<PAGE> 1
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 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:
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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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(4) Proposed maximum aggregate value of transaction:
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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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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
MGIC
INVESTMENT
CORPORATION
- ---------------------------
NOTICE
OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
- ---------------------------
1997
ANNUAL
REPORT
TO
SHAREHOLDERS
MGIC INVESTMENT CORPORATION
WILLIAM H. LACY
President and Chief Executive Officer
March 25, 1998
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of MGIC
Investment Corporation, which will be held in Vogel Hall at the Marcus Center
for the Performing Arts, 123 East State Street, Milwaukee, Wisconsin, on May 7,
1998, at 9:00 a.m. We look forward to greeting as many of our shareholders as
are able to be with us.
As explained in the accompanying Proxy Statement, in addition to the
election of directors and ratification of the appointment of independent
accountants, shareholders are being asked to approve amendments to the Articles
of Incorporation to increase the number of authorized shares of Common Stock
from 150 million to 300 million shares, and to authorize a class of Preferred
Stock. Your Board of Directors unanimously recommends that you vote FOR the
nominees for director identified in the Proxy Statement and FOR all of these
proposals. At the meeting, we will report on the state of our business and there
will be an opportunity for you to ask questions.
This year we have combined our Annual Report to Shareholders and Proxy
Statement. By doing so, we reduced the cost of our annual meeting materials
without affecting the quality of the information we are providing to you.
WHETHER OR NOT YOU EXPECT TO ATTEND, TO ENSURE YOUR REPRESENTATION AT THE
MEETING AND THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY, for which a return envelope is provided.
Sincerely,
William Lacy
William H. Lacy
President and Chief Executive Officer
<PAGE> 3
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 7, 1998
To the Shareholders of
MGIC Investment Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of MGIC
Investment Corporation (the "Corporation"), a Wisconsin corporation, will be
held in Vogel Hall at the Marcus Center for the Performing Arts, 123 East State
Street, Milwaukee, Wisconsin, on May 7, 1998, at 9:00 a.m., for the following
purposes:
(1) To elect a class of five directors of the Corporation to serve for
a term of three years expiring at the 2001 Annual Meeting;
(2) To consider and vote upon a proposal to amend the Corporation's
Articles of Incorporation to increase the authorized Common Stock
of the Corporation from 150,000,000 to 300,000,000 shares;
(3) To consider and vote upon a proposal to amend the Corporation's
Articles of Incorporation to authorize 10,000,000 shares of
Preferred Stock issuable in one or more series with the terms of
each series determined by the Board of Directors;
(4) To consider and vote upon a proposal to ratify the appointment of
Price Waterhouse LLP as independent accountants for 1998; and
(5) To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 11, 1998,
as the record date to determine the shareholders entitled to notice of and to
vote at this meeting.
By Order of the Board of Directors
Jeffrey H. Lane, Secretary
Milwaukee, Wisconsin
March 25, 1998
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
<PAGE> 4
MGIC INVESTMENT CORPORATION -- P.O. BOX 488, MGIC PLAZA, MILWAUKEE, WI 53201
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are first being mailed on
or about March 25, 1998, in connection with the solicitation of proxies on
behalf of the Board of Directors of MGIC Investment Corporation (the
"Corporation"), a Wisconsin corporation, for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m., Thursday, May 7, 1998, in Vogel Hall at
the Marcus Center for the Performing Arts, 123 East State Street, Milwaukee,
Wisconsin.
The record date is March 11, 1998, for determining shareholders entitled to
vote at the meeting. As of that date, 114,105,616 shares of Common Stock were
outstanding and entitled to be voted. For each matter which may come before the
meeting, shareholders will be entitled to one vote for each share of Common
Stock registered in the shareholder's name on the record date.
The enclosed proxy is solicited by the Board of Directors of the
Corporation. If the proxy is properly executed and returned, and choices are
specified, the shares represented thereby will be voted at the meeting in
accordance with those instructions. If no choices are specified, a properly
executed proxy will be voted as follows:
FOR--Election to the Board of the five individuals nominated by the Board
of Directors;
FOR--Approval of the proposed amendment to the Corporation's Articles of
Incorporation to increase the authorized Common Stock from 150,000,000 to
300,000,000 shares;
FOR--Approval of the proposed amendment to the Corporation's Articles of
Incorporation to authorize 10,000,000 shares of Preferred Stock; and
FOR--Ratification of the appointment of Price Waterhouse LLP as independent
accountants for the fiscal year ending December 31, 1998.
Proxies are revocable by written notice to the Secretary of the Corporation
at any time prior to their exercise and may also be revoked by signing and
delivering a proxy with a later date. Shareholders present at the meeting may
withdraw their proxies and vote in person.
Votes cast by proxy or in person at the meeting will be counted by
representatives of Firstar Trust Company, the transfer agent and registrar of
the Common Stock, which has been appointed by the Corporation to act as
inspector of election for the meeting. The inspector of election will treat
shares represented by proxies that reflect abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions, however, do not constitute a vote "for" or "against" any
matter and thus 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 and has not
received such instructions. The inspector of election will treat broker non-vote
shares as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has indicated on the proxy that it
does not have discretionary authority to vote, broker non-vote shares will be
disregarded in the calculation of "votes cast."
The Corporation's Annual Report to Shareholders for the fiscal year ended
December 31, 1997, appears immediately after this Proxy Statement. The Annual
Report to Shareholders is not incorporated by reference into this Proxy
Statement and is not to be deemed a part of this Proxy Statement.
<PAGE> 5
STOCK OWNERSHIP
- --------------------------------------------------------------------------------
The following table sets forth, as of January 31, 1998, unless otherwise
noted, certain stock ownership information regarding all shareholders known by
the Corporation to be the beneficial owners of more than 5% of the Corporation's
Common Stock, each executive officer named in the Summary Compensation Table
herein and all directors and executive officers as a group. Unless otherwise
noted, the owners have sole voting and investment power with respect to such
shares.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------ --------
<S> <C> <C>
The Northwestern Mutual Life
Insurance Company ("NML")
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 (1)............................ 20,938,400 18.4%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 (2)........................... 6,147,883 5.4%
William H. Lacy (3)......................................... 419,010 *
Curt S. Culver (3).......................................... 149,810 *
J. Michael Lauer (3)........................................ 296,576 *
Lawrence J. Pierzchalski (3)................................ 128,295 *
James S. MacLeod (3)........................................ 117,400 *
All directors and executive officers as a group (19 persons)
(3)(4).................................................... 1,517,008 1.3%
</TABLE>
- ---------------
* Less than 1%
(1) NML has sole voting and investment power as to 20,898,200 shares and shared
voting and investment power as to 40,200 shares.
(2) Ownership information is for shares of Common Stock as of December 31, 1997,
as reported in statements filed by FMR Corp. with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. Includes 5,900,897
shares beneficially owned by Fidelity Management & Research Company
("Fidelity"), a registered investment adviser and wholly-owned subsidiary of FMR
Corp., and 246,986 shares beneficially owned by Fidelity Management Trust
Company ("Fidelity Trust"), a bank and wholly-owned subsidiary of FMR Corp.
Edward C. Johnson 3d, Chairman of FMR Corp., FMR Corp., through its control of
Fidelity, and the investment companies for which Fidelity acts as investment
adviser ("Funds") each has sole investment power as to 5,900,897 shares owned by
the Funds; the Funds' Boards of Trustees have sole voting power as to such
shares. Mr. Johnson and FMR Corp., through its control of Fidelity Trust, each
has sole investment power as to the 246,986 shares owned by the institutional
accounts managed by Fidelity Trust, sole voting power as to 90,386 of such
shares and no voting power as to 156,600 of such shares. Mr. Johnson, members of
his family and trusts for their benefit own 49% of the voting stock of FMR Corp.
and through such ownership and a shareholders' voting agreement may be deemed to
form a controlling group with respect to FMR Corp.
(3) Includes shares which the named executive officers or all directors and
executive officers as a group (the "Group") had the vested right to acquire on
January 31, 1998, or which become vested within sixty days thereafter, under
stock options granted to executive officers as follows: Mr. Lacy--289,560; Mr.
Culver--139,360; Mr. Lauer--279,880; Mr. Pierzchalski--123,970; Mr.
MacLeod--117,400; and the Group--1,170,410. Also includes shares held in the
Corporation's Profit Sharing and Savings Plan and Trust as follows: Mr.
Lauer--12,776; Mr. Pierzchalski--4,366; and the Group--33,096. Also includes
shares for which voting and investment power is shared as follows: Mr.
Lauer--2,400; and the Group--22,400. Excludes shares, beneficial ownership
2
<PAGE> 6
of which is disclaimed, which are held as custodian for children or owned by
spouses or trusts as follows: Mr. Lauer--5,800; and the Group--150,800.
(4) Includes an aggregate of 23,090 shares held under the Corporation's 1993
Restricted Stock Plan for Non-Employee Directors and under the Deposit Share
Program under the Corporation's 1991 Stock Incentive Plan, as to which shares
the beneficial owners have sole voting power but no investment power. Excludes
20,938,400 shares held by NML. James D. Ericson and Edward J. Zore, who are
executive officers of NML and directors of the Corporation, have each disclaimed
beneficial ownership of such shares.
ELECTION OF DIRECTORS
(ITEM 1)
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION
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.
Each of the following incumbent directors whose term expires this year has
been nominated and recommended by the Board of Directors for election to serve
as a director for a three-year term of office ending at the time of the 2001
Annual Meeting and thereafter until a successor is duly elected and qualified.
James A. Abbott
James D. Ericson
Daniel Gross
Sheldon B. Lubar
Edward J. Zore
Each nominee has consented to being named in this Proxy Statement and has
indicated a willingness to serve if elected. However, if at the time of the
Annual Meeting any of the nominees named above is not available to serve as a
director (an event which the Board of Directors does not now anticipate), the
proxies will be voted for the election as directors of such other person or
persons as the Board of Directors may designate, unless the Board of Directors,
in its discretion, reduces the number of directors.
SHAREHOLDER VOTE REQUIRED
Each nominee receiving a plurality of the votes cast at the 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 more of the
nominees will be disregarded in the calculation of a plurality of the "votes
cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES
NAMED ABOVE, AND UNLESS A SHAREHOLDER GIVES INSTRUCTIONS ON THE PROXY CARD TO
THE CONTRARY, THE PROXY WILL BE VOTED FOR THE NOMINEES.
Set forth on the following pages for each nominee and for each director
whose term expires in a subsequent year is certain information, including age,
principal occupation, business experience for at least the past five years, the
year first elected a director of the Corporation, and the committees of the
Board of Directors on which each director serves.
3
<PAGE> 7
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
NOMINATED FOR ELECTION FOR A TERM ENDING 2001 ------------
<S> <C> <C>
[ABBOTT PHOTO] JAMES A. ABBOTT, 58, a Director since 1989, served as
President and Chief Executive Officer of First Union
Mortgage Corporation, a mortgage banking company, from
January 1980 until his retirement in December 1994. Mr.
Abbott is Chairman of the Audit Committee of the Board of
Directors. He is a graduate of the University of North
Carolina. 6,628(2)
[ERICSON PHOTO] JAMES D. ERICSON, 62, a Director since 1985, has been
President and Chief Executive Officer of The Northwestern
Mutual Life Insurance Company since October 1993, and before
that Mr. Ericson served The Northwestern Mutual Life
Insurance Company as President and Chief Operating Officer
from 1990 to 1993 and as Executive Vice
President-Investments from 1987 to 1990. He is a Trustee of
The Northwestern Mutual Life Insurance Company, Chairman of
the Board and Chief Executive Officer of Northwestern
Investment Management Company, and a Director of
Northwestern Mutual Series Fund, Inc., Consolidated Papers,
Inc., Green Bay Packaging Corp. and Kohl's Corporation. Mr.
Ericson holds a B.A. degree and an L.L.B. degree from State
University of Iowa. -0-(3)
[GROSS PHOTO] DANIEL GROSS, 55, a Director since 1997, has been President,
Chief Executive Officer and a Director of Enhance Financial
Services Group Inc., a provider of financial guaranty
insurance, reinsurance and other analytical products and
services, since 1995. Mr. Gross, who was a founder of
Enhance Financial Services Group Inc. in 1986, served as
Chief Operating Officer of that company from 1986 to 1994.
He is a member of the Management Development Committee of
the Board of Directors. Mr. Gross holds a B.S. degree from
the Sloan School of Management of Massachusetts Institute of
Technology. 2,000
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[LUBAR PHOTO] SHELDON B. LUBAR, 68, a Director since 1991, has been
Chairman and Chief Executive Officer of Christiana
Companies, Inc., an operating and investment company with
interests in logistics, public storage warehousing and
manufacturing, since 1987, and also has been Chairman of
Lubar & Co., Incorporated, a private investment firm, since
1977. Mr. Lubar is a Director of Ameritech Corporation, EVI,
Inc., Firstar Corporation, Jefferies & Co. and Massachusetts
Mutual Life Insurance Co. He is Chairman of the Management
Development Committee of the Board of Directors and a member
of the Executive Committee. Mr. Lubar holds a B.B.A. degree
and an L.L.B. degree from the University of
Wisconsin-Madison. 26,648(2)(4)
[ZORE PHOTO] EDWARD J. ZORE, 52, a Director since 1990, has been an
Executive Vice President of The Northwestern Mutual Life
Insurance Company since February 1995 and is currently
Executive Vice President (Life and DI Insurance). He served
The Northwestern Mutual Life Insurance Company as Chief
Financial Officer and Chief Investment Officer from February
1995 to February 1998 and as Senior Vice President and Chief
Investment Officer from 1990 until 1995. Mr. Zore is a
Director of Northwestern Investment Management Company,
Northwestern Mutual Investment Services, Inc., Northwestern
Mutual Life International, Inc., and Baird Financial
Corporation, all of which are subsidiaries of The
Northwestern Mutual Life Insurance Company. He is a member
of the Executive and Securities Investment Committees of the
Board of Directors. Mr. Zore holds a B.A. degree and an M.S.
degree from the University of Wisconsin-Milwaukee. -0-(3)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2000
[CASE PHOTO] KARL E. CASE, 51, a Director since 1991, is 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 also is a Director of
the New England Economic Project, Inc., Century Bank & Trust
and the Lincoln Institute of Land Policy. Dr. Case is
Chairman of the Risk Management Committee of the Board of
Directors. He is a graduate of Miami University, Oxford,
Ohio, and holds M.A. and Ph.D. degrees from Harvard
University. 2,648(2)
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C> <C>
[MCINTOSH PHOTO] WILLIAM A. MCINTOSH, 58, a Director since 1996, is a
financial services consultant. Mr. McIntosh 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 Chairman of the Securities
Investment Committee of the Board of Directors. Mr. McIntosh
is a graduate of Xavier University, Ohio. 4,234(2)
[MUMA PHOTO] LESLIE M. MUMA, 53, a Director since 1995, has been
President and Chief Operating Officer of Fiserv, Inc., a
financial industry automation products and services firm,
since 1984 and was elected Vice Chairman in 1995. He is a
member of the Executive and Management Development
Committees of the Board of Directors. Mr. Muma holds degrees
in Theoretical Mathematics and Business from the University
of South Florida. 10,588(2)
[WALLISON PHOTO] PETER J. WALLISON, 56, a Director since 1990, has been a
partner in the law firm of Gibson, Dunn & Crutcher since
April 1987, and was Counsel to the President of the United
States from March 1986 to March 1987. Mr. Wallison is a
member of the Audit Committee of the Board of Directors. He
holds a B.A. degree from Harvard College and an L.L.B.
degree from the Harvard Law School. 2,578(2)
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
DIRECTORS CONTINUING IN OFFICE OWNED(1)
TERM ENDING 1999 ------------
<S> <C> <C>
[BUSH PHOTO] MARY K. BUSH, 49, 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 Texaco, Inc., a
Trustee of Pioneer Funds and a member of the Advisory Board
of Washington Mutual Investors Fund. Ms. Bush is a member of
the Audit Committee of the Board of Directors. Ms. Bush is a
graduate of Fisk University and holds an MBA degree from the
University of Chicago. 2,000(2)
[ENGELMAN PHOTO] DAVID S. ENGELMAN, 60, a Director since 1993, is a private
investor. Mr. Engelman was Chairman, President and Chief
Executive Officer of UnionFed Financial Corporation from
1991 until March 1997, and he held the same positions at its
subsidiary, Union Federal Bank, until the Office of Thrift
Supervision appointed a receiver for the bank in August
1996. Mr. Engelman is a Director of Long Beach Financial
Corporation and its mortgage banking subsidiary Long Beach
Mortgage Company. He is a member of the Risk Management
Committee of the Board of Directors. Mr. Engelman is a
graduate of the University of Arizona. 6,808(2)
[JASTROW PHOTO] KENNETH M. JASTROW, II, 50, a Director since 1994, has been
President, Chief Operating Officer and a Director of
Temple-Inland Inc., a holding company with interests in
paper, forest products and financial services, since
February 1998. He was Chief Financial Officer and Group Vice
President of Temple-Inland Inc. from 1992 until February
1998. He also has been President of Guaranty Federal Bank,
F.S.B., a subsidiary of Temple-Inland Inc., since 1994, and
Chairman and Chief Executive Officer of Temple-Inland
Mortgage Corporation, a subsidiary of Guaranty Federal Bank,
F.S.B., since 1991. He is a member of the Risk Management
Committee of the Board of Directors. Mr. Jastrow is a
graduate of the University of Texas. 2,550(2)
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
DIRECTORS CONTINUING IN OFFICE OWNED(1)
TERM ENDING 1999 ------------
<S> <C> <C>
[LACY PHOTO] WILLIAM H. LACY, 53, a Director since 1984, has been
President and Chief Executive Officer of the Corporation
since 1987. Mr. Lacy is a Director of Firstar Corporation
and Johnson Controls, Inc. He is Chairman of the Executive
Committee of the Board of Directors and a member of the
Securities Investment Committee. Mr. Lacy attended the
United States Air Force Academy and is a graduate of the
University of Wisconsin-Milwaukee. 419,010(5)
</TABLE>
- ---------------
(1) Ownership information is for shares of Common Stock as reported by directors
as of January 31, 1998. Unless otherwise noted, all directors have sole voting
and investment power with respect to such shares. The shares beneficially owned
by each director represent less than 1% of the total number of shares
outstanding.
(2) Includes 2,000 shares held under the Corporation's 1993 Restricted Stock
Plan for Non-Employee Directors and shares held under the Deposit Share Program
for Non-Employee Directors under the Corporation's 1991 Stock Incentive Plan as
follows: Mr. Abbott 628; Dr. Case 648; Mr. Engelman 608; Mr. Jastrow 550; Mr.
Lubar 648; Mr. McIntosh 234; Mr. Muma 588; and Mr. Wallison 578. Directors have
sole voting power and no investment power as to all shares described in this
note.
(3) Messrs. Ericson and Zore, as executive officers of NML, may be deemed to
have a beneficial interest in the 20,938,400 shares of Common Stock of the
Corporation beneficially owned by NML; each has disclaimed such beneficial
ownership. See "Stock Ownership" above.
(4) 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, as to all of which shares Mr.
Lubar disclaims beneficial ownership.
(5) Includes 289,560 shares which Mr. Lacy had the vested right to acquire as of
January 31, 1998, or which become vested within sixty days thereafter pursuant
to options granted under the Corporation's 1989 Stock Option Plan and the
Corporation's 1991 Stock Incentive Plan.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times during 1997, and each 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 during the period in 1997 in which he
or she was a director, except Dr. Case who has attended 90% of the meetings
since being elected a director in 1991 and who was on sabbatical outside the
United States during 1997.
The committees of the Board of Directors include the Audit Committee and
the Management Development Committee.
The members of the Audit Committee are Mr. Abbot, Mr. Wallison and Ms.
Bush. The Audit Committee held five meetings during 1997. The principal
functions of the Audit Committee are to review various matters pertaining to:
the Corporation's financial statements and regulatory examinations; the
Corporation's retention of and relationship with its independent accountants;
the effectiveness of the Corporation's internal accounting controls and internal
audit function; and the adequacy and appropriateness of the Corporation's
accounting and financial policies and practices.
The members of the Management Development Committee are Messrs. Lubar,
Gross, and Muma. The
8
<PAGE> 12
Management Development Committee held six meetings during 1997. The principal
functions of the Management Development Committee are to: review and approve
compensation for the senior management of the Corporation, including salary
changes and bonus awards; administer the Corporation's 1989 Stock Option Plan
and 1991 Stock Incentive Plan; monitor and evaluate appointments of, and
succession planning for, the senior management of the Corporation; and make
recommendations concerning the composition of the Board of Directors and its
committee structure.
The Management Development Committee will consider nominees to the Board of
Directors who are recommended by shareholders, provided that any such
recommendation is submitted in writing by December 1 of the year preceding the
year in which the applicable Annual Meeting of Shareholders occurs, accompanied
by a description of the proposed nominee's qualifications and other relevant
biographical information and the consent of the proposed nominee to serve. The
recommendation should be addressed to the Management Development Committee, in
care of the Secretary of the Corporation.
COMPENSATION OF DIRECTORS
No additional compensation is paid to any director who is an employee of
the Corporation or of any of its subsidiaries. Directors who are not employees
of the Corporation or of NML receive an annual fee for their services of
$20,000, 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 committee of
the Board receives an additional $2,000 annual fee. Fees that would have been
paid by the Corporation to executive officers of NML for their services as
directors are paid to NML. The Corporation reimburses directors for travel,
lodging and related expenses incurred in connection with attending Board of
Directors and committee meetings.
Under the Corporation's Deferred Compensation Plan for Non-Employee
Directors, each director who is not an employee of the Corporation or of an
affiliate of the Corporation may elect to defer all or any part of his or her
annual retainer and meeting fees for payment on the earlier of his or her death,
disability or termination of service as a director or to a future date specified
by the participating non-employee director. A participating non-employee
director 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 Corporation's Common Stock
and is ultimately distributed in cash only. If a director defers fees in 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
Corporation's Common Stock. Mr. Lacy, because of his employment by the
Corporation, and Messrs. Ericson and Zore, because of their employment by NML,
are not eligible to participate in this plan.
The Corporation's 1991 Stock Incentive Plan includes a deposit share
program ("Deposit Share Program") open to each director who is not an employee
of the Corporation or an affiliate and is not a representative of a holder of
the Corporation's securities. Directors eligible to participate in the Deposit
Share Program may elect to purchase at fair market value shares of the
Corporation's Common Stock with a fair market value equal to up to 50% of the
compensation of such director for service as a director of the Corporation,
including as a member of a committee of the Board of Directors, during the
preceding calendar year. Shares of Common Stock so purchased are deposited with
the Corporation, and the Corporation matches each share deposited with one
restricted share of Common Stock ("Restricted Stock"). One-half of the shares of
Restricted Stock will vest on the third anniversary date of the award and the
remaining one-half of the shares of Restricted Stock will vest on the sixth
anniversary of the award date.
Awards of Restricted Stock that have not vested will be forfeited upon the
director ceasing to be a director of the Corporation for any reason, other than
by reason of death or a "Permissible Event," unless otherwise provided by the
Management Development Committee. In the event of the death of a director, all
shares of Restricted Stock will vest. A Permissible Event is termination of
service as a director of the Corporation by reason of (a) the director being
ineligible for continued service as a director of the Corporation under the
Corporation's retirement policy, which currently provides that no director may
stand for election or reelection after attaining age 70, or (b) the director's
taking a position with or providing
9
<PAGE> 13
services to a governmental, charitable or educational institution whose policies
prohibit continued service on the Board of Directors, or due to the fact that
continued service as a director would be a violation of law. If a director
ceases to be a director by reason of a Permissible Event, the Restricted Stock
will vest at the date the director ceases to be a director, in a percentage
equal to the number of days elapsed from award of the Restricted Stock to the
date the director ceases to be a director, divided by the number of days in the
applicable three or six year vesting period. All other shares of Restricted
Stock are forfeited unless otherwise determined by the Management Development
Committee. In its discretion, the Management Development Committee may also
provide that some or all of the shares of Restricted Stock will immediately
become vested upon a change in control of the Corporation, as defined by the
committee. Mr. Lacy, because of his employment by the Corporation, and Messrs.
Ericson and Zore, because of their employment by NML, are not eligible to
participate in the Deposit Share Program.
Under the Corporation's 1993 Restricted Stock Plan for Non-Employee
Directors, applicable to directors initially elected prior to 1997, each non-
employee director was awarded 2,000 shares of the Corporation's Common Stock
upon joining the Board of Directors, which shares are restricted until the
director ceases to be a director of the Corporation by reason of death,
disability or retirement. During the restricted period, the director has the
entire beneficial interest in, and all rights and privileges of a shareholder as
to, such shares, including the right to receive dividends and the right to vote
such shares, subject to the following restrictions: (a) none of the restricted
shares of Common Stock may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the restricted period; and (b) all of the
restricted shares of Common Stock will be forfeited and all rights of the
director to such shares will terminate when the director ceases being a director
of the Corporation other than by reason of death, disability or retirement.
For purposes of the 1993 Restricted Stock Plan for Non-Employee Directors,
"retirement" of a director means termination of service as a director of the
Corporation, if (a) the director at the time of termination was ineligible for
continued service as a director under the Corporation's retirement policy for
directors, or (b) the director had served as a director of the Corporation for
at least three years from the date restricted shares of Common Stock were
awarded to such director, and such termination is (i) due to the director's
taking a position with or providing services to a governmental, charitable or
educational institution whose policies prohibit continued service on the
Corporation's Board of Directors, (ii) due to the fact that continued service as
a director would be a violation of law, or (iii) not due to the voluntary
resignation or refusal to stand for reelection by the director.
When a director ceases to be a director by reason of death, disability or
retirement, all restrictions applicable to the shares of Common Stock lapse. Mr.
Lacy, because of his employment by the Corporation, and Messrs. Ericson and
Zore, because of their employment by NML, were not eligible to participate in
this plan.
The 1993 Restricted Stock Plan for Non-Employee Directors was terminated by
the Board of Directors in 1997 and no new awards of Common Stock will be made
under such plan. Termination of the plan does not affect any prior awards of
restricted shares under such plan.
10
<PAGE> 14
REPORT OF THE MANAGEMENT DEVELOPMENT COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
This report is submitted by the Management Development Committee of the
Board of Directors ("Committee"), comprised of three non-employee directors. The
Committee administers the Corporation's executive compensation program for the
five most highly compensated executive officers named in the tables below and
other senior executives of the Corporation. In addition, the Committee
administers the Corporation's 1989 Stock Option Plan and its 1991 Stock
Incentive Plan, monitors and evaluates the appointment of senior executives, and
reviews the management succession plans for the Corporation.
COMPENSATION PHILOSOPHY
The Corporation's compensation program is designed to motivate and reward
executives for attaining the financial and strategic objectives essential to the
Corporation's long-term success and growth in shareholder value. The program is
intended to provide a competitive level of total compensation and to offer
incentive and equity ownership opportunities directly linked to the
Corporation's performance and shareholder return. Key principles underlying the
design of the program include emphasis on cash compensation tied to performance
and stock-based incentive opportunities tied to shareholder value over fixed
pay, and a belief in pay based on performance rather than entitlements tied to
one's position.
The objectives of the Committee in structuring and administering the
Corporation's executive compensation program are to:
- maintain a strong and direct link between the Corporation's financial
goals and the executive compensation program;
- motivate executives to achieve key financial goals through emphasis on
performance-based compensation;
- align the interest of executives with those of the Corporation's
shareholders by providing a substantial portion of compensation in the
form of the Corporation's stock; and
- provide competitive total compensation opportunities to attract and
retain high-caliber executives critical to the long-term success of the
Corporation.
COMPETITIVE BENCHMARKS
In its annual review of executive compensation, the Committee is guided by
data derived from compensation surveys prepared by independent consultants. The
surveys provide the Committee with competitive data on overall compensation
levels, changes in pay levels, and the mix of compensation elements for senior
executives in a variety of companies. The Committee believes that the
Corporation's competitors for executive talent are not limited to the seven
companies which, in addition to the Corporation, comprise the Standard & Poor's
500 Financial (Diversified) Index, which is the peer group used for the
performance graph comparison of shareholder return. Therefore, the companies
used for comparison purposes in analyzing the Corporation's executive
compensation program represent a significantly broader group of firms than the
companies included in the index.
In January 1997, the Committee received a report from an independent
compensation and benefits consulting firm on executive compensation for a number
of publicly-traded financial guaranty and insurance companies and for certain
publicly-traded companies based in Milwaukee. The Committee used this
information in its consideration of salary range movement, incentive bonus
opportunities and stock option awards for senior executives in 1997.
EXECUTIVE COMPENSATION PROGRAM
The Corporation's executive compensation program consists of an annual cash
component, which includes base salary and a variable performance incentive
bonus, and a long-term incentive component, consisting of periodic stock option
awards.
BASE SALARY
The Committee reviews base salary ranges and salary levels of the
Corporation's senior executives each year, taking into consideration individual
performance, level of responsibility, scope and complexity of the position,
internal equity, comparative compensation data, and, for executives other than
Mr. Lacy, the recommendations of
11
<PAGE> 15
Mr. Lacy. The Committee's review of Mr. Lacy's compensation is discussed below
under "Compensation of the Chief Executive Officer."
In recent years, the Committee has adjusted the salary ranges for the
senior executives of the Corporation to establish as the midpoint for each
position the median compensation level for the comparable position within a
comparative group of companies selected objectively by the consultant on the
basis of similar market capitalization. For 1997, the Committee decided to
maintain the salary range midpoint at the 50th percentile of competitive levels,
consistent with the Committee's belief that a substantial portion of the senior
executives' annual pay should remain "at risk" and linked to the achievement of
corporate objectives and increases in shareholder value. Therefore, in January
1997, the Committee increased the salary range midpoints of the senior
executives by 2.7%, representing the average salary range movement reflected in
the compensation report, and increased the salaries of the senior executives who
were below their adjusted salary midpoints to approximate the new midpoint for
their respective positions. The salaries shown in the Summary Compensation Table
for 1997 for the named officers 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 1997.
ANNUAL PERFORMANCE INCENTIVE BONUS
The purpose of the annual variable performance incentive program is to
provide a direct financial incentive in the form of a cash bonus to senior
executives who achieve key objectives during the year. Under the program, the
amount of the Corporation's net income must exceed a threshold before any cash
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 amounts of the
net income threshold and net income target are subjectively determined by the
Committee at the beginning of each year based on the Committee's assessment of
the business environment and the Corporation's financial plan for that year. In
recent years, the net income target has been an amount equal to the net income
projected to be earned in the Corporation's financial plan for the year and the
net income threshold has been 80% to 90% of that amount. The net income target
for 1997 was set by the Committee in January 1997, at an amount equal to the net
income projected in the Corporation's 1997 financial plan and the net income
threshold was set at 85% of that amount.
The Committee has established four tiers applicable to senior executives'
bonus opportunities, with maximums ranging from 40% to 100% of base salary in
effect at the time of bonus award. In January 1997, the maximum percentage for
certain tiers was increased and on Mr. Lacy's recommendation, the Committee
approved placement of the senior executives in the bonus tiers. Mr. Lacy's
recommendation to the Committee regarding placement of the senior executives in
the bonus tiers was based upon his subjective judgment as to the ability of each
senior executive to influence the Corporation's competitiveness and
profitability under the existing business climate.
The bonus amounts paid to the senior executives were decided in January
1998, when Mr. Lacy submitted to the Committee for approval his recommendations
as to the bonus awards. Mr. Lacy based his recommendations upon a subjective
evaluation of the executive's contribution to the Corporation's competitiveness
in the marketplace, quality of execution of functional duties and
responsibilities, effective management of expenses, success in improving
productivity, and achievement of annual goals jointly established by Mr. Lacy
and each executive. No specific weight was assigned to any of these factors, nor
was any specific weight assigned to any combination of such factors with the
Corporation's performance. The Committee approved the recommended bonus amounts
without change.
STOCK OPTION PROGRAM
The long-term incentive component of the Corporation's executive
compensation program provides for the award of stock options, designed to
promote significant equity interest by the senior executives in the Corporation
with the intent of aligning their interest with those of the other shareholders.
Under the Corporation'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 to the extent that shareholders are similarly
benefited by future increases in the price of the Corporation's stock.
On January 22, 1997, the Committee granted stock options to the senior
executives. The last grant of stock options by the Committee to senior
executives occurred in January 1994, other than an option granted to a newly
hired senior executive, and
12
<PAGE> 16
no stock options were granted in 1995 or 1996 to senior executives who
participated in the 1994 stock option grant. Information regarding the stock
options granted during 1997 to Mr. Lacy and the four other highest paid
executive officers at December 31, 1997 is set forth in the table under
"Executive Compensation -- Option Grants During the Last Fiscal Year."
The stock options granted in 1997 have a term of ten years and vest
(subject to acceleration under certain circumstances) on January 22 of each of
the five years following January 22, 1997, in which the Corporation's earnings
per share are at least 10% more than its earnings per share for the immediately
preceding fiscal year. The rate at which the stock options vest is equal to the
percent which the Corporation's earnings per share for that year was of $16.80,
a five-year aggregate earnings target approved by the Committee in connection
with the grant of the stock options. Any options which remain unvested on
January 22, 2002, will become vested on January 22, 2006. The options are
exercisable at $36.4375 per share, the closing price of the stock on the New
York Stock Exchange on the date of grant. (The earnings target and exercise
price were adjusted for the two-for-one stock split in the form of a 100% stock
dividend which was paid June 2, 1997.) Any value ultimately realized by the
senior executives from a stock option award depends completely upon increases in
the price of the Corporation's Common Stock.
The number of stock options granted to the senior executives reflected the
intention of the Committee not to grant any additional stock options to such
senior executives prior to 2000. In determining the size of stock option grants
to the senior executives, the Committee subjectively considered the compensation
consultant's report, the performance-based vesting requirements of the stock
options and the triennial plan for stock option grants.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Lacy, President and Chief Executive Officer of the
Corporation, is comprised of the same elements as the compensation of other
senior executives: base salary, annual performance incentive bonus and periodic
stock option awards. The Committee reviews Mr. Lacy's total compensation
annually and evaluates adjustments based upon a variety of factors, including
the comparative survey data.
Mr. Lacy's salary range midpoint was set by the Committee in 1996 at the
50th percentile of salary levels reported for the highest paid officers in the
comparative group of companies selected by the consultant. For 1997, the
Committee increased the salary range midpoint for Mr. Lacy by 3.0%, the average
salary range movement in the compensation consultant's report. Mr. Lacy's base
salary, which was last adjusted in 1994 and was below the midpoint of his salary
range, was increased to an annual rate effective in April 1997, of $550,000, an
amount slightly greater than midpoint.
In determining the variable performance incentive bonus to be paid to Mr.
Lacy, the Committee considers the Corporation's net income in relation to the
net income target established by the Committee and the Committee's evaluation of
Mr. Lacy's overall contributions to the Corporation, although no specific weight
or ranking is assigned to these factors in the Committee's subjective
determination of the bonus amount to be paid to Mr. Lacy. In January 1997, the
Committee assigned Mr. Lacy to the bonus tier with the highest bonus
opportunity, 100% of base salary. The Committee's decision to assign Mr. Lacy to
this category was based on the Committee's subjective evaluation of his ability
to influence the Corporation's profitability.
In January 1998, the Committee determined that the bonus award to be paid
to Mr. Lacy was $550,000, an amount equal to 100% of his base salary rate then
in effect. That determination was based on the strong performance of the
Corporation and the Committee's subjective assessment of Mr. Lacy's
contributions to the Corporation's profitability.
In January 1997, the Committee granted stock options to Mr. Lacy, which, as
adjusted for the two-for-one stock split, cover 240,000 shares. The number of
stock options granted to Mr. Lacy was determined by the Committee based upon its
subjective assessment of the comparative compensation data supplied by the
consultant and consideration of the triennial nature of the stock option grants
to senior executives.
TAX DEDUCTIBILITY LIMIT
Under Section 162(m) of the Internal Revenue Code, the corporate federal
income tax deduction for compensation paid to any of the five most highly
compensated executive officers of a publicly-held company is limited to $1
million, unless certain requirements are met. During 1997, no senior
13
<PAGE> 17
executive of the Corporation was paid compensation
for federal income tax purposes in excess of $1 million, other than as a result
of exercise of stock options under the Corporation's stock incentive plan,
compensation from which is not subject to the Section 162(m) limit. The
Committee anticipates that there may be some compensation paid in 1998 which
will not be deductible for federal income tax purposes. The Committee believes
the effect of such compensation on income tax expense will not be material and
that it is in the Corporation's interest to preserve flexibility to pay
compensation that is based on the Committee's subjective evaluation of executive
performance.
MEMBERS OF THE MANAGEMENT DEVELOPMENT COMMITTEE:
Sheldon B. Lubar, Chairman (member throughout 1997)
Daniel Gross (member since July 1997)
Leslie M. Muma (member since May 1997)
William A. McIntosh (member until May 1997)
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares the cumulative total stockholder return on the
Corporation'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 Financial (Diversified) Index. The graph assumes $100 was invested on
December 31, 1992, in the Corporation's Common Stock, the Standard & Poor's 500
Stock Index and the Standard & Poor's 500 Financial (Diversified) Index, and
that all dividends were reinvested.
<TABLE>
<CAPTION>
MGIC S&P 500
Measurement Period INVESTMENT FINANCIAL
(Fiscal Year Covered) CORPORATION (DIVERSIFIED) S&P 500
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 115 119 110
12/31/94 131 114 111
12/31/95 216 185 153
12/31/96 303 237 189
12/31/97 532 373 251
</TABLE>
14
<PAGE> 18
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following tables provide information concerning compensation, stock
option grants and exercises, as well as descriptions of the Corporation's
Pension Plan ("Pension Plan") and Supplemental Executive Retirement Plan
("Supplemental Plan") as they relate to the Chief Executive Officer and the four
other most highly compensated executive officers of the Corporation. All Common
Stock and stock option data have been adjusted for the two-for-one split in the
form of a 100% stock dividend which was paid June 2, 1997.
SUMMARY COMPENSATION TABLE
The following table summarizes information concerning compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Corporation or of Mortgage Guaranty Insurance Corporation
("MGIC") for fiscal year 1997 and for the previous two fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2)
------------------ ---- --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lacy 1997 536,350 550,000 1,524 240,000 68,084
President and Chief 1996 500,000 400,000 1,679 -0- 69,768
Executive Officer of the 1995 486,542 400,000 1,101 -0- 74,590
Corporation and Chairman
and Chief Executive Officer
of MGIC
Curt S. Culver 1997 314,548 320,000 457 200,000 33,853
Executive Vice President of 1996 276,740 240,000 335 -0- 40,216
the Corporation and 1995 219,769 184,000 156 -0- 16,317
President and Chief
Operating Officer of MGIC
J. Michael Lauer 1997 237,209 240,000 541 80,000 28,732
Executive Vice President 1996 227,308 184,000 737 -0- 28,390
and Chief Financial 1995 217,846 121,000 346 -0- 28,503
Officer of the
Corporation and MGIC
Lawrence J. Pierzchalski 1997 222,269 225,000 253 80,000 20,470
Executive Vice President - 1996 203,366 172,000 198 -0- 21,511
Risk Management of MGIC 1995 157,500 144,000 64 -0- 9,802
James S. MacLeod 1997 185,904 171,000 188 80,000 10,787
Executive Vice President - 1996 171,468 96,250 147 -0- 9,672
Field Operations of MGIC 1995 162,000 81,000 -0- -0- 9,803
</TABLE>
- ---------------
(1) The amounts shown in this column represent reimbursements for the payment of
taxes related to income imputed in connection with the Supplemental Plan. Other
Annual Compensation for 1997 and for the years 1996 and 1995 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
lesser of (a) $50,000 or (b) 10% of the combined salary and bonus for the named
individual in each year.
(2) The 1997 amounts included in "All Other Compensation" consist of:
15
<PAGE> 19
<TABLE>
<CAPTION>
VALUE OF SPLIT
PROFIT MATCHING DOLLAR
SHARING 401(K) LIFE INSURANCE TOTAL OTHER
NAME CONTRIBUTIONS CONTRIBUTIONS PREMIUMS(A) COMPENSATION
---- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
William H. Lacy $8,000 $1,600 $52,801 $68,084(b)
Curt S. Culver 8,000 1,600 24,253 33,853
J. Michael Lauer 8,000 1,600 19,132 28,732
Lawrence J. Pierzchalski 8,000 1,600 10,870 20,470
James S. MacLeod 8,000 1,600 -0- 10,787(c)
</TABLE>
- ---------------
(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
individuals. MGIC will be reimbursed for premiums paid upon the sooner of the
retirement or termination of employment of each of the insureds.
(b) Includes $5,683 in supplemental long term disability insurance premium paid
on behalf of Mr. Lacy.
(c) Includes $1,187 in group life insurance premium paid on behalf of Mr.
MacLeod.
- --------------------------------------------------------------------------------
OPTION GRANTS DURING THE LAST FISCAL YEAR
The following table summarizes information with respect to stock options
awarded during 1997 to the Chief Executive Officer of the Corporation and the
four other most highly compensated executive officers of the Corporation or
MGIC.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
- ------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
---- ---------- -------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
William H. Lacy 240,000 15.1 36.4375 1/22/07 4,108,800
Curt S. Culver 200,000 12.6 36.4375 1/22/07 3,424,000
J. Michael Lauer 80,000 5.0 36.4375 1/22/07 1,369,600
Lawrence J. Pierzchalski 80,000 5.0 36.4375 1/22/07 1,369,600
James S. MacLeod 80,000 5.0 36.4375 1/22/07 1,369,600
</TABLE>
- ---------------
(1) All options were granted on January 22, 1997, and have a term of ten years.
Options vest on January 22 of each of the five years following January 22, 1997,
in which the Corporation's earnings per share are at least 10% more than its
earnings per share for the immediately preceding fiscal year. The rate at which
the stock options vest is equal to the percent which the Corporation's earnings
per share for that year was of $16.80, a five-year aggregate earnings target
approved by the Management Development Committee in connection with the grant of
the stock options. Any options which remain unvested on January 22, 2002, will
become vested on January 22, 2006. The options are exercisable at $36.4375 per
share, which was the closing price of the Common Stock on the New York Stock
Exchange on the date of grant. The options become immediately vested and
exercisable upon a change in control of the Corporation, or as and to the extent
determined by the Management Development Committee upon the occurrence of
certain specified transactions affecting the Corporation.
(2) Grant date present values were determined under the Black-Scholes option
pricing model using the following assumptions: expected stock price volatility
of 0.2418; all options are exercised at the end of the ninth year of the option
term; a dividend yield of 0.50%; and a risk-free rate of return of 6.60%, which
16
<PAGE> 20
was the yield on a U.S. Government Zero Coupon Bond 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.
- --------------------------------------------------------------------------------
AGGREGATED STOCK OPTION EXERCISES IN THE LAST FISCAL YEAR AND OPTION VALUES AT
DECEMBER 31, 1997
The following table summarizes information with respect to stock options
held at December 31, 1997, and stock options exercised during 1997 by the Chief
Executive Officer of the Corporation and the four other most highly compensated
executive officers of the Corporation or MGIC.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 AT DECEMBER 31, 1997
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME DURING 1997(#) ($)(1) (#) (#)(2) ($)(2)(3) ($)(2)(3)
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Lacy -0- -0- 201,480 329,040 11,784,660 11,744,910
Curt S. Culver 50,000 1,762,002 80,320 229,680 4,451,605 7,522,470
J. Michael Lauer -0- -0- 240,520 109,680 14,552,615 3,914,970
Lawrence J. Pierzchalski 20,000 793,120 111,650 98,550 6,134,562 3,348,731
James S. MacLeod 14,000 586,985 91,160 94,840 5,441,480 3,159,985
</TABLE>
- ---------------
(1) Value realized is the difference between the exercise price and the market
value at the close of business on the date immediately preceding the date of
exercise.
(2) The Corporation's stock option agreements for all options granted under the
Corporation's 1989 Stock Option Plan and 1991 Stock Incentive Plan provide that
the options shall become immediately exercisable upon a change in control of the
Corporation or, as and to the extent determined by the Management Development
Committee, upon the occurrence of certain specified corporate transactions
affecting the Corporation.
(3) Value is based on the closing price of $66.50 for the Corporation's Common
Stock on the New York Stock Exchange on December 31, 1997, less the exercise
price.
- --------------------------------------------------------------------------------
PENSION PLAN
The Corporation maintains a Pension Plan for the benefit of substantially
all employees of the Corporation, including executive officers. The Pension Plan
is a noncontributory defined benefit pension plan intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Under the terms of the Pension Plan in effect during 1997, each eligible
employee, including the executive officers named in the above tables, earned an
annual pension credit for each year of service equal to 2% of such employee's
total cash compensation for that year, except that, in accordance with
applicable requirements of the Code, compensation in excess of $160,000 is
disregarded. At retirement, the employee's annual pension credits are added
together to determine the employee's accrued pension benefit. 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 with respect
to 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.
17
<PAGE> 21
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 Code places
a maximum limitation on the amount of annual benefits that may be paid under the
Pension Plan, which was $116,667 for 1997 for persons born between 1938 and 1954
and retiring at or after age 65, indexed for cost-of-living increases. The
estimated annual benefits payable upon normal retirement to Messrs. Lacy,
Culver, Lauer, Pierzchalski and MacLeod as of December 31, 1997 were $116,667,
$103,578, $68,949, $102,086 and $91,385 respectively, after giving effect to the
limitation imposed by the Code.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation maintains an unfunded, nonqualified Supplemental Plan for
designated employees (including executive officers), under which an eligible
employee, whose benefits from the Pension Plan are affected by the Code's
limitations on annual benefits and compensation that may be considered, is paid
the difference between the amounts the employee would have received from the
Pension Plan in the absence of such limitations and the amounts the employee is
actually entitled to receive from the Pension Plan. Benefits under the
Supplemental Plan are payable in the same manner, at the same time and in the
same form as the benefits paid under the Pension Plan. At December 31, 1997,
Messrs. Lacy, Culver, Lauer, Pierzchalski and MacLeod would have been entitled
to receive supplementary annual benefits under the Supplemental Plan of
$128,562, $19,941, $19,514, $10,417 and $6,828 respectively.
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Corporation has an agreement with Northwestern Mutual Investment
Services, Inc., a subsidiary of NML (the "NML subsidiary"), pursuant to which
the NML subsidiary was retained (i) to manage specified accounts under the
Corporation's long-term investment portfolio, and (ii) to provide investment,
accounting and reporting services to the Corporation. The agreement, which was
amended and restated in 1997, is cancelable by the Corporation upon 90 days
prior written notice and by the NML subsidiary upon 180 days prior written
notice. The Corporation paid the NML subsidiary $1,044,006 in fees during 1997
under the agreement. The Corporation believes the terms of the agreement are no
less favorable to the Corporation than could have been obtained from an
unaffiliated third party. It is expected that the Corporation will continue to
use the services of the NML subsidiary during 1998.
During 1997, MGIC purchased long-term disability coverage for its employees
from NML, and MGIC paid NML an aggregate of $238,015 in premiums for such
coverage. The premiums paid were based on NML's published rates and the
Corporation believes that the terms of this insurance are no less favorable to
MGIC than could have been obtained from an unaffiliated third party. At the
inception of the coverage in July 1988, the terms thereof were at least as
favorable as the coverage provided by the predecessor policy which had been
issued by an insurer unaffiliated with the Corporation. The Corporation has not
made subsequent inquiries or contacts with unaffiliated third party insurers
regarding the terms.
During 1997, MGIC paid an aggregate of $137,498 to NML in split-dollar life
insurance premiums for the whole life portion of the life insurance coverage
issued by NML on Messrs. Lacy, Culver, Lauer, Pierzchalski and another senior
executive pursuant to a split-dollar collateral assignment program. The premiums
paid were determined by NML's published rates and will be repaid to MGIC upon
the sooner of the retirement or termination of employment of each of the
insureds. Although neither the Corporation nor MGIC contacted unaffiliated third
party life insurers regarding the availability of terms, the Corporation
believes that the terms of this insurance are no less favorable to MGIC than
could have been obtained from an unaffiliated third party.
18
<PAGE> 22
The Corporation filed consolidated federal income tax returns with NML and
its subsidiaries from 1986 through August 13, 1991 pursuant to a tax sharing
agreement. While the Corporation is no longer a member of NML's consolidated tax
group, it has a continuing obligation to reimburse NML for the tax effect of any
changes in the taxable income of the Corporation relating to periods during
which the Corporation and its subsidiaries were included as part of that
consolidated group. During 1997, the Corporation made a payment of $3,912,732 to
NML under the tax sharing agreement.
During 1997, MGIC paid NML $76,017 in rent and expenses pursuant to a lease
agreement for office space in a Bellevue, Washington commercial office building
owned by NML. The Corporation believes the terms of the lease agreement, which
MGIC terminated in 1997 upon relocation of its Bellevue office, were no less
favorable to MGIC than could have been obtained from an unaffiliated third
party.
Pursuant to a Common Stock Purchase Agreement entered into in 1984 between
the Corporation and NML, NML has the right under certain conditions to require
the Corporation to file a registration statement under the Securities Act of
1933 for the sale of its shares of the Corporation's Common Stock, or to
participate in a registration of Common Stock otherwise initiated by the
Corporation. The Corporation is generally required to pay all costs associated
with any such registration (other than applicable underwriting commissions and
discounts) and to indemnify NML against certain liabilities under the Securities
Act of 1933.
During 1997, the Corporation and Credit-Based Asset Servicing and
Securitization LLC ("C-BASS"), a company in which the Corporation owns an equity
interest of approximately 48% (Enhance Financial Services Group Inc., of which
Mr. Gross is the Chief Executive Officer, owns an equal equity interest) made
separate purchases of home price index data and other analytical services from
Case Shiller Weiss, Inc. ("CSW") aggregating $125,922. The Corporation expects
that it and C-BASS will continue to make purchases of CSW products in 1998. Dr.
Case owns more than 10% of the stock of CSW. The foregoing disclosure is made
for informational purposes only as the Corporation does not consider C-BASS a
subsidiary of the Corporation for purposes of the regulations of the Securities
and Exchange Commission requiring that certain transactions with subsidiaries of
the Corporation be disclosed.
Mr. Wallison is a partner in the law firm of Gibson, Dunn & Crutcher,
which, from time to time, performs legal services for the Corporation.
During 1997, MGIC sold mortgage insurance and paid mortgage insurance
claims to unaffiliated companies of which certain of the Corporation's non-
employee directors were executive officers or directors. Such transactions were
made in the ordinary course of MGIC's business at its established premium rates
and in accordance with its standard policy terms and are not considered
material.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors, and persons who beneficially own
more than ten percent of the Corporation's Common Stock, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
directors and greater than ten percent beneficial owners are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file.
To the Corporation's knowledge, based solely on a review of the copies of
such reports furnished to the Corporation or written representations from the
Corporation's executive officers, directors and greater than ten percent
beneficial owners, such persons complied with all Section 16(a) filing
requirements in 1997.
19
<PAGE> 23
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
(ITEM 2)
- --------------------------------------------------------------------------------
The Board of Directors is recommending that shareholders approve an
amendment to Article 4 of the Articles of Incorporation to increase to
300,000,000 from 150,000,000 the number of shares of Common Stock which the
Corporation is authorized to issue. As of January 31, 1998, 113,867,817 shares
of Common Stock were outstanding and 3,646,150 shares were reserved under the
Corporation's stock incentive programs, leaving 32,486,033 shares unreserved and
available for issuance. In connection with the Corporation's June 1997
two-for-one stock split in the form of a 100% stock dividend, an aggregate of
approximately 62,000,000 shares of Common Stock were distributed and added to
shares reserved for issuance. Approval of this amendment would restore the ratio
of outstanding plus reserved shares of Common Stock, to authorized shares of
Common Stock, to approximately what it was before the two-for-one stock split.
The Board of Directors believes the Corporation should have the flexibility
to issue additional shares of Common Stock in the sound discretion of the Board,
without the delay or expense of a special shareholders' meeting. The additional
shares of Common Stock will be available for general corporate purposes,
including stock dividends, financings, mergers and acquisitions and stock
options and other employee benefit programs. At the date of mailing of this
Proxy Statement, the Corporation did not have any plans to issue any additional
shares of Common Stock, other than the possible issuance of reserved shares
under stock incentive programs referred to above.
Shareholders do not have any preemptive rights to subscribe for any shares
of Common Stock, including those authorized by the amendment. Any of the
authorized shares of Common Stock may be issued by action of the Board of
Directors without further action by shareholders, other than as may be required
by the rules of the New York Stock Exchange ("NYSE") or the Wisconsin Business
Corporation Law (the "WBCL"). (In general, the rules of the NYSE would require
approval only for shares issued in certain compensation programs and in certain
business combinations and the WBCL would require approval only for shares issued
in certain business combinations.) The issuance of Common Stock otherwise than
on a pro rata basis to all current shareholders may have the effect of diluting
the ownership interest and voting power of present shareholders. Similarly, the
shares authorized by the amendment could be used to discourage or make more
difficult a non-negotiated attempt to obtain control of the Corporation; this
effect could occur through issuance of additional shares of Common Stock that
would dilute the interest in the equity and the voting power of a party seeking
to gain control. The Corporation is not aware of any effort to obtain control of
the Corporation.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on the amendment is
required for approval of the amendment. Abstentions and "broker non-votes" will
not be counted as "votes cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK. UNLESS INDICATED OTHERWISE ON THE PROXY, THE
SHARES WILL BE VOTED FOR THE AMENDMENT.
20
<PAGE> 24
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK
(ITEM 3)
- --------------------------------------------------------------------------------
The Board of Directors is recommending that shareholders approve an
amendment to the Articles of Incorporation to create a class of Preferred Stock
issuable in one or more series (the "Preferred Stock amendment"). The Articles
of Incorporation currently authorize the issuance of only one class of stock,
the Common Stock, in an amount up to 150,000,000 shares, which will increase to
300,000,000 shares if the amendment to Article 4 described in Item 2 above is
approved. If the Preferred Stock amendment is approved, Article 4 of the
Articles of Incorporation will also be amended to authorize the issuance of up
to 10,000,000 shares of Preferred Stock, $1.00 par value. The text of the
Preferred Stock amendment is set forth in Exhibit A to this Proxy Statement and
the description below of the provisions of the Preferred Stock amendment is
qualified in all respects by reference to Exhibit A. Approval of the Preferred
Stock amendment will not affect the number of shares of Common Stock which may
be issued by the Corporation.
The Board of Directors believes it is desirable to have both Common Stock
and Preferred Stock available for issuance to provide the Corporation with
additional flexibility in its capital structure. The Preferred Stock amendment
would authorize a class of Preferred Stock that may be issued by the Board of
Directors in one or more series, with the Board having authority to determine
the terms of each series, including voting rights (which may include the right
to vote with the Common Stock or as a separate series, provided that the
Preferred Stock will not be entitled to more than one vote per share when voting
with the Common Stock); provisions for redemption, exchange or conversion
(including into Common Stock); rights to dividends and distributions that are
cumulative, partially cumulative or noncumulative; and preference over any other
class (including the Common Stock) or series with respect to dividends and
distributions. If the Preferred Stock amendment is approved, no further action
by the Common Stock would be required prior to issuing any shares of Preferred
Stock, other than as may be required by the rules of the NYSE or the WBCL. (In
general, the rules of the NYSE would require approval only for shares issued in
certain compensation programs and in certain business combinations and the WBCL
would require approval only for shares issued in certain business combinations.)
At the date of mailing of this Proxy Statement, the Corporation did not
have any plans to issue shares of Preferred Stock. Shares of Preferred Stock
would be available for general corporate purposes, including financings, mergers
and acquisitions, and other transactions. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to Common
Stock and adversely affect the rights and powers, including voting rights, of
the Common Stock.
The Preferred Stock amendment would also amend Article 5 of the Articles of
Incorporation to make the elimination of preemptive rights applicable to all
holders of shares of capital stock of the Corporation, including Preferred
Stock, rather than to the holders of shares of Common Stock only. The current
provision of the Articles of Incorporation permitting preemptive rights under
contracts approved by the Board of Directors would not be changed by the
Preferred Stock amendment.
In addition, the Preferred Stock amendment would amend Article 6 of the
Articles of Incorporation to provide that whenever any series of Preferred Stock
includes voting rights for the election of directors, the number, election, term
of office, filling of vacancies and other features of such directorships will be
governed by the terms established by the Board of Directors for such series of
Preferred Stock. Any directors elected by the Preferred Stock would not be
divided into classes, unless so provided by the terms of the series of Preferred
Stock, and would serve on the Board of Directors in addition to the number of
directors elected by the Common Stock.
The Board of Directors and management represent that they will not issue,
without prior shareholder approval, Preferred Stock (i) for any defensive or
anti-takeover purpose, (ii) to implement any shareholder rights plan, or (iii)
with features intended to make any attempted acquisition of the Corporation more
difficult or costly. No Preferred
21
<PAGE> 25
Stock will be issued to any individual or group for the purpose of creating a
block of voting power to support management on a controversial issue.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on the Preferred Stock
amendment is required for approval of the amendment. Abstentions and "broker
non-votes" will not be counted as "votes cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE PREFERRED STOCK AMENDMENT. UNLESS INDICATED OTHERWISE ON THE PROXY, THE
SHARES WILL BE VOTED FOR THE PREFERRED STOCK AMENDMENT.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 4)
- --------------------------------------------------------------------------------
The Board of Directors, upon recommendation of its Audit Committee, has
reappointed the accounting firm of Price Waterhouse LLP as independent
accountants of the Corporation for the fiscal year ending December 31, 1998. The
shareholders are being asked to ratify such appointment at the Annual Meeting. A
representative of Price Waterhouse LLP is expected to attend the meeting, will
be afforded an opportunity to make a statement if the representative desires to
do so, and will be available to respond to appropriate questions by
shareholders.
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 Price Waterhouse LLP as
independent accountants. Abstentions and "broker non-votes" will not be counted
as "votes cast."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS. UNLESS
INDICATED OTHERWISE ON THE PROXY, THE SHARES WILL BE VOTED FOR RATIFICATION.
OTHER MATTERS
- --------------------------------------------------------------------------------
PROPOSALS OF SHAREHOLDERS
Proposals intended for presentation by shareholders at the 1999 Annual
Meeting, in addition to meeting the shareholder eligibility and other
requirements of the Securities and Exchange Commission's rules governing such
proposals, must be received by the Corporation on or before November 26, 1998,
to be included in the 1999 Proxy Statement and proxy relating to the 1999 Annual
Meeting.
MANNER AND COST OF PROXY SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation. In
addition to the solicitation of proxies by use of the mails, officers, directors
and regular employees of the Corporation, acting on its behalf, may solicit
proxies by telephone, telegraph or personal interview. Also, the Corporation has
retained D.F. King & Co., Inc. to aid in the solicitation of proxies for which
the Corporation will pay a fee estimated to be $7,500, plus expenses. The
Corporation will, at its expense, request brokers and other custodians, nominees
and fiduciaries to forward proxy soliciting material to the beneficial owners of
shares held of record by such persons.
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 not set forth herein,
but if other matters do properly come before the Annual Meeting,it is intended
that the persons named in the proxy will vote on such matters in accordance with
their best judgment.
22
<PAGE> 26
EXHIBIT A
TEXT OF PREFERRED STOCK AMENDMENT TO
THE ARTICLES OF INCORPORATION
RESOLVED, that Article 4 of the Articles of Incorporation of the Corporation, as
previously amended, be amended to read in its entirety as follows:
The aggregate number of shares of capital stock which the
Corporation shall have the authority to issue, the designation of
each class of shares, the authorized number of shares of each
class and the par value thereof per share shall be as follows:
<TABLE>
<CAPTION>
DESIGNATION PAR VALUE AUTHORIZED
OF CLASS PER SHARE NUMBER OF SHARES
----------- --------- ----------------
<S> <C> <C>
Common Stock $1.00 300,000,000*
Preferred
Stock $1.00 10,000,000
</TABLE>
The preferences, limitations and relative rights of shares of each
class of capital stock shall be as follows:
A. COMMON STOCK.
(1) Voting. Except as otherwise provided by law and subject
to any voting rights of any series of Preferred Stock, only the
Common Stock shall be entitled to vote for the election of
directors of the Corporation and for all other corporate purposes.
Except as otherwise provided by law, upon any such vote, each
share of Common Stock shall have one vote.
(2) Dividends. Subject to any rights of any series of
Preferred Stock, the Common Stock shall be entitled to receive
such dividends as may be declared thereon from time to time by the
Board of Directors, in its discretion.
(3) Liquidation. In the event of the voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation, after there have been paid to or set aside for each
series of Preferred Stock the full preferential amounts, if any,
to which they are entitled, the Common Stock shall be entitled to
share ratably, according to the number of shares, in the remaining
assets of the Corporation, subject to any rights of any series of
Preferred Stock to participate therein.
B. PREFERRED STOCK.
The Board of Directors is expressly authorized, to the
fullest extent provided by the Wisconsin Business Corporation Law,
at any time, and from time to time, to provide for the issuance of
Preferred Stock in one or more series, with such designations,
preferences, limitations and relative rights as shall be stated in
the resolution or resolutions of the Board of Directors providing
for the issue thereof, including, without limitation, the number
of shares constituting such series; voting rights, if any, of the
shares of such series, provided that the shares of such series
will not be entitled to more than one vote per share when voting
as a single voting group with the Common Stock; rights relating to
redemption, exchange or conversion: (i) at the option of the
Corporation, a holder of shares, another person, or upon the
occurrence of a designated event or otherwise, (ii) for cash,
indebtedness, securities or other property, or (iii) in a
designated amount or in an amount determined under a formula, by
reference to extrinsic data or events or otherwise; rights to
distributions that may be cumulative, partially cumulative or
noncumulative; and preference over any other class or series with
respect to distributions.
-----------------------------
* The designation of 300,000,000 authorized shares of Common Stock
under Article 4 as shown in this Exhibit A is subject to the
approval by shareholders at the Annual Meeting of the proposed
amendment to Article 4 to increase the number of shares of
authorized Common Stock. If such amendment is not approved, the
number of shares of authorized Common Stock will be 150,000,000.
<PAGE> 27
FURTHER RESOLVED, that Article 5 of the Articles of Incorporation of the
Corporation be amended to read in its entirety as follows:
Holders of shares of capital stock shall not be entitled to any
preemptive right to acquire unissued shares of capital stock or
securities convertible into such shares or carrying a right to
subscribe to or acquire shares, except as may be provided by
contracts entered into by the Corporation with the approval of its
Board of Directors.
FURTHER RESOLVED, that Article 6 of the Articles of Incorporation of the
Corporation be amended by adding the following as paragraph C:
C. DIRECTORS ELECTED BY PREFERRED STOCK.
Notwithstanding the foregoing, whenever any one or more
series of Preferred Stock shall have the right, voting pursuant to
the terms of such series, to elect directors at any annual or
special meeting of shareholders, the number, election, term of
office, filling of vacancies and other features of such
directorships shall be governed by the terms of such series of
Preferred Stock. Unless expressly provided by such terms,
directors so elected shall not be divided into classes and, during
the prescribed terms of office of such directors, the Board of
Directors shall consist of such number of directors determined as
provided in Section A of this Article 6 plus the number of
directors determined as provided by the terms of the Preferred
Stock entitled to elect such directors.
A-2
<PAGE> 28
MGIC INVESTMENT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF MGIC INVESTMENT CORPORATION
The undersigned hereby appoints WILLIAM H. LACY 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 Vogel Hall, Marcus Center for the Performing Arts, 123 East State
Street, Milwaukee, Wisconsin, on Thursday, May 7, 1998, 9:00a.m. Central Time,
and at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2, 3 AND 4.
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.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
<TABLE>
<S><C>
MGIC INVESTMENT CORPORATION 1998 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2, 3 AND 4.
1. ELECTION OF DIRECTORS:
1 - JAMES A. ABBOTT 2 - JAMES D. ERICSON / / FOR all nominees / / WITHHOLD AUTHORITY
3 - DANIEL GROSS 4 - SHELDON B. LUBAR listed to the left (except to vote for all nominees
5 - EDWARD J. ZORE as specified below). listed to the left.
(Instructions: To withhold authority to vote
for any indicated nominee, write the number(s) ---------- > / /
of the nominee(s) in the box provided to the right.)
2. Approve the amendment to the Articles of
Incorporation to increase the authorized Common Stock. / / FOR / / AGAINST / / ABSTAIN
3. Approve the amendment to the Articles of
Incorporation to create a class of Preferred Stock. / / FOR / / AGAINST / / ABSTAIN
4. Ratify the appointment of Price Waterhouse LLP
as the independent accountants of the Corporation. / / FOR / / AGAINST / / ABSTAIN
5. In his discretion, each Proxy is authorized to
vote upon such other business as may properly come
before the meeting or any adjournment thereof.
Date _____________________________________ NO. OF SHARES
Check appropriate
box indicate changes below:
Address Change? / / Name Change? / /
/ /
SIGNATURE(S) IN BOX
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. 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 AS SUCH.
</TABLE>
