Document:

Quota Share Reinsurance Contract

 Exhibit 10.1 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 This agreement made by and between Employers Mutual Casualty Company (“Employers”) and EMC Reinsurance Company (“EMC Re”). 

 
 ARTICLE I 
  
 EMC Re is an affiliate of Employers and was formed by Employers for the sole
purpose of engaging in the business of reinsurance. 
  
 It is the
intention of the parties hereto that EMC Re will solicit, underwrite, and assume reinsurance risks in a mode of operation similar to that heretofore conducted by Employers, and that consistent therewith, EMC Re will gradually assume by means of this
Quota Share Agreement, the major portion of the reinsurance assumed business of Employers as is in force or as may be placed in force by Employers. 
  
 ARTICLE II 
  
 Excluded from this Quota Share Agreement at its inception are: (1) all direct insurance business written by Employers and its affiliated companies; (2)
all involuntary insurance or reinsurance business written by Employers and classed by Employers as “facilities business”; (3) facultative reinsurance assumed contracts; (4) intercompany reinsurance contracts between Employers and its
affiliated companies; (5) reinsurance assumed contracts that have been terminated or are in the process of termination. 
  
 ARTICLE III 
  
 Pursuant to and subject to the foregoing, Employers hereby cedes and transfers to EMC Re, and EMC Re hereby accepts, a quota share portion of the
reinsurance contracts on which Employers is subject to liability which were outstanding and in force as of 12:01 a.m. January 1, 1981, or which were issued thereafter, or as shall be issued hereafter, in accordance with the Assumption Addendum
attached hereto. Such liability shall include reserves for unearned premiums, outstanding loss and loss expenses (including unreported losses) and all other underwriting and administrative expenses, but shall not include liabilities incurred in
connection with investment transactions. Employers hereby assigns and transfers to EMC Re amounts equal to the aggregate of the liabilities quota shared as above, less a commission for the prepaid expenses of Employers. 
  
 ARTICLE IV 
  
 Employers shall not be prejudiced in any way by any error or omission through
accident or oversight resulting in a failure to accurately or fully cede, report, or recover with respect to this Quota Share Agreement, but any such error or omission shall be corrected immediately upon discovery. 
  

 ARTICLE V 
  

This agreement is a continuing one and is unlimited as to duration, but may be terminated as of the end of any calendar year upon ninety days prior
written notice; or may be otherwise terminated by agreement of the parties. 
  
 ARTICLE VI 
  
 Each of the
parties hereto agrees that the reinsurance business quota shared hereunder shall be payable by EMC Re on the basis of the liability of Employers under the contracts reinsured without diminution because of the insolvency of Employers; provided that
such reinsurance shall be payable directly to Employers or its liquidator, receiver or such other statutory successor, except as provided by Section 315 of New York Insurance Law, or except (a) where the contract specifically provides another payee
for such reinsurance in the event of the insolvency of the ceding insurer and (b) where EMC Re, with the consent of the direct reinsured company, has assumed such contract obligations of Employers as direct obligations of EMC Re to the payees under
such reinsurance contracts and in substitution for the obligations of Employers to such payees; and further provided that the liquidator, receiver or statutory successor of Employers shall give written notice of the pendency of any claim against
Employers on such contracts within any reasonable time after such claim; and EMC Re may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated in the defense or defenses which it may deem
available to Employers or its liquidator, receiver or statutory successor, the expense thus incurred by EMC Re to be chargeable, subject to court approval, against Employers as part of the expense of liquidation to the extent of a proportionate
share of the benefit which may accrue to Employers solely as a result of the defense undertaken by EMC Re. 
  
 Executed by the parties hereto the day and year as reflected in the Assumption Addendum attached hereto. 
  

 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 This agreement shall incept as 12:01 a.m. on the date executed by the parties hereto. The parties to this agreement mutually agree that as of its inception, the quota share portion of the net liabilities of Employers
as 12:01 a.m. January 1, 1981 ceded to and assumed by EMC Re shall be five percent. 
  
 Executed by the parties hereto this 10th day of June, 1981. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Robb B. Kelley

	 	 	 Robb B. Kelley, President

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 AMENDMENT #1 
  
 TO 
  
 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN

  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE
COMPANY 
  
 The parties to this agreement mutually agree that
the quota share portion of the net liabilities of Employers at 12:01 a.m. January 1, 1982 ceded to and assumed by EMC Re shall be twenty-five percent. 
  
 Executed by the parties hereto this 3rd day of January, 1982. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Robb B. Kelley

	 	 	 Robb B. Kelley, President

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 AMENDMENT #2 
  
 TO 
  
 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN

  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE
COMPANY 
  
 The parties to this agreement mutually agree that
the quota share portion of the net liabilities of Employers at 12:01 a.m. January 1, 1983 ceded to and assumed by EMC Re shall be fifty percent. 
  
 Executed by the parties hereto this 18th day of March, 1983. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ George W. Kochheiser

	 	 	 George W. Kochheiser, President

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 AMENDMENT #3 
  
 TO 
  
 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN

  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE
COMPANY 
  
 The parties to this agreement mutually agree that
the quota share portion of the net liabilities of Employers at 12:01 a.m. January 1, 1984 ceded to and assumed by EMC Re shall be seventy five percent. 
  
 Executed by the parties hereto this 3rd day of January, 1984. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Robb B. Kelley

	 	 	 Robb B. Kelley, Chairman & CEO

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 AMENDMENT #4 
  
 TO 
  
 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN

  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE
COMPANY 
  
 The parties to this agreement mutually agree that
the quota share portion of the net liabilities of Employers at 12:01 a.m. January 1, 1988 ceded to and assumed by EMC Re shall be ninety-five percent. 
  
 Executed by the parties hereto this 9th day of March, 1988. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Robb B. Kelley

	 	 	 Robb B. Kelley, Chairman & CEO

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 ENDORSEMENT #1 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 It is understood and agreed by and between the parties as follows: 
  

	 	1.	Certain business subject to this agreement and ceded hereunder was protected by pro-rata and excess of loss reinsurances; such reinsurances to enure to the benefit of the parties as
their interests appear herein. 

  

	 	2.	Such reinsurances were represented to be collectable; there was no intent to transfer to the reinsurer the credit risk of non-collectable reinsurances other than as would be deemed
incidental; and there was no consideration contemplated nor given for the assumption of such credit risk. 

  

	 	3.	At various times during the pendency of this agreement the parties have come to perceive that recoverables from one such reinsurer, Transit Casualty Company, were becoming of
doubtful collectability, and the parties began a scheduled “write down” of receivables from that source as their interests appeared in order to recognize the degree of doubt perceived. 

  

	 	4.	The parties have now determined that no part of such receivables from Transit Casualty Company are collectable, and that the entire account should be written off as a bad debt.

  

	 	5.	The parties further recognize that the combination of a) increases in the percentages of business ceded hereunder, and b) the more than 200 percent growth in the loss amounts now
recognized as non-recoverable from Transit, have exacerbated the adverse affects upon EMC Re hereunder to the point of severely reducing EMC Re’s surplus, and to the frustration of the purpose of this contract and to the goals of the parties
when it was drafted. 

  
 Now therefore, in
consideration of the foregoing, the parties agree as follows: 
  

	 	1.	EMC Re will pay Employers in full the outstanding portion of its 95% pro-rata part of the Transit Casualty Company scheduled write off as booked through September 30, 1988, in the
amount of 95% of $2,650,000. 

  

	 	2.	Employers Mutual Casualty Company will retain (in addition to its 5% quota share portion), and hereby releases EMC Re from liability therefore, any additional non-recoverable sums
now due or in the future recognized as necessary to be written off, applicable not only to Transit but to any other non-collectable reinsurance protections on business subject to this quota share agreement, from its inception.

  
 Executed by the parties hereto this 6th day of
December, 1988. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Robb B. Kelley

	 	 	 Robb B. Kelley, Chairman & CEO

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins, President

  

 COMMUTATION AGREEMENT AND RELEASE 
  
 This Agreement entered into by and between Employers Mutual Casualty Company (the “Company”) and EMC Reinsurance
Company (the “Reinsurer”) and shall be effective as of September 30, 1989 (the “commutation date”). 
  
 WHEREAS, the parties have entered into a certain quota share reinsurance contract effective from January 1, 1981, and remaining in full force and effect,
and 
  
 WHEREAS, the Company and the Reinsurer desire to settle,
adjust and determine the liabilities of the Reinsurer thereunder for losses occurring during all years prior to 12:01 A.M., January 1, 1981, and 
  
 WHEREAS, by reason of which settlement agreement there is due and owing to the Company from the Reinsurer the sum of $2,982,882.00, 
  
 NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $2,982,882.00, the Company has released and discharged, and by these presents does for itself, its successors and assigns, release and discharge the Reinsurer with respect to any contractual obligations under the aforesaid quota share
reinsurance contract as respects, and only as respects, losses occurring during any and all years prior to 12:01 A.M., January 1, 1981. 
  
 IN WITNESS WHEREOF, the parties have caused these presents to be executed in duplicate this 5th day of December, 1989. 
  

			
	 EMPLOYERS MUTUAL CASUALTY COMPANY

		
	 By:
	 	 /s/ George W. Kochheiser

	 	 	 George W. Kochheiser
 President

	
	 EMC REINSURANCE COMPANY

		
	 By:
	 	 /s/ Richard E. Haskins

	 	 	 Richard E. Haskins
 President

  

 ENDORSEMENT #2 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 It is understood and agreed by and between the parties as follows: 
  
 Effective January 1, 1993 Article III of the Quota Share is amended by adding the following additional paragraph: 
  
 Notwithstanding the foregoing terms, it is agreed that the maximum liability
transferred to EMC Re for loss resulting from any one occurrence, including reinstatement premium costs resulting from such occurrence, is limited to $1,000,000. As consideration to Employers for this per occurrence limitation, it is agreed that EMC
Re shall allow Employers an additional ceding commission of 5.25% 
  
 Executed by the parties this 2nd day of December, 1992. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Bruce G. Kelley

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Dean P. McClaflin

  

 COMMUTATION AGREEMENT AND RELEASE 
  
 This Agreement entered into by and between Employers Mutual Casualty Company (the “Company”) and EMC Reinsurance
Company (the “Reinsurer”) and shall be effective as of June 30, 1993 (the “commutation date”). 
  
 WHEREAS, the parties have entered into a certain quota share reinsurance contract effective from January 1, 1981, and remaining in full force and effect,
and 
  
 WHEREAS, the Company and the Reinsurer desire to settle,
adjust and determine final liabilities of the Reinsurer thereunder for losses originating from the business written by Russell Reinsurance Services, Inc., and 
  

WHEREAS, by reason of such settlement agreement there is due and owing to the Company from the Reinsurer the sum $17,806,179. 
  
 NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $17,806,179, the Company has released and discharged, and by these presents does for itself, its successors and assigns, release and discharge the Reinsurer with respect to any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating through Russell Reinsurance Services, Inc. 
  
 IN WITNESS WHEREOF, the parties have caused these presents to be executed in duplicate this 29th day of July, 1993. 
  

			
	 EMPLOYERS MUTUAL CASUALTY COMPANY

		
	 By:
	 	 /s/ Bruce G. Kelley

	 	 	 Bruce G. Kelley
 President

	
	 EMC REINSURANCE COMPANY

		
	 By:
	 	 /s/ Dean P. McClaflin

	 	 	 Dean P. McClaflin
 President

  

 COMMUTATION AGREEMENT AND RELEASE 
  
 This Agreement entered into by and between Employers Mutual Casualty Company (the “Company”) and EMC Reinsurance
Company (the “Reinsurer”) and shall be effective as of October 31, 1993 (the “commutation date”). 
  
 WHEREAS, the parties have entered into a certain quota share reinsurance contract effective from January 1, 1981, and remaining in full force and effect,
and 
  
 WHEREAS, the Company and the Reinsurer desire to settle,
adjust and determine final liabilities of the Reinsurer thereunder for losses originating from the business written by Improved Risk Mutual, and 
  
 WHEREAS, by reason of such settlement agreement there is due and owing to the Company from the Reinsurer the sum of $2,619,776. 
  
 NOW, THEREFORE, in consideration of the payment to the Company by the
Reinsurer of $2,619,776, the Company has released and discharged, and by these presents does for itself, its successors and assigns, release and discharge the Reinsurer with respect to any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating through Improved Risk Mutual. 
  
 IN WITNESS WHEREOF, the parties have caused these presents to be executed in duplicate this 1st day of December, 1993. 
  

			
	 EMPLOYERS MUTUAL CASUALTY COMPANY

		
	 By:
	 	 /s/ Bruce G. Kelley

	 	 	 Bruce G. Kelley
 President

	
	 EMC REINSURANCE COMPANY

		
	 By:
	 	 /s/ Dean P. McClaflin

	 	 	 Dean P. McClaflin
 President

  

 ENDORSEMENT #3 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 It is understood and agreed by and between the parties as follows: 
  
 Effective January 1, 1997, the last paragraph of Article III of the Quota Share found in Endorsement #2 is changed to read as follows: 
  
 Notwithstanding the foregoing terms, it is agreed that the maximum liability
transferred to EMC Re for loss resulting from any one occurrence, including reinstatement premium costs resulting from such occurrence, is limited to $1,500,000. As consideration to Employers for this per occurrence limitation, it is agreed that EMC
Re shall allow Employers an override commission of 5.00% plus .25% (fronting fee) equaling 5.25%. 
  
 Executed by the parties this 7th day of January, 1997. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Bruce G. Kelley

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Ronnie D. Hallenbeck

  

 AMENDMENT #5 
  
 TO 
  
 ASSUMPTION ADDENDUM 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN

  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE
COMPANY 
  
 The parties to this agreement mutually agree that
the quota share portion of the net liabilities of Employers at 12:01 a.m. January 1, 1997 ceded to and assumed by EMC Re shall be one hundred percent. 
  
 Executed by the parties hereto this 7th day of January, 1997. 
  

			
	 Employers Mutual Casualty Company

		
	 By:
	 	 /s/ Bruce G. Kelley

	
	 EMC Reinsurance Company

		
	 By:
	 	 /s/ Ronnie D. Hallenbeck

  

 ENDORSEMENT #4 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 It is understood and agreed by and between the parties as follows: 
  
 Effective January 1, 2000, the last paragraph of Article III of the Quota Share found in Endorsement #3 is changed to read as follows: 
  
 Notwithstanding the foregoing terms, it is agreed that the maximum liability
transferred to EMC Re for loss resulting from any one occurrence, including reinstatement premium costs resulting from such occurrence, is limited to $1,500,000. As consideration to Employers for this per occurrence limitation, it is agreed that EMC
Re shall allow Employers an override commission of 4.25% plus .25% (fronting fee) equaling 4.5%. 
  
 Executed by the parties this 7th day of July, 2000. 
  

			
	 Employers Mutual Casualty Company

		
	 BY:
	 	 /s/ Bruce G. Kelley

	 	 	 Bruce G. Kelley, President & CEO

	
	 EMC Reinsurance Company

		
	 BY:
	 	 /s/ Ronnie D. Hallenbeck

	 	 	 Ronnie D. Hallenbeck, President

  

 ENDORSEMENT #5 
  
 TO 
  
 QUOTA SHARE 
  
 REINSURANCE RETROCESSIONAL AGREEMENT 
  
 BETWEEN 
  
 EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY 
  
 For Reinsurance contracts inforce after January 1, 2004, Endorsement #1 shall not apply. 
  
 Signed this day 26th of February ,
2004 
  

			
	 Employers Mutual Casualty Company

		
	 BY:
	 	 /s/ Bruce G. Kelley

	 	 	 Bruce G. Kelley, President & CEO

  
 Signed this day 27th of February , 2004 
  

			
	 EMC Reinsurance Company

		
	 BY:
	 	 /s/ Ronnie D. Hallenbeck

	 	 	 Ronnie D. Hallenbeck, President2004 Senior Executive Compensation Bonus Program

 Exhibit 10.2 
  
 2004 SENIOR EXECUTIVE COMPENSATION BONUS PROGRAM 
  
 The Senior Executive Bonus Program is a measure of three areas often reviewed when comparing results of different companies or in comparing
current company results from one year to the next. 
  
 PURPOSE 

 

	1.	To provide a motivational tool in the form of compensation to help executives focus on specific organizational goals to improve profits, surplus and service in all areas of the
corporation. 

  

	2.	To maintain competitive advantage in terms of recruitment and retention of senior executives. 

  

	3.	To provide a plan based on EMC results and industry results, to provide a better measure of performance. 

  

	4.	Reward superior results more appropriately. 

  

	5.	Provide a maximum bonus difficult to attain so there is incentive to strive for better results. 

  

	6.	To provide a measure of safety to the company so that senior officers’ total compensation is reduced if company performance declines. 

  
 GENERAL BONUS CALCULATION 
  
 The bonus plan uses production, surplus growth and the combined ratio, all valid measures of
performance, as follows: 
  

	1.	EMC WRITTEN PREMIUM - Compares consolidated written premium to a goal that is established each year. 

  

	2.	CHANGE IN SURPLUS 

  

	3.	COMBINED RATIO - Compares EMC combined ratio to a target ratio established by the Committee each year. Also compares EMC’s combined ratio to that of the industry.

  
 Seventy-five percent of any bonus will be based on the Industry
estimate published in January by A.M. Best and paid at that time. The remaining twenty-five percent will be paid when final numbers are released by A.M. Best (generally in March). 
  
 ALL CALCULATIONS ARE ROUNDED TO THE NEAREST ONE TENTH OF ONE PERCENT. 
  
 The factors in each of the formulas are subject to change each year with final approval by the Senior Executive Compensation and Incentive
Stock Option Committee. 
  
 WRITTEN PREMIUM 
  
 This component is based on actual net written premium growth compared to a consolidated
written premium goal established each year and approved by the Committee. (See page 44 for current factor) 
  

 Achieving goal results in a bonus contribution of plus 7.5 percent of salary. This changes by 1.5 percent for each 1.0
percent variation from goal, subject to a maximum contribution of plus 15.0 percent and a minimum contribution of minus 15.0 percent. 
  
 The written premium component is determined as follows: 
 Percent of actual
change, minus goal, plus 5.0, times 1.50. 
  

			
	Example 1:	  	 The goal equals 8.5 percent premium growth.
 The
actual change equals 7.5 percent premium growth.

  
 7.5 percent minus 8.5 percent equals
minus 1 plus 5.0, equals 4.0 times 1.50 equals 6.0. The contribution in this example of written premium towards the total bonus is equal to 6.0 percent. 
  

			
	Example 2:	  	The goal equals 5.7 percent premium growth. The actual change equals minus 1.3 percent premium growth.

  
 Minus 1.3 percent minus 5.7 percent
equals minus 7.0 plus 5.0 equals minus 2.0 times 1.50 equals minus 3.0. 
  

			
	Example 3:	  	 The goal equals 4.7 percent premium growth.
 The
actual change equals 9.8 percent premium growth.

  
 9.8 percent minus 4.7 percent equals
5.1 percent plus 5.0 equals 10.1 times 1.50 equals 15.2 percent. The contribution in this example of written premium towards the total bonus equals plus 15.0 percent. 
  
 (This component not to exceed plus or minus 15.0 percent of total bonus.) 
  
 SURPLUS 
  
 The component of surplus is based on the actual change in surplus. Each one percent increase in surplus represents a change in bonus equal
to 1.00 percent of salary subject to a maximum of 25.0 percent. Each one percent decrease in surplus represents a two percent decrease of salary subject to a maximum of minus 20.0 percent. 
  
 The surplus component is determined as follows: 
 Positive change in surplus times multiplier of 1.00 
 Negative change in
surplus times multiplier of 2.00 
  

			
	Example 1:	  	 Change in surplus equals plus 4.6 percent.
 Contribution towards total bonus from surplus component equals 4.6 percent times 1.00 equals 4.6 percent.

  

			
	Example 2:	  	Change in surplus equals a minus 2.4 percent. Contribution towards total bonus from surplus component equals minus 2.4 percent times 2.00 equals minus 4.8 percent.

  

			
	Example 3:	  	Change in surplus equals a plus 10.7 percent. Contribution towards total bonus from surplus component equals 10.7 percent times 1.00 equals 10.7 percent.

  

 COMBINED RATIO 
  
 The component for combined ratio is based on EMC’s consolidated combined ratio relative to a target combined ratio on a trade basis, adjusted by a comparison of the
EMC combined ratio to that of the industry. 
  
 Refer to page 44 for current
target combined ratio and maximum combined ratio. 
  
 The target ratio is subject
to Committee approval each year. For each 1.0 percent change in the combined ratio, the bonus contribution changes 5.0 percent subject to a maximum contribution of plus 65.0 percent and a minimum contribution of minus 40.0 percent. 
  
 First determine EMC’s relationship to the industry by subtracting EMC’s combined
ratio from that of the industry. 
  
 The initial Industry estimate published in
December or January by A.M. Best will be the number used in the calculation. Adjustments will be made as required when A.M. Best releases final numbers, generally in March. 
  
 If the result is a positive number, subtract result (not to exceed 3.0 percent) from EMC’s combined ratio to obtain adjusted combined
ratio. Subtract adjusted combined ratio from target combined ratio, add 6.0, multiply by 5.00 to equal the bonus produced by the combined ratio component. 
  
 If the result is a negative number or 0.0, no adjustment is necessary and the EMC combined ratio is the adjusted combined ratio. Subtract the adjusted combined ratio from
the target combined ratio, add 6.0, multiply by 5.00 to equal the bonus produced by the combined ratio component. 
  
 The combined ratio formula is determined as follows: 
 Target combined ratio
minus the adjusted combined ratio plus 6.0 times 5.00. 
  
 In the examples below,
a target combined ratio of 103.0 is used. 
  

			
	Example 1:	  	 Industry ratio equals 101.6 percent.
 EMC ratio equals
97.1 percent.
 Adjustment * 101.6 minus 97.1 equals 3.0 (maximum adjustment allowed).
 Adjusted ratio * 97.1 minus 3.0 equals 94.1 percent. Target ratio equals 103.0 percent.
 103.0 percent minus 94.1
percent equals 8.9 plus 6 equals 14.9 times 5.00 equals 74.5 percent. (Capped at 65.0)

  
 The contribution towards total bonus
from the combined ratio component equals 65.0 percent. 
  

			
	Example 2:	  	 Industry ratio equals 101.6 percent.
 EMC ratio equals
100.1 percent.
 Adjustment * 101.6 minus 100.1 equals 1.5 percent.
 Adjusted ratio * 100.1 minus 1.5 equals 98.6 percent.
 Target ratio equals 103.0 percent.
 103.0 percent minus 98.6 percent equals 4.4 percent plus 6.0 equals 10.4 percent times 5.00 equals 
 52.0 percent.

  
 The contribution towards the total
bonus from the combined ratio component equals 52.0 percent. 
  

			
	Example 3:	  	 Industry ratio equals 101.6 percent.
 EMC ratio equals
110.1 percent.
 Adjustment - None (If EMC performance is worse than the industry average, use the EMC ratio in the formula).
 Adjusted ratio * 110.1.
 Target ratio equals 103.0 percent.

103.0 percent minus 110.1 percent equals minus 7.1 plus 6.0 equals minus 1.1 times 5.00 equals minus 5.5.

  
 The contribution towards the total
bonus from the combined ratio component equals minus 5.5 percent. 
  
 Assuming each example represents one year, the bonus for the three years would be as follows: 
  

										
	 Component

	  	Example 1

	 	 	Example 2

	 	 	Example 3

	 
	 Written Premium
	  	6.0	%	 	-3.0	%	 	15.0	%
	 Surplus
	  	4.6	%	 	-4.8	%	 	10.7	%
	 Combined Ratio
	  	65.0	%	 	52.0	%	 	-5.5	%
	 	  	
	
	 	
	
	 	
	

	 Total Bonus
	  	50.0	%	 	44.2	%	 	20.2	%

  

	*	Maximum bonus for Vice President is 50.0 percent. 

  
 This represents the bonus for Vice Presidents. Factors would be applied as follows to arrive at the bonus calculations for Senior Vice Presidents, Executive Vice
Presidents, and President. 
  

												
	 Position

	  	 	  	Example 1

	 	 	Example 2

	 	 	Example 3

	 
	 Vice President
	  	 	  	50.0	%	 	44.2	%	 	20.2	%
	 Senior VP
	  	Multiply by 1.10	  	55.0	%	 	51.3	%	 	22.2	%
	 Executive VP
	  	Multiply by 1.20	  	60.0	%	 	55.9	%	 	24.2	%
	 President
	  	Multiply by 1.30	  	65.0	%	 	60.6	%	 	26.3	%

  
 MAXIMUM BONUS 
  
 For Vice Presidents, the total bonus is the sum of the three components subject to a maximum
of 50 percent of salary. 
  

				
	 	  	Maximum Bonus

	 
	 For Vice Presidents, the percent of salary is
	  	50.0	%
	 For Senior Vice Presidents, multiply the bonus percentage by 1.10.
	  	55.0	%
	 For Executive Vice Presidents, multiply the bonus percentage by 1.20.
	  	60.0	%
	 For President, multiply the bonus percentage by 1.30.
	  	65.0	%

  
 EXECUTIVES ELIGIBLE
FOR BONUS 
  

							
	 Vice Presidents

	 	 Senior VP

	 	 Executive VP

	 	 President

	 Mark E. Reese
	 	Richard L. Gass	 	Ronald W. Jean	 	Bruce G. Kelley
	 Richard W. Hoffmann
	 	David O. Narigon	 	William A. Murray	 	 
	 Douglas J. Zmolek
	 	Raymond W. Davis	 	 	 	 
	 A. Beech Turner
	 	Donald D. Klemme	 	 	 	 
	 Jeffrey T. Dahms
	 	Kevin Hovick	 	 	 	 
	 	 	Steven C. Peck	 	 	 	 

  

 PLAN ADMINISTRATION 
  

	1.	An executive must be on the payroll a minimum of six months before he/she is eligible for a bonus payment. 

  

	2.	An executive terminating employment with the companies before the established date for the payment of bonuses will not be paid a bonus. 

  

	3.	Executives retiring or becoming deceased or disabled before the established date for the payment of bonuses will receive a bonus on the basis of the portion of the year he/she was
on the payroll. 

  

	4.	If an executive becomes a member of the Policy Committee at some time during the year, they will receive a prorata bonus for that portion of the year they are a member.

  

	5.	If an executive is promoted during the year and/or given a salary increase, the bonus will be prorated on the basis of the position and/or the salaries paid for the specific
position. 

  

	6.	Deductions for federal and state income taxes, and FICA, if applicable, will be made from each bonus on the basis of IRS regulations. 

  

	7.	The Executive Compensation Committee may, at its discretion adjust the bonus calculation for unusual or extenuating circumstances. 

  

	8.	The EMC Employee Contingent Salary Plan provides that employees eligible under a separate “bonus” program will receive the larger of the “bonus” and the
“contingent salary” for the plan year. In the unlikely event the “contingent salary” is larger than the “senior executive bonus” the Executive Compensation Committee may, at its discretion, approve payment of the
“contingent salary” in lieu of the “senior executive bonus”. 

  

	9.	If there is a disagreement or misunderstanding of the basis for the bonus or in the calculation in the amounts, the decision of the Senior Executive Compensation and Incentive Stock
Option Committee will be final. 

  
 2004 EXECUTIVE
BONUS PLAN 
  
 Approved Factors 
  

	 	•	Written Premium Growth Target = +4.0% 

  

	 	•	Target Combined Ratio = 98.0 

  

	 	•	Maximum Combined Ratio = 104.0

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