FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-10816
MGIC INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1486475
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 E. KILBOURN AVENUE 53202
MILWAUKEE, WISCONSIN (Zip Code)
(Address of principal executive offices)
(414) 347-6480
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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
(or for such shorter period that the registrant was required to
file such reports), 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 latest practicable date.
CLASS OF STOCK PAR VALUE DATE NUMBER OF SHARES
- -------------- --------- ---- ----------------
Common stock $1.00 7/31/99 109,126,978
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MGIC INVESTMENT CORPORATION
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of
June 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statement of Operations for the Three and Six
Month Periods Ended June 30, 1999 and 1998 (Unaudited) 4
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 22-23
Item 5. Other Information 23-24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
INDEX TO EXHIBITS 26
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1999 (Unaudited) and December 31, 1998
June 30, December 31,
1999 1998
-------- ------------
ASSETS (In thousands of dollars)
- ------
Investment portfolio:
Securities, available-for-sale, at market value:
Fixed maturities $2,661,837 $2,602,870
Equity securities 18,728 4,627
Short-term investments 142,865 172,209
---------- ----------
Total investment portfolio 2,823,430 2,779,706
Cash 3,994 4,650
Accrued investment income 43,440 41,477
Reinsurance recoverable on loss reserves 40,450 45,527
Reinsurance recoverable on unearned premiums 6,879 8,756
Home office and equipment, net 33,688 32,400
Deferred insurance policy acquisition costs 23,105 24,065
Investments in joint ventures 97,856 75,246
Other assets 45,494 38,714
---------- ----------
Total assets $3,118,336 $3,050,541
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Loss reserves $ 686,634 $ 681,274
Unearned premiums 173,500 183,739
Notes payable (note 2) 417,000 442,000
Other liabilities 65,561 102,937
---------- ----------
Total liabilities 1,342,695 1,409,950
---------- ----------
Contingencies (note 3)
Shareholders' equity:
Common stock, $1 par value, shares authorized
300,000,000; shares issued 121,110,800;
shares outstanding, 6/30/99 - 109,077,962;
1998 - 109,003,032 121,111 121,111
Paid-in surplus 215,994 217,022
Treasury stock (shares at cost, 6/30/99 - 12,032,838;
1998 - 12,107,768) (479,476) (482,465)
Accumulated other comprehensive income - unrealized
appreciation in investments, net of tax 19,762 94,572
Retained earnings 1,898,250 1,690,351
---------- ----------
Total shareholders' equity 1,775,641 1,640,591
---------- ----------
Total liabilities and shareholders' equity $3,118,336 $3,050,541
========== ==========
See accompanying notes to consolidated financial statements.
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MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three and Six Month Periods Ended June 30, 1999 and 1998
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars,
except per share data)
Revenues:
Premiums written:
Direct $200,989 $187,733 $389,335 $365,530
Assumed 1,166 2,168 1,604 4,137
Ceded (5,781) (3,238) (10,554) (6,517)
-------- -------- -------- --------
Net premiums written 196,374 186,663 380,385 363,150
(Increase) decrease in
unearned premiums (1,608) 2,585 8,362 15,919
-------- -------- -------- --------
Net premiums earned 194,766 189,248 388,747 379,069
Investment income, net of
expenses 38,627 35,325 75,542 69,714
Realized investment gains, net 1,212 946 3,353 11,241
Other revenue 15,326 12,507 28,956 21,968
-------- -------- -------- --------
Total revenues 249,931 238,026 496,598 481,992
-------- -------- -------- --------
Losses and expenses:
Losses incurred, net 30,941 52,514 75,173 111,952
Underwriting and other
expenses 51,949 45,532 105,182 90,690
Interest expense 4,644 3,456 10,042 7,086
Ceding commission (565) (929) (926) (1,266)
-------- -------- -------- --------
Total losses and expenses 86,969 100,573 189,471 208,462
-------- -------- -------- --------
Income before tax 162,962 137,453 307,127 273,530
Provision for income tax 50,028 42,241 93,775 84,271
-------- -------- -------- --------
Net income $112,934 $ 95,212 $213,352 $189,259
======== ======== ======== ========
Earnings per share (note 4):
Basic $ 1.04 $ 0.83 $ 1.96 $ 1.66
======== ======== ======== ========
Diluted $ 1.02 $ 0.82 $ 1.94 $ 1.64
======== ======== ======== ========
Weighted average common shares
outstanding - diluted (shares
in thousands, note 4) 110,254 115,713 110,129 115,727
======== ======== ======== ========
Dividends per share $ 0.025 $ 0.025 $ 0.050 $ 0.050
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
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MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
(Unaudited)
Six Months Ended
June 30,
--------------------
1999 1998
---- ----
(In thousands of dollars)
Cash flows from operating activities:
Net income $213,352 $189,259
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred insurance policy
acquisition costs 8,180 11,249
Increase in deferred insurance policy
acquisition costs (7,220) (9,358)
Depreciation and amortization 4,723 3,503
Increase in accrued investment income (1,963) (3,798)
Decrease in reinsurance recoverable on loss
reserves 5,077 4,304
Decrease in reinsurance recoverable on unearned
premiums 1,877 2,092
Increase in loss reserves 5,360 32,268
Decrease in unearned premiums (10,239) (18,012)
Equity earnings in joint venture (9,150) (4,920)
Other (469) (8,765)
-------- --------
Net cash provided by operating activities 209,528 197,822
-------- --------
Cash flows from investing activities:
Purchase of equity securities (14,101) (3,886)
Purchase of fixed maturities (662,732) (503,774)
Additional investment in joint venture (13,460) (15,000)
Proceeds from sale of equity securities - 116,164
Proceeds from sale or maturity of fixed maturities 490,989 247,210
-------- --------
Net cash used in investing activities (199,304) (159,286)
-------- --------
Cash flows from financing activities:
Dividends paid to shareholders (5,453) (5,705)
Net (decrease) increase in notes payable (25,000) 7,500
Interest payments on notes payable (11,265) (7,342)
Reissuance of treasury stock 1,494 12,210
Repurchase of common stock - (29,300)
-------- --------
Net cash used in financing activities (40,224) (22,637)
-------- --------
Net (decrease) increase in cash and short-term
investments (30,000) 15,899
Cash and short-term investments at beginning
of period 176,859 119,626
-------- --------
Cash and short-term investments at end of period $146,859 $135,525
======== ========
See accompanying notes to consolidated financial statements.
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MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Note 1 - Basis of presentation
The accompanying unaudited consolidated financial
statements of MGIC Investment Corporation (the "Company") and
its wholly-owned subsidiaries have been prepared in accordance
with the instructions to Form 10-Q and do not include all of
the other information and disclosures required by generally
accepted accounting principles. These statements should be
read in conjunction with the consolidated financial statements
and notes thereto for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K for that
year.
The accompanying consolidated financial statements have
not been audited by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of
management such financial statements include all adjustments,
consisting only of normal recurring accruals, necessary to
summarize fairly the Company's financial position and results
of operations. The results of operations for the six months
ended June 30, 1999 may not be indicative of the results that
may be expected for the year ending December 31, 1999.
Note 2 - Notes payable
At June 30, 1999, the Company's outstanding balance of the
notes payable on the 1997 and 1998 credit facilities were $200
million and $217 million, respectively, which approximated
market value. The interest rate on the notes payable varies
based on LIBOR and at June 30, 1999 and December 31, 1998 the
rate was 5.23% and 5.80%, respectively. The weighted average
interest rate on the notes payable for borrowings under the
1997 and 1998 credit agreements was 5.26% per annum for the
six months ended June 30, 1999.
During the first half of 1999, the Company utilized three
interest rate swaps each with a notional amount of $100
million to reduce and manage interest rate risk on a portion
of the variable rate debt under the credit facilities. With
respect to all such transactions, the notional amount of $100
million represents the stated principal balance used as a
basis for calculating payments. On the swaps, the Company
receives a floating rate based on various floating rate
indices and pays fixed rates ranging from 3.74% to 4.13%. Two
of the swaps renew monthly and one expires in October 2000.
Earnings in the first half of 1999 on the swaps of
approximately $1.8 million are netted against interest expense
in the Consolidated Statement of Operations.
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Note 3 - Contingencies
The Company is involved in litigation in the ordinary
course of business. In the opinion of management, the
ultimate disposition of the pending litigation will not have a
material adverse effect on the financial position of the
Company.
Note 4 - Earnings per share
The Company's basic and diluted earnings per share ("EPS")
have been calculated in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
The following is a reconciliation of the weighted-average
number of shares used for basic EPS and diluted EPS.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
(Shares in thousands)
Weighted-average shares
- Basic EPS 109,059 114,144 109,031 114,067
Common stock equivalents 1,195 1,569 1,098 1,660
------- ------- ------- -------
Weighted-average shares
- Diluted EPS 110,254 115,713 110,129 115,727
======= ======= ======= =======
Note 5 - Comprehensive income
The Company's total comprehensive income, as calculated
per Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars)
Net income $112,934 $ 95,212 $213,352 $189,259
Other comprehensive
(loss) gain (57,594) 4,188 (74,810) (6,604)
-------- -------- -------- --------
Total comprehensive
income $ 55,340 $ 99,400 $138,542 $182,655
======== ======== ======== ========
The difference between the Company's net income and total
comprehensive income for the three and six months ended June
30, 1999 and 1998 is due to the change in unrealized
appreciation on investments, net of tax.
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Note 6 - New accounting standards
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which will be effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The
statement establishes accounting and reporting standards for
derivative instruments and for hedging activities.
Management does not anticipate the adoption of SFAS 133 will
have a significant effect on the Company's results of
operations or its financial position due to its limited use of
derivative instruments. (See note 2.)
Note 7 - Subsequent events
The Company adopted a Shareholder Rights Plan on July 22,
1999. Under terms of the plan, on August 9, 1999, Common
Share Purchase Rights were distributed as a dividend at the
rate of one Common Share Purchase Right for each outstanding
share of the Company's Common Stock. The "Distribution Date"
occurs ten days after an announcement that a person has
acquired 15 percent or more of the Company's Common Stock (the
date on which such an acquisition occurs is the "Shares
Acquisition Date" and a person who makes such an acquisition
is an "Acquiring Person"), or ten business days after a person
announces or begins a tender offer in which consummation of
such offer would result in ownership by a person of 15 percent
or more of the Common Stock. The Rights are not exercisable
until the Distribution Date. Each Right will initially
entitle shareholders to buy one-half of one share of the
Company's Common Stock at a Purchase Price of $225 per full
share (equivalent to $112.50 for each one-half share), subject
to adjustment. If there is an Acquiring Person, then each
Right (subject to certain limitations) will entitle its holder
to purchase, at the Rights' then-current Purchase Price, a
number of shares of Common Stock of the Company (or if after
the Shares Acquisition Date, the Company is acquired in a
business combination, common shares of the acquiror) having a
market value at the time equal to twice the Purchase Price.
The Rights will expire on July 22, 2009, subject to extension.
The Rights are redeemable at a price of $.001 per Right at any
time prior to the time a person becomes an Acquiring Person.
Other than certain amendments, the Board of Directors may
amend the Rights in any respect without the consent of the
holders of the Rights.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Three Months Ended June 30, 1999 Compared With Three Months
Ended June 30, 1998
Net income for the three months ended June 30, 1999 was
$112.9 million, compared to $95.2 million for the same period
of 1998, an increase of 19%. Diluted earnings per share for
the three months ended June 30, 1999 was $1.02 compared to
$0.82 in the same period last year, an increase of 24%. The
percentage increase in diluted earnings per share was
favorably affected by the lower adjusted shares outstanding at
June 30, 1999 as a result of common stock repurchased by the
Company during the second half of 1998. See note 4 to the
consolidated financial statements. As used in this report,
the term "Company" means the Company and its consolidated
subsidiaries which do not include joint ventures in which the
Company has an equity interest.
The amount of new primary insurance written by Mortgage
Guaranty Insurance Corporation ("MGIC") during the three
months ended June 30, 1999 was $12.2 billion, compared to
$10.7 billion in the same period of 1998. Refinancing activity
accounted for 27% of new primary insurance written in the
second quarter of 1999, compared to 32% in the second quarter
of 1998.
The $12.2 billion of new primary insurance written during
the second quarter of 1999 was offset by the cancellation of
$10.2 billion of insurance in force, and resulted in a net
increase of $2.0 billion in primary insurance in force,
compared to new primary insurance written of $10.7 billion,
the cancellation of $11.5 billion, and a net decrease of $0.8
billion in primary insurance in force during the second
quarter of 1998. Direct primary insurance in force was $140.2
billion at June 30, 1999 compared to $138.0 billion at
December 31, 1998 and $137.5 billion at June 30, 1998. In
addition to providing direct primary insurance coverage, the
Company also insures pools of mortgage loans. New pool risk
written during the three months ended June 30, 1999 and June
30, 1998, which was virtually all agency pool insurance, was
$177 million and $148 million, respectively. The Company's
direct pool risk in force at June 30, 1999 was $1.5 billion
compared to $1.1 billion at December 31, 1998 and is expected
to increase as a result of outstanding commitments to write
additional agency pool insurance.
Cancellation activity has historically been affected by
the level of mortgage interest rates and remained high during
the second quarter of 1999 due to favorable mortgage interest
rates which resulted in a decrease in the MGIC persistency
rate (percentage of insurance remaining in force from one
year prior) to 66.6% at June 30, 1999 from 74.7% at June
30, 1998. However, the number of cancellations decreased
during the second quarter resulting in the persistency rate
increasing from 65.8% at March 31, 1999. Future cancellation
activity could also be affected as a result of legislation
that went into effect in July 1999 regarding cancellation of
mortgage insurance.
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Net premiums written were $196.4 million during the second
quarter of 1999, compared to $186.7 million during the second
quarter of 1998. Net premiums earned were $194.8 million for
the second quarter of 1999 compared to $189.2 million for the
same period in 1998. The increase was primarily a result of a
higher percentage of renewal premiums on mortgage loans with
deeper coverages.
Effective March 1, 1999, Fannie Mae changed its mortgage
insurance requirements for certain fixed-rate mortgages
approved by Fannie Mae's automated underwriting service. The
changes permit lower coverage percentages on these loans than
the deeper coverage percentages that went into effect in 1995.
In March 1999, Freddie Mac announced that it was implementing
similar changes. MGIC's premium rates vary with the depth of
coverage. While lower coverage percentages result in lower
premium revenue, lower coverage percentages should also result
in lower incurred losses at the same level of claim incidence.
MGIC's premium revenues could also be affected to the extent
Fannie Mae and Freddie Mac are compensated for assuming
default risk that would otherwise be insured by the private
mortgage insurance industry. These Government Sponsored
Enterprises (GSEs) introduced programs in 1998 and 1999 under
which a delivery fee could be paid to them, with mortgage
insurance coverage reduced below the coverage that would be
required in the absence of the delivery fee.
In March 1999, the Office of Federal Housing Enterprise
Oversight ("OFHEO") released a proposed risk-based capital
stress test for the GSEs. One of the elements of the proposed
stress test is that future claim payments made by a private
mortgage insurer on GSE loans are reduced below the amount
provided by the mortgage insurance policy to reflect the risk
that the insurer will fail to pay. Claim payments from an
insurer whose claims-paying ability rating is "AAA" are
subject to a 10% reduction over the 10-year period of the
stress test, while claim payments from a "AA" rated insurer,
such as MGIC, are subject to a 20% reduction. The effect of
the differentiation among insurers is to require the GSEs to
have additional capital for coverage on loans provided by a
private mortgage insurer whose claims-paying rating is less
than "AAA." As a result, there is an incentive for the GSEs to
use private mortgage insurance provided by a "AAA" rated
insurer. The Company does not believe there should be a
reduction in claim payments from private mortgage insurance
nor should there be a distinction between "AAA" and "AA" rated
private mortgage insurers. The proposed stress test covers
many topics in addition to capital credit for private mortgage
insurance. The stress test as a whole has been controversial
in the home mortgage finance industry and is not expected to
become final for some time. The Company cannot predict
whether the portion of the stress test discussed above will be
adopted in its present form.
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Mortgages (newly insured during the first half of 1999 or
in previous periods) equal to approximately 24% of MGIC's new
insurance written during the second quarter of 1999 were
subject to captive mortgage reinsurance and similar
arrangements compared to 12% during the same period in 1998.
Such arrangements entered into during a quarter customarily
include loans newly insured in a prior quarter. As a result,
the percentages cited above would be lower if only the current
quarter's newly insured mortgages subject to such arrangements
were included. The percentage of new insurance written subject
to captive mortgage reinsurance arrangements is expected to
increase during the remainder of 1999 as new transactions
are consummated. At June 30, 1999 approximately 10% of MGIC's
risk in force was subject to captive reinsurance and similar
arrangements compared to 7% at December 31, 1998. In a
February 1999 circular letter, the New York Department of
Insurance said it was in the process of developing guidelines
that would articulate the parameters under which captive
mortgage reinsurance is permissible under New York insurance
law.
Investment income for the second quarter of 1999 was $38.6
million, an increase of 9% over the $35.3 million in the
second quarter of 1998. This increase was primarily the
result of an increase in the amortized cost of average
invested assets to $2.8 billion for the second quarter of 1999
from $2.4 billion for the second quarter of 1998, an increase
of 13%. The portfolio's average pre-tax investment yield was
5.5% for the second quarter of 1999 and 5.8% for the same
period in 1998. The portfolio's average after-tax investment
yield was 4.7% for the second quarter of 1999 and 4.9% for the
same period in 1998. The Company realized gains of $1.2
million during the three months ended June 30, 1999 compared
to realized gains of $0.9 million during the same period in
1998 resulting primarily from the sale of fixed maturities in
both periods.
Other revenue was $15.3 million for the second quarter of
1999, compared with $12.5 million for the same period in 1998.
The increase is primarily the result of an increase in equity
earnings from Credit-Based Asset Servicing and
Securitization LLC and Litton Loan Servicing LP
(collectively, "C-BASS"), a joint venture with Enhance
Financial Services Group Inc. In accordance with generally
accepted accounting principles, each quarter C-BASS is
required to estimate the value of its mortgage-related assets
and recognize in earnings the resulting net unrealized gains
and losses. Including open trades, C-BASS's mortgage-related
assets were $682 million at June 30, 1999 and are expected to
increase in the future. Substantially all of C-BASS's
mortgage-related assets do not have readily ascertainable
market values and as a result their value for financial
statement purposes is estimated by the management of C-BASS.
Net losses incurred decreased 41% to $30.9 million during
the second quarter of 1999 from $52.5 million during the
second quarter of 1998. Such decrease was primarily attributed
to an increase in the redundancy in prior year loss reserves,
a decline in losses paid and notice inventory, continued
improvement in California and generally strong economic
conditions throughout the country. The redundancy results from
actual claim rates and actual claim amounts being lower than
those estimated by the Company when originally establishing
the reserve at December 31, 1998. The primary notice
inventory declined from 28,165 at March 31, 1999 to 25,573 at
June 30, 1999. The pool notice inventory increased from 7,382
at March 31, 1999 to 8,015 at June 30, 1999, attributable to
defaults on new agency pool insurance written during 1997 and
1998. At June 30,
PAGE 11
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1999, 68% of MGIC's insurance in force was written during the
preceding fourteen quarters, compared to 63% at June 30, 1998.
The highest claim frequency years have typically been the
third through fifth year after the year of loan origination.
However, the pattern of claims frequency for refinance loans
may be different from the historical pattern of other loans.
Underwriting and other expenses increased to $51.9
million in the second quarter of 1999 from $45.5 million in
the second quarter of 1998, an increase of 14%. This increase
was primarily due to increases associated with contract and
field office underwriting expenses.
Interest expense increased to $4.6 million in the second
quarter of 1999 from $3.5 million during the same period in
1998 due to higher outstanding notes payable, the proceeds of
which were used to repurchase common stock during the second
half of 1998.
The Company utilized financial derivative transactions
during the second quarter of 1999 consisting of interest rate
swaps to reduce and manage interest rate risk on its notes
payable. During the second quarter of 1999, earnings on such
transactions aggregated approximately $1.2 million and were
netted against interest expense. See note 2 to the
consolidated financial statements.
The consolidated insurance operations loss ratio was 15.9%
for the second quarter of 1999 compared to 27.7% for the
second quarter of 1998. The consolidated insurance operations
expense and combined ratios were 20.4% and 36.3%,
respectively, for the second quarter of 1999 compared to 19.1%
and 46.8% for the second quarter of 1998.
The effective tax rate was 30.7% in the second quarter of
1999 and 1998. During both periods, the effective tax rate
was below the statutory rate of 35%, reflecting the benefits
of tax-preferenced investment income.
Six Months Ended June 30, 1999 Compared With Six Months Ended
June 30, 1998
Net income for the six months ended June 30, 1999 was
$213.4 million, compared to $189.3 million for the same period
of 1998, an increase of 13%. Diluted earnings per share for
the six months ended June 30, 1999 was $1.94 compared to $1.64
in the same period last year, an increase of 18%. The
percentage increase in diluted earnings per share was
favorably affected by the lower adjusted shares outstanding at
June 30, 1999 as a result of common stock repurchased by the
Company during the second half of 1998. See note 4 to the
consolidated financial statements.
The amount of new primary insurance written by MGIC during
the six months ended June 30, 1999 was $24.2 billion, compared
to $19.2 billion in the same period of 1998. Refinancing
activity accounted for 34% of new primary insurance written in
both the first half of 1999 and 1998.
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The $24.2 billion of new primary insurance written during
the first half of 1999 was offset by the cancellation of $22.0
billion of insurance in force, and resulted in a net increase
of $2.2 billion in primary insurance in force, compared to new
primary insurance written of $19.2 billion, the cancellation
of $20.2 billion, and a net decrease of $1.0 billion in
primary insurance in force during the first half of 1998.
Direct primary insurance in force was $140.2 billion at June
30, 1999 compared to $138.0 billion at December 31, 1998 and
$137.5 billion at June 30, 1998. In addition to providing
direct primary insurance coverage, the Company also insures
pools of mortgage loans. New pool risk written during the six
months ended June 30, 1999 and June 30, 1998, which was
virtually all agency pool insurance, was $374 million and $292
million, respectively. The Company's direct pool risk in force
at June 30, 1999 was $1.5 billion compared to $1.1 billion at
December 31, 1998 and is expected to increase as a result of
outstanding commitments to write additional agency pool
insurance.
Cancellation activity has historically been affected by
the level of mortgage interest rates and remained high during
the first half of 1999 due to favorable mortgage interest
rates which resulted in a decrease in the MGIC persistency
rate (percentage of insurance remaining in force from one
year prior) to 66.6% at June 30, 1999 from 74.7% at June
30, 1998. However, the number of cancellations decreased
during the second quarter resulting in the persistency rate
increasing from 65.8% at March 31, 1999. Future cancellation
activity could also be affected as a result of legislation
that went into effect in July 1999 regarding cancellation of
mortgage insurance.
Net premiums written were $380.4 million during the first
half of 1999, compared to $363.2 million during the first half
of 1998. Net premiums earned were $388.7 million for the
first half of 1999 compared to $379.1 million for the same
period in 1998. The increase was primarily a result of a
higher percentage of renewal premiums on mortgage loans with
deeper coverages.
For a discussion of certain programs with the GSEs
regarding reduced mortgage insurance requirements and for a
discussion of proposed capital regulations for the GSEs, see
second quarter discussion.
Mortgages (newly insured during the first half of 1999 or
in previous periods) equal to approximately 27% of MGIC's new
insurance written during the first half of 1999 were subject
to captive mortgage reinsurance and similar arrangements
compared to 15% during the same period in 1998. Such
arrangements entered into during a reporting period
customarily include loans newly insured in a prior reporting
period. As a result, the percentages cited above would be
lower if only the current reporting period's newly insured
mortgages subject to such arrangements were included. The
percentage of new insurance written subject to captive
mortgage reinsurance arrangements is expected to increase
during the remainder of 1999 as new transactions are
consummated. At June 30, 1999 approximately 10% of MGIC's
risk in force was subject to captive reinsurance and similar
arrangements compared to 7% at December 31, 1998. In a
February 1999 circular letter, the New York Department of
Insurance said it was in the process of developing guidelines
that would articulate the parameters under which captive
mortgage reinsurance is permissible under New York insurance
law.
PAGE 13
<PAGE>
Investment income for the first half of 1999 was $75.5
million, an increase of 8% over the $69.7 million in the first
half of 1998. This increase was primarily the result of an
increase in the amortized cost of average invested assets to
$2.7 billion for the first half of 1999 from $2.4 billion for
the first half of 1998, an increase of 15%. The portfolio's
average pre-tax investment yield was 5.5% for the first half
of 1999 and 5.8% for the same period in 1998. The portfolio's
average after-tax investment yield was 4.7% for the first half
of 1999 and 4.9% for the same period in 1998. The Company
realized gains of $3.4 million during the six months ended
June 30, 1999 resulting primarily from the sale of fixed
maturities compared to realized gains of $11.2 million during
the same period in 1998 resulting primarily from the sale of
equity securities.
Other revenue was $29.0 million for the first half of
1999, compared with $22.0 million for the same period in 1998.
The increase is primarily the result of an increase in equity
earnings from C-BASS, a joint venture with Enhance Financial
Services Group Inc. and an increase in contract underwriting
revenue. In accordance with generally accepted accounting
principles, each quarter C-BASS is required to estimate the
value of its mortgage-related assets and recognize in earnings
the resulting net unrealized gains and losses. Including open
trades, C-BASS's mortgage-related assets were $682 million at
June 30, 1999 and are expected to increase in the future.
Substantially all of C-BASS's mortgage-related assets do not
have readily ascertainable market values and as a result
their value for financial statement purposes is estimated by
the management of C-BASS.
Net losses incurred decreased 33% to $75.2 million during
the first half of 1999 from $112.0 million during the first
half of 1998. Such decrease was primarily attributed to an
increase in the redundancy in prior year loss reserves, a
decline in losses paid and notice inventory, continued
improvement in California and generally strong economic
conditions throughout the country. The redundancy results
from actual claim rates and actual claim amounts being lower
than those estimated by the Company when originally
establishing the reserve at December 31, 1998. The primary
notice inventory declined from 29,253 at December 31, 1998 to
25,573 at June 30, 1999. The pool notice inventory increased
from 6,524 at December 31, 1998 to 8,015 at June 30, 1999,
attributable to defaults on new agency pool insurance written
during 1997 and 1998. At June 30, 1999, 68% of MGIC's
insurance in force was written during the preceding fourteen
quarters, compared to 63% at June 30, 1998. The highest claim
frequency years have typically been the third through fifth
year after the year of loan origination. However, the pattern
of claims frequency for refinance loans may be different from
the historical pattern of other loans.
Underwriting and other expenses increased to $105.2
million in the first half of 1999 from $90.7 million in the
first half of 1998, an increase of 16%. This increase was
primarily due to increases associated with contract and field
office underwriting expenses.
Interest expense increased to $10.0 million in the first
half of 1999 from $7.1 million during the same period in 1998
due to higher outstanding notes payable, the proceeds of which
were used to repurchase common stock during the second half of
1998.
PAGE 14
<PAGE>
The Company utilized financial derivative transactions
during the first half of 1999 consisting of interest rate
swaps to reduce and manage interest rate risk on its notes
payable. During the first half of 1999, earnings on such
transactions aggregated approximately $1.8 million and were
netted against interest expense. See note 2 to the
consolidated financial statements.
The consolidated insurance operations loss ratio was 19.3%
for the first half of 1999 compared to 29.5% for the first
half of 1998. The consolidated insurance operations expense
and combined ratios were 21.6% and 40.9%, respectively, for
the first half of 1999 compared to 19.5% and 49.0% for the
first half of 1998.
The effective tax rate was 30.5% in the first half of
1999, compared to 30.8% in the first half of 1998. During
both periods, the effective tax rate was below the statutory
rate of 35%, reflecting the benefits of tax-preferenced
investment income. The lower effective tax rate in 1999
resulted from a higher percentage of total income before tax
being generated from tax-preferenced investments.
Liquidity and Capital Resources
The Company's consolidated sources of funds consist
primarily of premiums written and investment income. The
Company generated positive cash flows from operating
activities of $209.5 million for the six months ended June 30,
1999, as shown on the Consolidated Statement of Cash Flows.
Funds are applied primarily to the payment of claims and
expenses. The Company's business does not require significant
capital expenditures on an ongoing basis. Positive cash flows
are invested pending future payments of claims and other
expenses; cash flow shortfalls, if any, could be funded
through sales of short-term investments and other investment
portfolio securities.
Consolidated total investments were $2.8 billion at both
June 30, 1999 and December 31, 1998. The investment portfolio
includes unrealized gains on securities marked to market at
June 30, 1999 and December 31, 1998 of $30.4 million and
$145.5 million, respectively. As of June 30, 1999, the
Company had $142.9 million of short-term investments with
maturities of 90 days or less. In addition, at June 30,
1999, based on amortized cost, the Company's total
investments, which were primarily comprised of fixed
maturities, were approximately 99% invested in "A" rated and
above, readily marketable securities, concentrated in
maturities of less than 15 years.
The Company's investments in C-BASS and Sherman Financial
Group LLC ("joint ventures") were $97.9 million in aggregate
at June 30, 1999, which includes the Company's share of the
joint ventures' earnings since their inception. MGIC had
guaranteed one half of a $50 million credit facility for C-
BASS that was repaid in July 1999. Sherman Financial Group
LLC, another joint venture with Enhance Financial Services
Group Inc., is engaged in the business of purchasing,
servicing and securitizing delinquent unsecured consumer
assets such as credit card loans, Chapter 13 bankruptcy debt,
telecommunications receivables, student loans and auto
deficiencies. Effective in May 1999, MGIC began guaranteeing
one half of a $50 million Sherman credit facility that will
expire in December 1999. The Company expects that it will
provide additional funding to the joint ventures.
PAGE 15
<PAGE>
Consolidated loss reserves increased slightly to $686.6
million at June 30, 1999 from $681.3 million at December 31,
1998 reflecting an increase in the estimated number of loans
in default. The primary notice inventory has declined as
mentioned earlier, offset by an increase in management's
estimate of the number of defaults incurred but not reported.
Consistent with industry practices, the Company does not
establish loss reserves for future claims on insured loans
which are not currently in default.
Consolidated unearned premiums decreased $10.2 million
from $183.7 million at December 31, 1998 to $173.5 million at
June 30, 1999, primarily reflecting the continued high level
of monthly premium policies written, for which there is no
unearned premium. Reinsurance recoverable on unearned
premiums decreased $1.9 million to $6.9 million at June 30,
1999 from $8.8 million at December 31, 1998, primarily
reflecting the reduction in unearned premiums.
Consolidated shareholders' equity increased to $1.8
billion at June 30, 1999, from $1.6 billion at December 31,
1998, an increase of 8%. This increase consisted of $213.4
million of net income during the first six months of 1999 and
$1.9 million from the reissuance of treasury stock offset by a
decrease in net unrealized gains on investments of $74.8
million, net of tax, and dividends declared of $5.5 million.
MGIC is the principal insurance subsidiary of the Company.
MGIC's risk-to-capital ratio was 11.9:1 at June 30, 1999
compared to 12.9:1 at December 31, 1998. The decrease was due
to MGIC's increased policyholders' reserves, partially offset
by the net additional risk in force of $737.9 million, net of
reinsurance, during the first six months of 1999.
The Company's combined insurance risk-to-capital
ratio was 12.8:1 at June 30, 1999, compared to 13.6:1 at
December 31, 1998. The decrease was due to the same reasons
as described above.
The risk-to-capital ratios set forth above have been
computed on a statutory basis. However, the methodology used
by the rating agencies to assign claims-paying ability ratings
permits less leverage than under statutory requirements. As a
result, the amount of capital required under statutory
regulations may be lower than the capital required for rating
agency purposes. In addition to capital adequacy, the rating
agencies consider other factors in determining a mortgage
insurer's claims-paying rating, including its competitive
position, business outlook, management, corporate strategy,
and historical and projected operating performance.
For certain material risks of the Company's business, see
"Risk Factors" below.
Risk Factors
The Company and its business may be materially affected by
the factors discussed below. These factors may also cause
actual results to differ materially from the results
contemplated by forward looking statements that the Company
may make.
PAGE 16
<PAGE>
Reductions in the volume of low down payment home mortgage
----------------------------------------------------------
originations may adversely affect the amount of private
- --------------------------------------------------------------
mortgage insurance (PMI) written by the PMI industry. The
- --------------------------------------------------------
factors that affect the volume of low down payment mortgage
originations include:
- the level of home mortgage interest rates,
- the health of the domestic economy as well as
conditions in regional and local economies; housing
affordability; population trends, including the rate of
household formation,
- the rate of home price appreciation, which in times of
heavy refinancing affects whether refinance loans have
loan-to-value ratios that require PMI, and
- government housing policy encouraging loans to first-
time homebuyers.
By selecting alternatives to PMI, lenders and investors
---------------------------------------------------------
may adversely affect the amount of PMI written by the PMI
- --------------------------------------------------------------
industry. These alternatives include:
- ---------
- government mortgage insurance programs, including
those of the Federal Housing Administration and the
Veterans Administration,
- holding mortgages in portfolio and self-insuring,
- use of credit enhancements by investors, including
Fannie Mae and Freddie Mac, other than PMI or using
other credit enhancements in conjunction with reduced
levels of PMI coverage, and
- mortgage originations structured to avoid PMI, such as
a first mortgage with an 80% loan-to-value ratio and a
second mortgage with a 10% loan-to-value ratio (referred
to as an 80-10-10 loan) rather than a first mortgage
with a 90% loan-to-value ratio.
Fannie Mae and Freddie Mac have a material impact on the
----------------------------------------------------------
PMI industry. Because Fannie Mae and Freddie Mac are the
- --------------
largest purchasers of low down payment conventional mortgages,
the business practices of these GSEs have a direct effect on
private mortgage insurers. These practices affect the entire
relationship between the GSEs and mortgage insurers and
include:
- the level of PMI coverage, subject to the limitations
of the GSE's charters when PMI is used as the required
credit enhancement on low down payment mortgages,
PAGE 17
<PAGE>
- whether the mortgage lender or the GSE chooses the
mortgage insurer providing coverage,
- whether a GSE will give mortgage lenders an incentive
to select a mortgage insurer which has a "AAA" claims-
paying ability rating to benefit from the lower capital
required of the GSE under OFHEO's proposed stress test
when a mortgage is insured by a "AAA" company,
- the underwriting standards that determine what loans
are eligible for purchase by the GSEs, which thereby
affect the quality of the risk insured by the mortgage
insurer, as well as the availability of mortgage loans,
- the terms on which mortgage insurance coverage can be
canceled before reaching the cancellation thresholds
established by law, and
- the circumstances in which mortgage servicers must
perform activities intended to avoid or mitigate loss on
insured mortgages that are delinquent.
The Company expects the level of competition within the
---------------------------------------------------------
PMI industry to remain intense. Competition for PMI premiums
- --------------------------------
occurs not only among private mortgage insurers but
increasingly with mortgage lenders through captive mortgage
reinsurance transactions in which a lender's affiliate
reinsures a portion of the insurance written by a private
mortgage insurer on mortgages originated by the lender. The
level of competition within the PMI industry has also
increased as many large mortgage lenders have reduced the
number of private mortgage insurers with whom they do business
at the same time as consolidation among mortgage lenders has
increased the share of the mortgage lending market held by
large lenders.
Changes in interest rates, house prices and cancellation
---------------------------------------------------------
policies may materially affect persistency. In each year,
- ---------------------------------------------
most of MGIC's premiums are from insurance that has been
written in prior years. As a result, the length of time
insurance remains in force is an important determinant of
revenues. The factors affecting persistency of the insurance
in force include:
- the level of current mortgage interest rates compared
to the mortgage coupon rates on the insurance in force,
which affects the vulnerability of the insurance in
force to refinancings, and
- mortgage insurance cancellation policies of mortgage
investors along with the rate of home price appreciation
experienced by the homes underlying the mortgages in the
insurance in force.
PAGE 18
<PAGE>
The strong economic climate that has existed throughout
---------------------------------------------------------
the United States for some time has favorably impacted losses
- --------------------------------------------------------------
and encouraged competition to assume default risk. Losses
- ------------------------------------------------------
result from events that adversely affect a borrower's ability
to continue to make mortgage payments, such as unemployment,
and whether the home of a borrower who defaults on his
mortgage can be sold for an amount that will cover unpaid
principal and interest and the expenses of the sale.
Favorable economic conditions generally reduce the likelihood
that borrowers will lack sufficient income to pay their
mortgages and also favorably affect the value of homes,
thereby reducing and in some cases even eliminating a loss
from a mortgage default. A significant deterioration in
economic conditions would adversely affect MGIC's losses. The
low level of losses that has recently prevailed in the private
mortgage insurance industry has encouraged competition to
assume default risk through captive reinsurance arrangements,
self-insurance, 80-10-10 loans and other means.
Litigation against mortgage lenders and settlement service
----------------------------------------------------------
providers has been increasing. In recent years, consumers
- --------------------------------
have brought a growing number of lawsuits against home
mortgage lenders and settlement service providers seeking
monetary damages. The Real Estate Settlement Procedures Act
gives home mortgage borrowers the right to bring lawsuits
seeking damages of three times the amount of the charge paid
for a settlement service involved in a violation of this law.
Under rules adopted by the United States Department of Housing
and Urban Development, "settlement services" are services
provided in connection with settlement of a mortgage loan,
including services involving mortgage insurance.
The pace of change in the home mortgage lending and
---------------------------------------------------------
mortgage insurance industries will likely accelerate. The
- --------------------------------------------------------
Company expects the processes involved in home mortgage
lending will continue to evolve through greater use of
technology. This evolution could effect fundamental changes
in the way home mortgages are distributed. Lenders who are
regulated depositary institutions could gain expanded
insurance powers if financial modernization proposals become
law. The capital markets are beginning to emerge as providers
of insurance in competition with traditional insurance
companies. These trends and others increase the level of
uncertainty attendant to the PMI business, demand rapid
response to change and place a premium on innovation.
PAGE 19
<PAGE>
Year 2000 Compliance
All of the Company's information technology systems ("IT
Systems"), including all of its "business critical" IT
Systems, have been assessed, reprogrammed, if necessary, and
tested for Year 2000 compliance. The Company completed
internal testing of all IT Systems for Year 2000 compliance in
the second quarter of 1999. All reprogrammed systems have
been implemented, i.e., are currently in use at the Company.
In order to maintain Year 2000 compliance during the second
half of 1999, the Company will be testing all changes which it
makes to its systems under Year 2000 conditions.
Some of the Company's "business critical" IT Systems
interface with computer systems of third parties. The
Company, Fannie Mae, Freddie Mac and many of these third
parties participated in the Mortgage Bankers Association Year
2000 Readiness Test (the "MBA Test"). The MBA Test, conducted
during the first half of 1999, was designed to help mortgage
industry participants evaluate interaction of their computer
systems in a Year 2000 environment. Through the MBA Test and
additional independent testing efforts, the Company has
completed the Year 2000 readiness evaluation of its key
automated interfaces with customers representing more than 90%
of the Company's in-force policies.
All costs incurred through June 1999 for IT Systems for
Year 2000 compliance have been expensed and were immaterial.
The costs of the remaining retesting and implementation are
expected to be immaterial.
Telecommunications services and electricity are essential
to the Company's ability to conduct business. The Company's
long-distance voice and data telecommunications suppliers and
the local telephone company serving the Company's owned
headquarters and warehouse facilities have written to the
Company to the effect that their respective systems will be
Year 2000 compliant. The electric company serving these
facilities has given the Company assurance that it will also
be Year 2000 compliant. In addition, the Company has made
arrangements to acquire back-up power for its headquarters.
The Company has received written assurance regarding Year 2000
compliance from landlords of the Company's underwriting
service centers and local telephone companies.
The Company has long practiced contingency planning to
address business disruption risks and has procedures for
planning and executing contingency measures to provide for
business continuity in the event of any circumstance that
results in disruption to the Company's headquarters, warehouse
facilities and leased workplace environments, including lack
of utility services, transportation disruptions, and service
provider failures. The Company has developed additional plans
for the "special case" of business disruption due to Year 2000
compliance issues. These plans address continuity measures in
five areas: physical building environment, including
conducting operations at off-site facilities; business
operations units, as discussed below; external factors over
which the Company does not have control but can implement
measures to minimize adverse impact on the Company's business;
application system restoration priorities for the Company's
computer systems; and contingencies specifically targeted
towards monitoring Company facilities and systems at year-end
1999.
PAGE 20
<PAGE>
The business unit recovery plans address resumption of
business in the worst case scenario of a total loss to a
Company facility, including the inability to utilize
computerized systems.
In view of the timing and scope of the MBA Test and other
testing, the Company's contingency planning does not currently
include developing special procedures with individual third
parties if they are not themselves Year 2000 compliant. If
the Company is unable to do business with such third parties
electronically, it would seek to do business with them on a
paper basis. Without knowing the identity of non-compliant
third parties and the amount of transactions occurring between
the Company and them, the Company cannot evaluate the effects
on its business if it were necessary to substitute paper
business processes for electronic business processes with such
third parties. Among other effects, Year 2000 non-compliance
by such third parties could delay receipt of renewal premiums
by the Company or the reporting to the Company of mortgage
loan delinquencies and could also affect the amount of the
Company's new insurance written.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
At June 30, 1999, the Company had no derivative financial
instruments in its investment portfolio. The Company places
its investments in instruments that meet high credit quality
standards, as specified in the Company's investment policy
guidelines; the policy also limits the amount of credit
exposure to any one issue, issuer and type of instrument. At
June 30, 1999, the effective duration of the Company's
investment portfolio was 6.0 years. The effect of a 1%
increase/decrease in market interest rates would result in a
6.0% decrease/increase in the value of the Company's
investment portfolio.
The Company's borrowings under the credit facilities are
subject to interest rates that are variable. Changes in
market interest rates would have minimal impact on the value
of the notes payable. See note 2 to the consolidated
financial statements.
PAGE 21
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the
Company was held on May 6, 1999.
(b) At the Annual Meeting, the following Directors
were elected to the Board of Directors, for a term
expiring at the Annual Meeting of Shareholders
to be held in 2002 or until a successor is
duly elected and qualified:
Mary K. Bush
David S. Engelman
Kenneth M. Jastrow, II
Daniel P. Kearney
William H. Lacy
Directors with continuing terms of office are:
Term expiring 2000:
Karl E. Case
Curt S. Culver
William A. McIntosh
Leslie M. Muma
Peter J. Wallison
Term expiring 2001:
James A. Abbott
James D. Ericson
Daniel Gross
Sheldon B. Lubar
Edward J. Zore
PAGE 22
<PAGE>
(c) Matters voted upon at the Annual Meeting and
the number of shares voted for, against, withheld,
abstaining from voting and broker non-votes were as
follows:
(1) Election of five Directors for a term
expiring in 2002.
FOR WITHHELD
--- --------
Mary K. Bush 93,267,389 366,860
David S. Engelman 93,240,717 393,532
Kenneth M.Jastrow, II 93,240,942 393,307
Daniel P. Kearney 93,241,922 392,327
William H. Lacy 93,232,394 401,855
(2) Ratification of the appointment of
PricewaterhouseCoopers LLP as independent public
accountants for the Company for 1999.
For: 93,423,500
Against: 50,128
Abstaining from Voting: 160,621
There were no broker non-votes on any matter.
(d) Not applicable
ITEM 5. OTHER INFORMATION
Under amendments to the Corporation's Bylaws adopted in
July 1999, a shareholder who desires to bring business before
the Annual Meeting of Shareholders or who desires to nominate
directors at the Annual Meeting must satisfy the following
requirements:
- be a shareholder of record entitled to vote at the Annual
Meeting; and
- give notice to the Company's Secretary in writing that is
received at the Company's principal offices not less than
45 days nor more than 70 days before the first anniversary
of the date set forth in the Company's proxy statement for
the prior Annual Meeting as the date on which the Company
first mailed such proxy materials to shareholders. For the
2000 Annual Meeting, the relevant dates are no later than
February 10, 2000 and no earlier than January 16, 2000.
PAGE 23
<PAGE>
In the case of business other than nominations for directors,
the notice must, among other requirements, briefly describe
such business, the reasons for conducting the business and any
material interest of the shareholder in such business. In the
case of director nominations, the notice must, among other
requirements, give various information about the nominees,
including information that would be required to be included in
a proxy statement of the Company had each such nominee been
proposed for election by the Board of Directors of the
Company.
Under such amendments to the Bylaws, a Special Meeting may
consider only the business included in the notice of meeting
sent to shareholders by the Company. Shareholders who desire
to call a Special Meeting of Shareholders must be holders of
record of shares having at least 10% of the votes entitled to
be cast at the Special Meeting and follow procedures specified
in the Bylaws, which include the Company's Secretary receiving
a written description of the purpose for which the Special
Meeting is to be held.
If a purpose of a Special Meeting is to elect directors, a
shareholder who desires to nominate directors at the Special
Meeting must satisfy the following requirements:
- be a shareholder of record at the time notice of the
Special Meeting is given by the Company and be entitled
to vote at the Special Meeting; and give notice to the
Company's Secretary in writing that is received at the
Company's principal offices no earlier than 90 days
before the Special Meeting and no later than the later
of (i) 60 days before the Special Meeting and (ii) 10
days after the date on which there is a public
announcement of the date of the Special Meeting and
the nominees for director by the Board of Directors
of the Company.
The notice must, among other requirements, give various
information about the nominees, including information that
would be required to be included in a proxy statement of the
Company had each nominee been proposed for election by the
Board of Directors of the Company.
The Company's Bylaws are filed as Exhibit 3. The
description set forth above is qualified in its entirety by
reference to the actual text of the Bylaws.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits listed in the
accompanying Index to Exhibits are filed as part
of this Form 10-Q.
(b) Reports on Form 8-K - A report on Form 8-K
dated July 22, 1999 was filed reporting under
Item 5 the adoption of a Shareholder Rights Plan.
PAGE 24
<PAGE>
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, on
August 12, 1999.
MGIC INVESTMENT CORPORATION
\s\ J. Michael Lauer
-------------------------------
J. Michael Lauer
Executive Vice President and
Chief Financial Officer
\s\ Patrick Sinks
-------------------------------
Patrick Sinks
Vice President, Controller and
Chief Accounting Officer
PAGE 25
<PAGE>
INDEX TO EXHIBITS
(Item 6)
Exhibit
Number Description of Exhibit
- ------- ----------------------
3 By-laws, as amended
10 1991 Stock Incentive Plan, as amended
11.1 Statement Re Computation of Net Income
Per Share
27 Financial Data Schedule
PAGE 26
<PAGE>
EXHIBIT 3
AMENDED AND RESTATED BYLAWS
OF
MGIC INVESTMENT CORPORATION
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may
have such principal and other business offices, either within
or without the State of Wisconsin, as the Board of Directors
may designate or as the business of the corporation may
require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law
to be maintained in the State of Wisconsin may be, but need
not be, identical with the principal office in the State of
Wisconsin, and the address of the registered office may be
changed from time to time by the Board of Directors or by the
registered agent. The business office of the registered agent
of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual
meeting of the shareholders ("Annual Meeting") shall be held
on the first Monday in May, at such time or on such other day
as may be designated by resolution of the Board of Directors.
In fixing a meeting date for any Annual Meeting, the Board of
Directors may consider such factors as it deems relevant
within the good faith exercise of its business judgment.
2.02.Purposes of Annual Meeting. At each Annual
Meeting, the shareholders shall elect the number of directors
equal to the number of directors in the class whose term
expires at the time of such Annual Meeting and transact such
other business as may properly come before the Annual Meeting
in accordance with Section 2.14 of these Bylaws. If the
election of directors shall not be held on the date designated
herein, or fixed as herein provided, for any Annual Meeting,
or any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of shareholders
(a "Special Meeting") as soon thereafter as is practicable.
2.03.Special Meetings.
(a) A Special Meeting, unless otherwise prescribed
by the Wisconsin Insurance Corporation Law, may be called only
by (i) the Board of Directors, (ii) the Chairman of the Board
or (iii) the President and shall be called by the Chairman of
the Board or the President upon the demand, in accordance with
this Section 2.03, of the holders of record of shares
representing at least 10% of all the votes entitled to be cast
on any issue proposed to be considered at the Special Meeting.
(b) In order that the corporation may determine the
shareholders entitled to demand a Special Meeting, the Board
of Directors may fix a record date to determine the
shareholders entitled to make such a demand (the "Demand
Record Date"). The Demand Record Date shall not precede the
date upon which the resolution fixing the Demand Record Date
is adopted by the Board of Directors and shall not be more
than ten days after the date upon which the resolution fixing
the Demand Record Date is adopted by the Board of Directors.
Any shareholder of record seeking to have shareholders demand
a Special Meeting shall, by sending written notice to the
Secretary of the corporation by hand or by certified or
registered mail, return receipt requested, request the Board
of Directors to fix a Demand Record Date. The Board of
Directors shall promptly, but in all events within ten days
after the date on which a valid request to fix a Demand Record
Date is received, adopt a resolution fixing the Demand Record
Date and shall make a public announcement of such Demand
Record Date. If no Demand Record Date has been fixed by the
Board of Directors within ten days after the date on which
such request is received by the Secretary, the Demand Record
Date shall be the 10th day after the first date on which a
valid written request to set a Demand Record Date is received
by the Secretary. To be valid, such written request shall set
forth the purpose or purposes for which the Special Meeting is
to be held, shall be signed by one or more shareholders of
record (or their duly authorized proxies or other
representatives), shall bear the date of signature of each
such shareholder (or proxy or other representative) and shall
set forth all information about each such shareholder and
about the beneficial owner or owners, if any, on whose behalf
the request is made that would be required to be set forth in
a shareholder's notice described in paragraph (a) (ii) of
Section 2.14 of these Bylaws.
(c) In order for a shareholder or shareholders to
demand a Special Meeting, a written demand or demands for a
Special Meeting by the holders of record as of the Demand
Record Date of shares representing at least 10% of all the
votes entitled to be cast on any issue proposed to be
considered at the Special Meeting must be delivered to the
corporation. To be valid, each written demand by a
shareholder for a Special Meeting shall set forth the specific
purpose or purposes for which the Special Meeting is to be
held (which purpose or purposes shall be limited to the
purpose or purposes set forth in the written request to set a
Demand Record Date received by the corporation pursuant to
paragraph (b) of this Section 2.03), shall be signed by one or
more persons who as of the Demand Record Date are shareholders
of record (or their duly authorized proxies or other
representatives), shall bear the date of signature of each
such shareholder (or proxy or other representative), and shall
set forth the name and address, as they appear in the
corporation's books, of each shareholder signing such demand
and the class and number of shares of the corporation which
are owned of record and beneficially by each such shareholder,
shall be sent to the Secretary by hand or by certified or
registered mail, return receipt requested, and shall be
received by the Secretary within seventy days after the Demand
Record Date.
(d) The corporation shall not be required to call a
Special Meeting upon shareholder demand unless, in addition to
the documents required by paragraph (c) of this Section 2.03,
the Secretary receives a written agreement signed by each
Soliciting Shareholder (as defined below), pursuant to which
each Soliciting Shareholder, jointly and severally, agrees to
pay the corporation's costs of holding the Special Meeting,
including the costs of preparing and mailing proxy materials
for the corporation's own solicitation, provided that if each
of the resolutions introduced by any Soliciting Shareholder at
such meeting is adopted, and each of the individuals nominated
by or on behalf of any Soliciting Shareholder for election as
a director at such meeting is elected, then the Soliciting
Shareholders shall not be required to pay such costs. For
purposes of this paragraph (d), the following terms shall have
the meanings set forth below:
(i) "Affiliate" of any Person (as defined
herein) shall mean any Person controlling,
controlled by or under common control with such
first Person.
(ii) "Participant" shall have the meaning
assigned to such term in Rule 14a-11 promulgated
under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(iii) "Person" shall mean any
individual, firm, corporation, partnership, joint
venture, association, trust, unincorporated
organization or other entity.
(iv) "Proxy" shall have the meaning assigned to
such term in Rule 14a-1 promulgated under the
Exchange Act.
(v) "Solicitation" shall have the meaning
assigned to such term in Rule 14a-11 promulgated
under the Exchange Act.
(vi) "Soliciting Shareholder" shall mean, with
respect to any Special Meeting demanded by a
shareholder or shareholders, any of the following
Persons:
(A) if the number of shareholders
signing the demand or demands of meeting
delivered to the corporation pursuant to
paragraph (c) of this Section 2.03 is ten
or fewer, each shareholder signing any
such demand;
(B) if the number of shareholders
signing the demand or demands of meeting
delivered to the corporation pursuant to
paragraph (c) of this Section 2.03 is more
than ten, each Person who either (I) was a
Participant in any Solicitation of such
demand or demands or (II) at the time of
the delivery to the corporation of the
documents described in paragraph (c) of
this Section 2.03 had engaged or intends
to engage in any Solicitation of Proxies
for use at such Special Meeting (other
than a Solicitation of Proxies on behalf
of the corporation); or
(C) any Affiliate of a Soliciting
Shareholder, if a majority of the
directors then in office determine,
reasonably and in good faith, that such
Affiliate should be required to sign the
written notice described in paragraph (c)
of this Section 2.03 and/or the written
agreement described in this paragraph (d)
in order to prevent the purposes of this
Section 2.03 from being evaded.
(e) Except as provided in the following sentence,
any Special Meeting shall be held at such hour and day as may
be designated by whichever of the Board of Directors, the
Chairman of the Board or the President shall have called such
meeting. In the case of any Special Meeting called by the
Chairman of the Board or the President upon the demand of
shareholders (a "Demand Special Meeting"), such meeting shall
be held at such hour and day as may be designated by the Board
of Directors; provided, however, that the date of any Demand
Special Meeting shall be not more than seventy days after the
Meeting Record Date (as defined in Section 2.06 hereof); and
provided further that in the event that the directors then in
office fail to designate an hour and date for a Demand Special
Meeting within ten days after the date that valid written
demands for such meeting by the holders of record as of the
Demand Record Date of shares representing at least 10% of all
the votes entitled to be cast on each issue proposed to be
considered at the Special Meeting are delivered to the
corporation (the "Delivery Date"), then such meeting shall be
held at 2:00 P.M. local time on the 100th day after the
Delivery Date or, if such 100th day is not a Business Day (as
defined below), on the first preceding Business Day. In
fixing a meeting date for any Special Meeting, the Board of
Directors, the Chairman of the Board or the President may
consider such factors as it or he deems relevant within the
good faith exercise of its or his business judgment,
including, without limitation, the nature of the action
proposed to be taken, the facts and circumstances surrounding
any demand for such meeting, and any plan of the Board of
Directors to call an Annual Meeting or a Special Meeting for
the conduct of related business.
(f) The corporation may engage regionally or
nationally recognized independent inspectors of elections to
act as an agent of the corporation for the purpose of promptly
performing a ministerial review of the validity of any
purported written demand or demands for a Special Meeting
received by the Secretary. For the purpose of permitting the
inspectors to perform such review, no purported demand shall
be deemed to have been delivered to the corporation until the
earlier of (i) five Business Days following receipt by the
Secretary of such purported demand and (ii) such date as the
independent inspectors certify to the corporation that the
valid demands received by the Secretary represent at least 10%
of all the votes entitled to be cast on each issue proposed to
be considered at the Special Meeting. Nothing contained in
this paragraph (f) shall in any way be construed to suggest or
imply that the Board of Directors or any shareholder shall not
be entitled to contest the validity of any demand, whether
during or after such five Business Day period, or to take any
other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect
thereto).
(g) For purposes of these Bylaws, "Business Day"
shall mean any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of Wisconsin are
authorized or obligated by law or executive order to close.
2.04.Place of Meeting. The Board of Directors, the
Chairman of the Board, the President or the Secretary may
designate any place, either within or without the State of
Wisconsin, as the place of meeting for any Annual Meeting or
for any Special Meeting or for any postponement or adjournment
thereof. If no designation is made, the place of meeting
shall be the principal business office of the corporation in
the State of Wisconsin. Any meeting may be adjourned to
reconvene at any place designated by vote of the Board of
Directors or by the Chairman of the Board, the President or
the Secretary.
2.05.Notice of Meeting. Written or printed notice
stating the date, time and place of any Annual Meeting or
Special Meeting shall be delivered not less than three days
(unless a longer period is required by the Wisconsin Business
Corporation Law) nor more than 70 days before the date of such
meeting either personally or by mail, by or at the direction
of the Chairman of the Board, the President or the Secretary,
to each shareholder of record entitled to vote at such meeting
and to such other shareholders as required by the Wisconsin
Business Corporation Law. In the event of any Demand Special
Meeting, such notice shall be sent not more than 45 days after
the Delivery Date. If mailed, notice pursuant to this Section
2.05 shall be deemed to be effective when deposited in the
United States mail, addressed to the shareholder at his
address as it appears on the stock record books of the
corporation, with postage thereon prepaid. Unless otherwise
required by the Wisconsin Business Corporation Law or the
articles of incorporation of the corporation, a notice of an
Annual Meeting need not include a description of the purpose
for which the meeting is called. In the case of any Special
Meeting, (a) the notice of meeting shall describe any business
that the Board of Directors shall have theretofore determined
to bring before the meeting and (b) in the case of a Demand
Special Meeting, the notice of meeting (i) shall describe any
business set forth in the statement of purpose of the demands
received by the corporation in accordance with Section 2.03 of
these Bylaws and (ii) shall contain all of the information
required in the notice received by the corporation in
accordance with Section 2.14(b) of these Bylaws. If an Annual
Meeting or Special Meeting is adjourned to a different date,
time or place, the corporation shall not be required to give
notice of the new date, time or place if the new date, time or
place is announced at the meeting before adjournment;
provided, however, that if a new Meeting Record Date for an
adjourned meeting is or must be fixed, the corporation shall
give notice of the adjourned meeting to persons who are
shareholders as of the new Meeting Record Date.
2.06.Fixing of Record Date. The Board of Directors
may fix in advance a date not less than 10 days and not more
than 70 days prior to the date of any Annual Meeting or
Special Meeting as the record date for the purpose of
determining shareholders entitled to notice of, and to vote
at, such meeting ("Meeting Record Date"). In the case of any
Demand Special Meeting, (i) the Meeting Record Date shall not
be later than the 30th day after the Delivery Date and (ii) if
the Board of Directors fails to fix the Meeting Record Date
within 30 days after the Delivery Date, then the close of
business on such 30th day shall be the Meeting Record Date.
The shareholders of record on the Meeting Record Date shall be
the shareholders entitled to notice of, and to vote at, the
meeting. Except as provided by the Wisconsin Business
Corporation Law for a court-ordered adjournment, a
determination of shareholders entitled to notice of, and to
vote at, any Annual Meeting or Special Meeting is effective
for any adjournment of such meeting unless the Board of
Directors fixes a new Meeting Record Date, which it shall do
if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting. The Board of
Directors may also fix in advance a date as the record date
for the purpose of determining shareholders entitled to take
any other action or determining shareholders for any other
purpose. Such record date shall be not more than 70 days
prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. The
record date for determining shareholders entitled to a
distribution (other than a distribution involving a purchase,
redemption or other acquisition of the corporation's shares)
or a share dividend is the date on which the Board of
Directors authorizes the distribution or share dividend, as
the case may be, unless the Board of Directors fixes a
different record date.
2.07.Voting Records. After a Meeting Record Date
has been fixed, the corporation shall prepare a list of the
names of all of the shareholders entitled to notice of the
meeting. The list shall be arranged by class or series of
shares, if any, and show the address of, and number of shares
held by, each shareholder. Such list shall be available for
inspection by any shareholder, beginning two business days
after notice of the meeting is given for which the list was
prepared and continuing to the date of the meeting, at the
corporation's principal office or at a place identified in the
meeting notice in the city where the meeting will be held. A
shareholder or his agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business
Corporation Law, copy the list, during regular business hours
and at his expense, during the period that it is available for
inspection pursuant to this Section 2.07. The corporation
shall make the shareholders' list available at the meeting and
any shareholder or his agent or attorney may inspect the list
at any time during the meeting or any adjournment thereof.
Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action
taken at a meeting of shareholders.
2.08.Quorum and Voting Requirements; Postponements;
Adjournments.
(a) Shares entitled to vote as a separate voting
group may take action on a matter at any Annual Meeting or
Special Meeting only if a quorum of those shares exists with
respect to that matter. If the corporation has only one class
of stock outstanding, such class shall constitute a separate
voting group for purposes of this Section 2.08. Except as
otherwise provided in the articles of incorporation of this
corporation or the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast on the matter shall
constitute a quorum of the voting group for action on that
matter. Once a share is represented for any purpose at any
Annual Meeting or Special Meeting, other than for the purpose
of objecting to holding the meeting or transacting business at
the meeting, it is considered present for purposes of
determining whether a quorum exists for the remainder of the
meeting and for any adjournment of that meeting, unless a new
Meeting Record Date is or must be set for the adjourned
meeting. If a quorum exists, except in the case of the
election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the articles
of incorporation of the corporation or the Wisconsin Business
Corporation Law requires a greater number of affirmative
votes. Unless otherwise provided in the articles of
incorporation of the corporation, each director shall be
elected by a plurality of the votes cast by the shares
entitled to vote in the election of directors at any Annual
Meeting or Special Meeting at which a quorum is present.
(b) The Board of Directors acting by resolution may
postpone and reschedule any previously scheduled Annual
Meeting or Special Meeting; provided, however, that a Demand
Special Meeting shall not be postponed beyond the 100th day
following the Delivery Date. Any Annual Meeting or Special
Meeting may be adjourned from time to time, whether or not
there is a quorum, (i) at any time, upon a resolution of
shareholders if the votes cast in favor of such resolution by
the holders of shares of each voting group entitled to vote on
any matter theretofore properly brought before the meeting
exceed the number of votes cast against such resolution by the
holders of shares of each such voting group or (ii) at any
time prior to the transaction of any business at such meeting,
by the Chairman of the Board or the President or pursuant to a
resolution of the Board of Directors. No notice of the time
and place of adjourned meetings need be given except as
required by the Wisconsin Business Corporation Law. At any
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
2.09.Conduct of Meetings. The Chairman of the
Board, and in his absence, the Vice Chairman of the Board, and
in his absence, the President, and in their absence, a Vice
President in the order provided under Section 4.08, and in
their absence, any person chosen by the shareholders present
shall call any Annual Meeting or Special Meeting to order and
shall act as chairman of such meeting, and the Secretary of
the corporation shall act as secretary of all Annual Meetings
and Special Meetings, but in the absence of the Secretary, the
presiding officer may appoint any other person to act as
secretary of the meeting.
2.10.Proxies. At all Annual Meetings and Special
Meetings, a shareholder entitled to vote may vote in person or
by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by signing an appointment
form, either personally or by his attorney-in-fact. An
appointment of a proxy is effective when received by the
Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for
eleven months from the date of its signing unless a different
period is expressly provided in the appointment form. Unless
otherwise provided, a proxy may be revoked any time before it
is voted, either by written notice filed with the Secretary or
the acting secretary of the meeting or by oral notice given by
the shareholder to the presiding officer during the meeting.
The presence of a shareholder who has filed his proxy does not
of itself constitute a revocation. The Board of Directors
shall have the power and authority to make rules establishing
presumptions as to the validity and sufficiency of proxies.
2.11.Voting of Shares.
(a) Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at any Annual
Meeting or Special Meeting, except to the extent that the
voting rights of the shares of any class or classes are
enlarged, limited or denied by the Wisconsin Business
Corporation Law or the articles of incorporation of the
corporation.
(b) Shares held by another corporation, if a
sufficient number of shares entitled to elect a majority of
the directors of such other corporation is held directly or
indirectly by this corporation, shall not be entitled to vote
at any Annual Meeting or Special Meeting, but shares held in a
fiduciary capacity may be voted.
2.12.Acceptance of Instruments Showing Shareholder
Action. If the name signed on a vote, consent, waiver or
proxy appointment corresponds to the name of a shareholder,
the corporation, if acting in good faith, may accept the vote,
consent, waiver or proxy appointment and give it effect as the
act of a shareholder. If the name signed on a vote, consent,
waiver or proxy appointment does not correspond to the name of
a shareholder, the corporation may accept the vote, consent,
waiver or proxy appointment and give it effect as the act of
the shareholder if any of the following apply:
(a) The shareholder is an entity and the name
signed purports to be that of an officer or agent of the
entity.
(b) The name purports to be that of a personal
representative, administrator, executor, guardian or
conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable
to the corporation is presented with respect to the vote,
consent, waiver or proxy appointment.
(c) The name signed purports to be that of a
receiver or trustee in bankruptcy of the shareholder and, if
the corporation requests, evidence of this status acceptable
to the corporation is presented with respect to the vote,
consent, waiver or proxy appointment.
(d) The name signed purports to be that of a
pledgee, beneficial owner, or attorney-in-fact of the
shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to
sign for the shareholder is presented with respect to the
vote, consent, waiver or proxy appointment.
(e) Two or more persons are the shareholder as co-
tenants or fiduciaries and the name signed purports to be the
name of at least one of the co-owners and the person signing
appears to be acting on behalf of all co-owners.
The corporation may reject a vote, consent, waiver
or proxy appointment if the Secretary or other officer or
agent of the corporation who is authorized to tabulate votes,
acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's
authority to sign for the shareholder.
2.13.Waiver of Notice by Shareholders. A
shareholder may waive any notice required by the Wisconsin
Business Corporation Law, the articles of incorporation of the
corporation or these Bylaws before or after the date and time
stated in the notice. The waiver shall be in writing and
signed by the shareholder entitled to the notice, contain the
same information that would have been required in the notice
under applicable provisions of the Wisconsin Business
Corporation Law (except that the time and place of meeting
need not be stated) and be delivered to the corporation for
inclusion in the corporate records. A shareholder's
attendance at any Annual Meeting or Special Meeting, in person
or by proxy, waives objection to all of the following: (a)
lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting or promptly upon
arrival objects to holding the meeting or transacting business
at the meeting; and (b) consideration of a particular matter
at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering
the matter when it is presented.
2.14.Notice of Shareholder Business and Nomination
of Directors.
(a) Annual Meetings.
(i) Nominations of persons for election to the
Board of Directors of the corporation and the
proposal of business to be considered by the
shareholders may be made at an Annual Meeting (A)
pursuant to the corporation's notice of meeting, (B)
by or at the direction of the Board of Directors or
(C) by any shareholder of the corporation who is a
shareholder of record at the time of giving of
notice provided for in this Bylaw and who is
entitled to vote at the meeting and complies with
the notice procedures set forth in this Section
2.14.
(ii) For nominations or other business to be
properly brought before an Annual Meeting by a
shareholder pursuant to clause (C) of paragraph
(a)(i) of this Section 2.14, the shareholder must
have given timely notice thereof in writing to the
Secretary of the corporation. To be timely, a
shareholder's notice shall be received by the
Secretary of the corporation at the principal
offices of the corporation not less than 45 days nor
more than 70 days prior to the first annual
anniversary of the date set forth in the
corporation's proxy statement for the immediately
preceding Annual Meeting as the date on which the
corporation first mailed definitive proxy materials
for the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the
event that the date for which the Annual Meeting is
called is advanced by more than 30 days or delayed
by more than 30 days from the first annual
anniversary of the immediately preceding Annual
Meeting, notice by the shareholder to be timely must
be so delivered not earlier than the close of
business on the 100th day prior to the date of such
Annual Meeting and not later of (A) the 75th day
prior to the date of such Annual Meeting or (B) the
10th day following the day on which public
announcement of the date of such Annual Meeting is
first made. In no event shall the announcement of
an adjournment of an Annual Meeting commence a new
time period for the giving of a shareholder notice
as described above. Such shareholder's notice shall
be signed by the shareholder of record who intends
to make the nomination or introduce the other
business (or his duly authorized proxy or other
representative), shall bear the date of signature of
such shareholder (or proxy or other representative)
and shall set forth: (A) the name and address, as
they appear on this corporation's books, of such
shareholder and the beneficial owner or owners, if
any, on whose behalf the nomination or proposal is
made; (B) the class and number of shares of the
corporation which are beneficially owned by such
shareholder or beneficial owner or owners; (C) a
representation that such shareholder is a holder of
record of shares of the corporation entitled to vote
at such meeting and intends to appear in person or
by proxy at the meeting to make the nomination or
introduce the other business specified in the
notice; (D) in the case of any proposed nomination
for election or re-election as a director, (I) the
name and residence address of the person or persons
to be nominated, (II) a description of all
arrangements or understandings between such
shareholder or beneficial owner or owners and each
nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination
is to be made by such shareholder, (III) such other
information regarding each nominee proposed by such
shareholder as would be required to be disclosed in
solicitations of proxies for elections of directors,
or would be otherwise required to be disclosed, in
each case pursuant to Regulation 14A under the
Exchange Act, including any information that would
be required to be included in a proxy statement
filed pursuant to Regulation 14A had the nominee
been nominated by the Board of Directors and (IV)
the written consent of each nominee to be named in a
proxy statement and to serve as a director of the
corporation if so elected; and (E) in the case of
any other business that such shareholder proposes to
bring before the meeting, (I) a brief description of
the business desired to be brought before the
meeting and, if such business includes a proposal to
amend these Bylaws, the language of the proposed
amendment, (II) such shareholder's and beneficial
owner's or owners' reasons for conducting such
business at the meeting and (III) any material
interest in such business of such shareholder and
beneficial owner or owners.
(iii) Notwithstanding anything in the
second sentence of paragraph (a)(ii) of this Section
2.14 to the contrary, in the event that the number
of directors to be elected to the Board of Directors
of the corporation is increased and there is no
public announcement naming all of the nominees for
director or specifying the size of the increased
Board of Directors made by the corporation at least
45 days prior to the Anniversary Date, a
shareholder's notice required by this Section 2.14
shall also be considered timely, but only with
respect to nominees for any new positions created by
such increase, if it shall be received by the
Secretary at the principal offices of the
corporation not later than the close of business on
the 10th day following the day on which such public
announcement is first made by the corporation.
(b) Special Meetings. Only such business shall be
conducted at a Special Meeting as shall have been described in
the notice of meeting sent to shareholders pursuant to Section
2.05 of these Bylaws. Nominations of persons for election to
the Board of Directors may be made at a Special Meeting at
which directors are to be elected pursuant to such notice of
meeting (i) by or at the direction of the Board of Directors
or (ii) by any shareholder of the corporation who (A) is a
shareholder of record at the time of giving of such notice of
meeting, (B) is entitled to vote at the meeting and (C)
complies with the notice procedures set forth in this Section
2.14. Any shareholder desiring to nominate persons for
election to the Board of Directors at such a Special Meeting
shall cause a written notice to be received by the Secretary
of the corporation at the principal offices of the corporation
not earlier than ninety days prior to such Special Meeting and
not later than the close of business on the later of (x) the
60th day prior to such Special Meeting and (y) the 10th day
following the day on which public announcement is first made
of the date of such Special Meeting and of the nominees
proposed by the Board of Directors to be elected at such
meeting. Such written notice shall be signed by the
shareholder of record who intends to make the nomination (or
his duly authorized proxy or other representative), shall bear
the date of signature of such shareholder (or proxy or other
representative) and shall set forth: (A) the name and address,
as they appear on the corporation's books, of such shareholder
and the beneficial owner or owners, if any, on whose behalf
the nomination is made; (B) the class and number of shares of
the corporation which are beneficially owned by such
shareholder or beneficial owner or owners; (C) a
representation that such shareholder is a holder of record of
shares of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to make
the nomination specified in the notice; (D) the name and
residence address of the person or persons to be nominated;
(E) a description of all arrangements or understandings
between such shareholder or beneficial owner or owners and
each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination is to be
made by such shareholder; (F) such other information regarding
each nominee proposed by such shareholder as would be required
to be disclosed in solicitations of proxies for elections of
directors, or would be otherwise required to be disclosed, in
each case pursuant to Regulation 14A under the Exchange Act,
including any information that would be required to be
included in a proxy statement filed pursuant to Regulation 14A
had the nominee been nominated by the Board of Directors; and
(G) the written consent of each nominee to be named in a proxy
statement and to serve as a director of the corporation if so
elected.
(c) General.
(i) Only persons who are nominated in
accordance with the procedures set forth in this
Section 2.14 shall be eligible to serve as
directors. Only such business shall be conducted at
an Annual Meeting or Special Meeting as shall have
been brought before such meeting in accordance with
the procedures set forth in this Section 2.14. The
chairman of the meeting shall have the power and
duty to determine whether a nomination or any
business proposed to be brought before the meeting
was made in accordance with the procedures set forth
in this Section 2.14 and, if any proposed nomination
or business is not in compliance with this Section
2.14, to declare that such defective proposal shall
be disregarded.
(ii) For purposes of this Section 2.14, "public
announcement" shall mean disclosure in a press
release reported by the Dow Jones News Service,
Associated Press or comparable national news service
or in a document publicly filed by the corporation
with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing
provisions of this Section 2.14, a shareholder shall
also comply with all applicable requirements of the
Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in
this Section 2.14. Nothing in this Section 2.14
shall be deemed to limit the corporation's
obligation to include shareholder proposals in its
proxy statement if such inclusion is required by
Rule 14a-8 under the Exchange Act.
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers; Number and Classification; Vacancy.
(a) All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of
Directors.
(b) The number of directors of the corporation shall be not
less than 7 nor more than 17, as determined from time to time
by the Board of Directors, divided into three substantially
equal classes and designated as Class I, Class II and Class
III, respectively. Commencing at a Special Meeting to be held
promptly after the adoption of these Bylaws, a class of
directors shall be elected to Class I for a term to expire at
the 1992 Annual Meeting, a class of directors shall be elected
to Class II for a term to expire at the 1993 Annual Meeting
and a class of directors shall be elected to Class III for a
term to expire at the 1994 Annual Meeting and, in each case,
until their successors are duly qualified and elected. At
each Annual Meeting thereafter the successors to the class of
directors whose term shall expire at the time of Annual
Meeting shall be elected to hold office until the third
succeeding Annual Meeting, and until their successors are duly
qualified and elected or until there is a decrease in the
number of directors that takes effect after the expiration of
their term.
(c) Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of
directors, shall be filled by the affirmative vote of a
majority of the directors then in office, though less than a
quorum of the Board of Directors, or by a sole remaining
director. Any director so elected shall serve until the next
election of the class for which such director shall have been
chosen and until his successor shall be duly qualified and
elected.
3.02. Resignations and Qualifications. A director may
resign at any time by delivering written notice which complies
with the Wisconsin Business Corporation Law to the Board of
Directors, the Chairman of the Board or to the corporation. A
director's resignation is effective when the notice is
delivered unless the notice specifies a later effective date.
Directors need not be residents of the State of Wisconsin or
shareholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw
immediately after the Annual Meeting. The place of such
regular meeting shall be the same as the place of the Annual
Meeting which precedes it, or such other suitable place as may
be announced to directors at or before such Annual Meeting.
The Board of Directors may provide, by resolution, the date,
time and place, either within or without the State of
Wisconsin, for the holding of additional regular meetings of
the Board of Directors without other notice than such
resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman
of the Board, President, Secretary or any two directors. The
Chairman of the Board, the President or the Secretary may
designate any place, either within or without the State of
Wisconsin, as the place for holding any such special meeting.
If no designation is made, the place of meeting shall be the
principal business office of the corporation in the State of
Wisconsin.
3.05 Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section
3.03) shall be given to each director not less than 24 hours
prior to the meeting by giving oral, telephonic or written
notice to a director communicated in person, or by telegram,
facsimile or other form of wire or wireless communication, or
not less than 48 hours prior to a meeting by delivering,
sending by private carrier or mailing written notice to the
business address or such other address as a director shall
have designated in writing filed with the Secretary. If
mailed, such notice shall be deemed to be effective when
deposited in the United States mail so addressed with postage
thereon prepaid. If notice be given by telegram, such notice
shall be deemed to be effective when the telegram addressed as
in case of notice by mail is delivered to the telegraph
company. If notice is given by private carrier, such notice
shall be deemed to be effective when the notice addressed as
in case of notice by mail is delivered to the private carrier.
Whenever any notice whatever is required to be given to any
director of the corporation under the articles of
incorporation of the corporation, these Bylaws or any
provision of the Wisconsin Business Corporation Law, a waiver
thereof in writing, signed at any time, whether before or
after the date and time of meeting, by the director entitled
to such notice, shall be deemed equivalent to the giving of
such notice. The corporation shall retain any such waiver as
part of its permanent corporate records, but only for so long
as such other permanent corporate records are maintained. A
director's attendance at, or participation in, a meeting
waives any required notice to him of the meeting unless the
director at the beginning of the meeting or promptly upon his
arrival objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to
action taken at the meeting. 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, or waiver of notice, of such meeting.
3.06. Quorum. Except as otherwise provided by the Wisconsin
Business Corporation Law, the articles of incorporation of the
corporation or these Bylaws, a majority of the number of
directors fixed in Section 3.01 shall constitute a quorum for
the transaction of business at any meeting of the Board of
Directors, but a majority of the directors present (though
less than such quorum) may adjourn any meeting of the Board of
Directors or any committee thereof, as the case may be, from
time to time without further notice. Except as otherwise
provided by the Wisconsin Business Corporation Law, the
articles of incorporation or by these Bylaws, a quorum of any
committee of the Board of Directors created pursuant to
Section 3.12 hereof shall consist of a majority of the number
of directors appointed to serve on the committee, but a
majority of the members present (though less than a quorum)
may adjourn the meeting from time to time without further
notice.
3.07. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors, unless the act of
a greater number is required by the Wisconsin Business
Corporation Law, the articles of incorporation of this
corporation or these Bylaws.
3.08. Conduct of Meetings. The Chairman of the Board, and
in his absence, the Vice Chairman of the Board, and in their
absence, the President and in their absence, a Vice President
in the order provided under Section 4.08, and in their
absence, any director chosen by the directors present, shall
call meetings of the Board of Directors, but in the absence of
the Secretary, the presiding officer may appoint any Assistant
Secretary or any director or any other person present to act
as secretary of the meeting. Minutes of any regular or
special meeting of the Board of Directors shall be prepared
and distributed to each director.
3.09. Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish
reasonable compensation of all directors for services to the
corporation as directors, officers or otherwise, or may
delegate such authority to an appropriate committee. The
Board of Directors also shall have authority to provide for,
or to delegate authority to an appropriate committee to
provide for, reasonable pensions, disability or death
benefits, and other benefits or payments, to directors,
officers and employees and to their estates, families,
dependents, or beneficiaries on account of prior services
rendered by such directors, officers and employees to the
corporation.
3.10. Unanimous Consent Without Meeting. Any action
required or permitted by the articles of incorporation of the
corporation, these Bylaws or any provision of the Wisconsin
Business Corporation Law to be taken by the Board of Directors
(or any committee thereof created pursuant to Section 3.12) at
a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by
all members of the Board of Directors or of the committee, as
the case may be, then in office. Any such consent action may
be signed in separate counterparts and shall be effective when
the last director or committee member signs the consent,
unless the consent specifies a different effective date.
3.11. Presumption of Assent. A director of the corporation
who is present at a meeting of the Board of Directors or any
committee thereof of which he is a member at which action on
any corporate matter is taken shall be presumed to have
assented to the action taken unless any of the following
occurs: (a) the director objects at the beginning of the
meeting or promptly upon his arrival to holding the meeting or
transacting business at the meeting; (b) the director's
dissent or abstention from the action taken is entered in the
minutes of the meeting; or (c) the director delivers written
notice that complies with the Wisconsin Business Corporation
Law of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. Such right to
dissent or abstain shall not apply to a director who voted in
favor of such action.
3.12. Committees.
(a) (i) An Executive Committee consisting of three or more
members of the Board of Directors be and it hereby is created.
The Board of Directors by the affirmative vote of a majority
of the number of directors fixed in Section 3.01, shall
designate the members of the Executive Committee, one of whom
shall be designated by the Board of Directors as Chairman of
the Executive Committee. The Executive Committee shall have
and may exercise all powers of the Board of Directors in the
management of the business and affairs of the corporation when
the Board of Directors is not in session; provided, however,
that the Executive Committee shall have no power or authority
to take action on behalf of the Board of Directors to the
extent limited in Section 3.12(b) of these Bylaws or the
Wisconsin Business Corporation Law. The Board of Directors
shall have the power at any time to fill vacancies in, to
change the members of, or to dissolve the Executive Committee
by the affirmative vote of a majority of the directors then in
office, though less than a quorum of the Board of Directors,
or by a sole remaining director.
(ii) Notice of each meeting of the Executive Committee shall
be given to each member thereof in accordance with Section
3.05. The attendance or participation of a committee member
at a meeting shall constitute a waiver of required notice to
him of such meeting, unless the committee member at the
beginning of the meeting or promptly upon his arrival objects
to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at
the meeting. Neither the business to be transacted at, not
the purpose of, any meeting of the Executive Committee need be
specified in the notice, or waiver of notice, of such meeting.
(iii) The act of the majority of the members present at a
meeting at which a quorum is present shall be the act of the
Executive Committee, unless the act of a greater number is
required by the Wisconsin Business Corporation Law or by the
articles incorporation of the corporation or these Bylaws.
(iv) The Chairman of the Executive Committee, and, in his
absence, any member chosen by the members present, shall call
meetings of the Executive Committee to order and shall act as
chairman of the meeting. The presiding officer may appoint
any member or other person present to act as secretary of the
meeting. Unless otherwise provided by the Wisconsin Business
Corporation Law, the articles of incorporation of the
corporation or these Bylaws, the Executive Committee shall fix
its own rules governing the conduct of its activities and
shall keep and report to the Board of Directors regular
minutes of the proceedings of the Executive Committee for
subsequent approval by the Board of Directors.
(b) The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors
fixed in Section 3.01 may designate one or more other
committees, appoint members of the Board of Directors to serve
on the committees and designate other members of the Board of
Directors to serve as alternates. Alternate members of a
committee shall take the place of any absent member or members
at any meeting of such committee upon request of the Chairman
of the Board or the President or upon request of the chairman
of such meeting. Each committee (other than the Executive
Committee) shall consist of two or more directors elected by,
and to serve at the pleasure of, the Board of Directors. A
committee may be authorized to exercise the authority of the
Board of Directors, except that a committee (including the
Executive Committee) may not do any of the following: (a)
authorize distributions; (b) approve or propose to
shareholders action that the Wisconsin Business Corporation
Law requires to be approved by shareholders; (c) fill
vacancies on the Board of Directors or, unless the Board of
Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining
committee members, on any Board committee; (d) amend the
articles of incorporation of the corporation; (e) adopt, amend
or repeal these Bylaws; (f) approve a plan of merger not
requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or
method prescribed by the Board of Directors; and (h) authorize
or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares,
except that the Board of Directors may authorize a committee
to do so within limits prescribed by the Board of Directors.
Unless otherwise provided by the Board of Directors in
creating the committee, a committee (including the Executive
Committee) may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.
Notices of committee meetings shall be given to committee
members in compliance with Section 3.05. Each such committee
shall fix its own rules governing the conduct of its
activities and shall make such reports to the Board of
Directors of its activities as the Board of Directors may
request.
3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the
meeting or these Bylaws, members of the Board of Directors
(and any committees thereof created pursuant to Section 3.12)
may participate in regular or special meetings by, or through
the use of, any means of communication by which all
participants may simultaneously hear each other, such as by
conference telephone. If a meeting is conducted by such
means, then at the commencement of such meeting the presiding
officer shall inform the participating directors that a
meeting is taking place at which official business may be
transacted. Any participant in a meeting by such means shall
be deemed present in person at such meeting. If action is to
be taken at any meeting held by such means on any of the
following: (a) a plan of merger or share exchange; (b) a sale,
lease, exchange or other disputation of substantial property
or assets of the corporation; (c) a voluntary dissolution or
the revocation of voluntary dissolution proceedings; or (d) a
filing for bankruptcy, then the identity of each director
participating in such meeting must be verified by the
disclosure at such meeting by each such director of each such
director's social security number to the secretary of the
meeting before a vote may be taken on any of the foregoing
matters. For purposes of the preceding clause (b), the phrase
"sale, lease, exchange or other disposition of substantial
property or assets" shall mean any sale, lease, exchange or
other disposition of property or assets of the corporation
having a net book value equal to 10% or more of the net book
value of the total assets of the corporation on and as of the
close of the fiscal year last ended prior to the date of such
meeting and as to which financial statements of the
corporation have been prepared.
ARTICLE IV. OFFICERS
4.01. Number. The principal offices of the corporation
shall be a President, one or more Vice Presidents, as
authorized from time to time by the Board of Directors, a
Controller, a Secretary and a Treasurer and such other
officers and agents as the Board of Directors may from time to
time determine necessary, each of whom shall be chosen by the
Board of Directors. The Board of Directors may also from time
to time elect or appoint a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also
authorize any duly authorized officer to appoint one or more
officers or assistant officers. Any number of offices may be
held by the same person.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be
elected annually at the first meeting of the Board of
Directors held after each Annual Meeting. If the election of
officers shall not be held at such meeting, such election
shall be held as soon thereafter as practicable. Each officer
shall hold office until his successor shall have been duly
chosen or until his prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any
officer and, unless restricted by the Board of Directors or
these Bylaws, an officer may remove any officer or assistant
officer appointed by that officer, at any time, with or
without cause and notwithstanding the contract rights, if any,
of the officer removed. The election or appointment of an
officer does not of itself create contract rights.
4.04. Resignations and Vacancies.
(a) An officer may resign at any time by delivering notice
to the corporation that complies with the Wisconsin Business
Corporation Law. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later
effective date and the corporation accepts the later effective
date.
(b) A vacancy in the office of President, Secretary or
Treasurer shall be filled by the Board of Directors for the
unexpired portion of the term. A vacancy in any other office
may also be filled by the Board of Directors, should it deem
it necessary to do so. If a resignation of an officer is
effective at a later date as contemplated by this Section
4.04, the Board of Directors may fill the pending vacancy
before the effective date if the Board of Directors provides
that the successor may not take office until the effective
date.
4.05. Chairman of the Board. The Chairman of the Board
shall be the Chief Executive Officer of the corporation, and
subject to the control of the Board of Directors, shall, in
general, supervise and control the business and affairs of the
corporation and shall determine long-range, strategic
direction and objectives and shall formulate major corporate
policies. The Chairman of the Board shall preside at all
Annual Meetings and Special Meetings and at all meetings of
the Board of Directors. He shall also in general perform such
other duties and functions as may be assigned herein and as
may be delegated or assigned to him by the Board of Directors
from time to time. The Chairman of the Board shall have
authority, subject to such rules as may be prescribed by the
Board of Directors, to appoint and remove such agents and
employees of the corporation as he shall deem necessary, to
prescribe their powers, duties and compensation and to
delegate authority to them. The Chairman shall have authority
to sign, execute and acknowledge, on behalf of the
corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other departments or
instruments necessary or proper to be executed in the course
of the corporation's regular business, or which shall be
authorized by the Board of Directors.
4.06. Vice Chairman of the Board. The Vice Chairman of the
Board, if one shall be elected or appointed, shall in the
absence of the Chairman of the Board, perform the duties and
functions of the Chairman of the Board. He shall also in
general perform such other duties and functions as may be
delegated or assigned to him by the Board of Directors or the
Chairman of the Board.
4.07. President. The President shall perform such duties as
may be delegated to or assigned to him by the Chief Executive
Officer or by the Board of Directors from time to time. The
President shall have authority to sign, execute and
acknowledge, on behalf of the corporation, all deeds,
mortgages, securities, contracts, leases, reports and all
other documents necessary or proper to be executed in the
course of the corporation's regular business, or which shall
be authorized by the Board of Directors, and, except as
otherwise provided by law or the Board of Directors, he may
authorize any Vice President or other officer or agent of the
corporation to sign, execute and acknowledge such documents or
instruments in his place and stead.
4.08. The Vice Presidents. The Board of Directors shall
elect one or more Vice Presidents as it shall deem necessary
for the carrying out of the corporation's business, some of
whom may be designated as Executive Vice Presidents and some
of whom may be designated as Senior Vice Presidents. In the
absence of the President or in the event of his death,
inability or refusal to act, the Vice President (or, in the
event there be more than one Vice President, giving priority
to any Executive Vice Presidents, and then to any Senior Vice
Presidents (in the order of their respective priorities), but
otherwise in the order designated by the Board of Directors or
in the absence of any such designation, then in order of
choosing) shall perform the duties of the President and, when
so acting, shall have all the powers of and be subject to all
restrictions upon the President. Any Vice President shall
perform such duties and have such authority, as, from time to
time, may be delegated or assigned to him by the President, or
by the Board of Directors. The execution of any instrument of
the corporation by any Vice President shall be conclusive
evidence as to third parties of his authority to act in the
stead of the President.
4.09. The Secretary. The Secretary shall: (a) keep the
minutes of the Annual Meetings and Special Meetings and other
meetings of the Board of Directors in one or more books
provided for that purpose (including records of consent
actions taken by the shareholders or the Board of Directors
(or committees thereof) without a meeting; (b) see that all
notices are duly given in accordance with the provisions of
these Bylaws or as required by the Wisconsin Business
Corporation Law; (c) be custodian of the corporate records and
of the seal of the corporation and see that the seal of the
corporation is affixed to all documents the execution of which
on behalf of the corporation under its seal is duly
authorized; (d) maintain a record of the shareholders of the
corporation, in a form that permits preparation of a list of
the names and addresses of all shareholders, by class or
series of shares, if any, and showing the number and class or
series of shares, if any, held by each shareholder; (e) sign
with the President, or a Vice President, certificates for
shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to
the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated
or assigned to him by the President, any Vice President or the
Board of Directors.
4.10. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities
of the corporation; (b) receive and give receipts for moneys
due and payable to the corporation from any source whatsoever,
and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Section 5.04;
and (c) in general perform all of the duties incident to the
office of Treasurer and have such other duties and exercise
such other authority as from time to time may be delegated or
assigned to him by the President, any Vice President or the
Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of
his duties in such sum and with such surety or sureties as the
Board of Directors shall determine.
4.11. Controller. Subject to the control and supervision of
the Board of Directors, the Controller shall have charge of
the books of account of the corporation and maintain
appropriate accounting records and he shall perform such other
duties and exercise such other authority as from time to time
may be delegated or assigned to him by the Board of Directors,
the President or the Vice President responsible for financial
matters.
4.12. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant
Treasurers as the Board of Directors may from time to time
authorize. The Assistant Secretaries may sign with the
President or a Vice President certificates for shares of the
corporation, the issuance of which shall have been authorized
by a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their
duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and
Assistant Treasurers, in general, shall perform such duties
and have such authority as shall from time to time be
delegated or assigned to them by the Secretary or the
Treasurer, respectively, or by the President, any Vice
President or the Board of Directors.
4.13. Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any
duly appointed officer of the corporation to appoint, any
person to act as assistant to any officer, or as agent for the
corporation in his stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting
officer or other agent so appointed by the Board of Directors
or an authorized officer shall have the power to perform all
the duties of the office to which he is so appointed to be
assistant, or as to which he is so appointed to act, except as
such power may be otherwise defined or restricted by the Board
of Directors or the appointing officer.
4.14. Salaries. The salaries of the principal officers
shall be fixed from time to time by the Board of Directors or,
except in the case of the Chairman of the Board, the Vice
Chairman of the Board, President or any Executive Vice
President, by a duly authorized committee thereof, and no
officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any
contract or execute or deliver any instrument in the name of
and on behalf of the corporation, and such authorization may
be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages and instruments of
assignment or pledge made by the corporation shall be executed
in the name of the corporation by the President or any Vice
President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer; the Secretary or an
Assistant Secretary, when necessary or required, shall affix
the corporate seal thereto; and when so executed no other
party to such instrument or any third party shall be required
to make any inquiry into the authority of the signing officer
or officers.
5.02. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued
in its name unless authorized by or under the authority of a
resolution of the Board of Directors. Such authorization may
be general or confined to specific instances.
5.03. Checks, Drafts, Etc. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the
Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of
the corporation in such banks, trust companies or other
depositories as may be selected by or under the authority of a
resolution of the Board of Directors.
5.05. Voting of Securities Owned by the Corporation. Subject
always to the specific directions of the Board of Directors,
any share or shares of stock or other securities issued by any
other corporation and owned or controlled by the corporation
may be voted at any meeting of security holders of such other
corporation by the President or by any Vice President who may
be present. Whenever, in the judgment of the President or of
any Vice President, it is desirable for the corporation to
execute a proxy or written consent in respect to any share or
shares of stock or other securities issued by any other
corporation and owned by the corporation, such proxy or
consent shall be executed in the name of the corporation by
the President or by any one of the Vice Presidents and, if
required, should be attested by the Secretary or an Assistant
Secretary under the corporate seal without necessity of any
authorization by the Board of Directors. Any person or
persons designated in the manner above stated as the proxy or
proxies of the corporation shall have full right, power and
authority to vote the share or shares of stock issued by such
other corporation and owned by the corporation the same as
such share or shares might be voted by the corporation.
5.06. No Nominee Procedures. The corporation has not
established, and nothing in these Bylaws shall be deemed to
establish, any procedure by which a beneficial owner of the
corporation's shares that are registered in the name of a
nominee is recognized by the corporation as the shareholder
under Section 180.0723 of the Wisconsin Business Corporation
Law.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form consistent
with the Wisconsin Business Corporation Law, as shall be
determined by the Board of Directors. Such certificates
shall be signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or by the Secretary or
an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby
are issued, with the number of shares and date of issue, shall
be registered upon the stock transfer books of the
corporation. All certificates surrendered to the corporation
for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as
provided in Section 6.06.
6.02. Facsimile Signature and Seal. The seal of the
corporation on any certificates for shares may be a facsimile.
The signatures of the President or Vice President and the
Treasurer or Assistant Treasurer or the Secretary or an
Assistant Secretary upon a certificate may be facsimiles if
the certificate is manually countersigned (a) by a transfer
agent other than the corporation or its employee, or (b) by a
registrar other than the corporation or its employee.
6.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the
certificate (either manually or in facsimile) no longer holds
office when the certificate is issued. If any officer, who
has signed or whose facsimile signature has been placed upon
any certificate for shares, has ceased to be such officer
before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at
the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the
corporation may treat the registered owner of such shares as
the person exclusively entitled to vote, to receive
notifications and otherwise to exercise all the rights and
powers of an owner. Where a certificate for shares is
presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or
any other person suffering loss as a result of such
registration of transfer if (a) there were on the certificate
the necessary endorsements, and (b) the corporation had no
duty to inquire into adverse claims or has discharged any such
duty. The corporation may require reasonable assurance that
such endorsements are genuine and effective and compliance
with such other regulations as may be prescribed under the
authority of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous
notation of any restriction imposed by the corporation upon
the transfer of such shares.
6.06. Lost, Destroyed or Stolen Certificates. The Board of
Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen 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 person requesting such new certificate or certificates, or
his or her 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, stolen or
destroyed.
6.07. Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of
any tangible or intangible property or benefit to the
corporation, including cash, promissory notes, services
performed, contracts for services to be performed or other
securities of the corporation. Before the corporation issues
shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be
issued is adequate. The determination of the Board of
Directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether
the shares are validly issued, fully paid and nonassessable.
The corporation may place in escrow shares issued in whole or
in part for a contract for future services or benefits, a
promissory note, or other property to be issued in the future,
or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respects of the shares
against their purchase price, until the services are
performed, the benefits or property are received or the
promissory note is paid. If the services are not performed,
the benefits or property are not received or the promissory
note is not paid, the corporation may cancel, in whole or in
part, the shares escrowed or restricted and the distributions
credited.
6.08. Stock Regulations. The Board of Directors shall have
the power and authority to make all such further rules and
regulations not inconsistent with the statues of the State of
Wisconsin as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares
of the corporation.
ARTICLE VII. SEAL
7.01. The Board of Directions shall provide a
corporate seal for the corporation which shall be circular in
form and shall have inscribed thereon the name of the
corporation, and the state of incorporation and the words,
"Corporate Seal."
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms
used in this Article VIII and not otherwise hereinafter
defined in this Section 8.01 shall have the meaning set forth
in Section 180.0850 of the Statute. The following terms
(including any plural forms thereof) used in this Article VIII
shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise that directly or indirectly
through one or more intermediaries, controls or is controlled
by, or is under common control with, the Corporation.
(b) "Authority" shall mean the entity selected by the
Director or Officer to determine his or her right to
indemnification pursuant to Section 8.04.
(c) "Board" shall mean the entire then elected and serving
Board of Directors of the Corporation, including all members
thereof who are Parties to the subject Proceeding or any
related Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer
breached or failed to perform his or her duties to the
Corporation and his or her breach of or failure to perform
those duties is determined, in accordance with Section 8.04,
to constitute misconduct under Section 180.0851 (2) (a) 1, 2,
3 or 4 of the Statute.
(e) "Corporation," as used herein and as defined in the
Statute and incorporated by reference into the definitions of
certain other capitalized terms used herein, shall mean this
Corporation, including, without limitation, any successor
corporation or entity to this Corporation by way of merger,
consolidation or acquisition of all or substantially all of
the capital stock or assets of this Corporation.
(f) "Director or Officer" shall have the meaning set forth
in the Statute; provided, that, for purposes of this Article
VIII, it shall be conclusively presumed that any Director or
Officer serving as a director, officer, partner, trustee,
member of any governing or decision-making committee, employee
or agent of an Affiliate shall be so serving at the request of
the Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the Board
who are not Parties to the subject Proceeding or any related
Proceeding.
(h) "Party" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article VIII, the term
"Party" shall also include any Director or Officer or employee
who is or was a witness in a Proceeding at a time when he or
she has not otherwise been formally named a Party thereto.
(i) "Proceeding" shall have the meaning set forth in the
Statute; provided, that, in accordance with Section 180.0859
of the Statute and for purposes of this Article VIII, the term
"Proceeding" shall also include all Proceedings (i) brought
under (in whole or in part) the Securities Act of 1933, as
amended, the Exchange Act, their respective state
counterparts, and/or any rule or regulation promulgated under
any of the foregoing; (ii) brought before an Authority or
otherwise to enforce rights hereunder; (iii) any appeal from
a Proceeding; and (iv) any Proceeding in which the Director or
Officer is a plaintiff or petitioner because he or she is a
Director or Officer; provided, however, that any such
Proceeding under this subsection (iv) must be authorized by a
majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through 180.0859,
inclusive, of the Wisconsin Business Corporation Law as the
same shall then be in effect, including any amendments
thereto, but, in the case of any such amendment, only to the
extent such amendment permits or requires the Corporation to
provide broader indemnification rights than the Statute
permitted or required the Corporation to provide prior to such
amendment.
8.02 Mandatory Indemnification. To the fullest extent
permitted or required by the Statute, the Corporation shall
indemnify a Director or Officer against all Liabilities
incurred by or on behalf of such Director or Officer in
connection with a Proceeding in which the Director or Officer
is a Party because he or she is a Director or Officer.
8.03. Procedural Requirements.
(a) A Director or Officer who seeks indemnification under
Section 8.02 shall make a written request therefor to the
Corporation. Subject to Section 8.03 (b), within 60 days of
the Corporation's receipt of such request, the Corporation
shall pay or reimburse the Director or Officer for the entire
amount of Liabilities incurred by the Director or Officer in
connection with the subject Proceeding (net of any Expenses
previously advanced pursuant to Section 8.05).
(b) No indemnification shall be required to be paid by the
Corporation pursuant to Section 8.02 if, within such 120-day
period, (i) a Disinterested Quorum, by a majority vote
thereof, determines that the Director or Officer requesting
indemnification engaged in misconduct constituting a Breach of
Duty of (ii) a Disinterested Quorum cannot be obtained.
(c) In either case of nonpayment pursuant to Section
8.03(b), the Board shall immediately authorize by resolution
that an Authority, as provided in Section 8.04, determine
whether the Director's or Officer's conduct constituted a
Breach of Duty and, therefore, whether indemnification should
be denied hereunder.
(d) (i) If the Board does not authorize an Authority to
determine the Director's or Officer's right to indemnification
hereunder within such 120-day period and/or (ii) if
indemnification of the requested amount of Liabilities is paid
by the Corporation, then it shall be conclusively presumed for
all purposes that a Disinterested Quorum has affirmatively
determined that the Director or Officer did not engage in
misconduct constituting a Breach of Duty and, in the case of
subsection (i) above (but not subsection (ii)),
indemnification by the Corporation of the requested amount of
Liabilities shall be paid to the Director or Officer
immediately.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a
Director's or Officer's right to indemnification pursuant to
Section 8.03, then the Director or Officer requesting
indemnification shall have the absolute discretionary
authority to select one of the following as such Authority:
(i) An independent legal counsel; provided, that
such counsel shall be mutually selected by such Director
or Officer and by a majority vote of a Disinterested
Quorum or, if a Disinterested Quorum cannot be obtained,
then by a majority vote of the Board; or
(ii) A panel of three arbitrators selected from the
panels of arbitrators of the American Arbitration
Association in Milwaukee, Wisconsin; provided, that (A)
one arbitrator shall be selected by such Director or
Officer, the second arbitrator shall be selected by a
majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a
majority vote of the Board, and the third arbitrator shall
be selected by the two previously selected arbitrators,
and (B) in all other respects, such panel shall be
governed by the American Arbitration Association's then
existing Commercial Arbitration Rules.
(b) In any such determination by the selected Authority
there shall exist a rebuttable presumption that the Director's
or Officer's conduct did not constitute a Breach of Duty and
that indemnification against the requested amount of
Liabilities is required. The burden of rebutting such a
presumption by clear and convincing evidence shall be on the
Corporation or such other party asserting that such
indemnification should not be allowed.
(c) The Authority shall make its determination within 60
days of being selected and shall submit a written opinion of
its conclusion simultaneously to both the Corporation and the
Director or Officer.
(d) If the Authority determines that indemnification is
required hereunder, the Corporation shall pay the entire
requested amount of Liabilities (net of any Expenses
previously advanced pursuant to Section 8.05), including
interest thereon at a reasonable rate, as determined by the
Authority, within 10 days of receipt of the Authority's
opinion; provided, that, if it is determined by the Authority
that a Director or Officer is entitled to indemnification
against Liabilities' incurred in connection with some claims,
issues or matters, but not as to other claims, issues or
matters, involved in the subject Proceeding, the Corporation
shall be required to pay (as set forth above) only the amount
of such requested Liabilities as the Authority shall deem
appropriate in light of all of the circumstances of such
Proceeding.
(e) The determination by the Authority that indemnification
is required hereunder shall be binding upon the Corporation
regardless of any prior determination that the Director or
Officer engaged in a Breach of Duty.
(f) All Expenses incurred in the determination process under
this Section 8.04 by either the Corporation or the Director or
Officer, including, without limitation, all Expenses of the
selected Authority, shall be paid by the Corporation.
8.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse from
time to time or at any time, within 10 days after the receipt
of the Director's or Officer's written request therefor, the
reasonable Expenses of the Director or Officer as such
Expenses are incurred; provided, the following conditions are
satisfied:
(i) The Director or Officer furnishes to the
Corporation an executed written certificate affirming his
or her good faith belief that he or she has not engaged
in misconduct which constitutes a Breach of Duty; and
(ii) The Director or Officer furnishes to the
Corporation an unsecured executed written agreement to
repay any advances made under this Section 8.05 if it is
ultimately determined by an Authority that he or she is
not entitled to be indemnified by the Corporation for
such Expenses pursuant to Section 8.04.
(b) If the Director or Officer must repay any previously
advanced Expenses pursuant to this Section 8.05, such Director
or Officer shall not be required to pay interest on such
amounts.
8.06. Indemnification and Allowance of Expenses of Certain
Others.
(a) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof,
indemnify a director or officer of an Affiliate (who is not
otherwise serving as a Director or Officer) against all
Liabilities, and shall advance the reasonable Expenses,
incurred by such director or officer in a Proceeding to the
same extent hereunder as if such director or officer incurred
such Liabilities because he or she was a Director or Officer,
if such director or officer is a Party thereto because he or
she is or was a director or officer of the Affiliate.
(b) The Corporation shall indemnify an employee who is not a
Director or Officer, to the extent he or she has been
successful on the merits or otherwise in defense of a
Proceeding, for all Expenses incurred in the Proceeding if the
employee was a Party because he or she was an employee of the
Corporation.
(c) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof,
indemnify (to the extent not otherwise provided in Section
8.06(b) hereof) against Liabilities incurred by, and/or
provide for the allowance of reasonable Expenses of, an
employee or authorized agent of the Corporation acting within
the scope of his or her duties as such and who is not
otherwise a Director or Officer.
8.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual
who is or was an employee or authorized agent of the
Corporation against any Liability asserted against or incurred
by such individual in his or her capacity as such or arising
from his or her status as such, regardless of whether the
Corporation is required or permitted to indemnify against any
such Liability under this Article VIII.
8.08. Severability. If any provision of this Article VIII
shall be deemed invalid or inoperative, or if a court of
competent jurisdiction determines that any of the provisions
of this Article VIII contravene public policy, this Article
VIII shall be construed so that the remaining provisions shall
not be affected, but shall remain in full force and effect,
and any such provisions which are invalid or inoperative or
which contravene public policy shall be deemed, without
further action or deed by or on behalf of the Corporation, to
be modified, amended and/or limited, but only to the extent
necessary to render the same valid and enforceable; it being
understood that it is the Corporation's intention to provide
the Directors and Officers with the broadest possible
protection against personal liability allowable under the
Statute.
8.09. Nonexclusively of Article VIII. The rights of a
Director, Officer or employee (or any other person) granted
under this Article VIII shall not be deemed exclusive of any
other rights to indemnification against Liabilities or
allowance of Expenses which the Director, Officer or employee
(or such other person) may be entitled to under any written
agreement, Board resolution, vote of shareholders of the
Corporation or otherwise, including, without limitation, under
the Statute. Nothing contained in this Article VIII shall be
deemed to limit the Corporation's obligations to indemnify
against Liabilities or allow Expenses to a Director, Officer
or employee under the Statute.
8.10. Contractual Nature of Article VIII; Repeal or
Limitation of Rights. This Article VIII shall be deemed to be
a contract between the Corporation and each Director, Officer
and employee of the Corporation and any repeal or other
limitation of this Article VIII or any repeal or limitation of
the Statute or any other applicable law shall not limit any
rights of indemnification against Liabilities or allowance of
Expenses then existing or arising out of events, acts or
omissions occurring prior to such repeal or limitation,
including, without limitation, the right to indemnification
against Liabilities or allowance of Expenses for Proceedings
commenced after such repeal or limitation to enforce this
Article VIII with regard to acts, omissions or events arising
prior to such repeal or limitation.
ARTICLE IX. FISCAL YEAR
9.01. The fiscal year of the corporation shall be the
calendar year.
ARTICLE X. AMENDMENTS
10.01. By Shareholders. Except as otherwise
provided in the articles of incorporation of the corporation
or these Bylaws, these Bylaws may be altered, amended or
repealed and new Bylaws may be adopted by the shareholders at
any Annual Meeting or Special Meeting at which a quorum is in
attendance.
10.02. By Directors. Except as otherwise provided in the
articles of incorporation of the corporation or these Bylaws,
these Bylaws may also be altered, amended or repealed and new
Bylaws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any
meeting at which a quorum is in attendance; provided, however,
that notice of any proposal to take any such action shall have
been given to each director not less than 72 hours prior to
the meeting by one of the methods set forth in Section 3.05;
but no Bylaw adopted by the shareholders shall be amended,
repealed or readopted by the Board of Directors unless the
Bylaw so adopted so permits.
10.03. Implied Amendments. Except as otherwise provided in
the articles of incorporation of the corporation or these
Bylaws, any action taken or authorized by the shareholders or
by the Board of Directors, which would be inconsistent with
the Bylaws then in effect but is taken or authorized by
affirmative vote of not less than the number of shares or the
number of directors required to amend the Bylaws so that the
Bylaws would be consistent with such action, shall be given
the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary
to permit the specific action so taken or authorized.
EXHIBIT 10
MGIC INVESTMENT CORPORATION
1991 STOCK INCENTIVE PLAN, AS AMENDED
1. Purpose. The purpose of the MGIC Investment
Corporation 1991 Stock Incentive Plan, as amended to March 6,
1997 and as proposed to be further amended in accordance with
amendments adopted by the Board (as hereinafter defined) on
March 6, 1997 (the "Amended Plan"), is to secure for MGIC
Investment Corporation (the "Company") and its subsidiaries
the benefits of the additional incentive inherent in the
ownership of the Company's Common Stock, $1.00 par value (the
"Common Stock"), by certain key employees and executive
officers of the Company and its subsidiaries and directors of
the Company, who are important to the success and the growth
of the business of the Company and to help the Company secure
and retain the services of such persons. In addition to
granting stock options ("Options"), the Amended Plan provides
for a deposit share program ("Deposit Share Program") and for
the award of Common Stock, subject to certain terms,
conditions and restrictions ("Restricted Stock"). It is
intended that certain of the Options issued pursuant to the
Amended Plan will constitute incentive stock Options
("Incentive Stock Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"),
and the remainder of the Options issued pursuant to the
Amended Plan will constitute nonstatutory Options. The
Options and Restricted Stock are hereinafter referred to
collectively as "Awards".
2. Administration.
(a) Stock Award Committee. The Amended Plan shall be
administered under the supervision of the Board of
Directors of the Company (the "Board"), which shall
exercise its powers, to the extent herein provided,
through the agency of the Stock Award Committee (the
"Committee"), which shall consist of at least two members
and shall be appointed from among the members of the
Board. Any member of the Committee may resign or be
removed by the Board and new members may be appointed by
the Board. Additionally, the Committee shall be
constituted so as to satisfy at all times the outside
director requirement of Code Section 162(m) and the
regulations thereunder or any substitute provision
therefor.
(b) Rules and Regulations. The Committee, from time to
time, may adopt rules and regulations for carrying out
the provisions and purposes of the Amended Plan. The
interpretation and construction of any provision of the
Amended Plan by the Committee shall be final, conclusive
and binding on all interested parties. In order to carry
out its responsibilities, the Committee may execute such
documents and enter into such agreements and make all
determinations deemed necessary or advisable to
effectuate the purposes of the Amended Plan.
(c) Authority. The Committee shall have all the powers
vested in it by the terms of the Amended Plan, such
powers to include exclusive authority (subject to the
terms of the Amended Plan and applicable law) to select
the persons to be granted Awards under the Amended Plan,
to determine the type, size and terms of Awards to be
made to each person selected, to determine the time when
Awards will be granted and to establish objectives and
conditions for earning Awards. The Committee shall
determine which Options are to be Incentive Stock Options
and which are to be nonstatutory Options and shall in
each case enter into a written Option agreement with the
recipient thereof (an "Option Agreement") setting forth
the terms and conditions of the grant and the exercise of
the subject Option, as determined by the Committee in
accordance with the Amended Plan. To the extent that the
aggregate fair market value of Common Stock with respect
to which Incentive Stock Options under the Amended Plan
and any other plans of the Company or its subsidiaries
are exercisable by an Employee (as hereinafter defined)
for the first time during any calendar year exceeds
$100,000, such Options shall be treated as Options which
are not Incentive Stock Options. To the extent the Code
is amended from time to time to provide additional or
different limitations on the grant of Incentive Stock
Options, the foregoing limitation shall be considered to
be amended accordingly. The Committee shall have full
power and authority to administer and interpret the
Amended Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the
administration of the Amended Plan and for the conduct of
its business as the Committee deems necessary or
advisable. The Committee's interpretation of the Amended
Plan, and all actions taken and determinations made by
the Committee pursuant to the powers vested in it, shall
be conclusive and binding on all parties concerned,
including the Company, its subsidiaries, its
shareholders, Participants (as defined in Section 4
below) and any employee of the Company or its
subsidiaries. The Committee may delegate duties to any
person or persons; provided, that, no delegation of
duties is permitted with respect to (i) any grant, award
or other acquisition from the Company if the person or
persons to whom duties are delegated would not satisfy
the standard of Rule 16b-3(d)(1) under the Securities
Exchange Act of 1934, as amended, or any substitute
provision therefor or the requirements of Section 162(m)
of the Code and (ii) any disposition to the Company if
the person or persons to whom duties are delegated would
not satisfy the standard of Rule 16b-3(d)(1).
(d) Records. The Committee shall maintain a written
record of its proceedings. A majority of the Committee
members shall constitute a quorum for any meeting. Any
determination or action of the Committee may be made or
taken by a majority of the members present at any such
meeting, or without a meeting by a resolution or written
memorandum concurred in by all of the members then in
office.
3. Stock Subject to Awards. The aggregate number
of shares of Common Stock for which Awards may be granted
under the Amended Plan shall not exceed 7,000,000 shares,
subject to adjustment as provided in Section 8 below. If, and
to the extent that, Options granted under the Amended Plan
terminate or expire without having been exercised, or shares
of Restricted Stock under the Amended Plan are forfeited, the
shares covered by such terminated or expired Options or
forfeited Restricted Stock, as the case may be, may be the
subject of further grants under the Amended Plan. Restricted
Stock granted under the Amended Plan and shares issued upon
the exercise of any Option granted under the Amended Plan may
be, at the Company's discretion, shares of authorized and
unissued Common Stock, shares of issued Common Stock held in
the Company's treasury or reacquired shares or any combination
thereof. The foregoing notwithstanding, the maximum number of
shares of Restricted Stock for which Awards may be granted is
400,000 shares.
4. Persons Eligible. Under the Amended Plan, (i)
Awards may be granted to any key employee or executive officer
of the Company who is an employee of the Company or its
subsidiaries, including any employee who is also a member of
the Board (an "Employee") and (ii) shares of Restricted Stock
shall be awarded to each Non-Employee Director under the
Deposit Share Program, as provided herein. "Non-Employee
Director" means a member of the Board who is not an employee
of the Company or of any person, directly or indirectly,
controlling, controlled by or under common control with the
Company and is not a member of the Board representing a holder
of any class of securities of the Company. In determining the
Employees to whom Awards are to be granted and the number of
shares to be covered by an Award, the Committee shall take
into consideration the Employee's present and potential
contribution to the success of the Company and such other
factors as the Committee may deem proper and relevant. An
Employee receiving an Award, and a Non-Employee Director
receiving shares of Restricted Stock under the Amended Plan
are individually hereinafter referred to as a "Participant".
In no event may Awards be granted to any one Participant for
more than twenty percent (20%) of the aggregate number of
shares of Common Stock for which Awards may be granted under
the Amended Plan, including for this purpose Awards granted to
such Participant which are subsequently cancelled, forfeited
or otherwise terminated.
5. Provisions Applicable to Options.
(a) Price and Type of Options. The purchase price of
each share of Common Stock under any Option granted under
the Amended Plan shall be as determined by the Committee
in its sole discretion, but shall not be less than the
Fair Market Value thereof (determined in a manner
equivalent to the determination under Section 6(e),
unless in the case of Incentive Stock Options, the Code
requires a different method, in which case the method
required by the Code shall be followed for Incentive
Stock Options) on the date of grant. The type of Option
granted shall be as determined by the Committee, but any
Incentive Stock Options granted shall be subject to such
terms and conditions as are required for the
qualification as such by the Code on the date of grant.
Any Options granted under the Amended Plan shall be
clearly identified as Incentive Stock Options or
nonstatutory stock Options.
(b) Exercisability of Options. The Committee shall
determine when and to what extent an Option shall be
vested, including continuation of vesting after
retirement at a specified age and with a specified number
of years of service; and may provide for Options to be
vested based upon such performance related goals as the
Committee in its sole discretion deems appropriate
("Performance Goals"). The Committee may, in its sole
discretion, also provide that some or all Options granted
shall immediately become vested or exercisable as of a
date fixed by the Committee upon a change in control of
the Company as defined by the Committee or in the event
of a sale, lease or transfer of all or substantially all
of the Company's assets, equity securities or businesses,
or merger, consolidation or other business combination of
the Company. The Committee may also if it so elects make
any such action contingent upon consummation of the event
which prompted the action.
(c) Termination of Options. The unexercised portion of
any Option granted under the Amended Plan shall
automatically and without notice terminate and become
null and void at the time of the earliest to occur of the
following:
(i) Thirty (30) days after the termination of
the Participant's employment with the Company and
all subsidiaries thereof for any reason
(including, without limitation, disability, or
termination by the Company and all subsidiaries
thereof, with or without cause) other than by
reason of the Participant's death, retirement
from the Company and all subsidiaries thereof
after reaching age 55 and after having been
employed by the Company or any subsidiary thereof
for at least seven (7) years or a leave of
absence approved by the Company;
(ii) (x) except as provided in (y), three
hundred sixty-five (365) days after the
termination of the Participant's employment with
the Company and all subsidiaries thereof by
reason of the Participant's death, or by reason
of the Participant's retirement from the Company
and all subsidiaries thereof after reaching
age 55 and after having been employed by the
Company or any subsidiary thereof for at least
seven (7) years; or (y) in the case of such
retirement, such longer period as the Committee
may provide for a Participant;
(iii)Thirty (30) days after expiration or
termination of a leave of absence approved by the
Company unless the Participant becomes reemployed
with the Company or any subsidiary prior to such
30-day period in which event the Option shall
continue in effect in accordance with its terms;
(iv) The expiration of the Option Period (as
hereinafter defined); or
(v) In whole or in part, at such earlier time
or upon the occurrence of such earlier event as
the Committee in its discretion may have
provided upon the granting of such Option.
(d) Term of Options. The term of each Option granted
under the Amended Plan will be for such period (herein
referred to as the "Option Period") of not less than
seven (7) years and not more than ten (10) years as the
Committee shall determine. With respect to Incentive
Stock Options, such term may not exceed ten (10) years or
such other term provided in the Code. Each Option shall
be subject to earlier termination as described under
"Termination of Options" in subparagraph (c) above. An
Option shall be considered granted on the date the
Committee acts to grant the Option or such date
thereafter as the Committee shall specify.
(e) Exercise of Options. Options granted under the
Amended Plan may be exercised by the Participant, as to
all or part of the shares covered thereby, in accordance
with the terms of such Participant's Option Agreement. A
partial exercise of an Option may not be made with
respect to fewer than ten (10) shares unless the shares
purchased are the total number then available for
purchase under the Option. A Participant shall exercise
such Option by delivering ten (10) days' (or such shorter
period as the Company shall permit) prior written notice
of the exercise thereof on a form prescribed by the
Company to the Secretary of the Company at its principal
office, specifying the number of shares to be purchased.
The purchase price of the shares as to which an Option
shall be exercised shall be paid in full in cash or its
equivalent at the time of exercise.
The Participant shall be responsible for paying all
withholding taxes, if any, applicable to any Option
exercise and the Company shall have the right to take any
action necessary to insure that the Participant pays the
required withholding taxes. Upon payment of the Option
purchase price and the required withholding taxes, the
Company shall cause a certificate for the shares so
purchased to be delivered to the Participant.
(f) Stock Withholding. Notwithstanding the terms of
subparagraph (e) above, a Participant shall be permitted
to satisfy the Company's withholding tax requirements by
electing to have the Company withhold shares of Common
Stock otherwise issuable to the Participant or to deliver
to the Company shares of Common Stock having a fair
market value on the date income is recognized pursuant to
the exercise of an Option equal to the amount required to
be withheld. The election shall be made in writing and
shall be made according to such rules and in such form as
the Committee may determine.
(g) Exercise of Options following Participant's Death.
If a Participant dies ("Deceased Participant") while in
the employ of the Company, or during any longer period
applicable to a Deceased Participant under Section
5(c)(ii)(y), and if the Deceased Participant's death
occurs prior to the date the Option terminates,
regardless of whether the Option is subject to exercise
under the terms of the Option, such Option shall become
immediately vested and exercisable by the personal
representative of the Deceased Participant or the person
to whom the Deceased Participant's rights under the
Option would be transferred by law or applicable laws of
descent and distribution. The Committee may also provide
as to Options outstanding as of January 1, 1994 for a
right to surrender the Option to the Company at a price
equal to the difference between the aggregate Option
price and the fair value of the Common Stock subject to
the Option as of the Deceased Participant's death. The
surrender shall also be subject to such terms and
conditions as are determined by the Committee and set
forth in the Option Agreement.
(h) Non-Transferability of Options. Except to the
extent as may be permitted under rules established by the
Committee, an Option or any right evidenced thereby shall
not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable during
the Participant's lifetime only by him or by his guardian
or legal representative.
(i) Rights of Participant. The Participant shall have
none of the rights of a shareholder of the Company with
respect to the shares subject to any Option granted under
the Amended Plan until a certificate or certificates for
such shares shall have been issued upon the exercise of
any Option.
6. Restricted Stock Awards. The Committee may make
awards of Restricted Stock ("Restricted Stock Awards") to
Participants who are Employees, and shall make Awards to Non-
Employee Directors, subject to the provisions of this Section
6.
(a) Restricted Stock Agreements. Restricted Stock
Awards shall be evidenced by Restricted Stock agreements
("Restricted Stock Agreements") which shall conform to
the requirements of the Amended Plan and may contain such
other provisions (such as provisions for the protection
of Restricted Stock in the event of mergers,
consolidations, dissolutions and liquidations affecting
either the Restricted Stock Agreement or the Common Stock
issued thereunder) as the Committee shall deem advisable.
(b) Payment of Restricted Stock Awards. Restricted
Stock Awards shall be made by delivering to the
Participant or an Escrow Agent (as defined below) a
certificate or certificates for such shares of Restricted
Stock of the Company, as determined by the Committee
("Restricted Shares"), which Restricted Shares shall be
registered in the name of such Participant. The
Participant shall have all of the rights of a holder of
Common Stock with respect to such Restricted Shares
except as to such restrictions as appear on the face of
the certificate. The Committee may designate the Company
or one or more of its employees to act as custodian or
escrow agent for the certificates ("Escrow Agent").
(c) Terms, Conditions and Restrictions. Restricted
Shares shall be subject to such terms and conditions,
including vesting and forfeiture provisions, if any, and
to such restrictions against resale, transfer or other
disposition as may be provided in this Amended Plan and,
consistent therewith, as may be determined by the
Committee at such time as it grants a Restricted Stock
Award to a Participant. Any new or different Restricted
Shares or other securities resulting from any adjustment
of such Restricted Shares pursuant to Section 8 hereof
shall be subject to the same terms, conditions and
restrictions as the Restricted Shares prior to such
adjustment. The Committee may in its discretion, remove,
modify or accelerate the release of restrictions on any
Restricted Shares as it deems appropriate. In the event
of the Participant's death, all transfers or other
restrictions to which the Participant's Restricted Shares
are subject shall immediately lapse, and the Deceased
Participant's legal representative or person receiving
such Restricted Shares under the Deceased Participant's
will or under the laws of descent and distribution shall
take such Restricted Shares free of any such transfer or
other restrictions.
(d) Dividends and Voting Rights. Except as otherwise
provided by the Committee, during the restricted period
the Participant shall have the right to receive dividends
from and to vote the Participant's Restricted Shares.
(e) Deposit Share Program. Subject to the provisions
set forth below and subject to rules established by the
Committee, pursuant to the Company's Deposit Share
Program, (1) Employees may elect to acquire shares of
Common Stock with a Fair Market Value up to a percentage
designated by the Committee of cash bonuses under the
Company's incentive compensation programs designated by
the Committee, and (2) Non-Employee Directors shall be
entitled to acquire shares of Common Stock with a Fair
Market Value equal to up to 50% of the compensation of
such Non-Employee Director for service as a director of
the Company, including for service as a member of a
Committee of the Board, during the preceding calendar
year (in each case, "Deposit Shares"). Deposit Shares
shall be issued in an amount which the Deposit Share
Participant (as defined in Section 6(e)(i) below) elects
to use to acquire Common Stock (subject to limits
provided in this Section 6(e)) divided by the Fair Market
Value of a share of Common Stock on the Award Date (as
defined in Section 6(e)(ii) below). For purposes hereof,
the term "Fair Market Value" shall be as determined by
the Committee, except that during any period the Common
Stock is traded on a recognized exchange, Fair Market
Value shall be based upon the last sales price of Common
Stock on the principal securities exchange on which the
same is traded on the Award Date or if no sales of Common
Stock have taken place on such date, the last sales price
on the first date following the Award Date on which sales
occur. Deposit Share Participants electing to deposit
Deposit Shares with the Company under the Deposit Share
Program and receive Restricted Stock Awards in connection
therewith shall do so as follows:
(i) The Committee shall notify each Participant
who is an Employee selected to participate in the
Deposit Share Program and each Non-Employee Director
(such Employees and Non-Employee Directors together
referred to as "Deposit Share Participants") of the
maximum amount which they are permitted to use to
acquire Common Stock to be deposited with the Escrow
Agent, and Deposit Share Participants may choose to
deposit any number of Deposit Shares they are
permitted to deposit under the Committee rules
(Deposit Shares so acquired and deposited are herein
sometimes referred to as the "Original Deposit").
(ii)Deposit Share Participants must make their
irrevocable election on or before the date
designated by the Committee or if no date is
designated, then at least thirty (30) days prior to
the Award Date. The Award Date ("Award Date") for
each year in which a Deposit Share Participant is
eligible to receive Deposit Shares shall be February
15, or the Monday following February 15 in any year
in which February 15 falls on a Saturday or Sunday,
unless the Committee designates a different Award
Date. The Award Date for Employees and Non-Employee
Directors need not be the same. The Committee shall
have the discretion to waive any date or deadline
established pursuant to this section. The Committee
may also allow a Deposit Share Participant who is an
Employee to acquire Deposit Shares in lieu of a
bonus, or to deliver a check equal to the dollar
amount of bonuses for which the Deposit Share
Participant may purchase Deposit Shares, in which
case the full amount of the cash bonus (less
applicable withholding) will be paid to the Employee
and the Employee shall deliver a check to the
Company, subject to the limitations established by
the Committee.
(iii)All elections shall be in writing and filed
with the Committee or its designee. Such elections
may, if permitted by the Committee, also specify one
of the following alternatives regarding the manner
in which dividends are paid on all deposited stock
(including Deposit Shares, shares purchased with
dividends, if any, and matching Restricted Shares
(but only if the Committee allows dividends on such
Restricted Shares to be paid and credited)):
(1) Dividends shall be accumulated by the
Escrow Agent for the purchase of additional shares
for the Deposit Share Participant's account; or
(2) Dividends shall be paid currently to the
Deposit Share Participant.
A Deposit Share Participant shall be deemed to have
elected Alternative (1) unless or until the Deposit Share
Participant delivers written notice to the Company selecting
Alternative (2) as the method by which dividends are to be
paid and credited.
(iv)As soon as practicable following an Original
Deposit, the Company shall match the Deposit Shares
deposited with the Escrow Agent for the Deposit
Share Participant's account by depositing (1) for an
Employee, up to one (1) Restricted Share for each
Deposit Share in the Original Deposit, as determined
by the Committee, and (2) for a Non-Employee
Director, one and one-half (1-1/2) Restricted Share
for each Deposit Share in the Original Deposit.
Restricted Shares shall be distributed to the
Deposit Share Participant entitled thereto as
promptly as practicable after they vest.
(v) With respect to Employees, the Restricted
Shares deposited by the Company shall vest in
accordance with the schedule determined by the
Committee. With respect to Non-Employee Directors,
the Restricted Shares shall vest on the third
anniversary of the date of the Award. Awards of
Restricted Stock that are not vested shall be
forfeited upon the Non-Employee Director ceasing to
be a director of the Company for any reason, except
in the case of death, as hereinafter provided in
Section 6 (e) (ix), except in the case of a
Permissible Event (as hereinafter defined) or except
as otherwise provided by the Committee. If a Non-
Employee Director ceases to be a director by reason
of a Permissible Event, the Restricted Shares shall
continue to vest during the balance of the three-
year vesting period if (1) no later than the date on
which the Non-Employee Director ceases to be a
director of the Company, the Non-Employee Director
enters into an agreement approved by the Committee
under which the Non-Employee Director agrees not to
compete with the Company or its subsidiaries during
the balance of such period and (2) the Non-Employee
Director complies with the agreement. Any Restricted
Shares that do not vest by reason of a Permissible
Event shall be forfeited unless otherwise provided
by the Committee. A Permissible Event shall be any
termination of service as a director of the Company
by reason of:
(1) the Non-Employee Director being
ineligible for continued service as a director of
the Company under the Company's retirement policy;
or
(2) the Non-Employee Director's taking a
position with or providing services to a
governmental, charitable or educational institution
whose policies prohibit continued service on the
Board or due to the fact that continued service as a
director would be a violation of law.
The Company may, in its sole discretion, provide
that some or all Restricted Stock shall immediately
become vested in the circumstances with respect to
immediate vesting of Options contemplated by Section
5(b).
(vi)Shares purchased with dividends paid on
deposited stock (Original Deposit, Restricted Stock
or any shares purchased with dividends) may be
withdrawn from a Deposit Share Participant's account
at any time.
(vii)A Deposit Share Participant's interests in
the Original Deposit or the Restricted Stock may not
be sold, pledged, assigned or transferred in any
manner, other than by will or the laws of descent
and distribution, so long as such shares are held by
the Escrow Agent, and any such sale, pledge,
assignment or other transfer shall be null and void;
provided, however, a pledge of the Deposit Share
Participant's interest in the Original Deposit or a
transfer of such Participant's interest in the
Original Deposit (any permitted transfer not being
considered a withdrawal of the Original Deposit) or
in the Restricted Stock may be permitted in
accordance with rules which the Committee may
establish. To the extent Restricted Shares become
vested, at the same time as Restricted Shares are
released by the Escrow Agent, the Escrow Agent shall
also release a percentage (computed to the nearest
whole percent) of the Original Deposit equal to the
number of Restricted Shares then being released,
divided by the number of Restricted Shares deposited
by the Company with respect to the Original Deposit.
(viii)Any or all of the Original Deposit may be
withdrawn at any time. Such withdrawal shall cause
a forfeiture of any non-vested Restricted Shares
attributable to the Deposit Shares being withdrawn.
Any Deposit Shares withdrawn shall be deemed to have
been withdrawn under Section 6(e)(vi) to the extent
there are any such shares, and then under this
Section 6(e)(viii).
(ix)In the event the employment with the Company
or its subsidiaries of a Deposit Share Participant
who is an Employee is terminated during the vesting
period by reason of the Deposit Share Participant's
death, the vesting requirements shall be deemed
fulfilled upon the date of such termination of
employment. In the event a Non-Employee Director's
service as a director of the Company is terminated
during the vesting period by reason of the Non-
Employee Director's death, the vesting requirements
shall be deemed to be fulfilled on the date of such
termination of service.
(x) In the event the employment with the Company
and its subsidiaries of a Deposit Share Participant
who is an Employee is terminated during the vesting
period for any reason other than death, the
Restricted Shares, to the extent not otherwise
vested, shall automatically be forfeited and
returned to the Company unless the Committee shall,
in its sole discretion, otherwise provide.
7. Right to Terminate Employment. Nothing in the
Amended Plan or in any Award granted under the Amended Plan to
a Participant who is an Employee shall confer upon any such
Participant the right to continue in the employment of the
Company or affect the right of the Company to terminate such a
Participant's employment at any time, nor cause any Award
granted to become exercisable as a result of the election by
the Company of its right to terminate at any time the
employment of such a Participant subject, however, to the
provisions of any agreement of employment between the Company
and such Participant. Nothing in the Amended Plan or in any
Award of Restricted Stock under the Amended Plan to a
Participant who is a Non-Employee Director shall confer upon
such Director the right to continue as a member of the Board.
8. Dilution and Other Adjustments. In the event of
any change in the outstanding shares of the Company ("capital
adjustment") for any reason including, but not limited to, any
stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of
shares or other similar event, an adjustment in the number or
kind of shares of Common Stock subject to, the Option price
per share under, and (if appropriate) the terms and conditions
of, any outstanding Award, shall be modified or provided for
by the Committee in a manner consistent with such capital
adjustment, and the shares reserved for issuance under this
Amended Plan shall likewise be modified. The determination of
the Committee as to any such adjustment shall be conclusive
and binding for all purposes of the Amended Plan.
9. Form of Agreements with Participants. Each
Option Agreement and/or Restricted Stock Agreement to be
executed by a Participant shall be in such form as the
Committee shall in its discretion determine.
10. Legend on Certificates; Restrictions on
Transfer. The Company may, to the extent deemed necessary or
advisable, endorse an appropriate legend referring to any
restrictions imposed by state law or the Securities Act of
1933, as amended, upon the certificate or certificates
representing any shares issued or transferred to the
Participant pursuant to Awards.
11. Securities Act Compliance. Notwithstanding any
provision of the Amended Plan to the contrary, the Committee
shall take whatever action it may consider necessary or
appropriate to comply with the Securities Act of 1933, as
amended, or any other then applicable securities law,
including limiting the granting and exercise of Options or the
issuance of shares thereunder.
12. Amendment, Expiration and Termination of the
Amended Plan. Under the Amended Plan, Awards may be granted at
any time and from time to time before the tenth anniversary
date of adoption of amendments to this Plan by the Company's
Board of Directors on January 27, 1994 (the date on which this
Plan was last previously amended) at which time the Amended
Plan will expire, except as to Awards then outstanding. The
foregoing notwithstanding, no Incentive Stock Options may be
granted after January 1, 2001. The Amended Plan will remain
in effect with respect to outstanding Awards until such Awards
have been exercised or have expired, as the case may be. The
Amended Plan may be terminated or modified at any time by the
Board of Directors before the expiration of the Amended Plan,
except with respect to any Awards then outstanding under the
Amended Plan, provided that any increase in the maximum number
of shares subject to Awards specified in Section 3 or in
Section 4 hereof shall be subject to the approval of the
Company's shareholders unless made pursuant to the provisions
of Section 8 hereof. No amendment of the Amended Plan shall
adversely affect any right of any Participant with respect to
any Award theretofore granted under the Amended Plan.
13. Effective Date. If the Amended Plan is not
approved by the Company's shareholders prior to September 1,
1997, the MGIC Investment Corporation 1991 Stock Incentive
Plan as in effect immediately prior to March 6, 1997 shall
remain in effect and shall not be deemed to have been amended.
14. Governing Law. The Amended Plan and any Option
Agreement and/or Restricted Stock Agreement shall be governed
by and construed in accordance with the internal substantive
laws, and not the choice of law rules, of the State of
Wisconsin.
EXHIBIT 11.1
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
Three and Six Month Periods Ended June 30, 1999 and 1998
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars,
except per share data)
BASIC EARNINGS PER SHARE
Average common shares outstanding 109,059 114,144 109,031 114,067
======== ======== ======== ========
Net income $112,934 $ 95,212 $213,352 $189,259
======== ======== ======== ========
Basic earnings per share $ 1.04 $ 0.83 $ 1.96 $ 1.66
======== ======== ======== ========
DILUTED EARNINGS PER SHARE
Adjusted shares outstanding:
Average common shares outstanding 109,059 114,144 109,031 114,067
Net shares to be issued upon
exercise of dilutive stock
options after applying
treasury stock method 1,195 1,569 1,098 1,660
-------- -------- -------- --------
Adjusted shares outstanding 110,254 115,713 110,129 115,727
======== ======== ======== ========
Net income $112,934 $ 95,212 $213,352 $189,259
======== ======== ======== ========
Diluted earnings per share $ 1.02 $ 0.82 $ 1.94 $ 1.64
======== ======== ======== ========
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE SIX
MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 2,661,837
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 18,728
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,823,430
<CASH> 146,859
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 23,105
<TOTAL-ASSETS> 3,118,336
<POLICY-LOSSES> 686,634
<UNEARNED-PREMIUMS> 173,500
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 417,000
0
0
<COMMON> 121,111
<OTHER-SE> 1,654,530
<TOTAL-LIABILITY-AND-EQUITY> 3,118,336
388,747
<INVESTMENT-INCOME> 75,542
<INVESTMENT-GAINS> 3,353
<OTHER-INCOME> 28,956
<BENEFITS> 75,173
<UNDERWRITING-AMORTIZATION> 960
<UNDERWRITING-OTHER> 104,222
<INCOME-PRETAX> 307,127
<INCOME-TAX> 93,775
<INCOME-CONTINUING> 213,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,352
<EPS-BASIC> 1.96
<EPS-DILUTED> 1.94
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
