<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
Commission File Number 0-19506
UNITED WISCONSIN SERVICES, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1431799
(State of Incorporation) (I.R.S. Employer
Identification No.)
401 WEST MICHIGAN STREET, MILWAUKEE, WISCONSIN 53203-2896
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 226-6900
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 ___
Number of shares of Common Stock outstanding as of April 30, 1998 was
16,544,121.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED WISCONSIN SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
--------- ------------
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 47,081 $ 62,324
Investments - available for sale 442,360 419,417
Due from affiliates 1,205 5,510
Other receivables 65,860 66,306
Prepaid and other current assets 18,111 19,441
--------- ---------
Total current assets 574,617 572,998
Investments - held to maturity 11,768 11,697
Property and equipment, net 44,231 44,147
Goodwill and other intangibles, net 142,092 142,801
Other noncurrent assets 26,450 24,019
--------- ---------
Total assets $ 799,158 $ 795,662
--------- ---------
--------- ---------
</TABLE>
See Notes to Interim Consolidated Financial Statements
2
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UNITED WISCONSIN SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
--------- ------------
(In thousands)
<S> <C> <C>
Current liabilities:
Medical and other benefits payable $175,297 $187,053
Advance premiums 51,102 44,045
Due to affiliates 4,797 3,345
Payables and accrued expenses 43,440 49,856
Other current liabilities 32,052 23,862
-------- --------
Total current liabilities 306,688 308,161
Long-term debt:
Affiliates 70,000 70,000
Other 53,078 53,378
Other noncurrent liabilities 37,593 37,746
-------- --------
Total liabilities 467,359 469,285
Redeemable preferred stock -
Series A adjustable rate nonconvertible, $1,000
stated value, 25,000 shares authorized - -
Shareholder's equity:
Preferred stock (no par value, 475,000 shares authorized) - -
Common stock (no par value, $1 stated value,
50,000,000 shares authorized, 16,544,047 and
16,509,578 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively) 16,544 16,510
Paid-in capital 187,627 186,768
Retained earnings 121,740 117,331
Unrealized gains on investments 5,888 5,768
-------- --------
Total shareholders' equity 331,799 326,377
-------- --------
Total liabilities and shareholders' equity $799,158 $795,662
-------- --------
-------- --------
</TABLE>
See Notes to Interim Consolidated Financial Statements
3
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UNITED WISCONSIN SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
Revenues:
Health services revenues:
Premium revenue $383,011 $388,608
Other revenue 11,920 13,945
Investment results 9,971 9,845
-------- --------
Total revenues 404,902 412,398
Expenses:
Medical and other benefits 305,423 310,170
Selling, general and administrative expenses 83,064 90,695
Profit sharing on joint ventures 1,124 845
Interest expense 2,303 2,217
Amortization of goodwill and other intangibles 2,347 2,441
-------- --------
Total expenses 394,261 406,368
-------- --------
Income before income tax expense 10,641 6,030
Income tax expense 4,250 2,660
-------- --------
Net income $ 6,391 $ 3,370
-------- --------
-------- --------
Earnings per common share:
Basic $ 0.39 $ 0.21
Diluted 0.38 0.21
</TABLE>
See Notes to Interim Consolidated Financial Statements
4
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UNITED WISCONSIN SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Operating activities:
Net income $ 6,391 $ 3,370
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,780 5,764
Realized investment gains (2,271) (2,409)
Deferred income tax benefit (132) (1,032)
Changes in other operating accounts:
Other receivables 222 (5,348)
Medical and other benefits payable (11,336) (13,761)
Advance premiums 7,057 1,245
Due to/from affiliates 5,757 3,828
Other - net (3,868) (5,290)
--------- ---------
Net cash provided by (used in) operating activities 6,600 (13,633)
Investing activities:
Purchases of available for sale investments (133,357) (145,873)
Proceeds from sale of available for sale investments 112,156 149,443
Proceeds from maturity of available for sale investments 900 2,035
Purchases of held to maturity investments (348) (1,139)
Proceeds from maturity of held to maturity investments 195 1,005
--------- ---------
Net cash provided by (used in) investing activities (20,454) 5,471
Financing activities:
Cash dividends paid (1,982) (1,969)
Issuance of common stock 893 (236)
Repayment of debt (300) (300)
Net borrowings under line of credit agreement - (1,200)
--------- ---------
Net cash used in financing activities (1,389) (3,705)
Cash and cash equivalents:
Decrease during period (15,243) (11,867)
Balance at beginning of year 62,324 51,146
--------- ---------
Balance at end of period $ 47,081 $ 39,279
--------- ---------
--------- ---------
</TABLE>
See Notes to Interim Consolidated Financial Statements
5
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UNITED WISCONSIN SERVICES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying consolidated financial statements
for United Wisconsin Services, Inc. (the Company) have been prepared in
accordance with generally accepted accounting principles. The financial
information included herein has been prepared by management without audit
by independent certified public accountants.
The unaudited financial statements include all adjustments and accruals
consisting only of normal recurring accrual adjustments which are, in the
opinion of management, necessary for a fair presentation of the
consolidated financial position and results of operations for the interim
periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. The unaudited interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
December 31, 1997, incorporated by reference or included in the Company's
Form 10-K, as filed with the Securities and Exchange Commission.
EARNINGS PER COMMON SHARE - Basic earnings per common share are computed by
dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per common share are computed by dividing
net income by the weighted average number of common shares outstanding,
adjusted for the effect of dilutive securities for employee stock options.
Weighted average common shares outstanding were 16,515,874 and 16,337,616
and the effect of dilutive securities were 245,946 and 87,617 for the three
months ended March 31, 1998 and 1997, respectively.
COMPREHENSIVE INCOME - As of January 1 1998, the Company adopted Statement
130, REPORTING COMPREHENSIVE INCOME. Statement 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
transactions adjustments, which prior to adoption were reported separately
in shareholders' equity to be included in other comprehensive income.
Prior year financial statements have been reclassified to conform to the
requirements of Statement 130. During the first quarter of 1998 and 1997,
total comprehensive income(loss) amounted to $6,511,000 and $(3,208,000),
respectively.
RECLASSIFICATIONS - Certain reclassifications have been made to the
consolidated financial statements for 1997 to conform with the 1998
presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
United Wisconsin Services, Inc. (the Company) is a leading provider of
managed health care services and employee benefit products. The Company's three
primary product lines are (i) Health Maintenance Organization (HMO) products,
including Compcare Health Services Insurance Corporation (Compcare), Valley
Health Plan, Inc. (Valley), Unity Health Plans Insurance Corporation (Unity) and
certain point-of-service (POS) and other related products managed by Compcare,
Valley and Unity; (ii) small group managed care and life products sold through
American Medical Security Group, Inc. (AMSG), and American Medical Security
Holdings, Inc. (AMS), which owns United Wisconsin Life Insurance Company
(UWLIC), and (iii) specialty managed care products and services, including
dental, life, disability and workers' compensation products, managed care
consulting, electronic claim submission, pharmaceutical management and managed
behavioral health services. Operating results and statistics for these product
groups are presented below for the periods noted.
SUMMARY OF OPERATING RESULTS AND STATISTICS
<TABLE>
<CAPTION>
March 31,
---------
Membership at end of period: 1998 1997
--------- ---------
<S> <C> <C>
HMO products 294,145 279,096
AMS medical products 580,928 741,530
---------- ---------
Total medical products 875,073 1,020,626
AMS life products 238,824 354,894
Specialty managed care products and services 1,365,072 1,229,600
</TABLE>
<TABLE>
<CAPTION>
Three months ended
March 31,
---------
1998 1997
--------- ---------
<S> <C> <C>
Health services revenues (as a percentage of the total):
HMO products 32.1% 28.8%
AMS products 60.7 64.7
Specialty managed care products and 8.2 7.6
services
Intercompany eliminations (1.0) (1.1)
----- -----
Total 100.0% 100.0%
----- -----
----- -----
</TABLE>
7
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<TABLE>
<CAPTION>
Three months ended
March 31,
---------
1998 1997
--------- ---------
<S> <C> <C>
Operating statistics:
HMO products:
Medical loss ratio (1) 88.4% 88.2%
Selling, general and administrative expense ratio (2) 9.0 9.7
AMS products
Medical:
Medical loss ratio (1) 79.0 79.0
Selling, general and administrative expense ratio (2) 21.5 22.6
Life:
Loss ratio (1) 32.8 31.1
Selling, general and administrative expense ratio (2) 29.3 29.7
Specialty managed care products and services:
Loss ratio (1) 71.1 73.1
Consolidated:
Loss ratio (1) 79.7 79.8
Net income margin (3) 1.6 0.8
</TABLE>
(1) Medical and other benefits as a percentage of premium revenue.
(2) Selling, general and administrative expenses as a percentage of premium
revenue.
(3) Net income as a percentage of total revenues.
The Company's revenues are derived primarily from premiums, while medical
benefits constitute the majority of expenses. Profitability is directly
affected by many factors including, among others, premium rate adequacy,
estimates of medical benefits, health care utilization, effective administration
of benefit payments, operating efficiency, investment returns and federal and
state laws and regulations.
RESULTS OF OPERATIONS
TOTAL REVENUES
Total revenues for the three months ended March 31, 1998 decreased 1.8% to
$404.9 million from $412.4 million for the three months ended March 31, 1997.
These decreases were due primarily to decreased membership as a result of AMS's
effort to improve certain product line's profitability.
HEALTH SERVICES REVENUES -- HMO health services revenues for the three
months ended March 31, 1998 increased 9.4% to $126.6 million from $115.7 million
for the three months ended March 31, 1997. Average HMO medical premium per
member for the three months ended March 31, 1998 increased 3.5% from the same
period in the prior year. The average number of HMO medical members for the
three months ended March 31, 1998 increased 5.8% to 293,149 from 277,066 for the
three months ended March 31, 1997.
Health services revenues for AMS products for the three months ended March
31, 1998 decreased 7.9% to $239.7 million from $260.3 million for the three
months ended March 31, 1997. While average medical premium per member increased
19.6% for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997, the average number of small group medical members
outstanding decreased 23.0% for the three months ended March 31, 1998 to 602,329
from 782,122 for the three months ended March 31, 1997. Much of this membership
decline was the result of AMS's efforts to return this block of business to
profitability. These steps included: (i) exiting certain unprofitable markets
in Texas and Kentucky, (ii) canceling one life dental business, and (iii)
implementing substantial
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rate increases for certain product lines which resulted in membership losses
but improved profitability on renewed business. AMS continued to pursue
initiatives to reverse this membership decline, including new agency sales
relationships, expansion into new geographic areas, acquisitions of blocks of
business, and introduction of new products.
Health services revenues for specialty managed care products and services
for the three months ended March 31, 1998 increased 6.6% to $32.5 million from
$30.5 million for the three months ended March 31, 1997. This increase was due
primarily to an increase in general membership.
INVESTMENT RESULTS -- Investment results include investment income and
realized gains (losses) on investments. Investment results for the three months
ended March 31, 1998 increased 1.3% to $10.0 million from $9.8 million for the
three months ended March 31, 1997. Average annual investment yields, excluding
net realized gains, remained constant at 5.9% for the three months ended March
31, 1998 and 1997. Investment gains are realized in the normal investment
process in response to market opportunities. Average invested assets for the
three months ended March 31, 1998 decreased 1.8% to $495.8 million from $505.1
million for the three months ended March 31, 1997. The decrease in average
invested assets is due primarily to the decrease in medical and other benefits
payable resulting from the membership decline for AMS products over the past
year.
EXPENSE RATIOS
LOSS RATIO - The consolidated loss ratio represents the ratio of medical
and other benefits to premium revenue for the Company on a consolidated basis,
and is therefore a blended ratio for medical, life, dental, disability and other
product lines. The consolidated loss ratio was 79.7% for the first quarter of
1998 compared with 79.8% for the first quarter of 1997. The consolidated loss
ratio is influenced by the component loss ratio for each of the Company's
primary product lines, as discussed below.
The medical loss ratio for HMO products for the three months ended March
31, 1998 was 88.4%, compared with 88.2% for the three months ended March 31,
1997. The increase in the medical loss ratio in 1998 for HMO products is due
primarily to higher loss experience in the southeastern Wisconsin HMO market,
due in part to certain high-cost claims, an increase in the drug cost component
and an increase in outpatient utilization.
The medical loss ratio for AMS products for the three months ended March
31, 1998 remained constant with the three months ended March 31, 1997 at 79.0%.
AMS continues to reprice its products and eliminate unprofitable business.
The loss ratio for specialty managed care products and services for the
three months ended March 31, 1998 was 71.1%, compared with 73.1% for the three
months ended March 31, 1997. The decrease is primarily attributable to improved
results in the United Heartland worker's compensation block of business.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE RATIO -- The selling, general
and administrative (SGA) expense ratio includes commissions, administrative
expenses, and premium taxes and other assessments. The SGA expense ratio for
HMO products for the first quarter of 1998 was 9.0%, compared with 9.7% for the
first quarter of 1997. The decrease was due to improved management efficiencies
at each of the Company's HMOs, as well as a decline in assessments related to
Wisconsin's Health Insurance Risk Sharing Plan.
The SGA expense ratio for AMS medical products for the three months ended
March 31, 1998 was 21.5%, compared with 22.6% for the three months ended March
31 ,1997. The SGA expense ratio for AMS life products for the first quarter of
1998 was 29.3%, compared with 29.7% for the same period in the prior year. AMS
products are sold exclusively through independent agents who are compensated
through commissions. Over time, renewal business has gradually represented a
larger proportion of the total AMS medical and life business. Since renewal
commissions are typically lower than commissions on new sales, this has
contributed to the decrease in the expense ratios. AMS continues to focus on
efforts to improve operating efficiency through process re-engineering and to
align staff commensurate with gross premium revenue.
9
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SGA expenses related to specialty managed care products and services
increased 3.6% for the three months ended March 31, 1998 to $14.9 million from
$14.4 million for the same period in the prior year. Increases in SGA expenses
are tied to health services revenues which increased 6.6% for the three months
ended March 31, 1998 over the same period in 1997.
OTHER EXPENSES
Profit sharing on joint ventures was $1.1 million for the three months
ended March 31, 1998, compared with $0.8 million for the three months ended
March 31, 1997. These balances represent profit sharing expenses related to the
Unity and Valley joint ventures.
Interest expense increased to $2.3 million for the three months ended March
31, 1998 from $2.2 million for the same period in the prior year. Amortization
of goodwill and other intangibles totaled $2.3 million for the first quarter of
1998, compared with $2.4 million of amortization expense for the first quarter
of 1997.
NET INCOME
Consolidated net income for the three months ended March 31, 1998 increased
89.6% to $6.4 million or $0.39 per share from $3.4 million or $0.21 per share
for the three months ended March 31, 1997.
The Company's effective tax rate was 39.9% for the three months ended March
31, 1998 compared with 44.1% for the three months ended March 31, 1997.
Excluding the impact of non-deductible goodwill related to the AMS merger and
other acquisitions, the Company's effective tax rate was 37.6% for the three
months ended March 31, 1998, compared with 39.6% for the three months ended
March 31, 1997. The Company's effective tax rate fluctuates based upon the
relative profitability of the Company's three product lines and the differing
effective tax rates for each of those product lines. The lower effective tax
rate in 1998 was due primarily to a higher proportion of the Company's income
being generated by AMS, which records a lower effective tax rate than the
Company's other subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of cash flow consist primarily of health services
revenues and investment income. The primary uses of cash include medical and
other benefits and operating expense payments. Positive cash flows are invested
pending future payments of medical and other benefits and other operating
expenses. The Company's investment policies are designed to maximize yield,
preserve principal and provide liquidity to meet anticipated payment
obligations.
Historically, the Company has generated positive cash flow from operations.
For the three months ended March 31, 1998, net cash provided by or used in
operating activities amounted to a provision of $6.6 million, compared with
$14.8 million used for the three months ended March 31, 1997. The increase in
cash flow from operations in 1998 was due primarily to an increase in earnings
and an increase in Compcare and Unity's advanced premiums. Due to periodic cash
flow requirements of certain subsidiaries, the Company made borrowings under its
bank line of credit ranging up to $10.0 million during the first three months of
1998 and $7.0 million during the first three months of 1997 to meet short-term
cash needs.
The Company's investment portfolio consists primarily of investment grade
bonds and has a limited exposure to equity securities. At March 31, 1998,
$393.6 million or 86.7% of the Company's total investment portfolio was invested
in bonds. At December 31, 1997, $398.6 million or 92.5% of the Company's total
investment portfolio was invested in bonds. The bond portfolio had an average
quality rating of Aa3 at both March 31, 1998 and December 31, 1997 by Moody's
Investor Service, and the majority of the bond portfolio was classified as
available for sale. In accordance with Statement of Financial Accounting
Standards No. 115, bonds classified as available for sale are recorded on the
Company's balance sheet at market value. The market value of the total
investment portfolio, which includes stocks and bonds, exceeded amortized cost
by $9.4 million and $8.8 million at March 31, 1998 and December 31, 1997,
respectively. Unrealized holding gains and losses on bonds classified as
available for sale are included as a
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component of shareholders' equity, net of applicable deferred taxes. The
Company has no investments in mortgage loans, non-publicly traded securities
(except for principal only strips of U. S. Government securities), real
estate held for investment or financial derivatives.
From time to time, the Company makes capital contributions to its
subsidiaries to assist them in maintaining appropriate levels of capital and
surplus for regulatory and rating purposes. Insurance subsidiaries are required
to maintain certain levels of statutory capital and surplus. In Wisconsin,
where a large percentage of the Company's premium is written, these levels are
based upon the amount and type of premiums written and are calculated separately
for each subsidiary. As of the balance sheet date presented, statutory capital
and surplus for each of these insurance subsidiaries exceeded required levels.
In addition to internally generated funds and periodic borrowings on its
bank line of credit, the Company believes that additional financing to
facilitate long-term growth could be obtained through equity offerings, debt
offerings, financings from Blue Cross & Blue Shield United of Wisconsin or bank
borrowings, as market conditions may permit or dictate.
FORWARD LOOKING STATEMENTS
This report contains certain forward looking statements with respect to the
financial condition, results of operation and business of the Company. Such
forward looking statements are subject to inherent risks and uncertainties that
may cause actual results to differ materially from those contemplated by such
forward looking statements. Factors that may cause actual results to differ
materially from those contemplated by such forward looking statements include,
among others, rising health care costs, business conditions and competition in
the managed care industry, developments in health care reform and other
regulatory issues.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On April 22, 1998, the Company announced its intention to separate its
American Medical Security small group products business from its HMO
and specialty products business through a spin off. The Company has
filed a private letter ruling request with the Internal Revenue
Service seeking a ruling that the distribution will be tax free to
the Company and its shareholders. The Company expects to complete the
spin off during the third quarter of 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 Restated and Amended Bylaws of United Wisconsin Services,
Inc. dated February 25, 1998.
10.1 Employment and Noncompetition Agreement between United
Wisconsin Services, Inc., American Medical Security
Holdings, Inc., and Samuel V. Miller.
11 Statement regarding computation of per share earnings.
(See Note 1 of Notes to Interim Consolidated Financial
Statements).
(b) Reports on Form 8-K
None
12
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SIGNATURE
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.
DATE: 5/14/98
-----------
UNITED WISCONSIN SERVICES, INC.
/s/ C. Edward Mordy
------------------------------------------
C. Edward Mordy
Vice President and Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
13
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UNITED WISCONSIN SERVICES, INC.
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Document Description Number
- ------- -------------------- ----------
3 Restated and Amended Bylaws of United Wisconsin 15
Services, Inc. dated February 25, 1998.
10.1 Employment and Noncompetition Agreement between 46
United Wisconsin Services, Inc., American Medical
Security Holdings. Inc., and Samuel V. Miller.
11 Statement regarding computation of per share
earnings. (See Note 1 of Notes to Interim
Consolidated Financial Statements).
14
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EXHIBIT 3
15
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RESTATED AND AMENDED
BYLAWS OF
UNITED WISCONSIN SERVICES, INC.
FEBRUARY 25, 1998
ARTICLE I. OFFICES
SECTION 1. 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.
SECTION 2. 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 to 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 the registered office.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The Annual Meeting of the Shareholders
shall be held at the principal office of the Corporation in the City of
Milwaukee, Milwaukee County, Wisconsin, unless the Board of Directors shall
designate another location either within or without the State of Wisconsin.
The Annual Meeting shall take place on the last Wednesday of May each year or
at such other time and date as may be fixed by or under the authority of the
Board of Directors. If the day fixed for the Annual Meeting shall be a legal
holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day. At such meeting the Shareholders shall elect
directors and transact such other business as shall lawfully come before them.
A. ELECTORS AND OTHER BUSINESS. 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 the
Annual Meeting:
1. Pursuant to the Corporation's notice of meeting;
2. By or at the direction of the Board of Directors; or
3. By any Shareholder of the Corporation who is a shareholder of
record at the time of the giving of the notice provided for
in these Bylaws and who is entitled to vote at the meeting
and complies with the notice procedures set forth below.
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B. NOMINATIONS AND SUBMISSION OF BUSINESS MATTERS. For nominations
or other business to be properly before an Annual Meeting by a
shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. Timely
notice is that notice which is received by the Secretary at the
Corporation's principal office not less than 60 days nor more
than 90 days prior to the last Wednesday in May, provided,
however, that in the event the date of the Annual Meeting is
advanced by more than 30 days or delayed by more than 60 days
from the last Monday in May, notice by the Shareholder, to be
timely, must be received as provided above not earlier than the
90th day prior to the date of such Annual Meeting and not later
than the close of business on the later of (x) the 60th day prior
to such Annual Meeting, or (y) the 10th day on which public
announcement of the date of such a meeting is first made. 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 or her duly authorized proxy or other
representative), shall bear the date of signature of such
Shareholder or representative, and shall set forth:
1. The name and address, as they appear on the Corporation's
books, of such Shareholder and the beneficial owner(s), if
any, on whose behalf the nomination or proposal is made;
2. The class and number of shares of the Corporation which are
beneficially owned by such Shareholder or beneficial
owner(s);
3. A representation that such Shareholder is a holder of record
of shares 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;
4. In the case of any proposed nomination for election or
reelection as a director:
(a) the name and residence address of the nominee;
(b) a description of all arrangements or understandings
between such Shareholder or beneficial owner(s) and
each nominee and any other person(s) (naming such
person(s)) pursuant to which the nomination is to be
made by the Shareholder;
(c) 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
17
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be otherwise required to be disclosed, in each case
pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, 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
(d) 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
5. In the case of any other business that such Shareholder
proposes to bring before the meeting,
(a) a brief description of the business desired to be
brought before the meeting, and, if the business
includes a proposal to amend these Bylaws, the language
of the proposed amendment;
(b) such Shareholder's and beneficial owner's(s') reasons
for conducting such business at such time; and
(c) any material interest in such business of such
Shareholder or beneficial owners(s).
Notwithstanding anything in the above paragraph to the contrary, in
the event that the number of directors to be elected to the Board of
Directors of this 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 70 days prior to the last Wednesday in May, a Shareholder's
notice required by this Section shall also be considered timely, but
only with respect to nominees for new positions created by such
increase, if it is received by the Secretary at the Corporation's
principal office 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.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called by the Chairman of the Board, and shall be called by the Secretary on
written request of a majority of members of the Board of Directors, or on
written request of the holders of at least 10 percent of the Corporation's
shares entitled to vote on a matter. The request shall be signed, dated and
delivered to the Secretary describing one or more purposes for which the meeting
is to be held. The Board of Directors shall set the place of the meeting. If
no such designation is made, the place of the meeting shall be the principal
business office of the Corporation in the State of Wisconsin, but any meeting
may be adjourned to reconvene at any place designated by a vote of a majority of
the shares represented thereat.
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A. ELECTIONS AND OTHER BUSINESS. 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:
1. By or at the direction of the Board of Directors; or
2. By any Shareholder of the Corporation who:
(a) is a Shareholder of record at the time of giving notice
of the meeting,
(b) is entitled to vote at the meeting, and
(c) complies with the notice procedures set forth below.
B. NOMINATIONS AND SUBMISSION OF BUSINESS MATTERS. Only such
business as shall have been described in such notice shall be
conducted at the Special Meeting. Any Shareholder desiring to
nominate persons for election to the Board of Directors at a
Special Meeting shall cause written notice to be received by the
Secretary of the Corporation at its principal office not earlier
than 90 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 or (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 or her duly authorized proxy or other representative),
shall bear the date of signature of such Shareholder or other
representative, and shall set forth:
1. The name and address, as they appear on the Corporation's
books, of such Shareholder and the beneficial owner(s), if
any, on whose behalf the nomination is made;
2. The class and number of shares of the Corporation which are
beneficially owned by such Shareholder or beneficial
owner(s);
3. 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;
4. The name and residence address of the person(s) to be
nominated;
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5. A description of all arrangements or understandings between
such Shareholder or beneficial owner(s) and each nominee and
any other person(s) (naming such person(s)) pursuant to
which the nomination is to be made by such Shareholder;
6. 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 Securities Exchange Act
of 1934, as amended, 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
7. 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.
SECTION 3. NOTICE OF ANNUAL OR SPECIAL MEETING. Notice may be
communicated by telegraph, teletype, facsimile or other form of wire or wireless
communication, or by mail or private carrier, and, if these forms of personal
notice are impracticable, notice may be communicated by public announcement.
Such notice stating the place, day and hour of the meeting and, in case of a
special meeting, a description of each purpose for which the meeting is called,
shall be communicated or sent not less than 10 days nor more than 60 days before
the date of the meeting, by or at the direction of the Chairman of the Board or
the Secretary, or other Officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. Written notice by the
Corporation to its shareholders is effective when mailed and may be addressed to
the shareholder's address shown in the Corporation's current record of
shareholders.
SECTION 4. UNANIMOUS CONSENT WITHOUT MEETING. Any action that may be
taken at a meeting of the Shareholders may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by all of
the Shareholders entitled to vote with respect to the subject matter thereof.
SECTION 5. CLOSING OF STOCK TRANSFER BOOKS OR FIXING OF RECORD DATE. A
"Shareholder" of the Corporation shall mean the person in whose name shares are
registered in the stock transfer books of the Corporation or the beneficial
owner of shares to the extent of the rights granted by a nominee certificate on
file with the Corporation. Such nominee certificates, if any, shall be
reflected in the stock transfer books of the Corporation. For the purpose of
determining Shareholders entitled to notice of or to vote at any meeting of
Shareholders or any adjournment thereof, or Shareholders entitled to receive
payment of any dividend, or in order to make a determination of Shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, 70 days. If the stock transfer books shall be closed for the purpose of
determining Shareholders entitled to the notice of or to vote at a meeting of
Shareholders, such books shall be
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closed for at least 10 days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of Shareholders, such date
in any case to be not more than 70 days and, in case of a meeting of
Shareholders, not less than 10 days prior to the date on which the particular
action requiring such determination of Shareholders is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting
of Shareholders, or Shareholders entitled to receive payment of a dividend,
the close of business on the date on which notice of the meeting is mailed or
on the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of Shareholders. When a determination of Shareholders entitled
to vote at any meeting of Shareholders has been made as provided in this
Section, such determination shall be applied to any adjournment thereof
except where the determination has been made through the closing of the stock
transfer books and the stated period of closing has expired.
SECTION 6. VOTING RECORD. The Secretary shall, before each meeting of
Shareholders, make a complete list of the Shareholders entitled to vote at
such meeting, or any adjournment thereof, with the address of and the number
of shares held by each. Such record shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
Shareholder during the whole time of the meeting for the purposes of the
meeting. The original stock transfer books shall be prima facie evidence as
to who are the Shareholders entitled to examine such record or transfer books
or to vote at any meeting of Shareholders. Failure to comply with the
requirements of this Section shall not affect the validity of any action
taken at such meeting.
SECTION 7. QUORUM. Shares entitled to vote as a separate voting group
as defined in the Wisconsin Business Corporation Law may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the Articles of Incorporation or the Wisconsin Business
Corporation Law provide otherwise, a majority of the votes entitled to be
cast on the matter by a voting group constitutes a quorum of that voting
group for action on that matter.
Once a share is represented for any purposes at a 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 record date is or must be set for that adjourned
meeting.
If a quorum exists, action on a matter by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the Articles of Incorporation or the
Wisconsin Business Corporation Law require a greater number of affirmative
votes.
"Voting group" means any of the following:
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A. All shares of one or more classes or series that under the
Articles of Incorporation or the Wisconsin Business Corporation
Law are entitled to vote and be counted together collectively on
a matter at a meeting of Shareholders.
B. All shares that under the Articles of Incorporation or the
Wisconsin Business Corporation Law are entitled to vote generally
on a matter.
Though less than a quorum of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such 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.
SECTION 8. PROXIES. At all meetings of Shareholders, 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 or her attorney-in-fact. Such proxy
appointment is effective when received by the Secretary of the Corporation
before or at the time of the meeting. Unless otherwise provided in the
appointment form of proxy, a proxy appointment may be revoked at 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 or her proxy appointment shall not of itself constitute a
revocation. No proxy appointment shall be valid after eleven months from the
date of its execution, unless otherwise provided in the appointment form of
proxy. The Board of Directors shall have the power and authority to make
rules establishing presumptions as to the validity and sufficiency of proxy
appointments.
SECTION 9. VOTING OF SHARES. Each outstanding share shall be entitled
to one vote upon each matter submitted to a vote at a meeting of
Shareholders, except to the extent that the voting rights of the shares of
any voting group or groups are enlarged, limited or denied by the Articles of
Incorporation.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS.
A. OTHER CORPORATIONS. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the
president of such corporation or any other officer appointed by
such president. An appointment form of proxy executed by any
principal officer of such other corporation or assistant thereto
shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this Corporation, given in
writing to the Secretary of this Corporation, or the designation
of some other person by the Board of Directors or by the Bylaws
of such other corporation.
B. LEGAL REPRESENTATIVES AND FIDUCIARIES. Shares held by an
administrator,
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executor, guardian, conservator, trustee in bankruptcy, receiver or
assignee for creditors may be voted by him, either in person or by
proxy, without a transfer of such shares into his or her name,
provided that there is filed with the Secretary before or at the
time of meeting proper evidence of his or her incumbency and the
number of shares held by him, either in person or by proxy. An
appointment form of proxy executed by a fiduciary shall be
conclusive evidence of the signer's authority to act, in the
absence of express notice to this Corporation, given in writing to
the Secretary, that such manner of voting is expressly prohibited
or otherwise directed by the document creating the fiduciary
relationship.
C. PLEDGEES. A Shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred;
provided, however, a pledgee shall be entitled to vote shares
held of record by the pledgor if the Corporation receives
acceptable evidence of the pledgee's authority to sign.
D. TREASURY STOCK AND SUBSIDIARIES. Neither treasury shares, nor
shares held by another corporation if a majority of the shares
entitled to vote for the election of directors of such other
corporation is held by this Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding
shares entitled to vote, but shares of its own issue held by this
Corporation in a fiduciary capacity, or held by such other
corporation in a fiduciary capacity, may be voted and shall be
counted in determining the total number of outstanding shares
entitled to vote.
E. MINORS. Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the
Secretary of the Corporation has received written notice or has
actual knowledge that such Shareholder is a minor. Shares held
by a minor may be voted by a personal representative,
administrator, executor, guardian or conservator representing the
minor if evidence of such fiduciary status, acceptable to the
Corporation, is presented.
F. INCOMPETENTS AND SPENDTHRIFTS. Shares held by an incompetent or
spendthrift may be voted by such incompetent or spendthrift in
person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the
Secretary of the Corporation has actual knowledge that such
Shareholder has been adjudicated an incompetent or spendthrift or
actual knowledge of judicial proceedings for appointment of a
guardian. Shares held by an incompetent or spendthrift may be
voted by
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a personal representative, administrator, executor,
guardian or conservator representing the minor if evidence of
such fiduciary status, acceptable to the Corporation, is
presented.
G. JOINT TENANTS. Share registered in the names of two or more
individuals who are named in the registration as joint tenants
may be voted in person or by proxy signed by any one or more of
such individuals if either (i) no other such individual or his or
her legal representative is present and claims the right to
participate in the voting of such shares or prior to the vote
files with the Secretary of the Corporation a contrary written
voting authorization or direction or written denial of authority
of the individual present or signing the appointment form of
proxy proposed to be voted, or (ii) all such other individuals
are deceased and the Secretary of the Corporation has no actual
knowledge that the survivor has been adjudicated not to be the
successor to the interests of those deceased.
SECTION 11. CONDUCT OF MEETINGS. The Chairman of the Board, or in the
Chairman's absence, the President, or, in their absence such Vice President as
is designated by the Board of Directors, shall call the meeting to order and act
as Chairperson of the meeting. Only persons nominated in accordance with the
procedures set forth in Article II, Sections 1 and 2, shall be eligible to serve
as Directors. Only such business as shall have been brought before a meeting in
accordance with the procedures set forth in Article II, Sections 1 and 2, shall
be eligible to be conducted. The Chairperson of the meeting shall have the
power and duty to determine whether any nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in Article II, Sections 1 and 2, and, if any proposed nomination or
business is not in compliance therewith, to declare that such defective proposal
shall be disregarded.
SECTION 12. PUBLIC ANNOUNCEMENT. For purposes of Article II, Sections 1
and 2, "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 Securities
Exchange Act of 1934, as amended.
SECTION 13. INVALIDITY. The Chairperson, upon recommendation of the
Secretary, 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 doubt about the validity of
the signature on it or about the signatory's authority to sign for the
Shareholder. The Corporation and its officer or agent who accepts or rejects a
vote, consent, waiver or proxy appointment in good faith and in accordance with
the Wisconsin Business Corporation Law shall not be liable for damages to the
Shareholders for consequences of the acceptance or rejection.
SECTION 14. WAIVER OF NOTICE. A Shareholder may waive any notice required
by the Wisconsin Business Corporation Law, the Articles of Incorporation, or
these Bylaws before or
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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 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 promptly upon arrival or at the beginning of the meeting objects
to holding, 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.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The number of Directors of the
Corporation shall be nine (9), all of whom shall be nominated and elected by the
Shareholders as provided herein.
SECTION 2. TERM OF OFFICE. Elected Directors shall hold office for a term
of three (3) years and until their successors are elected and qualified, except
as otherwise provided in this Section or until their death, resignation or
removal. The Board of Directors shall be divided into three (3) classes of
three (3) directors each. The term of office of the first class of Directors
shall expire at the first annual meeting after their initial election and when
their successors are elected and qualified, the term of office of the second
class shall expire at the second annual meeting after their initial election and
when their successors are elected and qualified, and the terms of office of the
third class shall expire at the third annual meeting after their initial
election and when their successors are elected and qualified. At each annual
meeting after the initial classification of the Board of Directors, the class of
Directors whose term expires at the time of such election shall be elected to
hold office until the third succeeding annual meeting and until their successors
are elected and qualified.
SECTION 3. NOMINATIONS. Nominations for the election of directors shall
be made in accordance with the provisions of Article II, Sections 1 and 2
hereof, which requirements are hereby incorporated by reference in this Article
III, Section 3.
SECTION 4. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the Annual Meeting of Shareholders, for election of corporate
officers and transaction of other business. The Board of Directors may provide
by resolution the time and place for holding additional meetings without other
notice than such resolution.
SECTION 5. SPECIAL MEETINGS. Special Meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or the Secretary upon
written request of any three Directors. The Secretary shall give sufficient
notice of such meeting, to be not less than two (2) days, in person or by mail
or by telephone, telegraph, teletype, facsimile or other form of wire or
wireless communication as to enable the Directors so notified to attend such
meeting. The
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Chairman or Secretary who calls the meeting may fix any place, within or
without the State of Wisconsin, as the place for holding any Special Meeting
of the Board of Directors.
SECTION 6. WAIVER OF NOTICE. Whenever any notice whatsoever is required
to be given to any Director of the Corporation under the Articles of
Incorporation or Bylaws or any provisions of law, a waiver thereof in writing,
signed at any time, whether before or after the time of meeting, by the Director
entitled to such notice, shall be deemed equivalent to the giving of such
notice, and the Corporation shall retain copies of such waivers in its corporate
records. A director's attendance at or participation in a meeting waives any
required notice to him or her of the meeting unless the Director at the
beginning of the meeting or promptly upon his or her arrival objects to holding
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.
SECTION 7. QUORUM. A majority of the Directors in office for the time
being, and convened according to these Bylaws, shall constitute a quorum for the
transaction of business, but a majority of the directors present or
participating (though less than a quorum) may adjourn the meeting from time to
time without further notice.
SECTION 8. VACANCIES. Vacancies, including those created by an increase
in the number of directors in the Board of Directors, may be filled by the
remaining Directors. A Director elected to fill a vacancy shall serve for the
unexpired term of his or her predecessor. In the absence of action by the
remaining Directors, the Shareholders may fill such vacancy at a Special Meeting
in accordance with the Articles of Incorporation, or by unanimous consent
according to these Bylaws.
SECTION 9. REMOVAL. The Shareholders may remove one or more directors,
with or without cause, at a meeting called for that purpose, the notice of which
reflects that purpose, in accordance with the Articles of Incorporation of this
Corporation.
SECTION 10. COMPENSATION. A director may receive such compensation for
services as is determined by resolution of the Board irrespective of any
personal interest of its members. A director also may serve the Corporation in
any other capacity and receive compensation therefore. 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 to the Corporation by such Directors, Officers and employees.
SECTION 11. GENERAL POWERS. 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, subject to any
limitation set forth in these Bylaws or the Articles of Incorporation.
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SECTION 12. CONDUCT OF MEETINGS. The Chairman of the Board, or in the
Chairman's absence the President, or in their absence such Vice President as
is designated by the Board of Directors, shall call meetings of the Board of
Directors to order and shall act as Chairperson of the meeting. The
Secretary of the Corporation shall act as Secretary of all meetings of the
Board of Directors, but in the absence of the Secretary, the presiding
Officer may appoint an Assistant Secretary or any Director or other person
present or participating to act as Secretary of the meeting.
SECTION 13. MANNER OF ACTING. If a quorum is present or participating
when a vote is taken, the affirmative vote of a majority of directors present
or participating is the act of the Board of Directors or a committee of the
Board of Directors, unless the Wisconsin Business Corporation Law or the
Articles of Incorporation or these Bylaws require the vote of a greater
number of directors.
SECTION 14. PRESUMPTION OF ASSENT. A Director of the Corporation who
is present at or participates in a meeting of the Board of Directors or a
committee thereof which he or she is a member, at which action on any
corporate matter is taken, shall be presumed to have assented to the action
taken unless his or her dissent shall be entered in the minutes of the
meeting or unless he or she shall file his or her written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director who voted in
favor of such action.
SECTION 15. UNANIMOUS CONSENT WITHOUT MEETING. Any action required or
permitted by the Articles of Incorporation or Bylaws or any provision of law
to be taken by the Board of Directors at a meeting or by resolution may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors then in office.
SECTION 16. MEETING BY TELEPHONE OR BY OTHER COMMUNICATION TECHNOLOGY.
Meetings of the Board of Directors or committees may be conducted by
telephone or by other communication technology in accordance with Section
180.0820 of the Wisconsin Business Corporation Law.
SECTION 17. COMMITTEES.
A. REGULAR COMMITTEES.
1. GENERAL DESCRIPTION. In order to facilitate the work of the
Board of Directors of this Corporation, the following
regular committees shall be elected from the membership of
the Board of Directors at the regular meeting held in May of
each year (or at such other time as the Board of Directors
may determine):
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Executive Committee
Finance Committee
Management Review Committee
Audit Committee
Each committee shall have four members. The Chairman of the
Board of Directors, and in the Chairman's absence the
President, and in their absence, such Vice President as is
designated by the Board of Directors, shall submit
nominations for such committee memberships. Committee
members shall hold office until the next board meeting at
which Committee elections are conducted in accordance with
these Bylaws, and until their successors are elected and
qualified. Each Regular Committee of the Board of Directors
may exercise the authority of the full Board within the
scope of the duties and powers delegated to it in these
Bylaws, except that no committee of this Board shall do any
of the following:
(a) Authorize distributions;
(b) Approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires be approved
by shareholders;
(c) Fill vacancies on the board of directors or, except as
provided herein, on any of its committees;
(d) Amend the Articles of Incorporation;
(e) Adopt, amend or repeal the 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 full
Board; or
(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 or a senior executive officer
of the Corporation to do so within limits prescribed by
the Board of Directors.
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2. THE EXECUTIVE COMMITTEE. When the Board of Directors is not
in session, the Executive Committee shall have and may
exercise all of the powers of the full Board solely with
regard to those matters which are within the scope of the
Executive Committee's designated duties, as provided herein.
The Chairman of the Board of Directors shall be a member of
the Executive Committee.
The Executive Committee shall:
(a) Approve long range corporate and strategic plans,
including plans for any major borrowing or capital
raising programs;
(b) Advise and consult with management on corporate
policies regarding reserving, reinsurance and other
liabilities;
(c) Approve the annual operating plan;
(d) Approve major changes in policy affecting new services
and programs; and
(e) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Executive
Committee.
3. THE FINANCE COMMITTEE. When the Board of Directors is not
in session, the Finance Committee shall have and may
exercise all of the powers of the full Board solely with
regard to those matters which are within the scope of the
Finance Committee's designated duties, as provided herein.
The Chairman of the Board of Directors shall be a member of
the Finance Committee.
The Finance Committee shall:
(a) Approve investment policies and plans;
(b) Authorize and approve the investment of funds of the
Corporation;
(c) Consult with management regarding real estate, accounts
receivable and other assets;
(d) Determine the amount and types of all insurance that
should be carried by this Corporation and authorize the
purchase thereof;
(e) Advise and consult with the operating management in the
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selection of the carriers of such insurance;
(f) Advise and consult with management on corporate tax policy;
and
(g) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Finance
Committee.
4. THE MANAGEMENT REVIEW COMMITTEE. When the Board of
Directors is not in session, the Management Review Committee
shall have and may exercise all of the powers of the full
Board solely with regard to those matters which are within
the scope of the Management Review Committee's designated
duties, as provided herein.
The Management Review Committee shall:
(a) Evaluate Senior Management (corporate officers)
performance against objectives;
(b) Approve Senior Management development programs;
(c) Approve the corporate compensation policy, including
making recommendations and decisions on any bonuses or
incentive plans, and establish the annual compensation
for the Chairman of the Board of Directors;
(d) Act as the Nominating Committee for officers and
directors and make recommendations to the Board for
types, methods and levels of directors' compensation;
(e) Administer the compensation plans for the officers,
directors, and key employees; and
(f) Carry out such special assignments as the Board of
Directors may, from time to time, give to the
Management Review Committee.
5. THE AUDIT COMMITTEE. When the Board of Directors is not in
session, the Audit Committee shall have and may exercise all
of the powers of the full Board solely with regard to those
matters which are within the scope of the Audit Committee's
designated duties, as provided herein.
The Audit Committee shall:
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(a) Select and engage the independent certified public
accountants to audit the books, records and financial
transactions of the Corporation;
(b) Review with the independent accountants the scope of
their examination, with particular emphasis on the
areas to which either the committee or the independent
accountants believe special attention should be
directed. The Audit Committee may have the independent
accountants perform such additional procedures as the
Committee or the auditors deem necessary;
(c) Review and approve the annual plan for the financial
audit (internal audit) department;
(d) Review with the independent accountants the financial
statements and auditors' reports thereon;
(e) Review the management letter of the independent
accountants, and audit reports by the Corporation's
internal auditors to assure that appropriate action has
been taken by Senior Management as to each item
recommended;
(f) Encourage the independent accountants and the internal
auditors to communicate directly with the Chairman of
the Board and President or, if necessary, the Chairman
of the Audit Committee whenever any significant
recommendation has not been satisfactorily resolved at
the Senior Management level;
(g) Review the Conflict of Interest statements to assure
the Board of Directors that any conflict of interest
has been duly reported to and reviewed by Audit
Committee;
(h) Review and approve all related party transactions; and
(i) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Audit
Committee.
B. SPECIAL COMMITTEES. In addition to the foregoing Regular
Committees, the Board of Directors may, from time to time,
establish Special Committees and specify the composition,
functions and authority of any such Special Committee.
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C. VACANCIES; TEMPORARY APPOINTMENTS. When, for any cause a vacancy
occurs in any Regular Committee, the remaining committee members,
by majority vote, may fill such vacancy by a temporary
appointment of a director on the Board not on the subject
committee to fill the vacancy until the next Board Meeting, at
which time the full Board shall fill the vacancy.
D. COMMITTEE MINUTES AND REPORTS. All of the foregoing committees
shall keep minutes and records of all of their meetings and
activities and shall report the same to the Board of Directors at
its next regular meeting. Such minutes and records shall be
available for inspection by the Directors at all times.
ARTICLE IV. OFFICERS
SECTION 1. GENERALLY. The principal Officers of the Corporation shall be
a Chairman of the Board (Chief Executive Officer), a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors shall elect the
principal officers annually at the Annual Meeting. All officers shall hold
office for a period of one year and until their successors are duly elected and
qualified, or until their prior death, resignation or removal.
SECTION 2. REMOVAL. Any officer or agent may be removed by the Board of
Directors with or without cause whenever in its judgment the best interests of
the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment shall not of itself create contract rights.
SECTION 3. VACANCIES. A vacancy in any principal office because of death,
resignation, removal, or otherwise, shall be filled by the Board of Directors
for the unexpired portion of the term. The Board of Directors may, from time to
time, omit to elect one or more officers, or may omit to fill a vacancy, and in
such case, the designated duties of such officer, unless otherwise provided in
these Bylaws, shall be discharged by the Chairman of the Board or such other
officers as he or she may designate.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, who shall
also be the Chief Executive Officer, shall preside at all meetings of the
Shareholders and of the Directors and shall do and perform such other duties as
from time to time may be assigned to that office by the Board of Directors.
SECTION 5. PRESIDENT. The President shall have general supervision of the
business and affairs of the Corporation. The President may sign and execute all
authorized bonds, notes, checks, contracts, or other obligations in the name of
the Corporation. The President shall perform such other duties as from time to
time may be assigned to him or her by the Board of Directors.
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SECTION 6. VICE PRESIDENTS. Should the Chairman or the President be
absent or unable to act, the Board of Directors shall designate a Vice President
or other Officer to discharge the duties of the vacant office with the same
power and authority as is vested in that office. The Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
President or the Board of Directors.
SECTION 7. SECRETARY. The Secretary shall keep a record of the minutes of
the meetings of the Shareholders and of the Board of Directors. He or she shall
countersign all instruments and documents executed by the Corporation; affix to
instruments and documents the seal of the Corporation; keep in books therefore
the transactions of the Corporation; see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; and
perform such other duties as usually are incident to such office or may be
assigned by the Chairman of the Board, the President or the Board of Directors.
SECTION 8. TREASURER. The Treasurer, subject to the control of the Board
of Directors, shall collect, receive, and safely keep all monies, funds and
securities of the Corporation, and attend to all its pecuniary affairs. He or
she shall keep full and complete accounts and records of all its transactions,
of sums owing to or by the Corporation, and all rents and profits in its behalf.
SECTION 9. ASSISTANTS AND ACTING OFFICERS. The Chairman of the Board, the
President and the Board of Directors shall have the power to appoint any person
to act as assistant to any officer, or as agent for the Corporation in the
officer's stead, or to perform the duties of such officer whenever for any
reason it is impracticable for the officer to act personally, and the assistant
or acting officer or other agent so appointed by the Chairman of the Board, the
President or the Board of Directors shall have the power to perform all the
duties of the office to which he or she is so appointed to be assistant, or as
to which he or she is so appointed to act, except as such power otherwise may be
defined or restricted by the Chairman of the Board, the President or the Board
of Directors.
SECTION 10. SALARIES. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a Director of the Corporation.
ARTICLE V. FUNDS OF THE CORPORATION
SECTION 1. FUNDS. All funds of the Corporation shall be deposited or
invested in such depositories or in such securities as may be authorized from
time to time by the Board of Directors or appropriate committee under
authorization of the Board of Directors.
SECTION 2. NAME. All investments and deposits of funds of the Corporation
shall be made and held in its corporate name, except that securities kept under
a custodial agreement or trust arrangement with a bank or banking and trust
company may be issued in the name of a nominee of such bank or banking and trust
company and except that securities may be acquired and held in bearer form.
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SECTION 3. LOANS. All loans contracted on behalf of the Corporation and
all evidences of indebtedness that are issued in the name of the Corporation
shall be under the authority of a resolution of the Board of Directors. Such
authorization may be general or specific.
SECTION 4. CONTRACTS. The Board of Directors may authorize one or more
officers, or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such authorization
may be general or specific. 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 Chairman of the Board, the
President or one of the Vice Presidents and by the Secretary or Treasurer; the
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.
SECTION 5. DISBURSEMENTS. All monies of the Corporation shall be
disbursed by check, draft, or written order only, and all checks and orders for
the payment of money shall be signed by such Officer or Officers as may be
designated by the Board of Directors. The Officers and employees of the
Corporation handling funds and securities of the Corporation shall give surety
bonds in such sums as the Board of Directors or appropriate committee may
require.
SECTION 6. PROHIBITED TRANSACTIONS. No directors or Officer of the
Corporation shall borrow money from the Corporation, or receive any compensation
for selling, aiding in the sale, or negotiating for the sale of any property
belonging to the Corporation, or for negotiating any loan for or by the
Corporation.
SECTION 7. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject always
to the specific directions of the Board of Directors:
A. Any shares or other securities issued by any other corporation
and owned or controlled by this Corporation may be voted at any
meeting of security holders of such other corporation by the
Chairman of the Board, the President or in their absence any Vice
President of this Corporation who may be present and designated
by the Board of Directors; and
B. Whenever, in the judgment of the Chairman of the Board, the
President, or in their absence, a designated Vice President, it
is desirable for this Corporation to execute a proxy or written
consent in respect to any shares or other securities issued by
any other corporation and owned by this Corporation, such proxy
or consent shall be executed in the name of this Corporation by
the Chairman of the Board, the President, or a designated Vice
President of this Corporation in the order as provided in clause
A. of this Section, without necessity of any authorization by the
Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer. Any person
or persons designated in the manner above
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stated as the proxy or proxies of this Corporation shall have
full right, power and authority to vote the shares or other
securities issued by such other corporation and owned by this
Corporation the same as such shares or other securities might
be voted by this Corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such Certificates shall be signed by the
Chairman of the Board, the President, or a Vice President, and the Secretary, or
by another officer designated by the Chairman of the Board, the President or the
Board of Directors. 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 entered on 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 of this Article VI.
SECTION 2. FACSIMILE SIGNATURES AND SEAL. The seal of the Corporation on
any certificates for shares may be a facsimile. The signature of the Chairman
of the Board, the President or other authorized officer upon a certificate may
be a facsimile if the certificate is manually signed on behalf of a transfer
agent, or a registrar, other than the Corporation itself or an employee of the
Corporation.
SECTION 3. SIGNATURE BY FORMER OFFICER. In case any officer who has
signed or whose facsimile signature has been placed upon any certificate for
shares shall have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he or she were
such officer at the date of its issue.
SECTION 4. TRANSFER OF SHARES. Prior to due presentment of a certificate
for shares for registration of transfer, the Corporation may treat the
shareholder of such shares as the person exclusively entitled to vote, to
receive notifications and otherwise to have and 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 or with 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 said endorsements are
genuine and effective and in compliance with such other regulations as may be
prescribed by or under the authority of the Board of Directors:
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SECTION 5. 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.
SECTION 6. LOST, DESTROYED OR STOLEN CERTIFICATES. Where the owner claims
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner:
A. So requests before the Corporation has notice that such shares
have been acquired by a bona fide purchaser;
B. Files with the Corporation a sufficient indemnity bond; and
C. Satisfies such other reasonable requirements as may be prescribed
by or under the authority of the Board of Directors.
SECTION 7. CONSIDERATION FOR SHARES. The shares of the Corporation may
be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consideration less than the par value thereof. The
consideration to be received for shares may consist 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. When the Corporation receives the
consideration for which the Board of Directors authorized the issuance of
shares, the shares issued for that consideration are fully paid and
nonassessable, except as provided by Section 180.0622 of the Wisconsin
Business Corporation Law which may require further assessment for unpaid
wages to employees under certain circumstances. The Corporation may place in
escrow shares issued for a contract for future services or benefits or a
promissory note, or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respect of the shares against their
purchase price, until the services are performed, the benefits are received
or the note is paid. If the services are not performed, the benefits are not
received or the note is not paid, the Corporation may cancel, in whole or in
part, the shares escrowed or restricted and the distributions credited.
SECTION 8. UNCERTIFICATED SHARES. In accordance with Section 180.0626
of the Wisconsin Business Corporation Law, the Board of Directors may issue
any shares of any of its classes or series without certificates. The
authorization does not affect shares already represented by certificates
until the certificates are surrendered to the Corporation. Within a
reasonable time after the issuance or transfer of shares without
certificates, the Corporation shall send the Shareholder a written statement
of the information required on share certificates by Sections 180.0625 and
180.0627, if applicable, of the Wisconsin Business Corporation Law, and by
the Bylaws of the Corporation.
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The Corporation shall maintain at its offices, or at the office of its
transfer agent, an original or duplicate stock transfer book containing the
names and addresses of all Shareholders and the number of shares held by each
Shareholder. If the shares are uncertificated, the Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Wisconsin.
SECTION 9. TRANSFER AGENT AND REGISTRAR. The Corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board of Directors, where the shares of stock of the
Corporation shall be transferable. The Corporation also may maintain one or
more registry offices, each in charge of a registrar designated by the Board
of Directors, where such shares of stock shall be registered. The same
person or entity may be both a transfer agent and registrar.
SECTION 10. STOCK REGULATIONS. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the laws 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.
INDEMNIFICATION AND LIABILITY OF OFFICERS AND DIRECTORS
SECTION 1. INDEMNIFICATION.
A. Any person, or such person's estate or personal representative,
made or threatened with being made a party to any action, suit,
arbitration, or proceeding (civil, criminal, administrative, or
investigative, whether formal or informal), which involves
foreign, federal, state or local law, by reason of the fact that
such person is or was a Director or Officer of this Corporation
or of any corporation or other enterprise for which he or she
served at this Corporation's request as a director, officer,
partner, trustee, member of any decision-making committee,
employee, or agent, shall be indemnified by this Corporation for
all reasonable expenses incurred in the proceeding to the extent
he or she has been successful on the merits or otherwise.
B. In cases where a person described in subsection A. is not
successful on the merits or otherwise, this Corporation shall
indemnify such person against liability and reasonable expenses
incurred by him or her in any such proceeding, unless liability
was incurred because the person breached or failed to perform a
duty he or she owed to the Corporation and the breach or failure
to perform constituted any of the following:
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1. A willful failure to deal fairly with the Corporation or its
Shareholders in connection with a matter in which the
Director or Officer had a material conflict of interest;
2. A violation of criminal law, unless the Director or Officer
had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his or her conduct
was unlawful;
3. A transaction from which the Director or Officer derived an
improper personal profit; or
4. Willful misconduct.
C. The determination whether indemnification shall be required under
subsection B. shall be made, at the selection of the Director or
Officer, according to one of the following methods:
1. By a majority vote of a quorum of the Board of Directors
consisting of directors not at the time parties to the same
or related proceedings. If a quorum of disinterested
directors cannot be obtained, by majority vote of a
committee duly appointed by the Board of Directors and
consisting solely of two or more directors not at the time
parties to the same or related proceedings. Directors who
are parties to the same or related proceedings may
participate in the designation of members of the committee;
2. By independent legal counsel selected by a quorum of the
Board of Directors or its committee in the manner prescribed
in sub. 1. or, if unable to obtain such a quorum or
committee, by a majority vote of the full Board of
Directors, including Directors who are parties to the same
or related proceedings; or
3. By the court conducting the proceedings or another court of
competent jurisdiction, either on application by the
Director or Officer for an initial determination or on
application for review of an adverse determination under 1.
or 2., above.
D. The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea,
does not, by itself, create a presumption that indemnification of
the Director or Officer is not required.
E. A Director or Officer who seeks indemnification under this
Section shall make a written request to the Corporation.
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F. Upon written request by a Director or Officer who is a party to a
proceeding described in subsection A., this Corporation may pay
or reimburse his or her reasonable expenses as incurred if the
Director or Officer provides the Corporation with all of the
following:
1. A written affirmation of his or her good faith belief that
he or she has not breached or failed to perform his or her
duties to the Corporation; and
2. A written undertaking, executed personally or on his or her
behalf, to repay the allowance, and reasonable interest
thereon, to the extent that it is ultimately determined
under subsections C. 1. or C. 2., above, that
indemnification is not required or to the extent that
indemnification is not ordered by a court under subsection
C. 3., above. The undertaking under this subsection shall
be an unlimited general obligation of the Director or
Officer, may be accepted without reference to his or her
ability to repay the allowance, and may be secured or
unsecured.
G. This Article VII, Section 1 subsections A.-F., shall also apply
where a person, or such person's estate or personal
representative, is made or threatened with being made a party to
any proceeding described in subsection A. by reason of the fact
that such person is or was an Employee of the Corporation, except
that in addition to the categories of conduct set forth in
subsection B. in relation to which the Corporation has no duty to
indemnify, the Corporation also shall have no duty to indemnify
the Employee against liability and reasonable expenses incurred
by him or her in any such proceeding if liability was incurred
because the person breached or failed to perform a duty he or she
owed to the Corporation and the breach or failure to perform
constituted material negligence or material misconduct in
performance of the Employee's duties to the Corporation.
H. Unless a Director or Officer of this Corporation has knowledge
that makes reliance unwarranted, a Director or Officer, in
discharging his or her duties to the Corporation, may rely on
information, opinions, reports or statements, any of which may be
written or oral, formal or informal, including financial
statements and other financial data, if prepared or presented by
any of the following:
1. An officer or employee of the Corporation whom the Director
or Officer believes in good faith to be reliable and
competent in the matters presented;
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2. Legal counsel, public accountants or other persons as to
matters the Director or Officer believes in good faith are
within the person's professional or expert competence; or
3. In the case of reliance by a Director, a committee of the
Board of Directors of which the Director is not a member if
the Director believes in good faith that the committee
merits confidence.
This subsection does not apply to the liability of a Director for
improper declaration of dividends, distribution of assets,
corporate purchase of its own shares, or distribution of assets
to shareholders during liquidation, or for corporate loans made
to an Officer or Director, under Wisconsin Business Corporation
Law Section 180.0832(1), or the reliance of a Director on financial
information represented as correct by corporate officers or
independent or certified public accountants under Wisconsin
Business Corporation Law Section 180.0826.
I. In discharging his or her duties to the Corporation and in
determining what he or she believes to be in the best interest of
the Corporation, a Director or Officer may, in addition to
considering the effects of any action on Shareholders, consider
the following:
1. The effects of the action on employees, suppliers and
customers of the Corporation;
2. The effects of the action on communities in which
the Corporation operates; or
3. Any other factor the Director or Officer considers
pertinent.
SECTION 2. LIMITED LIABILITY OF DIRECTORS AND OFFICERS TO CORPORATION
AND SHAREHOLDERS.
A. Except as provided in subsection B. of this Section 2, a Director
or Officer is not liable to this Corporation, its Shareholders,
or any person asserting rights on behalf of the Corporation or
its Shareholders, for damages, settlements, fees, fines,
penalties or other monetary liabilities arising from a breach of,
or failure to perform, any duty resulting solely from his or her
status as a Director, unless the person asserting liability
proves that the breach or failure to perform constitutes any of
the following:
1. A willful failure to deal with the Corporation or its
Shareholders in connection with a matter in which the
Director had a material conflict of interest;
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2. A violation of criminal law, unless the Director or Officer
had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his or her conduct
was unlawful;
3. A transaction from which the Director derived an improper
personal profit; or
4. Willful misconduct.
B. This Section 2 does not apply to the liability of a Director or
Officer for improper declaration of dividends, distribution of
assets, corporate purchase of its own shares, or distribution of
assets to shareholders during liquidation, or for corporate loans
made to an Officer or Director, under Wisconsin Business
Corporation Law Section 180.0832(1).
SECTION 3. CODE OF ETHICS.
A. Directors, Officers and management employees shall exercise the
utmost good faith in all transactions touching upon their duties
to the Corporation and its property. In their dealings with and
on behalf of the Corporation they are held to a strict rule of
honesty and fair dealing between themselves and the Corporation.
They shall not use their positions, or knowledge gained
therefrom, so that a conflict may arise between the Corporation's
interest and that of the individual.
A "conflict of interest" transaction means a transaction with the
Corporation in which a Director of the Corporation has a direct
or indirect interest. The circumstances in which a Director of
the Corporation has an indirect interest in a transaction include
but are not limited to a transaction under any of the following
circumstances:
1. Another entity in which the Director has a material
financial interest or in which the Director is a general
partner is a party to the transaction; or
2. Another entity of which the Director is a director, officer
or trustee is a party to the transaction and the transaction
is, or because of its significance to the Corporation should
be, considered material by the Board of Directors of the
Corporation. A conflict of interest transaction is not
voidable by the Corporation solely because of the Director's
interest in the transaction if any of the circumstances set
forth in Section 180.0831 of the Wisconsin Business Corporation
Law are true or occur.
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B. All acts of Directors, Officers and management employees shall be
for the sole benefit of the Corporation in any dealing which may
affect it adversely.
C. No Director, Officer or management employee shall accept any
favor which might influence his official act or which might
reflect upon his business conduct.
D. Officers and management employees shall avoid outside employment or
activity which involves obligations which may compete with or be
in conflict with the interests of the Corporation.
E. A full disclosure of all facts of any transaction which is
subject to any doubt shall be made to the Chairman of the Board
or the President of the Corporation before consummating the same.
F. A copy of this Article VII, Section 3, annually shall be
delivered to all Directors, Officers and management employees,
each of whom shall acknowledge receipt thereof to the Secretary
of the Corporation.
ARTICLE VIII. CORPORATE DIVIDENDS
The Board of Directors may from time to time declare dividends on its
outstanding shares in the manner and upon the terms and conditions provided by
law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors may provide a corporate seal which may be circular
in form and may have inscribed thereon the name of the Corporation and the state
of incorporation and the words "Corporate Seal."
ARTICLE X. FISCAL YEAR
The fiscal year shall be set by the Board of Directors.
ARTICLE XI. AMENDMENTS
SECTION 1. BY SHAREHOLDERS. These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted by the Shareholders by affirmative vote
of not less than a majority
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of the shares present or represented at an annual or special meeting of the
Shareholders at which a quorum is in attendance.
SECTION 2. BY DIRECTORS. 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 or participating in any
meeting at which a quorum is in attendance; but no bylaw adopted by the
Shareholders shall be amended or repealed by the Board of Directors if the bylaw
so adopted so provides.
SECTION 3. IMPLIED AMENDMENTS. 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.
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CERTIFICATE OF ADOPTION
THE UNDERSIGNED OFFICER OF UNITED WISCONSIN SERVICES, INC. ("UWS") HEREBY
CERTIFIES:
THE FOREGOING RESTATED AND AMENDED BYLAWS OF UWS WERE DULY ADOPTED AS OF
THE 25th DAY OF FEBRUARY, 1998.
/s/ Stephen E. Bablitch
----------------------------------
Stephen E. Bablitch, Secretary
CORPORATE SEAL
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CERTIFICATE OF ADOPTION
THE UNDERSIGNED OFFICER OF UNITED WISCONSIN SERVICES, INC. ("UWS") HEREBY
CERTIFIES:
THE FOREGOING RESTATED AND AMENDED BYLAWS OF UWS WERE DULY ADOPTED AS OF
THE 25th DAY OF FEBRUARY, 1998.
/s/ Stephen E. Bablitch
----------------------------------
Stephen E. Bablitch, Secretary
CORPORATE SEAL
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EXHIBIT 10.1
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EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is executed as of this 7 day of April, 1998, by and between
United Wisconsin Services, Inc., a Wisconsin corporation ("UWS"), American
Medical Security Holdings, Inc., a Wisconsin Corporation (the "Company"),
and Samuel V. Miller, an individual ("EMPLOYEE").
RECITALS
UWS and Employee are parties to an employment and non-competition agreement
dated as of October 30, 1995 (the "Old Agreement").
Since the date of the Old Agreement, UWS has acquired by merger (the "AMSG
Merger") American Medical Security Group, Inc., a Delaware corporation
("AMSG"), and has transferred a substantial portion of the assets of AMSG to the
Company.
The parties desire to supersede the Old Agreement as hereinafter set forth.
The Company desires to employ Employee on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
EMPLOYMENT
1.1 TERM OF EMPLOYMENT.
(a) EMPLOYMENT BY THE COMPANY. The Company employs Employee, and
Employee accepts employment by the Company, for the period commencing January 1,
1997 and ending on December 31, 2000, subject to earlier termination as
hereinafter set forth in Article III (the "EMPLOYMENT TERM"). Following the
expiration of the Employment Term, this Agreement shall be automatically
renewed for successive one-year periods (collectively, the "RENEWAL TERMS";
individually, a "RENEWAL TERM") unless, at least 30 days prior to the expiration
of the Employment Term or the then current Renewal Term, either party provides
the other with a written notice of intention not to renew, in which case this
Agreement shall terminate as of the end of the Employment Term or said
Renewal Term, as applicable. If this Agreement is renewed, the terms of this
Agreement during such Renewal Term shall be the same as the terms in effect
immediately prior to such renewal, subject to any such changes or modifications
as mutually may be agreed between the parties as evidenced in a written
instrument signed by both the Company and Employee.
47
<PAGE>
1.2 POSITIONS AND DUTIES. Employee shall be employed by the Company
in the position of President and Chief Executive Officer and shall be subject
to the authority of, and shall report to, the Company's Board of Directors.
Employee's duties and responsibilities shall include all those customarily
attendant to the position of President and Chief Executive Officer.
1.3 ENTIRE BUSINESS TIME. Employee shall devote Employee's entire
business time, attention and energies exclusively to the business interests of
the Company.
ARTICLE II
COMPENSATION AND OTHER BENEFITS
2.1 BASE SALARY. The Company shall pay Employee an annual salary of
$500,000 prorated for any portion of a full year that Employee is employed,
("BASE SALARY"), payable in accordance with the normal payroll practices of the
Company.
2.2 PERFORMANCE BONUS. The Company shall pay Employee an annual
performance bonus ("Performance Bonus") of not less than $500,000 nor more than
$1,000,000 in a manner to be agreed upon by the parties. For 1996 and
subsequent calendar years, a part of the Employee's Performance Bonus shall be
deferred so that the Employee's W-2 Compensation for each calendar year does not
exceed $990,000. Any Performance Bonus deferred shall be deferred until
Employee ceases to be a covered employee under Section 162(m) of the Code. Any
amount deferred shall be held in a rabbi trust and shall be credited with
interest at the rate of 60% of the prime rate as reported in The Wall Street
Journal.
2.3 CONTINUED DEFERRAL OF TRANSACTION BONUS. In connection with the AMSG
Merger Employee earned a bonus of $1.0 million. The Old Agreement provided that
this bonus was not payable until the earlier of the time that Employee has
terminated his employment with the Company or Employee is no longer a "covered
employee" within the meaning of Section 162(m)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"). Such transaction bonus shall continue to be
deferred and shall continue to be held in a rabbi trust and shall be credited
with interest at the rate of 60% of the prime rate as reported in The Wall
Street Journal.
2.4 STOCK OPTIONS. Employee has been granted options to purchase common
stock, no par value, of UWS (the "UWS Commons Stock") as set forth below. Such
options shall continue in full force and effect in accordance with their terms.
(a) On December 6, 1995 UWS granted Employee an option to purchase
198,019 shares of UWS Common Stock with an exercise price of $25.25 per share,
in accordance with the United Wisconsin Services, Inc. Equity Incentive Plan
(the "Equity Incentive Plan").
48
<PAGE>
(b) Employee was granted an option to purchase 275,833 shares of UWS
Common Stock at a grant price of $18.13 per share under the Equity Incentive
Plan in substitution for the AMS Option the Employee was granted pursuant to
Section 2.4(b) of the Old Agreement. No such option shall be exercised to the
extent that the gain realized by the Employee would be nondeductible pursuant to
Section 162 (m) of the Code unless (i) exercise is after a Change in Control or
(ii) the option would expire if not exercised. In consideration of Employee's
agreement to the restriction set forth in the preceding sentence, such option
shall not be forfeited in the event of termination of employment for "Cause" as
defined in Section 2(f) of the United Wisconsin Services, Inc. Equity Incentive
Plan unless the termination of employment is also "For Cause" as defined in
Section 3.1(b) of this Agreement.
(c) On December 17, 1996 Employee was granted a fully vested option
to purchase 158,730 shares of UWS Common Stock at a grant price of $25.20 per
share.
2.5 BENEFIT PLANS. Employee will be eligible to participate in each of
AMS's retirement, benefit and health plans that are generally applicable to
comparable executive employees of AMS (the "PLANS"), in accordance with the
terms and conditions thereof. The Company and AMS agree to waive any waiting
periods applicable to any health, disability or insurance plans, to the extent
they may legally do so.
2.6 EXPENSES. The Company shall reimburse Employee for all reasonable
expenses incurred in the course of the performance of Employee's duties and
responsibilities with the Company pursuant to this Agreement and consistent
with the Company's and UWS's policies with respect to travel, entertainment
and miscellaneous expenses, and the requirements with respect to the
reporting of such expenses. Such reimbursement also shall include expenses
incurred with having Employee's spouse travel with Employee and attend
appropriate business-related functions and meetings up to four times per
calendar year and reasonable attorneys' fees incurred in connection with
negotiation and execution of this Agreement.
2.7 ANNUAL PHYSICAL EXAMINATION. Employee shall be reimbursed for the
cost of an annual physical examination.
2.8 AUTOMOBILE ALLOWANCE. Employee shall be provided with an automobile
and insurance and shall be reimbursed for normal and ordinary costs and expenses
in maintaining such automobile in connection with the performance of his duties.
2.9 VACATION. Employee shall be entitled to a maximum of four weeks of
vacation in any calendar year in accordance with the Company's vacation
policies. Holidays and attendance at seminars and professional meetings shall
not be applied against vacation time.
2.10 CLUB MEMBERSHIPS. Employee shall be reimbursed for initiation
fees and reasonable dues and assessments in connection with membership in a
business club and/or a country club chosen by Employee.
49
<PAGE>
2.11 TAX MATTERS. Employee acknowledges and agrees that reimbursement
of some or all of the expenses referred to in Article II may be considered or
treated as income to Employee, and Employee shall be responsible for any
applicable taxes thereon.
ARTICLE III
TERMINATION
3.1 RIGHT TO TERMINATE; AUTOMATIC TERMINATION.
(a) TERMINATION WITHOUT CAUSE. Subject to Section 3.2, the Company
may terminate Employee's employment, and all of the Company's obligations under
this Agreement at any time and for any reason. For purposes of this Agreement,
a change in Employee's title to a lesser title or a reduction of
responsibilities with the Company shall be deemed termination pursuant to this
Section 3.1(a).
(b) TERMINATION FOR CAUSE. Subject to Section 3.2, the Company may
terminate Employee's employment at any time "FOR CAUSE." "For Cause" is defined
as follows:
- Gross negligence in the performance of duties,
- Willful misconduct in performance of duties,
- Violation of law in performance of duties where Employee is
aware that he is violating the law at the time of said
conduct and such violation of law jeopardizes Company
operations,
- Dishonesty, fraud, deliberate misrepresentation to Company
officers or members of Boards of Directors,
- Conviction of a felony which substantially impairs
Employee's ability to perform his duties or which by law
disqualifies him from continued service with the Company,
- Insubordination, and
- Obtaining personal profit from any transaction in which the
Company has an interest and which constitutes a corporate
opportunity of the Company or is adverse to the interests
of the Company, unless such transaction was approved in
50
<PAGE>
writing by the Company's Board of Directors.
Prior to any termination for cause, Employee shall be provided with
reasonable advance notice of the specific grounds for termination, and Employee
shall be provided an opportunity to address the Company, on the merits of
termination.
(c) TERMINATION BY DEATH OR DISABILITY. Subject to Section 3.2,
Employee's employment and the obligations of the Company under this
Agreement shall terminate automatically, effective immediately and without
any notice being necessary, upon Employee's death or a determination of
disability of Employee. For purposes of this Agreement, "DISABILITY" means
the inability of Employee, due to a physical or mental impairment, for 90
days (whether or not consecutive) during any period of 360 days to perform
the duties and functions contemplated by this Agreement. "DISABILITY" does
not include any conditions, physical or mental, where Employee is able to
perform the essential functions of the job with or without reasonable
accommodation as provided in the Americans With Disabilities Act, 42 U.S.C.
Section 12101 ET SEQ. A determination of disability shall be made by the
Company's Board of Directors in consultation with a physician satisfactory
to the Company , and Employee shall cooperate with the efforts to make such
determination. Any such determination shall be conclusive and binding on the
parties subject to Employee's rights under law or the arbitration provision
of this Agreement. Any determination of total disability under this Section
3.1(c) is not intended to alter any benefits any party may be entitled to
receive under any long-term disability insurance policy carried by the
Company or Employee with respect to Employee, which benefits shall be
governed solely by the terms of any such insurance policy.
3.2 RIGHTS UPON TERMINATION.
(a) SECTION 3.1(a) TERMINATION DURING INITIAL TERM. If Employee's
employment is terminated by the Company pursuant to Section 3.1(a) hereof during
the initial term of the Agreement or if Employee's employment is not renewed
following expiration of the initial term of this Agreement as provided in
Section 1.1 hereof, Employee shall have no further rights against the Company
hereunder, except for the right to receive (i) $3 million as severance payment,
(ii) payment of any accrued but unpaid vacation time, (iii) reimbursement of
expenses to which Employee is entitled under Section 2.6 hereof, and (iv) any
rights in respect of Option Shares pursuant to Section 2.4 hereof. The
severance payment shall not be paid until the Employee ceases to be a covered
employee under Section 162(m) of the Code. Between the Employee's termination
of employment and the date payment is made pursuant to this Section, the
severance payment shall earn interest at the rate of 60% of the prime rate as
reported in The Wall Street Journal. The severance payment under this Section
3.2(a) shall be reduced if the severance payment is considered a parachute
payment (as defined in Code Section 280G) so that such payment, when combined
with other payments which are considered parachute payments, does not exceed
2.99 multiplied by the Employee's base amount (as defined in Code Section 280G).
(b) SECTION 3.1(a) TERMINATION DURING RENEWAL TERM. If Employee's
51
<PAGE>
employment is terminated by the Company pursuant to Section 3.1(a) hereof
during any Renewal Term or such Renewal Term is not renewed in accordance with
Section 1.1 hereof, Employee shall have no further rights against the Company
hereunder, except for the right to receive (i) $1 million as severance payment
(ii) payment of any accrued but unpaid vacation time, (iii) reimbursement of
expenses to which Employee is entitled under Section 2.6 hereof , and (iv) any
rights in respect of Option Shares pursuant to Section 2.4 hereof. The
severance payments shall not be paid until the Employee ceases to be a covered
employee under Section 162(m) of the Code. Between the Employee's termination
of employment and the date payment is made pursuant to this Section, the
severance payment shall earn interest at the rate of 60% of the prime rate as
reported in The Wall Street Journal.
(c) SECTIONS 3.1(b) AND 3.1(c) TERMINATIONS. If Employee's
employment is terminated pursuant to Sections 3.1(b) or 3.1(c) hereof, or if
Employee quits employment notwithstanding the terms of this Agreement, Employee
or Employee's estate shall have no further rights against the Company hereunder,
except for the right to receive (i) any unpaid Base Salary with respect to the
period prior to the effective date of termination; (ii) any death or disability
insurance payable as contemplated in Section 2.5 hereof, (iii) reimbursement of
expenses to which Employee is entitled under Section 2.6 hereof, and (iv) any
rights in respect of Option Shares pursuant to Section 2.4 hereof.
ARTICLE IV
CONFIDENTIALITY; NONCOMPETITION
4.1 CONFIDENTIAL INFORMATION; INTELLECTUAL PROPERTY.
(a) CONFIDENTIAL INFORMATION. Employee acknowledges that Employee
will be required to use his personal intellectual skills on behalf of the
Company and that it is reasonable and fair that the fruits of such skills should
inure to the sole benefit of the Company. Employee further acknowledges that
Employee may already have and will acquire information of a confidential nature
relating to the operation, finances, business relationships and trade secrets of
the Company. During Employee's employment and for a period of two years
following termination thereof with the Company, Employee will not use (except
for use in the course of the Employee's regular authorized duties on behalf of
the Company), publish, disclose or authorize anyone else to use, publish or
disclose, without the prior written consent of the Company, within the
geographical area in which such use, publication or disclosure would reasonably
be expected to harm the Company's existing or potential business interests, any
confidential information pertaining to the Company, including, without
limitation, any information relating to existing or potential business,
customers, trade or industrial practices, plans, costs, processes, or technical
or engineering data; PROVIDED, HOWEVER, that following termination of Employee's
52
<PAGE>
employment, Employee shall be prohibited from ever using, publishing, disclosing
or authorizing anyone else to use, publish or disclose, any confidential
information which constitutes a trade secret under applicable law. Employee's
obligations under this section apply to, and are intended to prevent, the direct
or indirect disclosure of confidential information to others where such
disclosure of confidential information would reasonably be considered to be
useful to Employer's competitors or to a third party to become a competitor
based in whole or in part on such disclosure of confidential information.
Employee shall not remove or retain any figures, calculations, formulae,
letters, papers, software, abstracts, summaries, drawings, blueprints, diskettes
or any other material, or copies thereof, which contain or embody
any confidential information or trade secrets of the Company, except for use in
the course of Employee's regular authorized duties on behalf of the Company.
The foregoing notwithstanding, Employee has no obligation to refrain from using,
publishing or disclosing any such confidential information which is or hereafter
shall become available to the public otherwise than by use, publication or
disclosure by Employee. This prohibition also does not prohibit Employee's
use of general skills and know-how acquired during and prior to employment,
as long as such use does not involve the use, publication or disclosure of the
Company's confidential information or trade secrets.
(b) AGREEMENT TO TRANSFER. Employee shall without further payment,
assign, transfer and set over, and does hereby assign, transfer and set over, to
the Company, all of Employee's right, title and interest in and to all trade
secrets, secret processes, inventions, improvements, patents, patent
applications, trademarks, trademark applications, copyrights and any and all
intellectual property rights which Employee may, either solely or jointly with
others, conceive or develop, make or suggest at any time during employment and
which relate to the existing or potential products, processes, work, research or
other activities of the Company.
4.2 NONCOMPETITION.
(a) During Employee's employment and for a one year period following
termination of Employee's employment hereof, Employee shall not without the
prior written consent of the Company directly or indirectly, as an employee,
officer, director, partner, consultant, owner (other than a minority shareholder
interest of not more than 3% of a company whose equity interests are publicly
traded on a nationally recognized stock exchange or over-the-counter) or in any
other capacity, solicit any business regarding services of the kinds that the
Company either offered or was planning to offer and of which Employee was aware
at or before the time of Employee's termination, from any person or entity that
(i) has, on the date of termination, its principal place of business in a state
other than Wisconsin, Minnesota, Michigan, Iowa or Illinois; (ii) was a customer
or prospective customer of the Company on the date of termination; and (iii)
was a customer with which Employee had personal contact in regard to such
services within two years prior to said termination.
(b) During Employee's employment and for a two year period
following termination of Employee's employment hereof, Employee shall not
without the prior written consent of the Company directly or indirectly, as
an employee, officer, director, partner, consultant,
53
<PAGE>
owner (other than a minority shareholder interest of not more than 3% of a
company whose equity interests are publicly traded on a nationally
recognized stock exchange or over-the-counter) or in any other capacity,
solicit any business regarding services of the kinds that the Company either
offered or was planning to offer and of which Employee was aware at or before
the date of Employee's termination, from any person or entity that (i) has,
on the date of termination, its principal place of business within Wisconsin,
Minnesota, Michigan, Illinois or Iowa, (ii) was a customer or prospective
customer of the Company on the date of termination, and (iii) was a customer
with which Employee had personal contact in regard to such services within
two years prior to said termination .
4.3 NON-SOLICITATION. For a period of two years after termination of
Employee's employment, Employee will not solicit, or assist another person to
solicit, any employee, agent, supplier or other person (other than a customer)
having business relations with the Company or UWS to terminate such employee's
employment or terminate or curtail such supplier's or other person's business
relationship with the Company or UWS, as the case may be.
4.4 RETURN OF DOCUMENTS. Immediately upon termination of employment with
respect to the Company Employee will return to the Company, and so certify in
writing to the Company, all the Company's papers, documents and things,
including information stored for use in or with computers and software
applicable to the Company's or UWS's business (and all copies thereof), which
are in Employee's possession or under Employee's control, regardless whether
such papers, documents or things contain confidential information or trade
secrets.
4.5 NO CONFLICTS. To the extent that they exist, Employee will not
disclose to the Company any of Employee's previous employer's confidential
information or trade secrets. Further, Employee represents and warrants that
Employee has not previously assumed any obligations inconsistent with those of
this Agreement and that employment by the Company does not conflict with any
prior obligations to third parties.
4.6 AGREEMENT ON FAIRNESS. Employee acknowledges that: (i) this
Agreement has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal counsel to review
this Agreement, and (iii) Employee voluntarily enters this Agreement.
4.7 EQUITABLE RELIEF. Employee acknowledges that any breach of this
Agreement will cause substantial and irreparable harm to the Company for which
money damages would be an inadequate remedy. Accordingly, the Company shall in
any such event be entitled to obtain injunctive and other forms of equitable
relief to prevent such breach in addition to any other rights or remedies
available at law, in equity or by statute.
54
<PAGE>
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES. Any and all notices, consents, documents or communications
provided for in this Agreement shall be given in writing and shall be personally
delivered, mailed by registered or certified mail (return receipt requested) or
sent by courier, confirmed by receipt, and addressed as follows (or to such
other address as the addressed party may have substituted by notice pursuant
to this Section 5.1):
(a) If to the Company or UWS:
401 West Michigan Street
Milwaukee, Wisconsin 53203
Attn.: General Counsel
(b) If to Employee:
3100 AMS Boulevard
Green Bay, Wisconsin 54313
With a copy to:
David Higley
Thelen, Marrin, Johnson & Bridges
2 Embarcadero Center
San Francisco, California 94111
Such notice, consent, document or communication shall be deemed given upon
personal delivery or receipt at the address of the party stated above or at any
other address specified by such party to the other party in writing, except that
if delivery is refused or cannot be made for any reason, then such notice shall
be deemed given on the third day after it is sent.
5.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and the full and complete agreement of the parties and supersedes and replaces
the Old Agreement and any other prior understandings and agreements among the
parties, with respect to the subject matter hereof.
5.3 AMENDMENT. This Agreement may be altered, amended or modified only in
a writing, signed by the parties hereto. Headings included in this Agreement
are for convenience only and are not intended to limit or expand the rights of
the parties hereto. References to Sections herein shall mean sections of
the text of this Agreement, unless otherwise indicated.
55
<PAGE>
5.4 ASSIGNABILITY. This Agreement and the rights and duties set forth
herein may not be assigned by Employee, but may be assigned by the Company, in
whole or in part to any entity controlled by the Company. This Agreement shall
be binding on and inure to the benefit of each party and such party's respective
heirs, legal representatives, successors and assigns.
5.5 SEVERABILITY. If any court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other provisions
hereof, which shall remain valid, binding and enforceable and in full force and
effect, and such invalid or unenforceable provision shall be construed in a
manner so as to give the maximum valid and enforceable effect to the intent of
the parties expressed therein.
5.6 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by a single arbitrator in
arbitration conducted in Milwaukee, Wisconsin, in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
The parties shall select an arbitrator, but if they are unable to
agree on one, the parties shall jointly request the American Arbitration
Association to designate five (5) arbitrator names. The parties, beginning with
the Employee, shall alternately strike names until one is left.
The arbitrator's decision shall be final and binding. Each party
shall be entitled to discovery exclusively by the following means: (i) requests
for admission, (ii) request for production of documents, and (iii) depositions
of no more than four individuals, provided that either party may apply to the
arbitrator upon a showing of good cause that more or less discovery is
warranted. All discovery shall be completed, and the arbitration hearing shall
commence, within 60 days after the appointment of the arbitrator. Unless the
arbitrator finds that exceptional circumstances justify the delay, the hearing
will be completed, and an award will be rendered within 60 days of the
commencement of the hearing.
The arbitrator shall have the authority to settle such controversy or
claims by finding that a party should be enjoined from certain actions or be
compelled to undertake certain actions, and in such event such court may enter
an order enjoining and/or compelling such actions and found by the arbitrator.
However, notwithstanding the foregoing, the parties expressly agree that a
court of competent jurisdiction may enter a temporary restraining order or an
order enjoining a breach of this Agreement pending a final award or further
order by the arbitrator. Such remedy, however, shall be cumulative and
nonexclusive, and shall be in addition to any other remedy to which the parties
may be entitled.
The Company shall pay the arbitrator's fees and expenses without
regard to which party prevails in the dispute. The arbitrator may award
reasonable attorneys' fees and costs to the prevailing party, but the arbitrator
shall consider financial ability to pay such fees and costs
56
<PAGE>
and undue hardship on the party ordered to pay said fees and costs.
For purposes of this Section 5.6, UWS and the Company shall be treated
as one party.
5.7 WAIVER OF BREACH. The waiver by any party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
5.8 GOVERNING LAW; CONSTRUCTION. This Agreement shall be governed by the
internal laws of the State of Wisconsin, without regard to any rules of
construction concerning the draftsman hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written above.
UNITED WISCONSIN SERVICES, INC.
By:
-------------------------------------
Thomas R. Hefty, Chairman, President
and Chief Executive Officer
AMERICAN MEDICAL SECURITY HOLDINGS, INC.
By:
-------------------------------------
C. Edward Mordy, Vice President
------------------------------------------
Samuel V. Miller
57
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1998 (unaudited) and the Consolidated
Statement of Income for the three months ended March 31, 1998 (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 442,360
<DEBT-CARRYING-VALUE> 11,768
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 454,128
<CASH> 47,081
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 799,158
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 51,102
<POLICY-OTHER> 175,297
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 123,078
0
0
<COMMON> 16,544
<OTHER-SE> 315,255
<TOTAL-LIABILITY-AND-EQUITY> 799,158
383,011
<INVESTMENT-INCOME> 9,971
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 11,920
<BENEFITS> 305,423
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 83,064
<INCOME-PRETAX> 10,641
<INCOME-TAX> 4,250
<INCOME-CONTINUING> 6,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,391
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.38
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
