (In thousands, except per share amounts) Basic EPS $32,802 27,955 $ 1.17 O/S Stock Options - 588 - ------- ------- ------- Diluted EPS $32,802 28,543 $ 1.15 ======= ======= =======
5. On June 29, 1998, the Company entered into an unsecured credit agreement with a group of banks. The credit agreement replaces the existing unsecured credit agreement and the building mortgage loan that was paid off on May 5, 1998. The new agreement provides for a five year revolving credit facility not to exceed $40 million and a seven year term loan of $80 million, of which $30 million of the term loan will amortize down over six years at $1.25 million per quarter. Borrowing rates are based on eurodollar and negotiated rates. The existing interest rate swap agreement on $58 million of the facility is still in effect. As of September 30, 1998, the Company had $29.5 million available under the revolving credit facility. The Company also renewed the $20 million uncommitted line of credit facility, which expired on June 30, 1998, for another year. In August 1998, the Company entered into a interest rate swap agreement with a financial institution for $30 million of the term loan that is amortizing. This agreement effectively fixes the interest rate at 5.705% plus credit spread until the loan amortizes to zero on May 31, 2004. The Company's exposure to credit risk is limited to interest movements and is considered to be negligible. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Foremost Corporation of America's combined loss and expense ratio for the first nine months of 1998 was 93.5% compared to 93.3% for the same period last year, in spite of industry catastrophe losses of $8.3 billion for the first nine months of 1998 compared with $2.6 billion for all of 1997. Operating earnings for the first nine months of 1998, are up by 8% over the same period last year. Return on equity for the first nine months of 1998 is an annualized 15%. These results are a reflection of the success of the Company's catastrophe exposure management efforts. Net income from continuing operations, before an extraordinary item, was $1.16 per share for the first nine months compared to $1.15 per share in 1997. Realized gains of $.13 per share in 1998 and $.20 per share in 1997 are included in the nine months results. Net income from continuing operations was $.43 per share, including $.04 per share in realized gains for the third quarter of 1998, compared to $.51 per share in 1997, including $.04 per share in realized gains. All per share amounts are stated on a diluted basis. On May 5, 1998, the Company pre-paid the $30.8 million mortgage on its corporate headquarters and incurred a $3.3 million after-tax prepayment penalty to extinguish this debt. This cost is classified as an extraordinary item in the financial statements for the second quarter of 1998 and reduced earnings by $.12 per share. The reason for prepaying the mortgage was to eliminate the restrictive operating covenants attached to this debt, which hindered the Company's ability to manage its capital base and leverage ratios through stock repurchases. The cost of this prepayment penalty will be recouped over time by the Company's present ability to borrow funds from its line of credit at lower interest rates. The interest savings equal approximately $.03 per share annually to the Company's operating results. The combined loss and expense ratio for the property and casualty group was 91.9% for the third quarter of 1998 compared to 87.8% for the same period last year. The increase in the combined ratio can be attributed to higher catastrophe losses, which tripled from last year's third quarter and resulted in an additional 4.8 points to the combined ratio. The Property Claims Services of the Insurance Services Office, Inc. estimates industry-wide catastrophe losses for the third quarter approximating $3.7 billion, which is more than seven times the amount of such losses in the third quarter of 1997. Written premium by major product line is as follows: -11-
3RD QUARTER --------------------------- INCREASE 1998 1997 (DECREASE) -------- -------- ---------- (In thousands) Mobile Home $ 97,688 $ 95,982 1.8% RV 11,003 11,760 (6.4%) Automobile 3,981 2,753 44.6% Basics 2,176 1,777 22.4% Homeowners 896 1,059 (15.4%) Other 947 1,358 (30.3%) -------- -------- ------ Total $116,691 $114,689 1.7% ======== ======== ======
NINE MONTHS --------------------------- INCREASE 1998 1997 (DECREASE) -------- -------- ---------- (In thousands) Mobile Home $279,980 $278,386 0.6% RV 39,695 40,411 (1.8%) Automobile 12,857 9,885 30.1% Basics 6,303 5,376 17.2% Homeowners 1,920 2,734 (29.8%) Other 2,717 4,338 (37.4%) -------- -------- ------ Total $343,472 $341,130 0.7% ======== ======== ======
Mobile home written premium for the first nine months of 1998 was flat on a comparable basis due to the effect of the Company's on-going catastrophe management program of not accepting new business in Florida and in certain portions of California. Direct response automobile premium increased to $6 million in the first nine months of 1998 compared with $1.5 -12- million in the same period of 1997. The Company's dwelling fire insurance, called BASICS, continues its strong growth with a 17% increase in written premium in the first nine months. After-tax investment income contributed $.188 per share in the third quarter of 1998 compared to $.194 per share in 1997. For the first nine months of the year, after-tax investment income contributed $.56 per share in 1998 and 1997. FINANCIAL POSITION The principle sources of cash for the first nine months of 1998 were $86.1 million from sales and maturities of investments and $37.6 million from operations. The Company also borrowed an additional $5.5 million from its line of credit. The primary uses of cash were $99.4 million for the purchases of securities, real estate and equipment, $16.9 million to purchase treasury stock and $7.4 million to pay dividends to shareholders. The Company had $34.4 million in cash and other liquid assets at September 30, 1998. Total invested assets on a cost basis increased 0.4%, or $1.8 million during the first nine months of 1998. Market values of securities available for sale decreased $8.8 million net of tax in the first nine months of 1998. On June 29, 1998, the Company entered into an unsecured credit agreement with a group of banks. The credit agreement replaces the existing unsecured credit agreement and the building mortgage loan that was paid off on May 5, 1998. The new agreement provides for a five year revolving credit facility not to exceed $40 million and a seven year term loan of $80 million, of which $30 million of the term loan will amortize down over six years at $1.25 million per quarter. Borrowing rates are based on eurodollar and negotiated rates, The existing interest rate swap agreement on $58 million of the facility is still in effect. As of September 30, 1998, the Company had $29.5 million available under the revolving credit facility. The Company also renewed the $20 million uncommitted line of credit facility, which expired on June 30, 1998, for another year. In August, 1998, the Company entered into a interest rate swap agreement with a financial institution for $30 million of the term loan that is amortizing. This agreement effectively fixes the interest rate at 5.705% plus credit spread until the loan amortizes to zero on May 31, 2004. The Company's exposure to credit risk is limited to interest movements and is considered to be negligible. The Company continued to manage its capital base and leverage ratios by repurchasing 31,475 shares of its common stock during the third quarter of 1998, under a previously announced repurchase plan. Since the -13- inception of this repurchase plan in February 1994, the Company has purchased 5,997,672 shares, adjusted for the January 1998 three-for-one stock split. YEAR 2000 READINESS DISCLOSURE The Year 2000 issue is the result of computer programs, microcontrollers, and other systems being designed using two digits instead of four to define the applicable year. The problem exists when date sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. By nature, the insurance industry is highly dependent upon computer systems because of significant transaction volumes and date dependencies for many of its applications. The Company has completed a detailed review of its computer programs to identify the systems that could be affected by the Year 2000 problem. The Company has a detailed written plan, which regularly is updated and monitored by technical personnel. Plan status is regularly reviewed by management of the Company. The Company also has hired an outside consulting firm to assist in the process of identifying, assessing, remediating, and testing Year 2000 problems. The procedures used by these consultants for the Year 2000 conversion effort have been certified by Information Technology Association of America "ITAA." The ITAA 2000 Certification Program evaluates the consultant's processes and methods used to develop new software or convert existing software to meet the date related needs of the next century. The Company is in the process of evaluating the Year 2000 readiness of third parties. Significant third parties with which the Company interfaces with regard to the Year 2000 problem include, among others, agents, technology vendors, financial institutions and service providers, and companies that provide utility infrastructure (power, delivery services, telecommunications). Unreadiness by these third parties would expose the Company to the potential for loss and impairment of business processes and activities. The Company is assessing these risks through bilateral efforts and is considering the need for contingency plans intended to address perceived risks. The Company cannot predict what effect the failure of such a third party to address, in a timely manner, the Year 2000 problem would have on the Company. As of September 30, 1998, the Company has completed approximately 70% of the Year 2000 modifications of its mainframe computer applications. The Company has identified the non-IT systems that have Year 2000 issues and has a plan to assess, remediate, and test, if necessary, these systems. The Company will continue to assess the impact of the Year 2000 issue on the remainder of its systems and applications throughout 1998 and 1999. The Company has performed tests of its systems and applications during 1998 and will continue to do so in 1999. The Company's goal is to have systems and applications Year 2000 ready by the middle of 1999, allowing the remaining time to be used for further validation and testing. -14- The Company spent approximately $1.8 million before 1997, $3.8 million in connection with Year 2000 issues in 1997 and expects that it will spend approximately $4.5 million and $2.9 million in 1998 and 1999, respectively. These costs primarily will consist of professional fees paid to third party providers of remediation services. It is the Company's policy to expense all costs associated with these systems changes. The Company also may invest in new or upgraded technology which has definable value lasting beyond 2000. In these instances, where Year 2000 compliance is merely ancillary, the Company may capitalize and depreciate such an asset over its estimated useful life. Based on currently available information, management does not presently anticipate that the costs to address the Year 2000 issues will have a material adverse impact on the Company's financial conditions, results of operations or liquidity. However, the extent to which the computer operations and other systems of the Company's important third parties are adversely affected could, in turn, affect the Company's ability to communicate with such third parties and could materially affect the Company's results of operations in any period or periods. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates. There can be no guarantee that these estimates will be achieved and actual results could differ from those anticipated. Specific factors that might cause differences include, but are not limited to, the ability of other companies on which the Company's systems rely to modify or convert their systems to be Year 2000 ready, the ability to locate and correct all relevant computer codes and microprocessors, the ability of all third parties who have business relationships with the Company to continue their businesses without interruption, and similar uncertainties. As a result, the Company is in the process of evaluating possible internal and external scenarios that might have an adverse effect on the Company, as well as the need for contingency plans to address these scenarios. We anticipate that all necessary contingency plans will be completed during 1999. This Year 2000 Readiness Disclosure is based upon and partially repeats information provided by the Company's outside consultants and others regarding the Year 2000 readiness of the Company and its customers, suppliers, financial institutions, and other parties. Although the Company believes this information to be accurate, it has not independently verified such information. FORWARD-LOOKING STATEMENTS All statements, other than statements of historical fact, contained in this 10-Q report are forward-looking statements. Forward-looking statements generally are accompanied by words such as "anticipate," -15- "believe," "estimate," "project," "expect" or similar statements. Such forward-looking information involves important known and unknown risks and uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the company's results to differ materially from the results discussed in such forward-looking statements include competition from other insurance companies, the general economic conditions, the effects of the Year 2000 issue on the Company's business, the effects of governmental regulation and the effects of weather-related catastrophes. All forward-looking statements are expressly qualified in their entirety by the cautionary statements in this paragraph and current and potential stockholders are cautioned not to place undue reliance on the forward-looking statements made in this report. SUBSEQUENT EVENT On October 1, 1998, the Company commenced action against First USA Bank and Banc One Corporation ("Defendants") in the United States District Court for the Western District of Michigan arising out of a dispute concerning an Insurance Services Agreement. The agreement granted the Company the exclusive right to provide certain insurance products to Defendants' credit card customers, and provided that Defendants would market the Company's products to credit card customers in exchange for a royalty fee from the Company. Defendants have not yet filed a response to the complaint, and no discovery has taken place in the litigation. -16- PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company's Bylaws contain provisions regarding the procedure and permissibility of shareholder proposals. Under the Bylaws no matter may be presented for shareholder action at an annual or special meeting of shareholders unless such matter is: (i) specified in the notice of the meeting (or any supplement to the notice) given by or at the direction of the Board of Directors; (ii) otherwise presented at the meeting by or at the direction of the Board of Directors; (iii) properly presented for action at the meeting by a shareholder in accordance with the notice provisions set forth in the Bylaws and any other applicable requirements; or (iv) a procedural matter presented, or accepted for presentation, by the Chairman of the meeting in his or her sole discretion. For a matter to be properly presented by a shareholder, the shareholder must have given timely notice of the matter in writing to the Secretary of the Company. To be timely, the notice must be delivered to or mailed to and received at the principal executive offices of the Company not less than 120 calendar days prior to the date corresponding to the date of the Company's proxy statement or notice of meeting released to shareholders in connection with the last preceding annual meeting of shareholders in the case of an annual meeting (unless the Company did not hold an annual meeting within the last year, or if the date of the upcoming annual meeting changed by more than 30 days from the date of the last preceding meeting, then the notice must be delivered or mailed and received not more than seven days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting), and not more than seven days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting in the case of a special meeting. The notice by the shareholder must set forth: (i) a brief description of the matter the shareholder desires to present for shareholder action; (ii) the name and record address of the shareholder proposing the matter for shareholder action; (iii) the class and number of shares of capital stock of the Company that are beneficially owned by the shareholder; and (iv) any material interest of the shareholder in the matter proposed for shareholder action. The shareholder proposal, together with any accompanying supporting statement, may not in the aggregate exceed 500 words. Except to the extent that a shareholder proposal submitted pursuant to the Bylaws is not made available at the time of mailing, the notice of the purposes of the meeting shall include the name and address of and the number of shares of the voting security held by the proponent of each shareholder proposal. A shareholder may submit matters and proposals for shareholder action at any annual or special shareholder meeting if the matters and proposals -17- are of general concern to, and are proper subjects for action by, the shareholders. A submitted proposal or matter may not be presented for shareholder action if it: (i) relates to the enforcement of a personal claim or the redress of a personal grievance against the Company, its management or any other person; (ii) consists of a recommendation, request or mandate that action be taken with respect to a matter, including a general economic, political, racial, religious, social or similar cause, that is not significantly related to the Company's business or is not within the Company's power to effectuate; (iii) has, at the shareholder's request, previously been submitted in either of the last two annual shareholder meetings and the shareholder has failed to present the proposal, in person or by proxy, for action at the meeting; (iv) is substantially similar to a matter or proposal presented within the preceding five calendar years: (x) if it was submitted once during the past five annual meetings and it received less than 3% of the total votes cast, or (y) if it was submitted twice during the past five annual meetings and it received less than 6% of the total votes cast at the time of its second submission, or (z) if it was submitted three times during such period and it received less than 10% of the votes cast at the time of its third submission (if any of (x), (y) or (z) apply, the proposal may be omitted for three years after the latest previous submission); or (v) consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the Company's ordinary business operations. Notwithstanding the above, if the shareholder desires to require the Company to include the shareholder's proposal in the Company's proxy materials, matters and proposals submitted for inclusion on the agenda shall be governed by the rules and regulations under the Securities Exchange Act of 1934, as amended. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 3.1 Articles of Incorporation of the Company 3.2 Bylaws of the Company 4.1 Articles of Incorporation. See Exhibit 3.1 4.2 Bylaws. See Exhibit 3.2 4.3 Specimen Stock Certificate 27 Financial Data Schedule -18- (b) Reports on 8-K - There were no reports filed on Form 8-K for the quarter ended September 30, 1998. -19- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FOREMOST CORPORATION OF AMERICA (Registrant) Date: November 12, 1998 /S/ PAUL D. YARED Paul D. Yared Its: Senior Vice President, Secretary and General Counsel Date: November 12, 1998 /S/ KENNETH C. HAINES Kenneth C. Haines Its: Controller -20- EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 3.1 Articles of Incorporation of the Company 3.2 Bylaws of the Company 4.1 Articles of Incorporation. See Exhibit 3.1 4.2 Bylaws. See Exhibit 3.2 4.3 Specimen Stock Certificate 27 Financial Data Schedule EX-3 2 EXHIBIT 3.1 C&S 500 (Rev. 6/92) MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU Date Received (FOR BUREAU USE ONLY) Name STEPHEN C. WATERBURY Address WARNER NORCROSS & JUDD LLP 900 OLD KENT BUILDING, 111 LYON STREET, N.W. City State Zip Code GRAND RAPIDS MICHIGAN 49503 EFFECTIVE DATE: Document will be returned to the name and address you enter above. [ ] [ ] [ ] - [ ] [ ] [ ] ARTICLES OF INCORPORATION OF FOREMOST-MICHIGAN CORPORATION 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-Michigan Corporation. 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 PURPOSE 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 60,000 shares of Common Stock, each with a par value of $1.00. The following provisions shall apply to the authorized stock of the corporation: A. 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. B. 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. C. 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 -2- rata all the remaining assets of the Corporation available for distribution to its shareholders. D. 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. ARTICLE V INCORPORATOR The name and mailing address of the incorporator is Paul D. Yared, Post Office Box 2450, Grand Rapids, Michigan 49501. 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 -3- 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 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 -4- 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 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. If authorized by these Articles, 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 filing, the certificate shall constitute an amendment to these Articles of Incorporation. -5- 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 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 consolidation, 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 goodwill 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 -6- 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 three-fourths (3/4) in value 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, 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, -7- 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. 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, if any. 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 -8- 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 failure to take any action as a director, except that a director's liability is not limited for: 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. 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. -9- 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 April 1998. ________________________________________ Paul D. Yared, Incorporator -10- MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU Date Received (FOR BUREAU USE ONLY) Name Tashia L. Rivard Address Warner Norcross & Judd LLP 900 Old Kent Building 111 Lyon Street, N.W. City Grand Rapids, MI 49503-2489 EFFECTIVE DATE: DOCUMENT WILL BE RETURNED THE NAME AND ADDRESS INDICATED ABOVE CERTIFICATE OF MERGER OF FOREMOST CORPORATION OF AMERICA INTO FOREMOST-MICHIGAN CORPORATION PURSUANT TO THE PROVISIONS OF ACT 284, PUBLIC ACTS OF 1972 (PROFIT CORPORATIONS), THE UNDERSIGNED CORPORATIONS EXECUTE THE FOLLOWING CERTIFICATE: This Certificate of Merger is filed pursuant to Section 712 of the Michigan Business Corporation Act, as amended (the "Michigan Business Corporation Act"). This Certificate of Merger pertains to the Agreement and Plan of Merger dated as of June 30, 1998 (the "Plan of Merger"), between Foremost Corporation of America, a Delaware corporation ("Foremost"), and Foremost-Michigan Corporation, a Michigan corporation ("Foremost-Michigan"), a copy of which is attached to this Certificate of Merger. 1. The Plan of Merger is as follows: (a) The name of each constituent corporation and its identification number is: CERTIFICATE OF MERGER - CONTINUED -
NAME CORPORATION IDENTIFICATION NUMBER ---- --------------------------------- Foremost Corporation of America 627-165 Foremost-Michigan Corporation 530-850
(b) The name of the surviving corporation is Foremost-Michigan Corporation and its identification number is 530-850. (c) For each constituent corporation, state:
NAME OF CORPORATION DESIGNATION AND NUMBER OF CLASS OR SERIES OF SHARES CLASS OR SERIES ENTITLED OUTSTANDING SHARES IN ENTITLED TO VOTE TO VOTE AS A CLASS EACH CLASS OR SERIES Foremost Corporation Common Stock Common Stock None of America $1.00 par value 27,243,940 shares Foremost-Michigan Common Stock Common Stock None Corporation $1.00 par value 100 shares
The number of outstanding shares of the Common Stock of Foremost is subject to change before the effective time of the merger due to the issuance of additional shares of Common Stock upon the exercise of employee stock options and the grant or sale of shares to, or for the account of, directors and employees pursuant to other benefit plans, and the issuance of additional shares if and as authorized by the board of directors of Foremost. 2. (a) The manner and basis of converting shares are as follows: The terms and conditions of the merger are fully set forth in the Plan of Merger attached as APPENDIX A, which is incorporated into and made a part of this Certificate of Merger. The manner and basis of converting each share of Foremost Common Stock into shares of Foremost-Michigan Common Stock are described in Article IV of the Plan of Merger. Under those provisions, each issued and outstanding share of Foremost Common Stock will -2- CERTIFICATE OF MERGER - CONTINUED - be converted into one validly issued, fully paid, and nonassessable share of Foremost-Michigan Common Stock. (b) The amendments to the Articles of the surviving corporation to be effected by the merger are as follows: ARTICLE I NAME The name of the corporation is Foremost Corporation of America. 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 -3- CERTIFICATE OF MERGER - CONTINUED - 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: (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 -4- CERTIFICATE OF MERGER - CONTINUED - 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 -5- CERTIFICATE OF MERGER - CONTINUED - (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. -6- CERTIFICATE OF MERGER - CONTINUED - (c) The Plan of Merger will be furnished by the surviving corporation, on request and without costs, to any shareholder of any constituent profit corporation. 3. This merger is permitted by the laws of the state of Delaware, the jurisdiction under which Foremost is organized, and the Plan of Merger was adopted and approved by such corporation pursuant to and in accordance with the laws of that jurisdiction. 4. The merger shall be effective on June 30, 1998. 5. The Plan of Merger was approved by the Board of Directors of Foremost-Michigan, the surviving Michigan corporation, without approval of the shareholders, in accordance with Section 703(a) of the Michigan Business Corporation Act. FOREMOST-MICHIGAN CORPORATION Dated: June ____, 1998 By _____________________________________ Richard L. Antonini Its Chairman, President, and Chief Executive Officer -7- CERTIFICATE OF MERGER - CONTINUED - Name of Organization Remitting Fees: WARNER NORCROSS & JUDD LLP 900 Old Kent Building 111 Lyon Street, N.W. Grand Rapids, Michigan 49503-2489 (616) 752-2000 Certificate Prepared By: Tashia L. Rivard WARNER NORCROSS & JUDD LLP 900 Old Kent Building 111 Lyon Street, N.W. Grand Rapids, Michigan 49503-2489 (616) 752-2171 -8- 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 27,243,940 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 -2- 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 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. -3- ARTICLE III - ARTICLES OF INCORPORATION On the effective date of Merger, the Articles of Incorporation of Foremost-Michigan shall be amended as set forth in the Certificate of Merger filed with the Michigan Corporation, Securities and Land Development Bureau. From and after the effective date of the Merger, such Articles of Incorporation, as amended, shall be and constitute the Articles of Incorporation, as amended, 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. -4- 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 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; -5- 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 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. -6- 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. 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 June, 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- EX-3 3 EXHIBIT 3.2 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 -2- 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 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 -3- 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. 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 -4- 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. (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 -5- 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 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. SECTION 17. SHAREHOLDER PROPOSALS. Except as otherwise provided by statute, the Corporation's Articles of Incorporation, or these bylaws: (i) No matter may be presented for shareholder action at an annual or special meeting of shareholders unless such matter is: (A) specified in the notice of the meeting (or any supplement to the notice) given by or at the direction of the Board of Directors; (B) otherwise presented at the meeting by or at the direction of the Board of Directors; (C) properly presented for action at the meeting by a shareholder in accordance with the notice provisions set forth in this Section and any other applicable requirements; or (D) a procedural matter presented, or accepted for presentation, by the Chairman of the meeting in his or her sole discretion. (ii) For a matter to be properly presented by a shareholder, the shareholder must have given timely notice of the matter in writing to the Secretary of the Corporation. To be timely, the notice must be delivered to or mailed to and received at the principal executive offices of the Corporation not less than 120 calendar days prior to the date corresponding to the date of the Corporation's proxy statement or notice of meeting released to shareholders in connection with the last preceding annual meeting of shareholders in the case of an annual meeting (unless the Corporation did not hold an annual meeting within the last year, or if the date of the upcoming annual meeting changed by more than 30 days from the date of the last preceding meeting, then the notice must be delivered or mailed and received not more than seven days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting), and not more than seven days after the earlier of the date -6- of the notice of the meeting or public disclosure of the date of the meeting in the case of a special meeting. The notice by the shareholder must set forth: (A) a brief description of the matter the shareholder desires to present for shareholder action; (B) the name and record address of the shareholder proposing the matter for shareholder action; (C) the class and number of shares of capital stock of the Corporation that are beneficially owned by the shareholder; and (D) any material interest of the shareholder in the matter proposed for shareholder action. (iii) The shareholder proposal, together with any accompanying supporting statement, shall not in the aggregate exceed 500 words. Except to the extent that a shareholder proposal submitted pursuant to this Section is not made available at the time of mailing, the notice of the purposes of the meeting shall include the name and address of and the number of shares of the voting security held by the proponent of each shareholder proposal. (iv) A shareholder may submit matters and proposals for shareholder action at any annual or special shareholder meeting if the matters and proposals are of general concern to, and are proper subjects for action by, the shareholders. A submitted proposal or matter may not be presented for shareholder action if it: (A) relates to the enforcement of a personal claim or the redress of a personal grievance against the Corporation, its management, or any other person; (B) consists of a recommendation, request, or mandate that action be taken with respect to a matter, including a general economic, political, racial, religious, social, or similar cause, that is not significantly related to the Corporation's business or is not within the Corporation's power to effectuate; (C) has, at the shareholder's request, previously been submitted in either of the last two annual shareholder meetings and the shareholder has failed to present the proposal, in person or by proxy, for action at the meeting; (D) is substantially similar to a matter or proposal presented within the preceding five calendar years: (x) if it was submitted once during the past five annual meetings and it received less than 3% of the total votes cast, or (y) if it was submitted twice during the past five annual meetings and it received less than 6% of the total votes cast at the time of its second submission, or (z) if it was submitted three times during such period and it received less than 10% of the votes cast at the time of its third submission (if any of (x), (y) or (z) apply, the proposal may not be presented for three years after the latest previous submission); or (E) consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the Corporation's ordinary business operations. -7- (v) Notwithstanding the above, if the Corporation is subject to the solicitation rules and regulations of the Securities Exchange Act of 1934, as amended, and the shareholder desires to require the Corporation to include the shareholder's proposal in the Corporation's proxy materials, matters and proposals submitted for inclusion in the Corporation's proxy materials shall be governed by those rules and regulations. 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. -8- 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. 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 one another, 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. -9- 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. 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. -10- 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 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 -11- 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 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 any time 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 -12- 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, at 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 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. -13- 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. 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 -14- 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 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 -15- 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 this 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 by a court if (A) the director received a financial benefit to which he or she was not entitled, (B) intentionally inflicted harm on the Corporation or its shareholders, (C) violated Section 551 of the Michigan Business Corporation Act, or (D) intentionally committed a criminal act. In connection with an action or suit by or in the right of the Corporation as described in Section 2, indemnification under this Section 3(ii) may be for expenses, including attorney's fees, actually and reasonably incurred. In connection 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 judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred. SECTION 4. AUTHORIZATION OF INDEMNIFICATION. (i) An indemnification under Section 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 Section 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. -16- (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 Subsection (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. (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 Section 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 following 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. -17- (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 Corporation Act, in which authorization all directors may participate. (B) 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 on the authorization. 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 both 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 -18- 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 liability to the Corporation or its shareholders only to the extent to which the Corporation could 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 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 Section 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 -19- 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, 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 -20- 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. 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 -21- 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 Corporation Act; provided, however, that business combinations with existing beneficial owners of more than 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, 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 -22- 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 Section 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. 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 XI 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 -23- 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. ARTICLE XII 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 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. -24- 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 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 -i- 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. . . . . . . . . . . . 13 Section 5. Advances. . . . . . . . . . . . . . . . . . . . . . . . 15 Section 6. Other Indemnification Agreements. . . . . . . . . . . . 15 Section 7. Insurance . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. Constituent Corporation . . . . . . . . . . . . . . . . 15 Section 9. Partial Indemnification . . . . . . . . . . . . . . . . 16 Section 10. Savings Clause. . . . . . . . . . . . . . . . . . . . . 16 Section 11. Definitions . . . . . . . . . . . . . . . . . . . . . . 16 Section 12. Construction. . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VII - SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 17 Section 2. Subsidiary Officers Not Executive Officers. . . . . . . 17 ARTICLE VIII - CERTIFICATES OF STOCK . . . . . . . . . . . . . . . . . . 17 Section 1. Form. . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 2. Facsimile Signature . . . . . . . . . . . . . . . . . . 17 Section 3. Lost Certificates . . . . . . . . . . . . . . . . . . . 18 Section 4. Transfers of Stock. . . . . . . . . . . . . . . . . . . 18 -ii- ARTICLE IX - MICHIGAN FAIR PRICE ACT . . . . . . . . . . . . . . . . . . 18 ARTICLE X - MICHIGAN CONTROL SHARE ACT . . . . . . . . . . . . . . . . . 18 Section 1. Governance by Act . . . . . . . . . . . . . . . . . . . 18 Section 2. Power to Redeem if No Acquiring Person Statement Is Filed. . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3. Power to Redeem After Shareholder Vote. . . . . . . . . 19 Section 4. Procedure for Redemption. . . . . . . . . . . . . . . . 19 Section 5. Interpretation of This Article. . . . . . . . . . . . . 19 ARTICLE XI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 19 Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2. Reserves. . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 20 Section 5. Seal. . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6. Written Waiver of Notice. . . . . . . . . . . . . . . . 20 ARTICLE XII - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 20 -iii- EX-4 4 EXHIBIT 4.3 NUMBER SHARES **FC ** ** ** INCORPORATED UNDER THE LAWS COMMON STOCK OF THE STATE OF MICHIGAN FOREMOST CORPORATION OF AMERICA THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF NEW YORK CUSIP 345469 10 0 THIS CERTIFIES THAT IS THE OWNER OF FULL PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $1 PER SHARE, OF Foremost Corporation of America, transferable upon the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned by and registered by the Transfer Agent and Registrar. [CERTIFICATE OF STOCK WATERMARK] Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/Paul D. Yared /s/Richard L. Antonini SENIOR VICE PRESIDENT, SECRETARY AND CHAIRMAN OF THE BOARD, PRESIDENT AND GENERAL COUNSEL CHIEF EXECUTIVE OFFICER The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws and regulations: TEN COM _____ as tenants in common UNIF GIFT MIN ACT-____Custodian____ TEN ENT _____ as tenants by the entireties (Cust) (Minor) JT TEN _____ as joint tenants with the right under Uniform Gifts to Minors of survivorship and not as Act __________________________ tenants in common (State) Additional abbreviations may also be used though not in the above list. For value received, _______________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [ ] _____________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ __________________________________ shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________________________________ Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated ___________________________ _________________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. The Corporation will furnish to a shareholder upon request and without charge a full statement of the designation, relative rights, preferences, and limitations of the shares of each class of capital stock of the Corporation authorized to be issued, as well as the designation, relative rights, preferences, and limitations of each series so far as the same may have been prescribed and the authority of the board to designate and prescribe the relative rights, preferences, and limitations of other series. This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Foremost Corporation of America (the "Company") and First Chicago Trust Company of New York (the "Rights Agent"), dated as of December 14, 1989, as amended (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal office of the stock transfer administration office of the Rights Agent. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of the certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. EX-27 5 ART. 9 FDS FOR 3RD QUARTER 10-Q
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FOREMOST CORPORATION OF AMERICA FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 363,965 982 1,017 79,506 12,137 12,340 501,736 1,610 23,377 77,386 760,875 89,065 262,794 0 0 91,649 0 0 27,233 228,074 760,875 326,483 18,283 5,871 1,792 192,467 96,193 20,134 43,635 (11,113) 32,522 0 (3,310) 0 29,212 1.07 1.04 82,722 194,747 (2,281) 149,242 36,952 89,065 0
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