<PAGE>
SCHEDULE 14A INFORMATION
(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 Section240.14a-11(c) or
Section240.14a-12
AMERIN CORPORATION
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
AMERIN CORPORATION
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Chicago, Illinois
April 3, 1998
To the Stockholders:
The Annual Meeting of Stockholders of Amerin Corporation (the "Company")
will be held on May 20, 1998, at 10:00 a.m., local time, at the principal
executive offices of the Company, 200 East Randolph Drive, 49th Floor, Chicago,
Illinois 60601-7125, for the following purposes:
1. To elect two Class III directors to serve for a three-year term expiring
in 2001;
2. To approve an amendment to the Company's 1992 Long-Term Stock Incentive
Plan (the "Stock Incentive Plan") increasing from 300,000 to 400,000 the
number of shares of the Company's Common Stock with respect to which
awards may be granted to any participant under the Stock Incentive Plan
in any four-year period beginning on or after September 19, 1995;
3. To ratify the selection of Ernst & Young LLP as independent auditors for
the Company for 1998; and
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only holders of record of the Company's Common Stock at the close of
business on March 27, 1998, will be entitled to vote at the meeting or any
adjournment or postponement thereof.
By order of the Board of Directors
Randolph C. Sailer II
SECRETARY
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOUR
VOTE IS IMPORTANT.
<PAGE>
AMERIN CORPORATION
200 East Randolph Drive, 49th Floor
Chicago, Illinois 60601-7125
--------------------
PROXY STATEMENT
--------------------
April 3, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the board of directors of Amerin Corporation (the "Company") to be
used at the 1998 Annual Meeting of Stockholders of the Company on May 20, 1998,
at 10:00 a.m., local time, to be held at the principal executive offices of the
Company, 200 East Randolph Drive, 49th Floor, Chicago, Illinois 60601-7125. This
Proxy Statement and accompanying form of proxy are first being mailed to
stockholders on or about April 3, 1998. The Company's Annual Report to
Stockholders for the year ended December 31, 1997 is enclosed.
Only holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock") at the close of business on March 27, 1998, will be
entitled to vote at the meeting. As of such date, there were 24,454,699 shares
of Common Stock issued and outstanding. Each share of Common Stock entitles the
holder to one vote. Holders of the Company's nonvoting common stock, par value
$.01 per share (the "Nonvoting Common Stock"), are not entitled to notice of, or
to vote at, the 1998 Annual Meeting.
The enclosed proxy, if properly signed and returned, will be voted in
accordance with its terms. Any proxy returned without specification as to any
matter will be voted as to each proposal in accordance with the recommendation
of the board of directors. You may revoke your proxy at any time before the vote
is taken by delivering to the Secretary of the Company written revocation or a
proxy bearing a later date, or by attending and voting at the 1998 Annual
Meeting.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation of proxies by mail, proxies may be solicited by
directors, officers and regularly engaged employees of the Company. Brokers,
nominees and other similar record holders will be requested to forward
solicitation material to the beneficial owners of Common Stock held of record by
such record holders and will be reimbursed by the Company upon request for their
out-of-pocket expenses.
Votes cast by proxy or in person at the 1998 Annual Meeting will be
tabulated by the election inspectors appointed for the 1998 Annual Meeting. The
presence at the 1998 Annual Meeting in person or by proxy of the holders of a
majority of the shares of Common Stock entitled to vote shall constitute a
quorum. The election inspectors will treat abstentions and "broker non-votes"
(shares held by a broker or nominee as to which a broker or nominee indicates on
the proxy that it does not have the authority, either express or discretionary,
to vote on a particular matter) as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as unvoted for purposes
of determining the approval of any matter submitted to the stockholders for a
vote.
3
<PAGE>
1. ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Company's board of directors is divided into three classes, with the
directors of each class elected for a term of three years and until their
successors are elected. 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. The following two incumbent directors whose terms expire at the
1998 Annual Meeting have been nominated and recommended by the board of
directors for election to serve as directors for a three-year term of office
ending at the 2001 Annual Meeting and thereafter until a successor is duly
elected and qualified.
Timothy A. Holt Larry E. Swedroe
Each of the nominees for election has agreed to serve if elected. In the
event that any nominee should become unavailable for election, the board of
directors may designate a substitute nominee, in which event the shares
represented by proxies at the 1998 Annual Meeting will be voted for such
substitute nominee unless an instruction to the contrary is indicated on the
proxy card.
STOCKHOLDER VOTE REQUIRED
Each nominee receiving a plurality of the votes cast at the 1998 Annual
Meeting will be elected as a director. Only votes cast for a nominee will be
counted. Votes cast include votes under proxies which are signed, but which do
not have contrary voting instructions. Broker non-votes, abstentions and
instructions on the accompanying proxy card to withhold authority to vote for
one or both of the nominees will be disregarded in the calculation of a
plurality of the "votes cast."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE AND
DULY SIGNED AND RETURNED PROXIES WILL BE SO VOTED UNLESS YOU INDICATE OTHERWISE.
4
<PAGE>
The following table sets forth as of March 15, 1998, with respect to each
nominee and each director continuing to serve, their name, age, principal
occupation, the year in which they first became a director of the Company and
directorships in certain other corporations.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- -------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
NOMINATED FOR ELECTION
For a Term Ending 2001
Timothy A. Holt ...................... 45 Mr. Holt has been Chief Investment Officer of Aetna Inc.
Director Since 1992 since September 1997. From February 1996 to September 1997,
he was Senior Vice President and Chief Financial Officer of
Aetna Life Insurance and Annuity Company and a Vice
President of Aetna Life Insurance Company (Aetna) since June
1987. He has been a director of Amerin Guaranty since
September 1992.
Larry E. Swedroe ..................... 46 Mr. Swedroe has been a principal of Buckingham Asset
Director Since 1996 Management, Inc., a personal investment advisory firm, since
May 1996. From January 1994 to April 1996, he was Vice
Chairman of Residential Services Corporation of America
(RSCA), the holding company for Prudential Home Mortgage and
Lender's Service, Inc. Prior thereto, he served as a
Managing Director of RSCA from November 1986 through
December 1993.
DIRECTORS CONTINUING IN OFFICE
Term Ending 1999
Gerald L. Friedman ................... 60 Mr. Friedman founded the Company and has been Chairman of
Director Since 1992 the Company and Amerin Guaranty since April 1992 and was
President of the Company and Amerin Guaranty from December
1996 through November 1997. Prior thereto, he founded and
served as Chairman and President of Financial Guaranty
Insurance Corporation from September 1983 to December 1990.
Mr. Friedman began his career with Mortgage Guaranty
Insurance Corporation (MGIC) in 1961, and, from 1978 to
1981, Mr. Friedman was President of MGIC Investment
Corporation, the holding company of MGIC. Mr. Friedman has
been a director of Amerin Guaranty since April 1992.
Alan E. Goldberg ..................... 43 Mr. Goldberg has been a Managing Director of Morgan Stanley
Director Since 1992 & Co. Incorporated since January 1988, is Vice Chairman of
MSLEF, Inc., and of Morgan Stanley Capital Partners III,
Inc. Mr. Goldberg also serves as director of CIMIC Holdings
Limited, Centre Cat Limited, Hamilton Services Limited,
Jefferson Smurfit Corporation and several private companies.
Mr. Goldberg has been a director of Amerin Guaranty since
April 1992.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- -------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
DIRECTORS CONTINUING IN OFFICE
Term Ending 2000
Howard I. Hoffen ..................... 34 Mr. Hoffen is currently a Managing Director, from November
Director since 1993 1996 was a Principal, from February 1994 through November
1996 was a Vice President, and from September 1989 through
February 1994 an Associate, at Morgan Stanley & Co.
Incorporated. He is a Vice President of The Morgan Stanley
Leveraged Equity Fund II, Inc. (MSLEF, Inc.), which is the
general partner of The Morgan Stanley Leveraged Equity Fund
II, L.P. (MSLEF) and a Director of Coho Energy Inc. and
Catalytica, Inc. Mr. Hoffen has been a director of Amerin
Guaranty since January 1993.
</TABLE>
On January 29, 1998, Peter H. Gleason resigned as a Class II director of the
Company and Amerin Guaranty. The Company is in the process of selecting a new
Class II director to take Mr. Gleason's place on the board of directors. It is
expected that the new director will be appointed by the board of directors
pursuant to the Company's By-Laws subsequent to the date of mailing of this
Proxy Statement, and will be nominated for election by the stockholders of the
Company at the 1999 Annual Meeting of Stockholders for a two-year term ending at
the 2001 Annual Meeting of the Stockholders.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held seven meetings during 1997. All directors (with
the exception of Mr. Holt) attended at least 75% of the meetings of the board
and any committee on which they serve held during 1997 or the portion of 1997
during which they were a director, except for. Mr. Holt attended three of the
seven meetings of the board held during 1997, and did not attend the single
Audit Committee meeting held during 1997.
The board of directors has an Audit Committee, a Compensation Committee, a
Stock Plan Committee, and a Finance Committee. The board does not have a
nominating or similar committee. The present members of the Audit Committee are
Timothy A. Holt (Chairman) and Howard I. Hoffen. The responsibilities of the
Audit Committee include: recommending to the board of directors the independent
auditors to be selected to conduct the annual audit of the books and records of
the Company; reviewing the proposed scope of such audit and approving the audit
fees to be paid; and reviewing the adequacy and effectiveness of the internal
accounting and financial controls of the Company with the independent auditors
and the Company's financial and accounting staff. The Audit Committee met once
during 1997.
The Compensation Committee of the board of directors of Amerin Corporation
is comprised of Alan E. Goldberg (Chairman), Larry E. Swedroe and Gerald L.
Friedman. The Compensation Committee was previously comprised of Mr. Goldberg
(Chairman) and Mr. Gleason (who resigned as a director of Amerin on January 29,
1998) from April 21, 1997 through February 5, 1998, and of Mr. Goldberg
(Chairman) and Mr. Friedman from the inception of the Compensation Committee in
December 1995 through April 21, 1997. Actions of the Compensation Committee
require a unanimous vote, except that Mr. Friedman does not participate in
consideration of his own compensation. During Mr. Friedman's prior tenure on the
Compensation Committee, the compensation of Mr. Friedman was determined by the
members of the board of directors of Amerin Corporation, none of whom (other
than Mr. Friedman) is an
6
<PAGE>
officer or employee of Amerin Corporation. Mr. Friedman did not participate in
the board's approval of his own compensation. The responsibilities of the
Compensation Committee include: reviewing and approving executive compensation,
including setting salaries and bonuses, approving employment agreements,
establishing stock incentive plans and bonus plans and making awards thereunder
and any related matters. The Compensation Committee met twice during 1997.
On February 5, 1998, the Board established a Stock Plan Committee to deal
with all issues relating to the Company's 1992 Long-Term Stock Incentive Plan.
The current members of the Stock Plan Committee are Larry E. Swedroe (Chairman)
and Alan E. Goldberg.
The current members of the Finance Committee are Larry E. Swedroe
(Chairman), Gerald L. Friedman and Alan E. Goldberg. Until February 5, 1998, the
members of the Finance Committee were Alan E. Goldberg (Chairman), Gerald L.
Friedman and Howard I. Hoffen. The responsibilities of the Finance Committee
include: recommending to the board of directors the investment advisor(s) to be
selected to manage the investment of the Company's assets; reviewing and
modifying as necessary the Company's internal investment guidelines; and
reviewing the performance of the Company's investment portfolio. The Finance
Committee met twice during 1997.
COMPENSATION OF DIRECTORS
No additional compensation is paid to any director who is an employee of the
Company or of any of its subsidiaries for service on the board of directors.
Directors who are not representatives of the original group of five
institutional investors ("Outside Directors") receive $2,000 for each board
meeting attended. In addition, each Outside Director receives (i) at his or her
election, either (A) $30,000 in cash or (B) an annual grant of shares of Common
Stock under the Company's 1992 Long-Term Stock Incentive Plan (the "Stock
Incentive Plan"), with the number of shares equal to $30,000 divided by the Fair
Market Value (as defined below) of a share of the Company's Common Stock on the
Grant Date (as defined below), and (ii) an annual grant under the Stock
Incentive Plan of non-qualified options to purchase 1,000 shares of Common
Stock. The options will vest in three equal installments on the first, second
and third anniversaries of the Grant Date, and will be subject to an exercise
price per share equal to the Fair Market Value of a share of Common Stock on the
Grant Date. For purposes of the foregoing, the "Fair Market Value" of a share of
Common Stock is the closing price per share of the Common Stock on the Nasdaq
National Market on the first day prior to the Grant Date on which the Nasdaq
National Market was open for trading. The "Grant Date" is the date of the Annual
Meeting of Stockholders of the Company; provided, however, that if a director is
appointed on a date other than the date of the Annual Meeting of Stockholders,
the "Grant Date" in such year shall be the date of such appointment. Directors
receive no additional compensation for service on committees of the board.
Outside Directors are reimbursed for travel and expenses related to attendance
at meetings of the board of directors or board committees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares
beneficially owned as of March 16, 1998 (except as noted) by: (i) each person or
entity that is known by the Company to own beneficially more than five percent
of the outstanding shares of Common Stock; (ii) each director of the
7
<PAGE>
Company, including the nominees for reelection as directors; (iii) each
Executive Officer named in the Summary Compensation Table herein; and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNED CLASS
- ------------------------------------------------------------------------------------ ----------------- -----------
<S> <C> <C>
Gerald L. Friedman.................................................................. 1,045,342 (2) 4.3%
Alan E. Goldberg.................................................................... 705,018 (3) 2.9%
Howard I. Hoffen.................................................................... 705,018 (3) 2.9%
Timothy A. Holt..................................................................... 1,016,938 (4) 4.1%
Larry E. Swedroe.................................................................... 2,760 (5) *
James G. Engelhardt................................................................. 55,371 (6) *
Roy J. Kasmar....................................................................... 82,946 (7) *
Jerome J. Selitto................................................................... 219,490 (8) *
R. Bruce Van Fleet, III............................................................. 20,100 (9) *
All directors and executive officers as a group (16 persons)...................... 3,302,230 (10) 13.4%
First Plaza Group Trust ............................................................ 1,350,189 5.3%
Mellon Bank, N.A., as Trustee
One Mellon Bank Center
Pittsburgh, PA 15258
Jurika & Voyles, L. P .............................................................. 1,976,033 (11) 8.0%
1999 Harrison Street, Suite 700
Oakland, CA 94612
Legg Mason, Inc. ................................................................... 1,800,613 (11) 7.3%
100 Light Street
Baltimore, MD 21202
Mellon Bank Corporation ............................................................ 1,457,095 (11) 5.9%
One Mellon Bank Center
Pittsburgh, PA 15258
</TABLE>
- --------------------
* Less than one percent
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended. All information
with respect to beneficial ownership has been furnished by the respective
director, executive officer or stockholder, as the case may be.
(2) Includes 55,600 shares of Common Stock issuable upon exercise of stock
options, 7,500 shares held by the Friedman Family Foundation (the
"Foundation"), a private charitable foundation, 30,000 shares held by the
Gerald. L. Friedman Charitable Remainder Unitrust of 1997 (the "GLF
Unitrust"), a charitable remainder trust, 30,000 shares held by the Sheree
A. Friedman Charitable Remainder Unitrust of 1997 (the "SAF Unitrust") a
charitable remainder trust, 6,875 shares (as to which Mr. Friedman disclaims
beneficial ownership) held by the Sarah Beth Friedman 1989 Trust, a trust
8
<PAGE>
created for the benefit of Mr. Friedman's daughter, 6,875 shares (as to
which Mr. Friedman disclaims beneficial ownership) held by Rachael L.
Friedman (Mr. Friedman's daughter), and 7,000 shares (as to which Mr.
Friedman disclaims beneficial ownership) held by Daniel B. Rand.
(3) All of the shares shown are held by two wholly-owned subsidiaries of Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD"). Mr. Goldberg and Mr. Hoffen
are a Managing Director and principal, respectively, of Morgan Stanley &
Co., Incorporated, an affiliate of MSDWD. Share data shown for such
individuals reflects shares shown as held by the two wholly-owned
subsidiaries of MSDWD, as to which such individuals disclaim beneficial
ownership.
(4) All of the shares shown are held by Aetna Life Insurance Company ("Aetna").
Mr. Holt is an officer and director of Aetna. He may be deemed to share the
power to vote and dispose of the shares of Common Stock held by Aetna and
may therefore be deemed the beneficial owner of such shares. Mr. Holt
disclaims beneficial ownership of such shares.
(5) Includes 667 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 37,563 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 61,201 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 137,100 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 19,900 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 499,371 shares of Common Stock issuable upon exercise of stock
options, 705,018 shares in the aggregate for Messrs. Goldberg and Hoffen and
1,016,938 shares for Mr. Holt. Messrs. Goldberg, Hoffen and Holt have
disclaimed beneficial ownership of such shares as described in Notes (3) and
(4) above.
(11) Share ownership numbers and percentages are as of December 31, 1997, the
last date at which each of these holders was required to report such
ownership.
SECTION 16(a) COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934 requires that the
Company's officers, directors and persons who beneficially own more than 10% of
a registered class of the Company's equity securities file with the Securities
and Exchange Commission and the Nasdaq Stock Market, Inc. certain reports with
respect to beneficial ownership of the Company's equity securities.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and on written representations provided to the
Company by each executive officer, director and 10% beneficial owner, the
Company believes each such person filed on a timely basis the reports required
by Section 16(a) with respect to the beneficial ownership of equity securities
of the Company during the fiscal year ended December 31, 1997 except as follows:
Mr. Selitto inadvertently reported late one bona fide gift.
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides information
relating to compensation for the year ended December 31, 1997 for the Chairman
and the other four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ---------------------------------------
AWARDS PAYOUTS
-------------------------- -----------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) ($) (#) ($) ($)
- --------------------- --------- ----------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald L. 1997 $ 240,000 $ 90,000 -- -- 278,000 -- --
Friedman ........... 1996 $ 215,000 $ 101,000 -- -- -- -- --
Chairman and Chief 1995 $ 200,000 $ 100,000 -- -- -- -- --
Executive Officer
Roy J. Kasmar(1) .... 1997 $ 245,000 $ 86,875 -- -- 100,000 -- $ 102,188
President and Chief 1996 $ 143,013 $ 74,000 $ 514,400 178,345 $ 105,509
Operating Officer
Jerome J. Selitto ... 1997 $ 265,000 $ 60,375 -- -- 278,000 -- --
Vice Chairman 1996 $ 245,000 $ 66,000 -- -- -- -- --
1995 $ 240,000 $ 45,000 -- -- -- --
James G. 1997 $ 205,000 $ 65,000 -- -- 55,000 -- --
Engelhardt ......... 1996 $ 195,000 $ 66,000 -- -- -- --
Executive Vice 1995 $ 185,000 $ 40,000
President
R. Bruce Van Fleet, 1997 $ 210,000 $ 58,505 -- -- 55,500 -- --
III(2) ............. 1996 $ 200,000 $ 42,475 -- -- -- -- --
Senior Vice 1995 $ 16,667 -- -- -- 22,000 -- --
President
</TABLE>
- -------------------------
(1) Mr. Kasmar joined Amerin Guaranty in May 1996 at an annual salary of
$245,000. Of the amounts set forth for Mr. Kasmar for 1996 and 1997,
respectively, under "All Other Compensation," $105,190 and $102,188,
represent payment to Mr. Kasmar with respect to relocation expenses.
(2) Mr. Van Fleet joined Amerin Guaranty in December 1995 at an annual salary of
$200,000.
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR. The following table sets forth
certain information regarding grants of stock options made during 1997 to the
Named Executive Officers pursuant to the Company's 1992 Long-Term Stock
Incentive Plan (the "Stock Incentive Plan"). No grants of stock appreciation
rights were made during 1997 to any of the Named Executive Officers.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
OF ASSUMED ANNUAL RATES OF
NUMBER OF
SECURITIES % OF TOTAL STOCK PRICE ANNUAL
UNDERLYING OPTIONS GRANTED EXERCISE APPRECIATION FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION ----------------------------
NAME GRANTED IN FISCAL YEAR ($/SH.)(1) DATE 5%($) 10%($)
- ----------------------------- ----------- ----------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Friedman(2)............... 278,000 27.1% 17.75 4/21/07 $ 3,102,480 $ 7,864,620
R. Kasmar (2)................ 38,500 3.8% 17.75 4/21/07 $ 429,660 $ 1,089,165
61,500 6.0% 22.875 11/14/07 $ 884,678 $ 2,241,983
J. Selitto(2)................ 278,000 27.1% 17.75 4/21/07 $ 3,102,480 $ 7,864,620
J. Engelhardt(2)............. 55,500 5.4% 17.75 4/21/07 $ 619,380 $ 1,570,095
R.B. Van Fleet, III.......... 55,500 5.4% 17.75 4/21/07 $ 619,380 $ 1,570,095
</TABLE>
- --------------------
(1) Based on the last reported sale price of the Common Stock on the Nasdaq
National Market on the business day immediately preceding the grant date.
(2) Twenty percent of each of the options awards vests on each of the first five
anniversaries of the award.
STOCK OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTIONS/SAR VALUES. The following table sets forth information regarding the
number and value of securities resulting from the exercise of stock options by
the Named Executive Officers and the underlying unexercised stock options held
by the Named Executive Officers as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/ SARS AT FISCAL AT FISCAL YEAR END
SHARES YEAR END (#) ($) (1)
ACQUIRED ON VALUE ----------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ----------- ----------------------- ---------------------------
<S> <C> <C> <C> <C>
G. Friedman..................... 0 0 0/278,000 $0/$2,849,500
R. Kasmar....................... 0 0 35,633/242,532 $158,066/$1,342,076
J. Selitto...................... 0 0 119,500/297,500 $2,832,690/$3,292,930
J. Engelhardt................... 7,000 $ 133,000 28,333/69,937 $668,283/$897,172
R. B. Van Fleet, III............ 0 0 4,400/73,100 $52,800/$780,075
</TABLE>
- --------------------
(1) In addition to the options shown as exercisable as of December 31, 1997, an
additional 6,500, 4,813 and 4,400 of the options shown in the table as
unexercisable became exercisable on January 1, 1998, for Mr. Selitto, Mr.
Engelhardt and Mr. Van Fleet, respectively.
(2) The last reported sale price of the Common Stock on the Nasdaq National
Market on December 31, 1997 ($28.00 per share) was used to determine the
value of the in-the-money options. The dollar amounts shown represent the
amount by which the product of such last reported sale price and the number
of shares purchasable upon the exercise of such in-the-money options exceeds
the aggregate exercise price payable upon such exercise.
11
<PAGE>
EMPLOYMENT AGREEMENT
Amerin Guaranty had an employment agreement with Mr. Friedman providing for
his continued employment as Chairman and Chief Executive Officer of Amerin
Guaranty for a term expiring on May 1, 1997. Under his agreement, Mr. Friedman
was obligated to devote the equivalent of at least two business days a week to
Amerin Guaranty's affairs or such lesser or greater amount of time as he
reasonably and in good faith determined and was not permitted to accept any
other responsibilities, with or without compensation, that would be inconsistent
with the services to be rendered by him under his employment agreement. He was
entitled to an annual salary of $215,000, with salary increases subject to the
discretion of the Compensation Committee, provided that Mr. Friedman's salary in
any year would not be less than his annual salary for the preceding year. Mr.
Friedman agreed in his employment agreement not to compete with the Company,
Amerin Guaranty or any affiliate of either of them for 10 years following the
termination of his employment, except for certain passive investments. Mr.
Friedman has informed the Company that, notwithstanding the expiration of his
employment agreement on May 1, 1997, he intends to maintain the level of
involvement in the Company for the foreseeable future.
SEVERANCE AGREEMENTS
In September 1997, the Company entered into severance agreements (the
"Severance Agreements") with each of Messrs. Friedman, Kasmar and Selitto. The
Severance Agreements provide for the payment of cash and the provision of
certain employee benefits in the event that a "Change in Control" of the Company
occurs and the executive is terminated within a two-year period following such
Change in Control. Pursuant to the Severance Agreements, any of the following
events will constitute a Change in Control: (i) A merger, reorganization,
consolidation of the Company, or a sale or transfer of the assets of the
Company, in which less than a majority of the combined voting power of the
then-outstanding voting stock of the surviving entity immediately after such
transaction is held in the aggregate by the holders of voting stock of the
company immediately prior to such transaction; (ii) the filing of a Schedule 13D
or Schedule 14D-1 disclosing that any person (other than one of the Company's
five original institutional investors) has become the beneficial owner of
securities representing 25% or more of the combined voting power of the
then-outstanding voting stock of the Company. For purposes of the Severance
Agreements, "termination" includes both actual termination and "constructive
termination," which is defined as any of: (i) The failure to maintain the
executive in substantially the same office or position which the executive held
immediately prior to the Change of Control; (ii) A significant adverse change in
the nature or scope of the authorities, powers, functions, responsibilities or
duties attached to the position which the executive held immediately prior to
the Change in Control; (iii) a reduction in the aggregate of the cash
compensation (salary and bonus) received by the executive prior to the Change in
Control; or (iv) the failure of the surviving entity after a Change of Control
to assume the Company's obligations under the Severance Arrangements.
In the event of a Change of Control and termination of any of Messrs.
Friedman, Kasmar and Selitto as described above, the terminated executive will
be entitled to the following benefits: (i) a cash payment equal to three times
the executive's annual salary (not including any bonus); (ii) extension of
Company medical benefits for two years; and (iii) payment of any certain "Excess
Parachute Payment" excise tax amounts arising from the executive's receipt of
value under the Severance Arrangements through a gross-up payment to the
executive that covers (i) the applicable excise tax and (ii) the income tax and
the excise tax on the gross-up payment itself. Under applicable federal tax
laws, the Company (or its
12
<PAGE>
successor) will lose its income tax deductions for both (i) the amount of the
Excess Parachute Payment and (ii) the gross-up payment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the board of directors of Amerin Corporation
is comprised of Alan E. Goldberg (Chairman), Larry E. Swedroe and Gerald L.
Friedman. The Compensation Committee was previously comprised of Mr. Goldberg
(Chairman) and Mr. Gleason (who resigned as a director of Amerin on January 29,
1998) from April 21, 1997 through February 5, 1998, and of Mr. Goldberg
(Chairman) and Mr. Friedman from the inception of the Compensation Committee in
December 1995 through April 21, 1997. Actions of the Compensation Committee
require a unanimous vote, except that Mr. Friedman did not participate in
consideration of his own compensation. During Mr. Friedman's prior tenure on the
Compensation Committee, the compensation of Mr. Friedman was determined by the
members of the board of directors of Amerin Corporation, none of whom (other
than Mr. Friedman) is an officer or employee of Amerin Corporation. Mr. Friedman
did not participate in the board's approval of his own compensation. Commencing
as of February 5, 1998, the compensation of Mr. Friedman will be determined by
the other two members of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors have
furnished the following report on executive compensation.
COMPENSATION POLICY
The goal of the Company's compensation policy is to attract and retain
professionals of the highest quality who will help the Company achieve its
business and financial objectives. In order to meet this goal, the Company must
offer compensation which is competitive within the mortgage insurance industry.
Because the Company is now publicly traded, executive compensation is now linked
to both individual performance and the creation and maintenance of stockholder
value. The compensation structure is designed to provide the opportunity for
superior compensation for outstanding personal and corporate performance, as
well as the possibility of significant reductions in total compensation due to
poor performance. Currently, the two basic components of executive compensation
are base salary and bonus.
BASE SALARY
The Compensation Committee will review base salary levels for executive
officers each year in order to continue to meet the Company's goal of attracting
and retaining executives of the highest quality. The Compensation Committee may
utilize salary surveys comparing Company salary levels to those of executives
who hold positions of similar overall responsibility. Salary adjustments will be
based on general movement in external salary levels, individual performance,
potential and changes in duties and responsibilities.
ANNUAL BONUS COMPENSATION
The relationship of base salary to bonus is intended to provide strong
motivation for each executive officer to reach both personal and corporate
goals. This relationship may vary depending on the nature
13
<PAGE>
and extent of the officer's responsibilities, as well as the ability of such
officer to influence overall corporate performance.
The composition of bonuses paid in January 1998 with respect to the 1997
year will vary for each executive officer. Depending on the officer, between 25%
and 80% of the bonus will be based on corporate performance and between 20% and
75% will be based on attainment of performance goals specific to that officer.
Officers with direct responsibility for, and greater ability to affect, Company
revenues and/or expenses, have a significant effect on the ability of the
Company to meet its overall operating and financial goals. As a result, the
percentage of bonus based on corporate performance is higher for such officers
than for officers without direct control over and responsibility for revenues
and/or expenses. Annual bonuses are subject to upward adjustment at the
Compensation's Committee's discretion based on significant events or
achievements which took place during the course of the year which were not
considered at the time the corporate and/or personal performance goals were
established.
STOCK OPTIONS
In order to increase the likelihood of retaining the services of the most
senior officers of the Company over time, in April 1997 the Compensation
Committee and the Board of Directors granted stock options to Gerald L.
Friedman, President and Chief Executive Officer of the Company, Roy J. Kasmar,
Vice President and Chief Operating Officer of the Company, and Jerome J.
Selitto, Vice Chairman of the Company. See "Executive Compensation--Option
Grants in Last Fiscal Year." The Compensation Committee does not otherwise
currently expect to utilize stock options as a regular component of annual
executive compensation, however it may do so in the future. The Compensation
Committee does currently expect that, in the event of future grants under the
Stock Incentive Plan to executives, it will generally recommend grants of
options to purchase shares rather than grants of shares of stock. However, the
Compensation Committee may recommend grants of shares of Common Stock under the
Stock Incentive Plan in connection with the recruitment of senior executives.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, a
public company will be denied deductions in certain circumstances for
compensation to the chief executive officer and the other four most highly
compensated executive officers to the extent that compensation for any of such
individuals exceeds one million dollars for a taxable year. Awards under the
Company's Stock Incentive Plan are not subject to the loss of deduction rules
under Section 162(m), but the other taxable components of executive compensation
provided by the Company (e.g., base salary and bonus) are subject to such rules.
In general the Company intends to avoid the loss of deduction under Section
162(m). In this regard, the Company generally intends to administer the Stock
Incentive Plan in a manner that will cause the awards thereunder to remain
deductible. Nevertheless, the Company reserves discretion to determine executive
compensation in a manner which could result in the loss of deduction when doing
so is in the best interests of the Company and its stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Friedman recused himself from consideration of all matters relating to
his own compensation. The annual compensation awarded to the Company's chief
executive officer in 1997 reflects the Company philosophy generally discussed
above that compensation for executive officers should be based
14
<PAGE>
on Company and individual performance. Because the chief executive officer bears
primary responsibility for the overall performance of the Company and the
creation and maintenance of shareholder value, decisions regarding Mr.
Friedman's annual compensation are based primarily on Company performance. The
Compensation Committee, acting without input from Mr. Friedman, considered that
the Company had achieved the majority of its strategic objectives for 1997 under
Mr. Friedman's leadership, which objectives included the continuing expansion of
its business and attainment of specified earnings goals. Mr. Friedman
contributed to the attainment of these objectives through his overall
leadership, his role in initiating and developing the Company's relationships
with important clients, and his participation in the development and marketing
of new products and approaches.
In recognition of these accomplishments, the Compensation Committee
increased Mr. Friedman's salary approximately 4.2% percent in 1998 over his 1997
base salary. With respect to bonus compensation, Mr. Friedman received 75% of
his maximum targeted bonus for 1997 (paid in January 1998), and the Compensation
Committee maintained his 1998 maximum target bonus at the level of his 1997
maximum target bonus.
ALAN E. GOLDBERG, CHAIRMAN
GERALD L. FRIEDMAN
LARRY E. SWEDROE
15
<PAGE>
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on the
Common Stock during the period from November 22, 1995, the date on which the
Common Stock began trading on the Nasdaq National Market, and December 31, 1996,
as compared to the returns of the Nasdaq National Market Index and the Nasdaq
Financial Index. The graph assumes $100 was invested on November 22, 1995, in
the Company's Common Stock at its initial offering price of $16.00 per share,
the Nasdaq National Market Index and the Nasdaq Financial Index, and that all
dividends were reinvested. No dividends have been declared or paid on the Common
Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG COMPANY, NASDAQ NATIONAL MARKET INDEX AND NASDAQ FINANCIAL INDEX
(COMPUTED AS OF MONTH END)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AMERIN CORPORATION NASDAQ STOCK MARKET (U.S.) NASDAQ FINANCIAL
<S> <C> <C> <C>
11/22/95 $100 $100 $100
12/95 167 103 104
12/96 161 127 134
12/97 175 156 205
</TABLE>
16
<PAGE>
1992 LONG-TERM STOCK INCENTIVE PLAN
The Company adopted the Stock Incentive Plan in 1992 to attract and retain
exceptional executive personnel and other key employees, to provide
performance-related incentives to achieve longer-range performance goals and to
enable such employees to participate in the long-term growth and financial
success of the Company. The Stock Incentive Plan was approved by the
stockholders of the Company in 1992. Immediately prior to the Company's initial
public offering in November 1995 (the "Offering"), the board of directors and
stockholders of the Company approved an amendment and restatement of the Stock
Incentive Plan that included various technical changes to such Plan and that
reduced the percentage of the outstanding Common Stock available for awards
under the Plan. At the Annual Meeting of Stockholders held on June 4, 1997, the
shareholders of the Company approved an amendment to the Plan which increased
from 200,000 to 300,000 the maximum total number of shares of Common Stock with
respect to which Awards may be granted to any participant during any four-year
period beginning on or after September 19, 1995. This number will be increased
from 300,000 to 400,000 if the amendment of the Stock Incentive Plan described
in Proposal 2 herein is approved by the Company's stockholders at the 1998
Annual Meeting of Stockholders.
The Stock Incentive Plan is administered by, and all grants of shares and
options under the Stock Incentive Plan are made by, the Compensation Committee.
The following awards (collectively, "Awards") may be granted under and in
accordance with the Stock Incentive Plan subject to such terms and conditions as
the Compensation Committee may determine: (i) stock options, (ii) stock
appreciation rights, (iii) restricted stock and restricted stock units, (iv)
performance awards based upon the achievement of such performance goals during
such performance period as the Compensation Committee shall establish and (v)
other stock-based awards (an "Other Stock-Based Awards") consisting of an Award
of shares of Common Stock or an Award based on or related to shares of Common
Stock and (vi) substitute awards granted in assumption of, or in substitution
for, outstanding awards previously granted by an entity acquired by or combined
with the Company ("Substitute Awards"). Each Award has been and will be
evidenced by an award agreement delivered to the participant specifying the
terms and conditions of the Award and any rules applicable thereto.
Subject to adjustments as described below, as of the date of this Proxy
Statement, the maximum number of shares of Common Stock with respect to which
Awards may be granted under the Stock Incentive Plan is 1,025,633 Shares of
Common Stock underlying Substitute Awards are not, except in the case of
Substitute Awards granted to participants who are officers or directors of the
Company for purposes of Section 16 of the Exchange Act, counted against the
number of shares of Common Stock available for Awards under the Stock Incentive
Plan. The maximum total number of shares of Common Stock with respect to which
Awards may be granted to any participant is 300,000 (400,000 if the amendment of
the Stock Incentive Plan described in Proposal 2 herein is approved by the
Company's stockholders) with respect to Awards granted during any four-year
period beginning on or after September 19, 1995. No future award under the Stock
Incentive Plan is determinable. If any shares of Common Stock covered by an
Award granted under the Stock Incentive Plan, or to which an Award relates, are
forfeited, or if an Award is settled for cash or otherwise terminates or is
canceled without the delivery of shares, then the shares of Common Stock covered
by such Award, or to which such Award relates or the number of shares otherwise
counted against the aggregate number of shares with respect to which Awards may
be granted under the Stock Incentive Plan, to the extent of any such settlement,
forfeiture, termination or cancellation, shall again be, or shall become, shares
of Common Stock with respect to which Awards may be granted. In the event that
any option or other Award granted under the Stock
17
<PAGE>
Incentive Plan is exercised through the delivery of shares of Common Stock, the
number of shares available for Awards under the Stock Incentive Plan shall be
increased by the number of shares surrendered, to the extent permissible under
applicable law. Notwithstanding the foregoing, the shares of Common Stock
covered by the options previously granted under the Stock Incentive Plan and the
shares of Common Stock previously issued under the Stock Incentive Plan to Mr.
Brafman before the Offering, which options and shares were canceled upon the
consummation of the Offering, are not available again for Awards. Any employee
or prospective employee of the Company or any of its affiliates (including any
officer or employee-director) may be designated as a participant in the Stock
Incentive Plan.
Subject to the provisions of the Stock Incentive Plan and applicable law,
the Compensation Committee has full power and authority to (i) designate
eligible individuals as participants in the Stock Incentive Plan, (ii) determine
the type or types of Awards to be granted under the Stock Incentive Plan, (iii)
determine the form and substance of grants made under the Stock Incentive Plan
to each participant, and the conditions and restrictions subject to which such
grants are made, (iv) interpret and administer the Stock Incentive Plan, (v)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Stock
Incentive Plan and (vi) make any other determination and take any other action
that it deems necessary or desirable for the administration of the Stock
Incentive Plan including antidilution and similar adjustments to the terms and
conditions of Awards and to the number of shares of Common Stock available for
Awards under the Stock Incentive Plan.
Both incentive stock options subject to Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and non-qualified stock options (together
with incentive stock options, the "Options") may be granted under the Stock
Incentive Plan at such exercise prices as the Compensation Committee shall
establish, provided, that such exercise price is not less than 100% of the fair
market value of the Common Stock on the date the Option is granted. Options
become exercisable at such times and subject to such terms as the Compensation
Committee may determine at the time of grant. Although incentive stock options
generally may not have a term of more than 10 years, there is no limit on the
term of non-qualified stock options under the Stock Incentive Plan. A
participant may pay the exercise price of an Option and any applicable
withholding amounts in cash, by check, in nonforfeitable, unrestricted shares of
Common Stock, pursuant to a cashless exercise arrangement with a broker that is
a member of the NASD, or by a combination of the foregoing.
Stock appreciation rights ("SARs") may be granted in tandem with another
Award, in addition to another Award or freestanding and unrelated to another
Award. SARs shall not be exercisable earlier than six months after the grant
date and shall have an exercise price of not less than 100% of the fair market
value of the Common Stock on the date of the grant, or, in the case of a stock
appreciation right granted in tandem with or in addition to another Award, at
the time of grant of such related Award. An SAR entitles the holder to receive
an amount equal to the excess of the fair market value of a share of Common
Stock on the date of exercise over the exercise price of the SAR.
Restricted stock and restricted stock units are subject to risks of
forfeiture and restrictions on transfer determined by the Compensation Committee
at the time of grant. Without limiting the generality of the foregoing, such a
risk of forfeiture may lapse based upon the performance of services by the
participant, the passage of time or the occurrence of specified events, and such
a restriction on transfer may include rights of repurchase or first refusal in
the Company. Upon the lapse of such risks of forfeiture and restrictions on
transfer, a recipient of a share of restricted stock will hold an unrestricted
share of
18
<PAGE>
Common Stock, and a recipient of a restricted stock unit will receive payment
equal to the value of a share of Common Stock (which may be paid in cash, Common
Stock or other property). Dividends paid on shares of restricted stock may be
paid directly to the participant or reinvested in shares of restricted stock or
restricted stock units, as determined by the Compensation Committee.
Performance awards entitle the participant to an award denominated in cash
or shares of Common Stock and payable upon the attainment of predetermined
performance objectives, as specified by the Compensation Committee. Such awards
are paid at such time and in such manner as the Compensation Committee may
determine.
An Other Stock-Based Award consists of any right that is based on, related
to or payable in shares of Common Stock other than an Option, share of
restricted stock, restricted stock unit or performance award. An Other
Stock-Based Award may be subject to such terms and conditions as the
Compensation Committee may determine. In addition, the Compensation Committee in
its discretion may provide that a participant will receive dividends or dividend
equivalent payments in connection with an Other Stock-Based Award. The price at
which securities may be purchased pursuant to any Other Stock-Based Award
granted by the Company shall not be less than 100% of the fair market value of
the securities to which such Other Stock-Based Award relates on the date of
grant.
An Award may be exercised only by the participant during the participant's
lifetime, or, if permissible under applicable law, by the participant's guardian
or legal representative or by a transferee receiving such Award pursuant to a
qualified domestic relations order (a "QDRO"). In addition, no Award that
constitutes a "derivative security," for purposes of Section 16 of the Exchange
Act, may be assigned, alienated, transferred or encumbered by a participant
other than by will, by the laws of descent and distribution or pursuant to a
QDRO.
No Awards may be granted under the Stock Incentive Plan after December 31,
2005.
The Stock Incentive Plan may be amended or terminated by the board of
directors at any time; provided, however, that no such amendment or termination
shall be made without the approval of the Company's stockholders if such
approval is necessary to comply with any tax or regulatory requirement. In
addition, the Compensation Committee may amend, suspend, discontinue, cancel or
terminate any granted Award (including without limitation, by resetting the
exercise price, performance goals or other terms of the Award or by replacing
the Award with an Award of a different form or type relating to the same or a
different number of shares of Common Stock), but no such amendment, suspension,
discontinuance, cancellation or termination that would impair the rights of a
participant in the Stock Incentive Plan or any holder of an Award will be
effective without the consent of such participant or holder.
The following is a brief summary of certain of the U.S. federal income tax
consequences of certain transactions under the Stock Incentive Plan based on
U.S. federal income tax laws in effect on January 1, 1998. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
NON-QUALIFIED STOCK OPTIONS. In general: (i) no income will be recognized
by an optionee at the time a non-qualified stock option is granted; (ii) at the
time of exercise of a non-qualified stock option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
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<PAGE>
option price paid for the shares of Common Stock and the fair market value of
the shares if they are nonrestricted on the date of exercise; and (iii) at the
time of sale of shares acquired pursuant to the exercise of a non-qualified
stock option, any appreciation (or depreciation) in the value of the shares
after the date of exercise will be treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been held.
INCENTIVE STOCK OPTIONS. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive stock option. If shares of
Common Stock are issued to an optionee pursuant to the exercise of an incentive
stock option and no disqualifying disposition of the shares is made by the
optionee within two years after the date of grant or within one year after the
transfer of the shares to the optionee, then upon the sale of the shares any
amount realized in excess of the option price will be taxed to the optionee as
long-term capital gain and any loss sustained will be a long-term capital loss.
If shares of Common Stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to any excess of the fair market value of
the shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid for
the shares. Any further gain (or loss) realized by the optionee generally will
be taxed as short-term or long-term capital gain (or loss) depending on the
holding period.
STOCK APPRECIATION RIGHTS. No income will be recognized by the recipient of
a stock appreciation right in connection with the grant of such stock
appreciation right. When a stock appreciation right is exercised, the recipient
thereof normally will be required to include as taxable ordinary income in the
year of exercise an amount equal to the amount of any cash, and the fair market
value of any other nonrestricted property, received pursuant to such exercise.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The recipient of restricted
stock or restricted stock units generally will be subject to tax at ordinary
income rates on the fair market value of such stock or units reduced by any
amount paid by the participant at such time as the shares or units are no longer
subject to forfeiture or restrictions on transfer for purposes of Section 83 of
the Code. However, a recipient who so elects under Section 83(b) of the Code
within 30 days of the date of transfer of such shares or units will have taxable
ordinary income on the date of transfer of the shares or units equal to the
excess of the fair market value thereof (determined without regard to the
restrictions) over the purchase price, if any, of the shares or units (an "83(b)
election"). If an 83(b) election has not been made, any dividends received with
respect to restricted stock subject to restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
PERFORMANCE AWARDS. No income generally will be recognized upon the grant
of performance awards. Upon payment in respect of the earn-out of performance
awards, the recipient generally will be required to include as taxable ordinary
income in the year of receipt an amount equal to the amount of cash received and
the fair market value of any other nonrestricted property received.
SPECIAL RULES APPLICABLE TO OFFICERS AND DIRECTORS. In limited
circumstances where the sale of stock that is received as the result of a grant
of an Award could subject an officer or director to suit under Section 16(b) of
the Exchange Act, the tax consequences to the officer or director may differ
from the tax consequences described above.
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<PAGE>
TAX CONSEQUENCES TO THE COMPANY OR A SUBSIDIARY
To the extent and at the time that a participant recognizes ordinary income
in the circumstances described above, the Company or the subsidiary for which
the participant performs services generally will be entitled to a corresponding
deduction, provided that, among other things, (i) the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code, (ii)
the deduction of the income is not disallowed in whole or in part by the $1
million deduction limitation applicable to certain compensation paid to
executives of publicly-held corporations, and (iii) any applicable withholding
obligations are satisfied. As a consequence of the foregoing, the Company or the
subsidiary for which a participant performs services will not be entitled to a
deduction corresponding to the timely exercise of an incentive stock option
granted to such participant. With respect to the $1 million deduction
limitation, the Company and the Compensation Committee will seek to maximize the
deductibility of the compensation paid by the Company to the extent that doing
so is consistent with their other compensation policies and objectives.
STOCK INCENTIVE PLAN BENEFITS
Grants or awards under the Stock Incentive Plan from the inception of the
Stock Incentive Plan through March 15, 1998 were made to the named executive
officers, other officers, key employees and directors, as indicated in the table
below.
<TABLE>
<CAPTION>
STOCK
OPTIONS RESTRICTED SHARES
GRANTED AWARDED
GRANT/AWARD ----------- -----------------------
NAME AND POSITION YEAR NUMBER NUMBER VALUE ($)(1)
- ------------------------------------------------------------ --------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Gerald L. Friedman.......................................... 1992 -- -- --
Chairman, President 1993 -- -- --
and Chief Executive 1994 -- -- --
Officer 1995 -- -- --
1996 -- -- --
1997 278,000 -- --
Roy J. Kasmar (2)........................................... 1996 178,165 21,835 $ 514,400
Executive Vice President 1997 100,000 -- --
and Chief Operating Officer
Jerome J. Selitto........................................... 1992 113,000 28,250 $ 119,780
Executive Vice President 1993 -- -- --
1994 26,000 6,500 $ 34,190
1995 -- -- --
1996 -- -- --
1997 278,000 -- --
James G. Engelhardt......................................... 1992 53,000 13,250 $ 56,180
Executive Vice President 1993 -- -- --
1994 19,250 4,875 $ 25,643
1995 -- -- --
1996 -- -- --
1997 55,500 -- --
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
STOCK
OPTIONS RESTRICTED SHARES
GRANTED AWARDED
GRANT/AWARD ----------- -----------------------
NAME AND POSITION YEAR NUMBER NUMBER VALUE ($)(1)
- ------------------------------------------------------------ --------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
R. Bruce Van Fleet, III..................................... 1995 22,000 -- --
Senior Vice President 1996 -- -- --
1997 55,500 -- --
Executive Group............................................. 1992 395,000 848,875 $ 629,230
1993 35,500 8,875 $ 37,630
1994 151,750 38,125 $ 200,538
1995 31,000 2,250 $ 11,925
1996 237,130 21,835 $ 514,400
1997 977,397 -- --
Non-Executive Director Group................................ 1992 -- -- --
1993 -- -- --
1994 -- -- --
1995 -- -- --
1996 1,000 830 $ 21,995
1997 1,000 1,263 --
Non-Executive Officer....................................... 1992 35,000 8,875 $ 37,630
Employee Group 1993 35,500 8,875 $ 37,630
1994 51,500 13,000 $ 68,380
1995 38,900 -- --
1996 18,612 -- --
1997 48,815 -- --
</TABLE>
- --------------------
(1) Reflects value on date of award.
(2) Mr. Kasmar joined Amerin Guaranty on date of award.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
Until October 22, 1997, the Company, MSLEF, JP Morgan Capital Corporation
("JPMCC"), Aetna, First Plaza Group Trust (a trust organized for the benefit of
certain employee benefit plans of General Motors Corporation and its
subsidiaries) and Leeway & Co. (a nominee for the Long Term Investment Trust,
formerly known as the AT&T Master Pension Trust) (collectively, the "Principal
Stockholders") and Mr. Friedman and Stuart M. Brafman and certain "Permitted
Transferees" (as defined in the Stockholders Agreement) were parties to the
Amended and Restated Shareholders Agreement, dated as of November 1, 1995 (the
"Stockholders Agreement"). As of October 22, 1997, the Stockholders Agreement
was terminated pursuant to the mutual agreement of all parties thereto. The
Stockholders Agreement set forth certain rights and obligations of the parties
with respect to the Common Stock of the Company and the ownership and corporate
governance of the Company, as described below.
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<PAGE>
DESIGNATION AND ELECTION OF DIRECTORS
Each party to the Stockholders Agreement other than JPMCC and each grantee
under the Stock Incentive Plan (each, a "Plan Grantee") was required to vote its
shares of Common Stock and each party to the Stockholders Agreement was required
to take such other action necessary to elect to the board persons designated for
election in accordance with the following procedures: (i) MSLEF could designate
one member of the board so long as it and its Permitted Transferees held at
least 2.5% of the aggregate outstanding Common Stock and Nonvoting Common Stock
(collectively, "Common Equity") and an additional member of the board so long as
they held at least 5% of the aggregate outstanding Common Equity; (ii) Aetna
could designate one member of the board so long as it and its Permitted
Transferees held at least 2.5% of the aggregate outstanding Common Equity; and
(iii) a majority in number of the Principal Stockholders (other than JPMCC and
MSLEF), acting together with their Permitted Transferees, could designate a
representative or employee of any of the Principal Stockholders as an additional
member of the board, provided that not more than two members of the board could
be representatives, employees or affiliates of the same Principal Stockholder or
its Permitted Transferees. In addition, each party to the Stockholders Agreement
other than JPMCC and each Plan Grantee was required to vote its shares of Common
Stock and each party to the Stockholders Agreement was required to take such
other action necessary such that, so long as Mr. Friedman was an employee of the
Company, Amerin Guaranty or Amerin Re, Mr. Friedman would be a member of the
board. Notwithstanding the foregoing, any party to the Stockholders Agreement
that held (together with its Permitted Transferees) two-thirds of the
outstanding shares of Common Equity held by the Principal Stockholders and
Messrs. Brafman and Friedman and Permitted Transferees would have been entitled
to designate at least two-thirds of the members of the board.
Upon the request of a party to the Stockholders Agreement designating a
director, each party to the Stockholders Agreement other than JPMCC and each
Plan Grantee was required to vote its shares of Common Stock and each party to
the Stockholders Agreement was required to take such other action necessary to
remove and designate a replacement for such director.
REGISTRATION RIGHTS
The stockholders party to the Stockholders Agreement had demand registration
rights with respect to "Registrable Stock" (as defined therein) held by them.
One or more of such stockholders could demand registration so long as (i) the
Registrable Stock sought to be registered constitutes at least 10% of the
outstanding Common Equity, or (ii) if such group included Mr. Friedman or Mr.
Brafman, the Registrable Stock sought to be registered by Mr. Friedman and Mr.
Brafman, in the aggregate, constituted at least 1% of the outstanding Common
Equity, provided that any demand pursuant to the foregoing clause (ii) could
only be made once in any 12 month period. In addition, if at any time prior to
the tenth anniversary of the consummation of the Company's initial public
offering the Company proposed to file a registration statement under the
Securities Act of 1933, as amended ("Securities Act"), either for its own
account or the account of others (other than a registration statement relating
to employee benefit or compensation plans, business combinations, exchange
offers with existing security holders or certain other types of registrations),
then each other party to the Stockholders Agreement had the opportunity, subject
to certain procedures, restrictions and priorities, to register such number of
shares of Registrable Stock as such stockholder requested, in which case the
Company was obligated to use its best efforts to permit the inclusion in the
registration statement of the Registrable Stock so
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requested to be included on the same terms and conditions as any similar
securities of the Company included therein.
The Company had agreed to pay all expenses associated with the exercise of
registration rights under the Stockholders Agreement other than underwriting
fees, discounts or commissions attributable to the sale of Registrable Stock or
any out-of-pocket expenses of the selling stockholders. Under the Stockholders
Agreement, the Company on the one hand and each stockholder selling Registrable
Stock on the other hand had agreed to indemnify each other for certain
liabilities, including liabilities under the Securities Act. The foregoing
registration rights were exercised with respect to a secondary public offering
of 4,025,000 shares (including 525,000 shares sold pursuant to an over-allotment
option) of Common Stock consummated on February 20, 1997.
AFFILIATE TRANSACTIONS
The Stockholders Agreement required that any transactions between the
Company, Amerin Guaranty or Amerin Re on the one hand and any other party
thereto or any of their affiliates on the other hand be on an arm's length basis
and required the approval of the majority of the disinterested members of the
board.
OTHER PROVISIONS.
The Stockholders Agreement provided for certain "tag along" rights, allowing
stockholders party thereto to participate in private and open market sales of
Common Stock proposed by other stockholders party thereto, and certain "drag
along" rights, allowing three (but not including JPMCC) of the five Principal
Stockholders holding at least 55% of the Common Equity then held by the
Principal Stockholders, Messrs. Friedman and Brafman, Permitted Transferees and
the Plan Grantees (but not including Common Equity held by JPMCC and its
Permitted Transferees) to require the other stockholders party thereto to sell
all or a portion of their shares of Common Equity, to the same purchaser and on
the same terms as the stockholders originally proposing such sales.
The Stockholders Agreement placed a variety of other requirements and
restrictions on transfers of Common Equity held by the stockholders party
thereto. Any sales were required to be made in accordance with applicable
securities laws. Any transfer other than to a permitted transferee was generally
required to be a sale for cash unless each other stockholder party to the
Stockholders Agreement consented. Transfers were not to be made if the board had
determined in its sole discretion and good faith judgment that the proposed
transferee was a competitor of the Company or was potentially adverse to certain
interests of the Company.
Messrs. Friedman and Brafman agreed in the Stockholders Agreement not to
compete with the Company, Amerin Guaranty, Amerin Re or any of their respective
affiliates for, in the case of Mr. Friedman, 10 years following the termination
of employment, and in the case of Mr. Brafman, 3 years following the termination
of employment, except for certain passive investments. Mr. Brafman retired from
the Company and Amerin Guaranty in December 1996.
CERTAIN TRANSACTIONS WITH MANAGEMENT
Pursuant to an employment agreement between Mr. Friedman and Amerin
Guaranty, in order to provide assistance with the tax liability, if any,
associated with the grant to Mr. Friedman of shares pursuant to the Management
Agreement (the "Friedman Shares"), Mr. Friedman has the right to borrow
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from Amerin Guaranty an amount equal to such tax liability. Such loan would have
a term of five years and bear interest (payable at maturity) at the prime rate
at the time the loan is made, would be prepayable in whole or in part by Mr.
Friedman at any time or from time to time and would be accelerated to the extent
of any cash proceeds from sales by Mr. Friedman of the Friedman Shares. No loans
have been made by Amerin Guaranty to Mr. Friedman and no amounts are
outstanding.
Pursuant to an agreement dated March 1, 1998, between Amerin Guaranty and
John F. Peterson, Senior Vice President of Amerin Guaranty, Mr. Peterson's will
resign from Amerin Guaranty as of April 30, 1998. Pursuant to this agreement,
Mr. Peterson will be entitled to exercise options to purchase 12,874 shares of
Amerin Common Stock which otherwise would have become exercisable in two equal
installments of 6,437 on January 1, 1999 and 2000, respectively. The agreement
also provides for the payment by Amerin Guaranty of Mr. Peterson's medical
insurance premiums through April 30, 1999. The estimated aggregate value of
these benefits is $303,606, based on an assumed market price per share of Amerin
Common Stock of $28.00 at the date of exercise.
The Company and Messrs. Friedman, Kasmar and Selitto are parties to certain
severance agreements. See "Severance Agreements."
PRINCIPAL STOCKHOLDERS
The Company maintains bank accounts with an affiliate of JPMCC, one of the
Principal Stockholders. As of December 31, 1997, the balance of funds held in
such accounts was $19,750. An affiliate of MS&Co has provided, and may in the
future provide, advisory services to the Company.
2. APPROVAL OF AMENDMENT OF THE 1992 LONG-TERM STOCK INCENTIVE PLAN
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder, a public company will be denied deductions in
certain circumstances for compensation to the chief executive officer and the
four other most highly compensated executive officers to the extent that
compensation for any of such individuals exceeds one million dollars for a
taxable year. Under special transition rules in the Section 162(m) regulations
for newly-public companies, Awards under the Company's 1992 Long-Term Stock
Incentive Plan (the "Stock Incentive Plan") were not subject to the loss of
deduction rules under Section 162(m). However, the Board of Directors has
unanimously adopted an amendment to the Stock Incentive Plan. This amendment
will increase from 300,000 to 400,000 the number of shares of the Company's
Common Stock with respect to which awards may be granted to any participant
under the Stock Incentive Plan in any four-year period beginning on or after
September 19, 1995. The amendment was adopted by the Board of Directors in order
to increase the ability of the Company to retain the services of its most senior
executives over time.
Upon the adoption of this amendment, Awards under the Stock Incentive Plan
are no longer eligible for the special transition rules for newly-public
companies and are subject to the loss of deduction rules under Section 162(m).
The loss of deduction rules under Section 162(m), however, contain exceptions
for certain awards under stock-based compensation plans, provided that the plans
are approved by the stockholders of the plan's sponsor. The stock-based awards
under the Stock Incentive Plan generally are intended to qualify for these
exceptions. Thus, if the Stock Incentive Plan, as amended, is approved by the
Company's stockholders, the Awards under such plan which otherwise satisfy the
requirements of the exceptions to the Section 162(m) rules will not be taken
into account in determining whether any portion of a grantee's compensation
exceeds one million dollars or is non-
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deductible by the Company. A description of the Stock Incentive Plan is set
forth herein under the caption "1992 Long-Term Stock Incentive Plan."
The stockholders are being asked to approve the Stock Incentive Plan as
amended by the Board in the manner described above. In order to be approved,
this proposal must receive the affirmative vote of a majority of the shares
entitled to vote at the 1998 Annual Meeting. If the stockholders do not approve
the Stock Incentive Plan as amended, the amendment will be void and the Stock
Incentive Plan will remain subject to the special transition rules for
newly-public companies until the earliest of the date on which all shares
available under the Stock Incentive Plan have been granted, the date of a
material amendment to the Stock Incentive Plan or the 1999 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE STOCK
INCENTIVE PLAN, AS AMENDED, AND DULY SIGNED AND RETURNED PROXIES WILL BE SO
VOTED UNLESS YOU INDICATE OTHERWISE.
3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors proposes that the stockholders ratify the
recommendation of the Audit Committee of Ernst & Young LLP to serve as the
Company's independent auditors for the 1998 fiscal year. The board of directors
anticipates that representatives of Ernst & Young LLP will be present at the
1998 Annual Meeting to respond to appropriate questions, and will have an
opportunity, if they so desire, to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SELECTION OF ERNST & YOUNG
LLP AS THE COMPANY'S INDEPENDENT AUDITORS AND DULY SIGNED AND RETURNED PROXIES
WILL BE SO VOTED UNLESS YOU INDICATE OTHERWISE.
OTHER INFORMATION
The Company has no reason to believe that any other business will be
presented at the 1998 Annual Meeting of Stockholders, but if any other business
shall be presented, votes pursuant to the proxy will be cast thereon in
accordance with the discretion of the persons named in the accompanying proxy.
Stockholder proposals to be presented at the 1999 Annual Meeting must be
received by the Company on or before December 31, 1998, for inclusion in the
proxy statement relating to that meeting. Proposals should be sent to the
attention of the Secretary of the Company. In addition, the Company's By-Laws
contain certain requirements with respect to the submission of proposals and the
nomination of directors at any stockholder meeting.
The Company will furnish, without charge, to each person whose proxy is
being solicited, upon request of such person, one copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission. Requests for copies of such report should be
directed to the Investor Relations Department, 200 East Randolph Drive, 49th
Floor, Chicago, Illinois 60601-7125.
AMERIN CORPORATION
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PROXY
1998 ANNUAL MEETING OF SHAREHOLDERS OF AMERIN CORPORATION
Gerald L. Friedman and Randolph C. Sailer II, and each of them, are hereby
appointed proxies, with full power of substitution, to vote all shares of
stock the undersigned is entitled to vote at the annual meeting of
shareholders of Amerin Corporation, to be held at the offices of Amerin
Corporation, 200 East Randolph Drive, 49th Floor, Chicago, Illinois, on May
20, 1998 at 10:00 a.m., Local Time, and at any adjournments thereof, as
follows, hereby revoking any proxy heretofore given.
1. ELECTION OF TWO DIRECTORS:
TIMOTHY A. HOLT AND LARRY E. SWEDROE
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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2. Amendment to the Amerin Corporation 1992 Long-Term Stock Incentive Plan to
increase the maximum number of shares that may be awarded to a
participant.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED, AND TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
3. Selection of Ernst & Young LLP as independent auditors for the 1998
fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
4. In their direction on such other matters as may properly come before the
meeting, all set out in the Notice and Proxy Statement relating to the
meeting, receipt of which are hereby acknowledged.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CHOICE IS INDICATED, WILL BE
VOTED FOR ITEMS 1, 2 & 3.
Dated: , 1998
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(Please sign exactly as name appears hereon. If stock is owned by more than
one person, all owners should sign. If signing as attorney, administrator,
executor, guardian or trustee, please indicate such capacity. A proxy given
by a corporation should be signed by an authorized officer.)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THIS CORPORATION
