SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to 14a-11(c) or Rule 14a-12
MGIC INVESTMENT CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(4) Date filed:
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MGIC
INVESTMENT
CORPORATION
- ---------------------------
NOTICE
OF 2002
ANNUAL
MEETING
AND
PROXY
STATEMENT
- ---------------------------
2001
ANNUAL
REPORT
TO
SHAREHOLDERS
MGIC INVESTMENT CORPORATION
CURT S. CULVER
Chief Executive Officer
March 18, 2002
Dear Shareholder:
On behalf of the Board of Directors of MGIC Investment Corporation, it is
my pleasure to invite you to attend the Annual Meeting of Shareholders to be
held on Thursday, May 2, 2002, at the Marcus Center for the Performing Arts in
Milwaukee, Wisconsin.
At the meeting, shareholders will be asked to elect four directors, to
approve a new Stock Incentive Plan and to ratify the appointment of
PricewaterhouseCoopers LLP as the company's independent accountants for 2002. We
will also report on our business.
Your vote is important. Even if you plan to attend, to be sure that your
shares are represented at the meeting, we encourage you to sign the enclosed
card designating the proxies to vote your shares. Please read the Proxy
Statement for more information about the matters to be considered at the meeting
and the voting process.
Our Annual Report to Shareholders follows the Proxy Statement in this
booklet.
Sincerely,
/s/ CURT S. CULVER
Curt S. Culver
Chief Executive Officer
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 2, 2002
To the Shareholders of
MGIC Investment Corporation:
The Annual Meeting of Shareholders of MGIC Investment Corporation, a
Wisconsin corporation, will be held in the Bradley Pavilion of the Marcus Center
for the Performing Arts, 929 North Water Street, Milwaukee, Wisconsin, on May 2,
2002, at 9:00 a.m., to vote on the following matters:
(1) Election of a class of four directors to serve a three-year term
expiring at the 2005 Annual Meeting;
(2) Approval of the 2002 Stock Incentive Plan;
(3) Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for 2002; and
(4) Any other matters that may be properly brought before the meeting.
The Board of Directors has fixed the close of business on March 4, 2002, as
the record date to determine the shareholders entitled to notice of and to vote
at the meeting.
By Order of the Board of Directors
Jeffrey H. Lane, Secretary
Milwaukee, Wisconsin
March 18, 2002
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
MGIC INVESTMENT CORPORATION P.O. BOX 488, MGIC PLAZA, MILWAUKEE, WI 53201
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
shareholders on or about March 18, 2002, in connection with the solicitation of
proxies on behalf of the Board of Directors of MGIC Investment Corporation (the
"Company"), a Wisconsin corporation, for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m., Thursday, May 2, 2002, in the Bradley
Pavilion of the Marcus Center for the Performing Arts, 929 North Water Street,
Milwaukee, Wisconsin.
VOTING MATTERS
RECORD DATE INFORMATION
You are entitled to one vote for each share of Common Stock registered in
your name in the Company's records on March 4, 2002. On that date, 106,190,909
shares of the Company's Common Stock were outstanding and entitled to vote.
VOTING BY PROXIES
The enclosed proxy card is solicited by the Board of Directors of the
Company. Your shares will be voted at the meeting by the named proxies in
accordance with the choices you specify on the proxy card. If you sign and
return a proxy card without giving specific choices, your shares will be voted
as follows:
FOR -- Election to the Board of the four individuals nominated by the Board
of Directors;
FOR -- Approval of the Company's 2002 Stock Incentive Plan;
FOR -- Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 2002; and
On such other matters as properly come before the meeting, in the best
judgment of the named proxies.
If your shares are held in the name of a broker, bank or other nominee, you
should be receiving with this Proxy Statement instructions from them on how you
can vote your shares.
HOW TO REVOKE A PROXY
You may revoke your proxy instructions at any time before your shares have
been voted by advising the Secretary of the Company in writing or by signing and
delivering a proxy card with a later date. If you attend the meeting, you may
withdraw your proxy and vote shares registered in your name in person. If your
shares are held in the name of a broker or other nominee you must follow their
instructions on how to revoke your vote.
HOW VOTES ARE COUNTED
A quorum is necessary to hold the meeting and will exist if a majority of
the outstanding shares of Common Stock entitled to vote are represented at the
meeting. Votes cast by proxy or in person at the meeting will be counted at the
meeting by representatives of U.S. Bank, N.A., the transfer agent and registrar
of the Company's Common Stock, which has been appointed by the Company to act as
inspector of election for the meeting. Abstentions will be counted for purposes
of determining the presence of a quorum, but do not constitute a vote "for" or
"against" any matter and will be disregarded in the calculation of "votes cast."
A "broker non-vote" occurs when a broker or other nominee does not have
authority to vote on a particular matter without instructions from the
beneficial owner of the shares and has not received such instructions. Broker
non-vote shares will be counted for purposes of determining the presence of a
quorum, but will be disregarded in the calculation of "votes cast."
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 2001, follows this Proxy Statement. The Annual Report to
Shareholders is a separate report and should not be considered a part of this
Proxy Statement.
STOCK OWNERSHIP
The following table gives information about shareholders who were
beneficial owners of more than 5% of the Common Stock as of December 31, 2001,
based on information filed with the Securities and Exchange Commission. The
table also shows the Common Stock beneficially owned by each executive officer
of the Company named in the Summary Compensation Table of this Proxy Statement,
and by all directors and executive officers as a group (the "Group"). Unless
otherwise noted, the persons listed in the table have sole voting and investment
power over their shares, and information regarding persons in the Group is given
as of February 15, 2002.
SHARES BENEFICIALLY PERCENT
NAME OWNED OF CLASS
---- ------------------- --------
Legg Mason, Inc.
100 Light Street
Baltimore, Maryland 21202 (1)............................. 14,665,831 13.8%
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206 (2)................................ 11,733,010 11.0%
Curt S. Culver (3).......................................... 356,614 *
J. Michael Lauer (3)........................................ 204,209 *
Lawrence J. Pierzchalski (3)................................ 116,500 *
James S. MacLeod (3)........................................ 118,456 *
Jeffrey H. Lane (3)......................................... 110,060 *
All directors and executive officers as a group (17 persons)
(3)(4).................................................... 1,132,472 1.1%
- ---------------
* Less than 1%
(1) Ownership information is as of December 31, 2001 and includes 9,562,921
shares as to which accounts managed by Legg Mason Funds Management, Inc., a
registered investment adviser and subsidiary of Legg Mason, Inc., have shared
voting and investment power. Legg Mason Value Trust, Inc., a registered
investment company managed by Legg Mason Funds Management, Inc., manages
8,533,700 of such shares.
(2) Ownership information is as of December 31, 2001 and includes 7,006,360
shares beneficially owned by Janus Fund, a registered investment company as to
which Janus Capital, a registered investment adviser, provides investment
advice. Thomas H. Bailey, as Chairman, President and Chief Executive Officer of
Janus Capital, may be deemed to have the power to vote or invest shares
beneficially owned by individual and institutional clients as to which Janus
Capital provides investment advice.
(3) Includes shares which the named executive officers had the right to acquire
on, or within 60 days after, February 15, 2002, under stock options granted to
executive officers as follows: Mr. Culver -- 322,800; Mr. Lauer -- 192,600; Mr.
Pierzchalski -- 112,600; Mr. MacLeod -- 92,600; Mr. Lane -- 102,431; and the
Group -- 907,981. Also includes shares held in the Company's Profit Sharing and
Savings Plan and Trust as follows: Mr. Culver--7,984; Mr. MacLeod -- 15,847; and
the Group -- 26,157. Also includes restricted shares awarded for 2001 listed in
note (2) to the Summary Compensation Table over which the named executive
officer has sole voting power but no investment power. Also includes shares for
which voting and investment power are shared as follows: Mr. Lauer -- 2,400; and
the Group -- 10,350. Excludes shares, beneficial ownership of which is
disclaimed, which are held as custodian for children or owned by spouses or
trusts as follows: Mr. Lauer -- 2,000; and the Group -- 66,000.
(4) Includes an aggregate of 26,337 share units held under the Deferred
Compensation Plan over which there is neither investment nor voting power. See
"Compensation of Directors -- Deferred Compensation Plan." Also includes an
aggregate of 46,355 restricted shares held by the Group in addition to the
shares referred to in note (3) above. The beneficial owners have sole voting
power but no investment power over these shares.
2
ITEM 1 -- ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
The Board of Directors is divided into three classes, with the directors of
each class serving for a term of three years. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
Annual Meeting for a three-year term. If a nominee for director is not available
for election, the proxies will vote for another person proposed by the Board of
Directors, or as an alternative, the Board of Directors may reduce the number of
directors to be elected at the Annual Meeting.
Under the Company's Bylaws, written notice of nominations by shareholders
for election to the Board must have been received by the Secretary no later than
February 9, 2002. No notice of any such nominations was received. As a result,
no other nominations for election to the Board of Directors may be made by
shareholders at the Annual Meeting.
NOMINEES FOR DIRECTOR
Four incumbent directors have been nominated by the Board of Directors for
re-election to serve a three-year term of office ending at the time of the 2005
Annual Meeting:
Mary K. Bush
David S. Engelman
Kenneth M. Jastrow, II
Daniel P. Kearney
The principal occupation, business experience for at least the past five
years and committee assignments of the nominees and the directors continuing in
office are described below.
SHAREHOLDER VOTE REQUIRED
Each nominee who receives a plurality of the votes cast at the meeting will
be elected a director. Only votes cast for a nominee will be counted. Votes cast
include votes under proxies which are signed and do not have contrary voting
instructions. Broker non-votes, abstentions and instructions on the proxy card
to withhold authority to vote for one or more of the nominees will be
disregarded in the calculation of a plurality of the votes cast.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE.
PROXIES WILL BE VOTED FOR THE NOMINEES UNLESS A SHAREHOLDER GIVES OTHER
INSTRUCTIONS.
3
SHARES
BENEFICIALLY
NOMINEES FOR DIRECTOR OWNED(1)
TERM ENDING 2005 ------------
[Bush Photo] MARY K. BUSH, 53, a Director since 1991, has been President
of Bush & Company, an international financial advisory firm,
since 1991. Ms. Bush was Managing Director and Chief
Operating Officer of the Federal Housing Finance Board, a
U.S. government agency, from 1989 to 1991, Vice
President-International Finance of the Federal National
Mortgage Association, a secondary mortgage institution, from
1988 to 1989, and served the President of the United States
as a member of the Board of the International Monetary Fund
from 1984 to 1988. She is a Director of Brady Corporation
and RJR Tobacco Holdings, Inc., a Trustee of Pioneer Funds
and a member of the Advisory Board of Washington Mutual
Investors Fund. Ms. Bush is Chairperson of the Audit
Committee of the Board of Directors. 5,645(2)(3)
[Engelman Photo] DAVID S. ENGELMAN, 64, a Director since 1993, has been
President and Chief Executive Officer, on an interim basis,
of Fleetwood Enterprises, Inc., a manufacturer of
recreational vehicles and manufactured housing, since
February 2002. Mr. Engelman was a private investor for more
than five years before then. He is a Director of Fleetwood
Enterprises, Inc., Quaker City Bancorp, Inc. and its banking
subsidiary Quaker City Bank. Mr. Engelman is a member of the
Risk Management and Securities Investment Committees of the
Board of Directors. 10,760(2)(3)(4)
[Jastrow Photo] KENNETH M. JASTROW, II, 54, a Director since 1994, has been
Chairman and Chief Executive Officer of Temple-Inland Inc.,
a holding company with interests in paper, forest products
and financial services, since January 2000. He served as
President and Chief Operating Officer of Temple-Inland Inc.
from 1998 to 2000 and held senior executive positions with
that company and its subsidiaries for more than five years
before then. Mr. Jastrow is a member of the Management
Development Committee of the Board of Directors. 12,854(2)(3)
4
SHARES
BENEFICIALLY
OWNED(1)
------------
[Kearney Photo] DANIEL P. KEARNEY, 62, a Director since 1999, is a business
consultant and private investor. Mr. Kearney served as
Executive Vice President and Chief Investment Officer of
Aetna, Inc., a provider of health and retirement benefit
plans and financial services, from 1991 to 1998. He was
President and Chief Executive Officer of the Resolution
Trust Corporation Oversight Board from 1990 to 1991, a
principal of Aldrich, Eastman & Waltch, Inc., a pension fund
advisor, from 1988 to 1989, and a managing director at
Salomon Brothers Inc, an investment banking firm, from 1977
to 1988. He is a Director of Fiserv, Inc., Great Lakes REIT
and MBIA, Inc. Mr. Kearney is a member of the Audit and
Securities Investment Committees of the Board of Directors. 7,214(3)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2004
[Abbott Photo] JAMES A. ABBOTT, 62, a Director since 1989, has been
Chairman and a principal of American Security Mortgage
Corp., a mortgage banking firm, since June 1999. He served
as President and Chief Executive Officer of First Union
Mortgage Corporation, a mortgage banking company, from
January 1980 to December 1994. Mr. Abbott is a member of the
Risk Management Committee of the Board of Directors. 12,355(2)(3)
[Hagerty Photo] THOMAS M. HAGERTY, 39, a Director since 2001, has been a
managing director with Thomas H. Lee Company, a private
investment firm, since 1992 and has been with the firm since
1988. Mr. Hagerty previously was in the Mergers and
Acquisitions Department of Morgan Stanley & Co.
Incorporated. He is a director of ARC Holdings, Conseco
Inc., Cott Corporation, Metris Companies and Syratech
Corporation. Mr. Hagerty is a member of the Securities
Investment Committee of the Board of Directors. 252(3)
5
SHARES
BENEFICIALLY
OWNED(1)
------------
[Lehman Photo] MICHAEL E. LEHMAN, 51, a Director since 2001, has been an
Executive Vice President and Chief Financial Officer of Sun
Microsystems, Inc., a provider of computer systems and
professional support services, since July 2000. Mr. Lehman
held senior executive positions with Sun Microsystems, Inc.
for more than five years before then. Mr. Lehman is a member
of the Audit Committee of the Board of the Directors. 2,629(3)(4)
[Lubar Photo] SHELDON B. LUBAR, 72, a Director since 1991, has been
Chairman of Lubar & Co. Incorporated, a private investment
and management firm, since 1977. Mr. Lubar is a Director of
C2, Inc., Grant-Prideco, Inc., Jefferies & Co.,
Massachusetts Mutual Life Insurance Co., U.S. Bancorp and
Weatherford International, Inc. Mr. Lubar is Chairman of the
Management Development Committee of the Board of Directors
and a member of the Executive Committee. 42,811(2)(3)(5)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2003
[Case Photo] KARL E. CASE, 55, a Director since 1991, is the Katharine
Coman and A. Barton Hepburn Professor of Economics at
Wellesley College where he has taught since 1976. Dr. Case
has been Visiting Scholar at the Federal Reserve Bank of
Boston since 1985 and a lecturer on economics and tax policy
in the International Tax Program at the Harvard Law School
since 1980. He is a Director of Century Bank & Trust, the
Lincoln Institute of Land Policy and the New England
Economic Project, Inc. Dr. Case is Chairman of the Risk
Management Committee of the Board of Directors. 9,492(2)(3)
6
SHARES
BENEFICIALLY
OWNED(1)
------------
[Culver Photo] CURT S. CULVER, 49, a Director since 1999, has been Chief
Executive Officer of the Company since January 2000. Mr.
Culver has been President of the Company and Chief Executive
Officer of Mortgage Guaranty Insurance Corporation ("MGIC")
since January 1999, President of MGIC since May 1996, and
held senior executive positions with MGIC for more than five
years before then. Mr. Culver is Chairman of the Executive
Committee of the Board of Directors. 356,614(6)
[McIntosh Photo] WILLIAM A. MCINTOSH, 62, a Director since 1996, is a
financial consultant and has been adjunct professor of
finance at Howard University, Washington, D.C. since August
1998. Mr. McIntosh served as an adjunct faculty member of
Wellesley College from January through May 2000. He was an
executive committee member and a managing director at
Salomon Brothers Inc, an investment banking firm, when he
retired in 1995 after 35 years of service. He is a Director
of Mason Street Funds, Inc. Mr. McIntosh is Chairman of the
Securities Investment Committee of the Board of Directors. 10,185(2)(3)
[Muma Photo] LESLIE M. MUMA, 57, a Director since 1995, has been Chief
Executive Officer of Fiserv, Inc., a financial industry
automation products and services firm, since March 1999. Mr.
Muma has been President of Fiserv since 1984. Mr. Muma is a
member of the Executive and Management Development
Committees of the Board of Directors. 19,510(2)(3)
- ---------------
(1) Ownership information is for shares of Common Stock as of February 15, 2002
and for non-employee directors includes share units held under the Deferred
Compensation Plan. See "Compensation of Directors -- Deferred Compensation
Plan." Unless otherwise noted, all directors have sole voting and investment
power with respect to the shares. Common Stock beneficially owned by each
director represents less than 1% of the total number of shares outstanding.
(2) Includes 2,000 shares held under the Company's 1993 Restricted Stock Plan
for Non-Employee Directors. The directors have sole voting power and no
investment power over these shares.
7
(3) Includes shares held under the Deposit Share Program for Non-Employee
Directors under the Company's 1991 Stock Incentive Plan as follows: Mr.
Abbott -- 3,182; Ms. Bush -- 3,301; Dr. Case -- 3,198; Mr. Engelman -- 3,139;
Mr. Jastrow -- 3,293; Mr. Kearney -- 1,958; Mr. Lubar -- 3,366; Mr.
McIntosh -- 3,297; and Mr. Muma -- 3,181. Directors have sole voting power and
no investment power over these shares. Also includes share units, over which the
directors have neither voting nor investment power, as follows: Dr.
Case -- 1,553; Mr. Jastrow -- 6,178; Mr. Hagerty -- 252; Mr. Kearney -- 1,534;
Mr. Lehman -- 129; Mr. Lubar -- 11,839; and Mr. Muma -- 4,852.
(4) Includes shares for which voting and investment power are shared as follows:
Mr. Engelman -- 5,450; and Mr. Lehman -- 2,500.
(5) Excludes 4,000 shares owned by a trust of which Mr. Lubar's wife is a
co-trustee; 12,000 shares owned by Mr. Lubar's wife; and an aggregate of 48,000
shares owned by Mr. Lubar's four adult children. Mr. Lubar disclaims beneficial
ownership of all these shares.
(6) Includes 322,800 shares which Mr. Culver had the vested right to acquire as
of February 15, 2002, or which become vested within sixty days thereafter
pursuant to options granted under the Company's 1991 Stock Incentive Plan; 7,984
shares held in the Company's Profit Sharing and Savings Plan and Trust; and
11,090 restricted shares over which Mr. Culver has sole voting power but no
investment power.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times during 2001. Each incumbent director
attended at least 75% of the meetings of the Board and committees of the Board
on which he or she served that were held while he or she was a director. The
committees of the Board of Directors include the Audit Committee and the
Management Development Committee.
AUDIT COMMITTEE
The members of the Audit Committee are Ms. Bush, Mr. Kearney and Mr.
Lehman. The Audit Committee held five meetings during 2001. The Board determined
that the members of the Audit Committee are independent as that term is used in
the rules of the New York Stock Exchange pertaining to audit committees.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in carrying out the
Board's oversight responsibilities in connection with the Company's accounting
policies and financial reporting practices, internal controls and the audit
process. The Audit Committee believes that, as provided in the Audit Committee's
Charter, the ultimate responsibility for the fairness of the Company's financial
statements rests with the Company's management. The Committee also believes, and
the Charter also provides, that the independent accountants are intended to be
the primary check on management's performance in this regard. The Charter was
included with the Proxy Statement for the 2001 Annual Meeting and has not
changed.
The Audit Committee reviewed and discussed with management and
PricewaterhouseCoopers LLP ("PwC"), the Company's independent accountants, the
Company's audited financial statements for the year ended December 31, 2001. The
Audit Committee discussed with PwC the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee also received from PwC the written disclosures required by
the Independence Standards Board's Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with PwC their independence from the Company and
its management. None of the officers of the Company having responsibility for
finance or accounting matters is a former partner or employee of PwC.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, which is to be filed with the Securities and
Exchange Commission. These are the same financial statements that appear in the
Company's Annual Report to Shareholders.
MEMBERS OF THE AUDIT COMMITTEE:
Mary K. Bush, Chairperson
Daniel P. Kearney
Michael E. Lehman (beginning July 2001)
8
AUDIT AND OTHER FEES
During the year ended December 31, 2001, PwC billed the Company fees for
services of the following types:
Audit Fees.................. $412,000
All Other Fees.............. $383,197
"Audit Fees" includes PwC's review of the Company's quarterly financial
statements. "All Other Fees" does not include services for designing or
implementing hardware or software systems underlying the financial statements or
generating information that is significant to the Company's financial statements
taken as a whole. There were no such fees for 2001. The Audit Committee
considered whether the services included within "All Other Fees" were compatible
with maintaining PwC's independence and concluded they were.
MANAGEMENT DEVELOPMENT COMMITTEE
The members of the Management Development Committee are Messrs. Jastrow,
Lubar and Muma. The Management Development Committee held four meetings during
2001. This Committee oversees the compensation program for the Company's senior
management, administers the Company's stock incentive plan and recommends to the
Board candidates to fill senior management positions and vacancies on the Board
of Directors and committees.
The Management Development Committee will consider nominees to the Board of
Directors who are recommended by shareholders. Recommendations must be submitted
in writing to the Committee, in care of the Secretary of the Company, by
December 1 of the year preceding the applicable Annual Meeting of Shareholders
and must include a description of the proposed nominee's qualifications,
background information and his or her consent to serve as a director.
COMPENSATION OF DIRECTORS
Annual and Meeting Fees: Directors who are employees of the Company or any
of its subsidiaries are not compensated for their service on the Board.
Directors who are not employees of the Company receive an annual fee for their
services of $24,000, plus $2,000 for each Board of Directors meeting attended,
and $1,000 for each committee meeting attended other than in connection with a
Board of Directors meeting. A director who also serves as chairperson of a Board
committee receives an additional $2,000 annual fee. The Company reimburses
directors for travel, lodging and related expenses incurred in connection with
attending Board of Directors and committee meetings.
Deferred Compensation Plan: Under the Company's Deferred Compensation Plan
for Non-Employee Directors, an eligible director may elect to defer payment of
all or part of the annual and meeting fees until the director's death,
disability, termination of service as a director or to another date specified by
the director. A director who participates in this plan may elect to have his or
her deferred compensation account either credited quarterly with interest
accrued at an annual rate equal to the six-month U.S. Treasury Bill rate
determined at the closest preceding January 1 and July 1 of each year or
translated on a quarterly basis into share units. Each share unit is equal in
value to a share of the Company's Common Stock and is ultimately distributed in
cash only. If a director defers fees into share units, dividend equivalents in
the form of additional share units are credited to the director's account as of
the date of payment of cash dividends on the Company's Common Stock. Mr. Culver,
because of his employment by the Company, is not eligible to participate in this
plan.
Deposit Share Program: Under the Deposit Share Program as in effect in
2001, an eligible director may deposit up to 100% of the annual and meeting fees
for the preceding year. The funds are used to purchase shares of Common Stock at
fair market value which are then deposited with the Company. The Company matches
each share deposited with one and one-half shares of restricted Common Stock
("Restricted Stock"). A director who had deferred annual and meeting fees during
the preceding year into share units (see "Deferred Compensation Plan" above) may
reduce the amount that would otherwise be required to be deposited to purchase
Common Stock by the amount so deferred. For matching purposes, the amount so
deferred is treated as if shares had been purchased and deposited and one and
one-half shares of Restricted Stock are awarded for each such share.
The Restricted Stock generally vests on the third anniversary of the award
unless a director chooses an extended vesting date. Except for gifts to family
members, the shares may not be transferred prior to vesting. If the shares have
not vested when a director's service on the Board of Directors ends, they will
be forfeited unless service as a director ends on account
9
of the director's death or certain events specified in the agreement relating to
the Restricted Stock or the Management Development Committee waives the
forfeiture. If a director chooses an extended vesting date, forfeiture will not
occur due to the director's leaving the Board on or after the third anniversary
of the award unless the director voluntarily left the Board or voluntarily did
not stand for re-election. All of the director's shares of Restricted Stock vest
on death. The shares of Restricted Stock will immediately become vested upon a
change in control of the Company, as defined by the agreement relating to the
Restricted Stock. The Board has authority to modify the Deposit Share Program.
Mr. Culver is not eligible to participate in it.
Former Restricted Stock Plan: Non-employee directors elected to the Board
of Directors before 1997 were each awarded, on a one-time basis, 2,000 shares of
Common Stock under the Company's 1993 Restricted Stock Plan for Non-Employee
Directors. The shares are restricted from transfer until the director ceases to
be a director of the Company by reason of death, disability or retirement, as
defined by the agreement relating to the shares, and are forfeited if the
director leaves the Board for another reason unless the forfeiture is waived by
the plan administrator. In 1997, the Board decided that no new awards of Common
Stock will be made under the plan.
REPORT OF THE MANAGEMENT DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Management Development Committee ("Committee") of the Board of
Directors submits this report on the compensation of the Company's senior
management.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program is designed to attract,
retain, motivate and reward high-quality professionals. The Committee's approach
to executive compensation emphasizes pay for performance over fixed salary, plus
compensation linked to shareholder value in the form of stock options and
restricted stock. The principal objectives of the program are to:
- link executive compensation to Company performance;
- align the interests of management and shareholders by providing a
substantial portion of an executive's compensation opportunity in the
form of Company stock; and
- maintain competitive pay levels to attract and retain high-quality
executives.
The key components of the Company's executive compensation program are base
salary, annual performance bonus (a portion of which in recent years has been
paid in restricted stock) and stock options. The Committee reviews compensation
levels of the Company's executives each year, using compensation survey data
prepared by independent consultants. The Committee believes that the Company's
peer group for executive talent is not limited to the companies included in the
Standard & Poor's industry index used for the performance graph comparison of
shareholder return. Therefore, the compensation survey data obtained by the
Committee cover a variety of publicly-traded financial guaranty and insurance
companies.
BASE SALARY
The Committee reviews the salary ranges and base salaries of the senior
executives each January, comparing the compensation levels of the Company's
executives to comparable positions in the companies represented in the survey
data. Salary ranges of the Company's senior executives are targeted at the
median compensation levels for comparable positions within the comparative group
of companies. The decision to set salary range midpoints at the 50th percentile
of competitive pay levels reflects the Committee's belief that a substantial
portion of the senior executives' annual pay should be linked to the Company's
performance and increases in shareholder value.
Mr. Culver's compensation is addressed under "Compensation of the Chief
Executive Officer" below. For 2001, the Committee increased the salary range
midpoints of the other senior executives by 3.6%, representing the average
salary range movement reflected in the compensation survey data, and increased
the salaries of those executives who were below their adjusted salary midpoints
to approximate the new midpoint of their respective positions. The salaries
shown for the named officers in the Summary Compensation Table which follows
this report reflect payment for the first three months of the year at the salary
rates in effect prior to the adjustments, which became effective in April 2001.
10
ANNUAL PERFORMANCE BONUS
Annual bonuses are awarded to senior executives based upon Company and
individual performance. Under the executive compensation program, the Company's
net income must exceed a threshold amount before any bonuses can be paid and
must equal or exceed a net income target in order for senior executives to be
eligible for maximum bonus awards. The Committee establishes the net income
threshold and net income target in January of each year based on an assessment
of the business environment and the Company's financial plan for that year. For
2001, the Committee set the target at an amount equal to the net income
projected in the Company's 2001 financial plan and set as the threshold an
amount equal to the Company's actual earnings for the prior year, exclusive of
capital gains.
The Committee established five tiers applicable to bonus opportunities,
with maximums ranging from 60% to 200% of base salary in effect at the time of
bonus award. For 2001, an executive could elect to receive up to one-third of
his or her bonus in the form of shares of restricted stock with an equivalent
market value. If restricted stock was elected, the Company awarded one and
one-half matching shares for each restricted shared elected. The balance of the
annual bonus was paid in cash. Ownership of the restricted shares for up to
one-third of the bonus vests one year from the date of award. Ownership of the
matching restricted shares vests three years from the date of the award.
The maximum bonus level for each senior executive was determined by the
Committee in January 2001, based upon Mr. Culver's recommendations. Mr. Culver's
recommendations generally reflected his subjective judgment as to the ability of
each senior executive to influence the Company's competitiveness and
profitability. Actual bonus amounts paid to the senior executives were decided
in January 2002, when Mr. Culver recommended bonus awards for the other senior
executives based upon, in general, his subjective evaluation of each executive's
performance during the year and contributions to the Company's success. The
Committee approved the suggested bonus amounts without change.
STOCK OPTIONS
The award of stock options to senior executives is designed to link the
interests of management with the interests of other shareholders in the
Company's long-term success. Under the Company's stock incentive plan, stock
options are granted at the market value on the date of grant. As a result,
senior executives will realize a gain from the options only if the price of the
Company's Common Stock increases in the future.
The Committee currently awards stock options to senior executives on an
annual basis. The options awarded in 1994, 1997 and 2000 provided for vesting
during the first five years after the grant based on achievement of corporate
performance goals established by the Committee. Any portion of these options
that had not vested by the fifth anniversary of the grant, vested on the ninth
anniversary of the grant if the executive was still employed at that time. The
performance goal for options awarded in 1994, 1997 and 2000 was based on a
five-year aggregate earnings target. The options granted in 2001 vest over a
five-year period on the basis of continuing employment. The number of options
granted in 2001 was generally about one-half of the performance-based options
granted in 2000. The number of options granted is within the discretion of the
Committee. Information on the stock option grants during 2001 to Mr. Culver and
the other named executive officers is set forth in the table under "Executive
Compensation -- Option Grants in 2001."
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Culver's base salary was adjusted by the Committee in January 2001 to
$550,000, an amount slightly below the salary range midpoint for the Chief
Executive Officer position, which represents an increase of 15.8% in recognition
of the Company's performance in 2000 and the fact that Mr. Culver's salary had
been significantly below his salary range midpoint.
For 2001, the Committee assigned Mr. Culver to the bonus tier with the
highest bonus opportunity, 200% of his base salary. The Committee's decision to
assign Mr. Culver to this bonus category was based on a subjective evaluation of
his ability to influence the Company's profitability and reflected the
Committee's desire to make Mr. Culver's performance bonus competitive with bonus
opportunities available to CEOs in the peer group of companies reflected in the
compensation survey data. In January 2002, in acknowledgement of the Company's
results for 2001 (including its net income, return on equity and growth in
primary insurance in force), and based upon the Committee's subjective
evaluation of Mr. Culver's performance and Mr. Culver's request that his bonus
11
be below his highest bonus opportunity, the Committee awarded Mr. Culver a
performance bonus of $850,000, an amount equal to 155% of his base salary.
Two-thirds of the bonus, or $566,983, was paid in cash, and pursuant to Mr.
Culver's election to receive one-third of his bonus in restricted stock (as
described under "Annual Performance Bonus" above), Mr. Culver was awarded 4,436
shares of restricted Company stock, representing one-third of his bonus and
6,654 additional restricted shares representing the matching shares awarded on
account of Mr. Culver's election. All of the restricted stock was valued at the
then current market price ($63.80) per share. The shares representing one-third
of Mr. Culver's bonus will vest in one year and the remaining shares will vest
in three years.
Mr. Culver was granted 75,000 stock options in January 2001. The options
have a term of ten years and vest at a rate of 20% each year over the next five
years (subject to acceleration under certain circumstances) based on continued
employment. The options are exercisable at $57.88 per share, the closing price
of the Common Stock on the New York Stock Exchange on the date of the grant.
TAX DEDUCTIBILITY LIMIT
Under the Internal Revenue Code, certain compensation in excess of $1
million paid during a year to any of the executive officers named in the Summary
Compensation Table for that year is not deductible. The Committee believes that
the effect of such compensation on income tax expense for 2001 was not material
and that the effect of such compensation awarded for 2001 on future income tax
expense will not be material. The Committee believes it is in the Company's
interest to preserve flexibility to pay compensation that will not qualify for
the income tax deduction because it is based on subjective factors.
MEMBERS OF THE MANAGEMENT DEVELOPMENT COMMITTEE:
Sheldon B. Lubar, Chairman
Kenneth M. Jastrow, II
Leslie M. Muma (beginning July 2001)
12
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the Standard & Poor's 500 Stock Index and the Standard & Poor's 500
Insurance (Property-Casualty) Index (the peer group index which has included the
Company since November, 1998). The graph assumes $100 was invested on December
31, 1996, in each of the Company's Common Stock, the Standard & Poor's 500 Stock
Index and the Standard & Poor's 500 Insurance (Property-Casualty) Index, and
that all dividends were reinvested.
[PERFORMANCE GRAPH]
- ------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001
- ------------------------------------------------------------------------------------------------
S&P 500 133 171 207 189 166
- ------------------------------------------------------------------------------------------------
S&P 500 Insurance (Property-Casualty) 143 130 94 149 138
- ------------------------------------------------------------------------------------------------
MGIC Investment Corporation 175 105 159 179 164
- ------------------------------------------------------------------------------------------------
13
EXECUTIVE COMPENSATION
The following tables provide information concerning compensation, stock
option awards and aggregated stock option exercises as they relate to the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company or of its principal subsidiary, Mortgage Guaranty Insurance
Corporation ("MGIC") in 2001. The Company's retirement benefits are also
described below.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARDS STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS(#) ($)(3)
- --------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
Curt S. Culver 2001 532,697 566,983 -0- 707,542 75,000 59,008
President and Chief 2000 463,482 633,339 1,230 316,661 150,000 59,105
Executive Officer 1999 419,252 566,678 766 283,322 175,000 62,052
J. Michael Lauer 2001 287,697 222,488 -0- 277,530 25,000 28,715
Executive Vice President 2000 277,710 280,046 979 139,954 50,000 28,974
and Chief Financial 1999 267,585 270,009 820 135,000 25,000 28,485
Officer
Lawrence J. Pierzchalski 2001 256,538 199,472 -0- 248,820 25,000 32,749
Executive Vice President- 2000 243,846 245,026 417 122,474 50,000 33,621
Risk Management 1999 238,789 240,029 360 119,971 25,000 33,122
James S. MacLeod 2001 251,077 228,748 -0- 161,223 25,000 53,082
Executive Vice President- 2000 235,692 238,057 475 118,943 50,000 53,120
Field Operations 1999 226,061 182,442 391 91,158 25,000 52,657
Jeffrey H. Lane 2001 217,692 176,147 -0- 219,600 25,000 10,100
Senior Vice President and 2000 208,846 210,006 917 104,994 37,500 10,100
General Counsel 1999 202,577 164,007 718 81,993 20,000 9,600
- ---------------
(1) The amounts shown in this column for 2000 and 1999 represent reimbursements
for the payment of taxes related to income imputed in connection with the
Supplemental Executive Retirement Plan referred to below. Other Annual
Compensation for the years shown in the table does not include perquisites
and other personal benefits because the aggregate amount of such
compensation for each of the named individuals in each year did not exceed
the disclosure threshold of the rules of the Securities and Exchange
Commission.
(2) For 2001, the amounts shown in this column are the New York Stock Exchange
closing price on the date of the award of $63.80, multiplied by the number
of shares as follows: Mr. Culver -- 11,090; Mr. Lauer -- 4,350; Mr.
Pierzchalski -- 3,900; Mr. MacLeod -- 2,527; and Mr. Lane -- 3,442. For 2000
and 1999, the amounts shown are the New York Stock Exchange closing price on
the date of award multiplied by the number of shares. At December 31,2001,
the number of restricted shares held and their value based on the year-end
closing price of the Common Stock on the New York Stock Exchange was as
follows: Mr. Culver -- 5,471, $337,670; Mr. Lauer -- 2,418, $149,239; Mr.
Pierzchalski -- 2,116, $130,600; Mr. MacLeod -- 2,055, $126,835; and Mr.
Lane -- 1,814, $111,960. For 2001, 40% of the shares vest on the first
anniversary of the award and the remainder vest on the third anniversary.
For 2000 and 1999, all shares vested on the first anniversary of the award.
Dividends are paid on the restricted shares.
14
(3) The 2001 amounts included in All Other Compensation consist of:
VALUE OF SPLIT
PROFIT MATCHING DOLLAR
SHARING 401(K) LIFE INSURANCE TOTAL OTHER
NAME CONTRIBUTIONS CONTRIBUTIONS PREMIUMS(A) COMPENSATION(B)
- ---- ------------- ------------- -------------- ---------------
Curt S. Culver $8,500 $1,600 $46,441 $59,008
J. Michael Lauer 8,500 1,600 18,615 28,715
Lawrence J. Pierzchalski 8,500 1,600 22,649 32,749
James S. MacLeod 8,500 1,600 42,982 53,082
Jeffrey H. Lane 8,500 1,600 -0- 10,100
- ---------------
(a) The amount shown represents the full dollar amount paid by or on behalf of
MGIC for the whole life portion of the split-dollar life insurance. The premium
attributed to the term portion of such insurance was paid by the named executive
officers. MGIC will be reimbursed for premiums paid upon the officer's
termination of employment.
(b) Includes supplemental long term disability insurance premiums paid on behalf
of Mr. Culver of $2,467.
- --------------------------------------------------------------------------------
OPTION GRANTS IN 2001
INDIVIDUAL GRANTS(1)
--------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
- ---- ---------- ------------ -------------- ---------- -----------
Curt S. Culver 75,000 14.05 57.880 01/24/2011 1,831,875
J. Michael Lauer 25,000 4.68 57.880 01/24/2011 610,625
Lawrence J. Pierzchalski 25,000 4.68 57.880 01/24/2011 610,625
James S. MacLeod 25,000 4.68 57.880 01/24/2011 610,625
Jeffrey H. Lane 25,000 4.68 57.880 01/24/2011 610,625
- ---------------
(1) The options have a term of ten years and vest on each of the next five
anniversaries of the January 24, 2001 grant date (subject to acceleration under
certain circumstances) based on continued employment.
(2) Grant date present values were determined under the Black Scholes option
pricing model using the following assumptions: expected stock price volatility
of 39.60%; all options are exercised at the end of the fifth year of the option
term; a dividend yield of 0.16%; and a risk-free rate of return of 5.12%, which
was the yield on a U.S. Treasury Strip with a maturity equal to the term of the
grant. No adjustments are made for risk of forfeiture or non-transferability.
Determining the grant date present value by use of this model is permitted by
rules of the Securities and Exchange Commission; however, use of this model does
not constitute an endorsement or an acknowledgement that such model can
accurately determine the value of options. The actual value realized from an
option will be measured by the difference between the stock price and the
exercise price on the date the option is exercised.
15
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 2001 AT DECEMBER 31, 2001(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME DURING 2001(#) ($)(1) (#) (#) ($) ($)
- ---- --------------- -------- ----------- ------------- ----------- -------------
Curt S. Culver 40,000 2,073,232 320,600 279,400 7,814,101 3,947,212
J. Michael Lauer -0- -0- 171,940 88,060 5,843,429 1,171,458
Lawrence J. Pierzchalski 25,000 1,134,379 104,940 88,060 2,755,064 1,171,458
James S. MacLeod 40,000 1,934,440 91,940 88,060 2,155,829 1,171,458
Jeffrey H. Lane -0- -0- 89,455 73,045 2,215,351 914,337
- ---------------
(1) Value realized is the market value at the close of business on the date
immediately preceding the date of exercise less the exercise price.
(2) Value is based on the closing price of $61.72 for the Common Stock on the
New York Stock Exchange at year-end 2001, less the exercise price.
- --------------------------------------------------------------------------------
PENSION PLAN
The Company maintains a Pension Plan for the benefit of substantially all
employees of the Company and maintains a Supplemental Executive Retirement Plan
(the "Supplemental Plan") for designated employees, including executive
officers. The Supplemental Plan provides benefits that cannot be provided by the
Pension Plan because of limitations in the Internal Revenue Code on benefits
that can be provided by a qualified pension plan, such as the Company's Pension
Plan.
Under the Pension Plan and the Supplemental Plan taken together, each
executive officer named above earns an annual pension credit for each year of
employment equal to 2% of the officer's eligible cash compensation for that
year. At retirement, in general, the annual pension credits are added together
to determine the employee's accrued pension benefit. However, the annual pension
credits for service prior to 1998 for each employee with at least five years of
vested service on January 1, 1998 will generally be equal to 2% of the
employee's average eligible compensation for the five years ended December 31,
1997. Eligible employees with credited service for employment prior to October
31, 1985 also receive a past service benefit, which is generally equal to the
difference between the amount of pension the employee would have been entitled
to receive for service prior to October 31, 1985 under the terms of a prior plan
had such plan continued, and the amount the employee is actually entitled to
receive under an annuity contract purchased when the prior plan was terminated.
Retirement benefits vest on the basis of a graduated schedule over a
seven-year period of service. Full pension benefits are payable upon retirement
at or after age 65 (age 62 if the employee has completed at least seven years of
service), and reduced benefits are payable beginning at age 55. The estimated
annual benefits payable upon retirement at age 62 to Messrs. Culver, Lauer,
Pierzchalski, MacLeod and Lane under the Pension Plan and the Supplemental Plan
taken together, based on pension benefits earned through December 31, 2001 and
an annual compensation increase of 3%, are $519,299, $152,454, $262,751,
$182,258 and $163,561, respectively.
CHANGE OF CONTROL AGREEMENTS
Each of Messrs. Culver, Lauer, Pierzchalski, MacLeod and Lane is a party to
a Key Executive Employment and Severance Agreement with the Company (a "KEESA").
If a change in control of the Company occurs and the executive's employment is
terminated within three years after the change in control (this three-year
period is referred to as the "employment period"), other than for cause or
disability, or if the executive terminates his employment for good reason, the
executive is entitled to a lump sum termination payment equal to twice the sum
of his annual base salary, his maximum bonus award and an amount for pension
accruals and profit sharing and matching contributions. If the
16
employment termination occurs during the employment period but more than three
months after the change in control, the termination payment is reduced. The
executive is also entitled to certain other benefits and the continuation of
medical and other specified employee benefits during the remainder of the
employment period. The KEESA provides that all unvested stock options and
restricted stock become fully vested at the date of the change in control. If
the excise tax under Section 280G of the Internal Revenue Code would apply to
the benefits provided under the KEESA, the executive is entitled to receive a
payment so that he is placed in the same position as if the excise tax did not
apply.
While the executive is employed during the employment period, the executive
is entitled to a base salary no less than the base salary in effect prior to the
change in control and to a bonus opportunity of no less than 75% of the maximum
bonus opportunity in effect prior to the change in control. The executive is
also entitled to participate in medical and other specified benefits.
The terms "change in control of the Company," "cause," "disability" and
"good reason" are defined in the KEESA. The Company has entered into the same or
similar agreements with 43 other officers.
OTHER INFORMATION
Two representatives of The Northwestern Mutual Life Insurance Company
("Northwestern Mutual") served as directors of the Company during 2001 until the
Company's annual meeting held in May 2001. The Company has an agreement with a
subsidiary of Northwestern Mutual (the "NML subsidiary") pursuant to which the
NML subsidiary was retained to manage specified accounts in the Company's
long-term investment portfolio, and to provide accounting and reporting services
to the Company. The agreement may be canceled by the Company upon 90 days prior
written notice and by the NML subsidiary upon 180 days prior written notice. The
Company paid the NML subsidiary $1,148,710 in fees during 2001 under the
agreement. The Company believes the terms of the agreement are no less favorable
to the Company than could have been obtained from an unaffiliated third party.
During 2001, MGIC purchased disability coverage for its employees from
Northwestern Mutual and MGIC paid Northwestern Mutual an aggregate of $291,683
in premiums for such coverage. Also during 2001, MGIC paid an aggregate of
$225,151 to Northwestern Mutual in split-dollar life insurance premiums for the
whole life portion of the life insurance coverage issued by Northwestern Mutual
on Messrs. Culver, Lauer, Pierzchalski and MacLeod and three other employees
pursuant to a split-dollar collateral assignment program. In each case, the
premiums paid were determined by Northwestern Mutual's published rates and the
split-dollar life insurance premiums will be repaid to MGIC upon the termination
of employment of each insured person.
During 2001, MGIC and other subsidiaries of the Company provided mortgage
insurance and other services to, or received services from, unaffiliated
companies of which certain non-employee directors were executive officers,
directors or 10% or greater equity owners. These transactions were made in the
ordinary course of business and are not considered material to the Company.
Similar transactions are expected in 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock (other than certain investment advisers
with respect to shares held for third parties), to file reports of their
beneficial ownership of Company stock and changes in stock ownership with the
Securities and Exchange Commission and the New York Stock Exchange. Based upon
copies of the reports furnished to the Company and statements by the executive
officers, directors and greater than ten percent beneficial owners subject to
Section 16(a), the Company believes that all Section 16(a) forms were timely
filed in 2001.
ITEM 2 -- APPROVAL OF THE MGIC INVESTMENT CORPORATION 2002 STOCK INCENTIVE PLAN
INTRODUCTION
The Board of Directors has approved and recommended for shareholder
approval the MGIC Investment Corporation 2002 Stock Incentive Plan (the "Plan").
The material features of the Plan are summarized below. The summary does not
change the actual terms of the Plan, which is included as Exhibit A to this
Proxy Statement.
17
The purpose of the Plan is to provide the benefits of additional incentive
inherent in ownership of the Company's Common Stock by executive officers, other
key employees of the Company and non-employee directors, who are viewed by the
Company as important to the Company's success. The Plan helps the Company to
compete with other organizations in obtaining and retaining the services of
these persons. The persons who are eligible to receive awards under the Plan as
described above are referred to as "eligible individuals" and the persons to
whom awards are made under the Plan are referred to as "participants." A
"non-employee director" is a director of the Company who is not an employee of
the Company or any affiliate and is not a representative of a particular holder
of the Company's securities.
The maximum number of shares of Common Stock which may be issued under the
Plan is 10,000,000 shares plus an additional amount of shares that is the total
of two components. The first component is the number of shares covered by awards
under the Company's 1991 Stock Incentive Plan that were outstanding on March 1,
2002 but are subsequently forfeited. During the three years ended December 31,
2001, 88,982 shares covered by awards under this plan were forfeited. The second
component is the number of shares that must be purchased at a purchase price of
not less than the fair market value of the shares as a condition to the award of
restricted stock under the Plan. While the Common Stock is listed on an
exchange, fair market value is the last reported sale price on the exchange.
Shares issued under the Plan that are subsequently forfeited will not count
against the limit on the maximum number of shares that may be issued under the
Plan.
The Plan provides for the award of stock options ("options"), stock
appreciation rights ("SARs"), restricted stock and restricted stock units. Each
type of award is described briefly below and they are referred to together as
"awards." No award may be granted after May 2, 2012.
On March 4, 2002, the last reported sale price of the Common Stock on the
New York Stock Exchange was $69.03. There are currently about 125 eligible
individuals, of whom 11 are non-employee directors.
ADMINISTRATION
The Plan is administered by a Committee of the Board. The Plan provides
that each member of the Committee must be an "outside director" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Among other functions, the Committee has power (a) to select the participants
from among the eligible individuals, (b) to determine the number of shares
covered by awards, and (c) within the limits of the Plan, to set the terms of
awards. The Plan authorizes the Committee to delegate its functions to any one
or more of its members.
OPTIONS AND SARS
An option is the right to purchase a specified number of shares of Common
Stock at a specified exercise price. An SAR is the right to receive, in cash or
shares with equivalent value, the difference between the fair market value of a
specified number of shares of Common Stock and a specified exercise price. The
exercise price per share of Common Stock subject to an option or an SAR will be
determined by the Committee. However, the exercise price per share may not be
less than the fair market value of a share of Common Stock on the date the award
is made.
The term of an option or SAR will be determined by the Committee, but may
not be more than ten years. Options and SARs will vest on such conditions as are
determined by the Committee. Vesting means that an option or SAR may be
exercised by the participant. Conditions to vesting can include remaining as an
employee or non-employee director for a specified period or the achievement of
performance goals set by the Committee. The vesting of options that would vest
at a later date if the participant remained with the Company may be accelerated
to an earlier date if performance goals are satisfied.
Options are exercised by payment in full of the exercise price, which may
be paid in cash or by delivery of shares of Common Stock owned by the
participant having a fair market value equal to the exercise price or by a
combination of cash and shares. Options may also be exercised through sale of
the shares received on exercise with sufficient proceeds from the sale remitted
to the Company to pay the exercise price. While not required by the terms of the
Plan, it is anticipated awards will generally provide that options and SARs that
have not vested terminate upon termination of the participant's employment,
other than by reason of death. In the case of death, it is anticipated that
awards will provide options and SARs will become fully vested.
Options may be "incentive stock options" under the Code ("ISOs") or options
that are not ISOs. No
18
more than 10,000,000 shares may be issued under options that are ISOs.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
Restricted stock is Common Stock that is not freely transferable to the
participant until specified restrictions lapse or specified conditions are met.
In this description, these restrictions and conditions are referred to together
as restrictions. A restricted stock unit is the right to receive stock in the
future, which right is subject to restrictions. The Plan authorizes the issuance
of up to a total of 1,000,000 shares of restricted stock and stock issued under
restricted stock units. Restricted stock that is forfeited will not count
against the limit on the maximum number of restricted shares.
Restricted stock and restricted stock units will be subject to such
restrictions as the Committee may impose. In addition to restrictions, the
Committee may condition an award of restricted stock on the participant's
purchasing shares of Common Stock and retaining the shares for a period
specified by the Committee. While not required by the terms of the Plan, it is
anticipated awards will generally provide that, upon termination of a
participant's employment during the applicable restriction period for any reason
other than death, all shares of restricted stock and all restricted stock units
still subject to restriction will be forfeited. Upon death of a participant, it
is anticipated that the award will provide that the restrictions still in effect
will immediately lapse and the person entitled to receive such shares under law
will take them free and clear of any restriction. The Committee has authority,
in its discretion, to waive in whole or in part, any restrictions with respect
to shares of restricted stock or restricted stock units.
ADJUSTMENTS AND CHANGE OF CONTROL
In the event of any corporate transaction involving the Company, including
any stock dividend, stock split, extraordinary cash dividend, recapitalization
or merger, the Committee will have the authority to adjust the number and type
of shares that may be issued under the Plan, including the limit on the number
of shares of restricted stock and stock issued under restricted stock units, and
any awards that are outstanding.
Upon a change of control of the Company, as defined by the Committee and
included in the agreement that will evidence the award, all awards become vested
immediately and all restrictions will lapse.
LIMITS ON INDIVIDUAL AWARDS AND TRANSFERABILITY
The maximum number of shares covered by all awards made to any one employee
is 2,000,000 shares. Unless otherwise provided by the Committee, no award may be
transferred by any participant other than by will, by designation of a
beneficiary or by the laws of descent and distribution.
AMENDMENT AND TERMINATION
The Board or the Committee may amend the Plan at any time. However, the
approval of the shareholders is required for amendments that increase the
maximum number of shares that may be issued under the Plan; increase the maximum
aggregate number of shares of restricted stock and stock issued under restricted
stock units that may be issued under the Plan; increase the maximum number of
shares covered by awards to any one employee; decrease the minimum option or SAR
exercise price; or increase the maximum term of an option or SAR to more than
ten years. The Board or the Committee may also terminate the Plan at any time.
No amendment or termination of the Plan will adversely affect any award
outstanding without the approval of the affected participant.
WITHHOLDING
Not later than the date on which an amount with respect to an award first
becomes includable in the income of a participant who is an employee, the
participant is required to pay to the Company or make arrangements satisfactory
to the Company regarding the payment of any taxes required by law to be withheld
with respect to such amount. The Committee may permit withholding obligations to
be settled with shares of Common Stock, including shares of Common Stock that
are part of an award that gives rise to the withholding requirement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS AND SARS
The grant of an option or SAR under the Plan will create no income tax
consequences to the participant or the Company. A participant who is granted an
option that is not an ISO will generally recognize ordinary income at the time
of exercise in an amount by which the fair market value of the Common Stock at
such time exceeds the exercise price. The value of the Common Stock or the
amount of cash delivered on exercise of an SAR will also generally be ordinary
income to the participant. The Company will be entitled to a deduction in the
same amount and at the
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same time as ordinary income is recognized by the participant. A subsequent
disposition of the Common Stock will give rise to capital gain or loss to the
extent the amount realized from the sale differs from the fair market value of
the Common Stock on the date of exercise.
In general, if an ISO is awarded to an employee, the participant holds the
shares of Common Stock acquired on the exercise of the ISO for at least two
years from the date of grant and one year from the date of exercise, and the
participant remained an employee until at least three months before exercise,
the participant will recognize no income or gain as a result of the exercise,
except that the alternative minimum tax may apply. Any gain or loss realized by
the participant on the disposition of the Common Stock will be treated as a
long-term capital gain or loss. No deduction will be allowed to the Company. If
the holding period requirements described above are not satisfied, the
participant will recognize ordinary income at the time of the disposition equal
to the lesser of (a) the gain realized on the disposition, or (b) the difference
between the exercise price and the fair market value of the shares of Common
Stock on the date of exercise. The Company will be entitled to a deduction in
the same amount and at the same time as ordinary income is recognized by the
participant. Any additional gain realized by the participant over the fair
market value at the time of exercise will be treated as capital gain.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF RESTRICTED STOCK
A participant will not recognize income upon the award of restricted stock
that is subject to a substantial risk of forfeiture unless the election
described below is made. A participant who has not made such an election will
recognize ordinary income at the end of the applicable restriction period in an
amount equal to the fair market value of the restricted stock at such time.
Subject to any limitation on such deduction under Section 162(m) of the Code,
the Company will be entitled to a corresponding deduction in the same amount and
at the same time as the participant recognizes income. An otherwise taxable
disposition of the restricted stock after the end of the applicable restriction
period will result in capital gain or loss. Dividends paid in cash and received
by a participant prior to the end of the applicable restriction period will
constitute ordinary income to the participant in the year paid. The Company will
be entitled to a corresponding deduction for such dividends. Any dividends paid
in stock will be treated as an award of additional restricted stock subject to
the tax treatment described herein.
A participant may, within thirty days after the date of the award of
restricted stock, elect to recognize ordinary income as of the date of the award
in an amount equal to the fair market value of such restricted stock on the date
of the award, determined without regard to any of the restrictions. Subject to
any limitation on such deduction under Section 162(m) of the Code, the Company
will be entitled to a corresponding deduction in the same amount and at the same
time as the participant recognizes income. If the election is made, any cash
dividends received with respect to the restricted stock will be treated as
dividend income to the participant in the year of payment and will not be
deductible by the Company. An otherwise taxable disposition of the restricted
stock (other than by forfeiture) will result in capital gain or loss. If a
participant who has made an election subsequently forfeits the restricted stock,
the participant will not be entitled to deduct any loss. In addition, the
Company would then be required to include as ordinary income the amount of the
deduction it originally claimed with respect to such shares.
TERMINATION OF 1991 STOCK INCENTIVE PLAN
Upon approval of the Plan, the 1991 Stock Incentive Plan will be terminated
and no further awards under that plan will be made. Termination will not affect
any prior awards under the 1991 Stock Incentive Plan.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
No awards have been made under the 2002 Stock Incentive Plan, and the
awards that may be made are not currently determinable. The table below sets
forth certain information about outstanding options awarded under the Company's
1991 Stock Incentive Plan as of March 1, 2002. Comparable information as of
December 31, 2001 may be found in note 11, "Shareholders' equity and dividend
restrictions" of the notes to the Company's financial statements for the three
years ended December 31, 2001 in the accompanying 2001 Annual Report to
Shareholders. No warrants or rights have been issued under the 1991 Stock
Incentive Plan, and it was approved by shareholders. The Company has no
compensation plan under which its equity securities may be issued that has not
been approved by shareholders.
20
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE
NO. OF SECURITIES TO BE WEIGHTED AVERAGE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A))
PLAN CATEGORY (A) (B) (C)
Equity compensation plans approved by
security holders 3,937,066 $48.40 356,496*
Equity compensation plans not
approved by security holders -0- -0- -0-
Total 3,937,066 $48.40 356,496*
- ---------------
* As described above, effective upon approval by shareholders of the 2002 Stock
Incentive Plan, no further awards will be made under the 1991 Stock Incentive
Plan. Pending approval by shareholders of the 2002 Stock Incentive Plan, awards
covering no more than 10,000 shares may be made after March 1, 2002 under the
1991 Stock Incentive Plan.
At March 1, 2002, the weighted average term of the options outstanding
under the 1991 Stock Incentive Plan was 7.4 years. In addition to shares
issuable on exercise of these options, as of March 1, 2002, awards covering
142,328 shares of restricted stock were outstanding under the 1991 Stock
Incentive Plan and 16,000 shares of restricted stock were outstanding under a
plan for non-employee directors that was terminated in 1997.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on the Plan is
required for approval of the Plan. Shares represented by proxies that reflect
abstentions and shares referred to as "broker non-votes" will not be treated as
"votes cast." If the shares under the Plan are to be listed on the New York
Stock Exchange, the rules of the Exchange require that, in addition, the total
votes cast on the Plan equal at least 50% of the number of shares entitled to
vote at the Annual Meeting. The Company does not plan to list the shares on the
Exchange because it has shares in treasury, which have already been listed,
sufficient to cover the maximum shares that may be issued under the Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2002 STOCK
INCENTIVE PLAN. THE SHARES WILL BE VOTED FOR THE PLAN, UNLESS INDICATED
OTHERWISE ON THE PROXY.
ITEM 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the accounting firm of PricewaterhouseCoopers LLP ("PwC") as
independent accountants of the Company for the fiscal year ending December 31,
2002. The shareholders are being asked to ratify this appointment at the Annual
Meeting. A representative of PwC is expected to attend the meeting and will be
given an opportunity to make a statement and respond to appropriate questions.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on this matter is
required for the ratification of the appointment of PwC as independent
accountants. Abstentions and "broker non-votes" will not be counted as "votes
cast."
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PWC AS INDEPENDENT ACCOUNTANTS. THE SHARES WILL BE VOTED FOR
RATIFICATION, UNLESS INDICATED OTHERWISE ON THE PROXY.
21
OTHER MATTERS
SHAREHOLDER PROPOSALS
Any shareholder who wants to include a proposal in the proxy material for
the Company's 2003 Annual Meeting must submit the proposal to the Company on or
before November 18, 2002. The rules of the Securities and Exchange Commission
also establish other requirements for shareholder proposals of this type.
Under the Company's Bylaws, a shareholder who wants to bring business
before the Annual Meeting of Shareholders, other than a proposal included in the
Company's proxy material, or who wants to nominate directors at the Annual
Meeting must satisfy the following requirements: (1) be a shareholder of record
entitled to vote at the Annual Meeting and also be a shareholder of record at
the time the following notice is given; and (2) give notice to the Company's
Secretary in writing that is received at the Company's principal offices not
less than 45 days nor more than 70 days before the first anniversary of the date
set forth in the Company's proxy statement for the prior Annual Meeting as the
date on which the Company first mailed such proxy materials to shareholders. For
the 2003 Annual Meeting, the relevant dates are no later than February 1, 2003
and no earlier than January 7, 2003.
In the case of business other than nominations for directors, the notice
must, among other requirements, briefly describe such business, the reasons for
conducting the business and any material interest of the shareholder in such
business. In the case of director nominations, the notice must, among other
requirements, give various information about the nominees, including information
that would be required to be included in a proxy statement of the Company had
each such nominee been proposed for election by the Board of Directors of the
Company.
MANNER AND COST OF PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. In addition to
soliciting proxies by mail, employees of the Company may solicit proxies by
telephone, facsimile or personal interview. The Company also has engaged D.F.
King & Co., Inc. to provide proxy solicitation services for a fee of $8,000,
plus expenses, including charges by brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of the
Company's Common Stock.
OTHER BUSINESS
At the date of mailing of this Proxy Statement, the Board of Directors knew
of no other business to be presented at the Annual Meeting. Under the Company's
Bylaws as described under "Other Matters -- Shareholder Proposals," because no
notice of any other business was given to the Company, no business may be
brought before the Annual Meeting by a shareholder.
22
EXHIBIT A
MGIC INVESTMENT CORPORATION
2002 STOCK INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The MGIC Investment Corporation 2002 Stock Incentive Plan
(the "Plan") has been established by MGIC Investment Corporation (the "Company")
to secure for the Company and its Subsidiaries the benefits of the additional
incentive inherent in the ownership of the Company's Common Stock, $1.00 par
value (the "Stock"), by certain executive officers and other key employees of
the Company and its Subsidiaries and by Non-Employee Directors of the Company,
all of whom are important to the success and the growth of the business of the
Company, and to help the Company secure and retain the services of such persons.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals, those persons who will be granted one or more Awards under
the Plan, and thereby become "Participants" in the Plan.
1.3. Definitions. Capitalized terms in the Plan are defined as set forth
in the Plan (including the definition provisions of subsection 8.1 of the Plan).
SECTION 2
OPTIONS AND SARS
2.1. Definitions.
(a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price established by the Committee. Any Option granted
under the Plan may be either an incentive stock option (an "ISO") or a
non-qualified option (an "NQO"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in Section 422(b) of the
Code. An "NQO" is an Option that is not intended to be such an "incentive stock
option."
(b) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection 4.7),
value equal to (or otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of exercise; over (b) an
Exercise Price established by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under the Plan shall be established by the Committee or shall be determined by a
method established by the Committee at the time the Option or SAR is granted,
except that the Exercise Price shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.
2.3. Exercise. An Option and an SAR shall be exercisable in accordance
with such terms, conditions, restrictions and contingencies, including those
governing the period(s) during which such Awards may be exercised, as the
Committee shall determine, except that the term of an Option and an SAR may not
exceed ten years.
2.4. Payment of Exercise Price. The payment of the Exercise Price of an
Option shall be subject to the following:
(a) Except as provided in the remainder of this subsection 2.4, the entire
Exercise Price for shares of Stock purchased upon the exercise of an Option
shall be paid at the time of such exercise.
(b) The Exercise Price shall be payable in cash or by tendering, through
either actual delivery of shares or through attestation, shares of Stock
acceptable to the Committee, and valued at Fair Market Value as of the day prior
to the day of exercise (or if the Committee determines, as of the day of
exercise), or in any combination of such shares and cash, as determined by the
Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from
such exercise. In the case of an exercise arrangement described in the preceding
sentence,
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payment of the Exercise Price may be made as soon as practicable after the
exercise.
SECTION 3
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
3.1. Definitions. A "Restricted Stock" Award is a grant of shares of
Stock, and a "Restricted Stock Unit" Award is the grant of a right to receive
shares of Stock in the future, with such shares of Stock or right to future
delivery of such shares of Stock subject to a risk of forfeiture or other
restrictions that will lapse upon the achievement of one or more goals relating
to completion of service by the Participant, or achievement of performance or
other objectives, as determined by the Committee.
3.2. Restrictions on Awards. Each Restricted Stock Award and Restricted
Stock Unit Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine, including the satisfaction of
conditions that must be satisfied prior to the grant of the Award, such as a
condition that to receive the Award, the Participant must purchase, and retain
for a specified period, shares of Stock. Stock that must be purchased as a
condition to the receipt of a Restricted Stock Award or a Restricted Stock Unit
Award is referred to as "Purchased Stock." Purchased Stock shall be deemed to be
issued or sold by the Company under the Plan.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 2002 annual meeting of shareholders, the Plan shall be
effective as of the date of such meeting (the "Effective Date"). The Plan shall
be unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Awards are outstanding. However, except for Awards granted
pursuant to commitments entered into prior to such ten-year anniversary, no
Awards may be granted after the ten-year anniversary of the Effective Date.
4.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
(a) The shares of Stock may be authorized but unissued shares or treasury
shares. As used herein, the term "issued" and similar terms include treasury
shares delivered under an Award.
(b) Subject to the following provisions of this subsection 4.2, the maximum
number of shares of Stock that may be delivered to Participants and their
beneficiaries under the Plan shall be equal to the sum of: (i) 10,000,000 shares
of Stock; (ii) all shares of Stock subject to Awards granted under the Company's
1991 Stock Incentive Plan to the extent that, after March 1, 2002, such shares
are forfeited, or the Award terminates, expires or is canceled and the shares
covered by the terminated, cancelled or expired Award cannot be delivered; and
(iii) all Purchased Stock which is purchased for cash, or in exchange for shares
of Stock if, in either case, the purchase price per share of such Purchased
Stock is at least equal to 100% of the Fair Market Value of the Stock on the
date of the Award related to such Purchased Stock.
(c) Subject to subsections 4.2(d) and (e), the following additional limits
are imposed under the Plan.
(i) The maximum number of shares that may be covered by Awards granted to
any one employee shall be 2,000,000 shares. If an Option is in tandem with
an SAR, such that the exercise of the Option or SAR with respect to a share
of Stock cancels the tandem SAR or Option right, respectively, with respect
to such share, the tandem Option and SAR rights with respect to each share
of Stock shall be counted as covering but one share of Stock for purposes of
applying the limit of this clause (i). If an Award is terminated, cancelled
or expires, or the shares under an Award are forfeited, the number of shares
subject to the Award shall be counted for purposes of applying such limit.
(ii) The maximum number of shares that may be issued under Options intended
to be ISOs shall be 10,000,000 shares. The maximum number of shares that may
be issued in conjunction with Awards granted pursuant to Section 3 (relating
to Restricted Stock and Restricted Stock Unit Awards) shall be 1,000,000
shares.
(d) To the extent any shares of Stock covered by an Award are not delivered
to a Participant or beneficiary because the Award is forfeited, canceled, or
expires, or if the shares are delivered but subsequently forfeited, or the
shares of Stock are not delivered because the Award is settled in cash or used
to satisfy the applicable tax withholding obligation, such shares shall not be
deemed to have been delivered for purposes of determining the maximum number of
shares of Stock available for delivery under subsections 4.2(b) and 4.2(c)(ii).
If the Exercise Price
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of any Option is satisfied by tendering shares of Stock to the Company (by
either actual tender or by attestation), only the number of shares of Stock
issued net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under subsections 4.2(b) and 4.2(c)(ii).
(e) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination or exchange of shares), the Committee may adjust
the shares of Stock that may be issued under the Plan and may also adjust Awards
to preserve the benefits or potential benefits of the Awards. Action by the
Committee may include: (i) adjustment of the number and kind of shares which may
be delivered under the Plan; (ii) adjustment of the number and kind of shares
subject to outstanding Awards; (iii) adjustment of the Exercise Price of
outstanding Options and SARs; and (iv) any other adjustments that the Committee
determines to be equitable.
4.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to deliver any shares of Stock or make any other distribution of
benefits unless such delivery or distribution would comply with all applicable
laws (including, without limitation, the requirements of the Securities Act of
1933), and the applicable requirements of any stock exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock certificates
to reflect the issuance of shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.
4.4. Tax Withholding. Delivery of shares of Stock or other amounts under
the Plan is subject to withholding of all applicable taxes, and the Committee
may condition the delivery of any shares of Stock or other amounts under the
Plan on satisfaction of the applicable withholding obligations. The Committee,
in its discretion, and subject to such requirements as the Committee may impose
prior to the occurrence of such withholding, may permit such withholding
obligations to be satisfied through cash payment by the Participant, through the
surrender of shares of Stock which the Participant already owns, or through the
surrender of shares of Stock to which the Participant is otherwise entitled
under the Plan.
4.5. Grant and Use of Awards. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Awards may be granted
as alternatives to or replacement of Awards granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary (including
a plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary). Subject to the overall limitation on
the number of shares of Stock that may be delivered under the Plan, the
Committee may use available shares of Stock as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.
4.6. Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock,
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.7. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Satisfaction of any such obligations
under an Award, which is sometimes referred to as "settlement" of the Award, may
be subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
settlement, subject to such rules and
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procedures as it may establish, which may include provisions for the payment or
crediting of interest or dividend equivalents, and may include converting such
credits into deferred Stock equivalents. Each Subsidiary shall be liable for
payment of cash due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for that Subsidiary
by the Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.
4.8. Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.9. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10. Agreement With Company. An Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided, or
otherwise made available, to the Participant, and the Committee may, but need
not, require that the Participant sign a copy of such document. Such document is
referred to in the Plan as an "Award Agreement" regardless of whether any
Participant signature is required.
4.11. Action by Company or Subsidiary. Any action required or permitted to
be taken by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.
4.12. Gender and Number. Where the context permits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company or
any Subsidiary, in its sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right to
the Stock or amounts, if any, payable under the Plan, unsecured by any assets of
the Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, in the case of a
Participant who is an employee, or an agreement to renominate a director as a
director, in the case of a Participant who is a Non-Employee Director, and
selection as a Participant will not give any participating employee or Non-
Employee Director the right to be retained in the employ, or remain a director,
of the Company or any Subsidiary, nor any right or claim to any benefit under
the Plan, unless such right or claim has specifically accrued under the terms of
the Plan. Except as otherwise provided in the Plan, no Award under the Plan
shall confer upon the holder thereof any rights as a shareholder of the Company
prior to the date on which the Participant fulfills all conditions for receipt
of such rights.
4.14. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
CHANGE IN CONTROL
Subject to the provisions of subsection 4.2(e) (relating to the adjustment
of shares), and except as otherwise provided in the Plan or the Award Agreement
reflecting the applicable Award, upon the occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with SARs)
shall become fully exercisable.
A-4
(b) All outstanding SARs (regardless of whether in tandem with Options)
shall become fully exercisable.
(c) All Restricted Stock and Restricted Stock Units shall become fully
vested.
SECTION 6
COMMITTEE
6.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 6. The Committee shall be selected by the Board,
and shall consist of at least two members and shall be appointed from among the
members of the Board. Any member of the Committee may resign or be removed by
the Board and new members may be appointed by the Board. Additionally, the
Committee shall be constituted so as to satisfy at all times the outside
director requirement of Code Section 162(m) and the regulations thereunder.
Unless otherwise determined by the Board, the Committee shall be the Management
Development Committee. If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee.
6.2. Powers of Committee. The Committee's administration of the Plan shall
be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Individuals those
persons who shall receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the Awards, to
establish the terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and (subject to the restrictions imposed by Section
7) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of the
Awards in jurisdictions outside the United States, the Committee will have the
authority and discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to applicable requirements
or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any Award Agreement made pursuant
to the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan, including an adjustment under subsection 4.2(e), is final
and binding on all persons. Except to the extent precluded by applicable law
governing discrimination in employment, decisions made by the Committee under
the Plan need not be uniform with respect to Participants notwithstanding that
Participants are similarly situated.
6.3. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
6.4. Information to be Furnished to Committee. The Company and Subsidiaries
shall furnish the Committee with such data and information as it determines may
be required for it to discharge its duties. The records of the Company and
Subsidiaries as to an employee's or Participant's employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee considers desirable to carry out the terms
of the Plan.
SECTION 7
AMENDMENT AND TERMINATION
The Board or the Committee may, at any time, amend or terminate the Plan,
except that the Board may amend the Plan to prohibit or restrict the Committee's
power to amend or terminate the Plan after the time at which such amendment is
adopted by the Board, and any such amendment by the Board shall not be subject
to change by the Committee. Notwithstanding the foregoing sentence, (i) no
amendment or termination may, in the absence of
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written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary of the former
Participant), adversely affect the rights of any Participant or beneficiary
under any Award prior to the date such amendment is adopted; (ii) no amendment
may increase the limitations on the number of shares set forth in subsections
4.2(b) and 4.2(c) or decrease the minimum Option or SAR Exercise Price set forth
in subsection 2.2, or increase the maximum term of an Option or SAR from the
maximum term set forth in subsection 2.3 unless any such amendment is approved
by the Company's shareholders. Adjustments pursuant to subsection 4.2(e) shall
not be subject to the foregoing limitations of this Section 7.
SECTION 8
DEFINED TERMS AND GOVERNING LAW
8.1. Defined Terms. In addition to the other definitions contained herein,
the following definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit granted under
the Plan, including, without limitation, the grant of Options, SARs, Restricted
Stock Awards and Restricted Stock Unit Awards.
(b) Board. The term "Board" shall mean the Board of Directors of the
Company.
(c) Change in Control. The term "Change in Control" shall mean a change in
control of the Company, as defined in the Award Agreement.
(d) Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference to any
successor provision of the Code.
(e) Eligible Individual. The term "Eligible Individual" shall mean any
executive officer or other key employee of the Company or a Subsidiary and any
Non-Employee Director. An Award may be granted to an employee, in connection
with hiring, retention or otherwise, prior to the date the employee first
performs services for the Company or a Subsidiary, provided that such Award
shall not become vested prior to the date the employee first performs such
services.
(f) Fair Market Value. For purposes of determining the "Fair Market Value"
of a share of Stock as of any date, the following rules shall apply:
(i) If the principal market for the Stock is a national securities exchange
or the Nasdaq stock market, then the "Fair Market Value" as of that date shall
be the last reported sale price of the Stock on that date on the principal
exchange or market on which the Stock is then listed or admitted to trading.
(ii) If the last sale price is not available or if the principal market for
the Stock is not a national securities exchange and the Stock is not quoted on
the Nasdaq stock market, then the "Fair Market Value" as of that date shall be
the average between the highest bid and lowest asked prices for the Stock on
such day as reported on the Nasdaq OTC Bulletin Board Service or by the National
Quotation Bureau, Incorporated or a comparable service.
(iii) If the day is not a business day, and as a result, paragraphs (i) and
(ii) next above are inapplicable, the "Fair Market Value" of the Stock shall be
determined as of the next earlier business day. If paragraphs (i) and (ii) next
above are otherwise inapplicable, then the "Fair Market Value" of the Stock
shall be determined in good faith by the Committee.
(g) Non-Employee Directors. The term "Non-Employee Director" means a
member of the Board who is not an employee of the Company, any Subsidiary or of
any person, directly or indirectly, controlling, controlled by or under common
control with the Company and is not a member of the Board representing a
particular holder of any class of securities of the Company.
(h) Subsidiary. The term "Subsidiary" and its plural means any company
during any period in which it is a "subsidiary corporation" (as that term is
defined in Code Section 424(f)) with respect to the Company.
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The following terms are defined where indicated below:
Award Agreement -- Subsection 4.10
Committee -- Subsection 6.1
Exercise Price -- Subsection 2.2
ISO -- Subsection 2.1(a)
NQO -- Subsection 2.1(a)
Option -- Subsection 2.1(a)
Participant -- Subsection 1.2
Purchased Stock -- Subsection 3.2
Stock -- Subsection 1.1
Restricted Stock -- Subsection 3.1
Restricted Stock Unit -- Subsection 3.1
SAR -- Subsection 2.1(b)
8.2. Governing Law. This Plan, and all Award Agreements, shall be
construed in accordance with and governed by the laws of the State of Wisconsin,
without reference to any conflict of law principles. Any legal action or
proceeding with respect to this Plan, any Award or any Award Agreement, or for
recognition and enforcement of any judgment in respect of this Plan, any Award
or any Award Agreement, may be brought and determined only in a state court
sitting in the County of Milwaukee, or the Federal District Court for the
Eastern District of Wisconsin sitting in the County of Milwaukee, in the State
of Wisconsin.
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MGIC INVESTMENT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 2, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MGIC INVESTMENT CORPORATION
The undersigned hereby appoints CURT S. CULVER and SHELDON B. LUBAR, and either
one of them, as proxy and attorney-in-fact of the undersigned, with full power
of substitution, to represent and vote, as designated below, all shares of
Common Stock of MGIC Investment Corporation which the undersigned is entitled
to vote at the Annual Meeting of Shareholders of such Corporation to be held in
the Bradley Pavilion of the Marcus Center for the Performing Arts, 929 North
Water Street, Milwaukee, Wisconsin, on Thursday, May 2, 2002, 9:00 a.m. Central
Time, and at any adjournment.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED BELOW BY THE UNDERSIGNED SHAREHOLDER. IF NO CHOICES ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2
AND 3.
The undersigned acknowledges receipt of the Annual Report of the Corporation
and the Notice of the Annual Meeting and accompanying Proxy Statement of the
Corporation.
[DOWN ARROW] DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED [DOWN ARROW]
MGIC INVESTMENT CORPORATION 2002 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED
IN ITEM 1 AND FOR ITEMS 2 AND 3.
1. ELECTION OF DIRECTORS: 1 - MARY K. BUSH 2 - DAVID S. ENGELMAN
3 - KENNETH M. JASTROW, II 4 - DANIEL P. KEARNEY
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed to the left to vote for all
(except as specified nominees listed to
below). the left.
(Instructions: To withhold authority to
vote for any indicated nominee, write ---------------------
the number(s) of the nominee(s) in the [RIGHT ARROW]
box provided to the right.) ---------------------
2. Approve the 2002 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants of the Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In his discretion, each Proxy is authorized to vote upon such other business
as may properly come before the meeting or any adjournment.
Check appropriate box Date
Indicate changes below: ------------------
Address Change? [ ] Name Change? [ ]
NO. OF SHARES
- --------------------------------------------
- --------------------------------------------
SIGNATURE(S) IN BOX
NOTE: Please sign exactly as your name
appears above. Joint owners should each
sign personally. A corporation should
sign full corporate name by duly authorized
officers and affix corporate seal. When
signing as attorney, executor, administrator,
trustee or guardian, give full title.
