SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-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)(4) 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:
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 3,000,000 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 __,1998
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
MGIC Investment Corporation
MGIC Plaza
Post Office Box 488
Milwaukee, Wisconsin 53201
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are first being
mailed on or about March __, 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 in Milwaukee,
Wisconsin.
The record date is March 11, 1998 for determining shareholders
entitled to vote at the meeting. As of that date, __________ 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
proper 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 number of authorized shares of Common
Stock;
FOR--Approval of the proposed amendment to the Corporation's Articles
of Incorporation to authorize 3,000,000 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
a plurality or 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 a plurality or
of "votes cast."
The Corporation's Annual Report to Shareholders for the fiscal year
ended December 31, 1997 accompanies this Proxy Statement. However, 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.
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.
Shares Percent
Beneficially of
Name Owned Class
The Northwestern Mutual Life
Insurance Company ("NML")
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 (1) 20,938,400 18.4%
William H. Lacy (2) 419,010 *
Curt S. Culver (2) 149,810 *
J. Michael Lauer (2) 296,576 *
Lawrence J. Pierzchalski (2) 128,295 *
Gordon H. Steinbach (2) 325,284 *
All directors and executive officers as a 1,550,330 1.4%
group (20 persons) (2)(3)
___________
* 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) 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. Steinbach-206,400; and the Group-
1,200,870. Includes shares held in the Corporation's Profit Sharing
and Savings Plan and Trust as follows: Mr. Lauer-12,776; Mr.
Pierzchalski-4,325; Mr. Steinbach-15,884; and the Group-33,232.
Includes shares for which voting and investment power is shared as
follows: Mr. Lauer-2,400; Mr. Steinbach--___; and the Group--___.
Excludes shares, beneficial ownership of which is disclaimed, which
are held as custodian for children or owned by spouses or trusts as
follows: Mr. Lauer-5,800; Mr. Steinbach--___; and the Group--___.
(3) Includes an aggregate of 24,224 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 THE 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.
Shares
Benefi-
Name, Principal Occupation Director cially
and Other Information Since Owned(1)
NOMINATED FOR ELECTION FOR A TERM ENDING 2001
James A. Abbott, age 58, 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. 1989 6,628(2)
James D. Ericson, age 62, 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 1985 -0-(3)
University of Iowa.
Daniel Gross, age 55, 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. He
also has been President and Chief
Executive Officer of Enhance
Reinsurance Company and Asset Guaranty
Insurance Company 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. 1997 2,000(2)
Sheldon B. Lubar, age 68, 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. 1991 26,648(2)(4)
Edward J. Zore, age 52, has been 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 before that 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. 1990 -0-(3)
DIRECTORS CONTINUING IN OFFICE
Term Ending 2000
Karl E. Case, age 51, 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. and Century Bank
& Trust. 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. 1991 2,648(2)
William A. McIntosh, age 58, is a
financial services consultant. Mr.
McIntosh was an executive committee
member and a managing director at
Salomon Brothers, 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. 1996 4,234(2)
Leslie M. Muma, age 53, has been
President and Chief Operating Officer of
Fiserv, Inc., a financial industry
automation products and services firm,
since 1984. 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. 1995 10,588(2)
Peter J. Wallison, age 56, has been a
partner in the law firm of Gibson, Dunn
& Crutcher since April 1987, and before
that 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. 1990 2,578(2)
DIRECTORS CONTINUING IN OFFICE
Term Ending 1999
Mary K. Bush, age 49, 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 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. 1991 2,000(2)
David S. Engelman, age 60, 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. He is a member of the Risk
Management Committee of the Board of
Directors. Mr. Engelman is a graduate
of the University of Arizona. 1993 6,808(2)
Kenneth M. Jastrow, II, age 50, has been
Chief Financial Officer and Group Vice
President of Temple-Inland Inc., a
holding company with interests in paper,
forest products and financial services,
since 1992. 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. 1994 2,550(2)
William H. Lacy, age 53, has been
President and Chief Executive Officer of
the Corporation since 1987. Mr. Lacy is
a Director of Firstar Bank Milwaukee.
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. 1984 419,010(5)
____________
(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.
(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 which
he or she was a director, except Dr. Case who has attended ___% of
meetings since being elected a director in 1991 and who was on sabbatical
outside the United States during 1997.
The Board of Directors has established a number of committees to deal
with certain areas of responsibility, including 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; the adequacy and
appropriateness of the Corporation's accounting and financial policies and
practices; and the adequacy of statements of policy regarding conflicts of
interest and business conduct, and the means used to monitor compliance
and grant exceptions.
The members of the Management Development Committee are Messrs.
Lubar, Gross, and Muma. The 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. Messrs. Case, Jastrow, Lubar, and Muma have elected to
participate in this plan. 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 Coporation'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 and 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 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. The Management Development Committee, in
its discretion, 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.
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 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
encourage significant ownership 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 1994, other than an option granted to a newly hired
senior executive, and 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 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, applicable to
publicly-held corporations, the annual corporate federal income tax
deduction for compensation paid to any of the five most highly compensated
executive officers is limited to $1 million, unless certain requirements
are met. During 1997, no senior 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, 1991, 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.
MEASUREMENT
PERIOD S&P 500
(FISCAL YEAR MGIC INVESTMENT FINANCIAL
COVERED) CORPORATION (DIVERSIFIED) S&P 500
12/31/92 $100 $100 $100
12/31/93 115 119 110
12/31/94 131 114 111
12/31/95 216 185 153
12/31/96 303 237 189
12/31/97 532 373 251
EXECUTIVE COMPENSATION
The following tables provide information concerning compensation,
option grants and aggregated stock option exercises, as well as
descriptions of the Corporation's Pension Plan ("Pension Plan") and
Supplemental Executive Retirement Plan ("Supplemental Plan") as they
relate to the Chief Executive Officer and the four other most highly
compensated executive officers of the Corporation. All Common Stock and
stock option references have been adjusted for the two-for-one stock
dividend which was paid June 2, 1997.
Summary Compensation Table
The following table summarizes information concerning compensation of
the Chief Executive Officer and the four other most highly compensated
executive officers of the Corporation or of Mortgage Guaranty Insurance
Corporation ("MGIC") for fiscal year 1997 and for the previous two fiscal
years.
Long-Term
Annual Compensation Compensation
Other
Annual Securities
Compen- Underlying
Name and Principal sation($) Stock All Other
Position Year Salary($) Bonus($) (1) Options(#) Compensation($)(2)
William H. Lacy 1997
President and Chief 1996 500,000 400,000 1679 -0- 69,768
Executive Officer of the 1995 486,542 400,000 1101 -0- 74,590
Corporation and Chairman and
Chief Executive Officer of
MGIC
Curt S. Culver 1997
Executive Vice President 1996 276,740 240,000 335 -0- 40,216
of the Corporation and 1995 219,769 184,000 156 -0- 16,317
President and Chief Operating
Officer of MGIC
J. Michael Lauer 1997
Executive Vice President 1996 227,308 184,000 737 -0- 28,390
and Chief Financial Officer 1995 217,846 121,000 346 -0- 28,503
of the Corporation and MGIC
Lawrence J. Pierzchalski 1997
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
Gordon H. Steinbach 1997
Executive Vice President- 1996 195,000 126,750 272 -0- 39,571
Credit Policy of MGIC 1995 195,000 107,250 206 -0- 39,598
____________
(1) The 1997 amounts shown in this column represent reimbursements during the fiscal year 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:
1997 Value of Split Supplemental
Profit Sharing Matching Dollar Long Term
Contributions 401(k) Life Insurance Disability Total Other
Name Paid in 1998 Contributions Premiums(a) Insurance Compensation
William H. Lacy $8,000 $1,600 $52,801 $5,683 $68,084
Curt S. Culver 8,000 1,600 24,253 -0- 33,853
J. Michael Lauer 8,000 1,600 19,132 -0- 28,732
Lawrence J. Pierzchalski 8,000 1,600 10,870 -0- 20,470
Gordon H. Steinbach 8,000 1,600 30,442 -0- 40,042
____________
(a) The amount shown represents the full dollar amount paid by or on
behalf of MGIC for the whole life portion of the split-dollar life
insurance. The premium attributed to the term portion of such
insurance was paid by the named individuals. MGIC will be reimbursed
for premiums paid upon the sooner of the retirement or termination of
employment of each of the insureds.
Option Grants During the Last Fiscal Year
The following table summarizes information with respect to stock
options awarded during 1997 to the Chief Executive Officer of the
Corporation and the four other most highly compensated executive officers
of the Corporation or MGIC.
Individual Grants(1) Grant Date
Value
% of Total
Options Grant Date
Granted to Present
Employees Exercise Expira- Value($)(2)
in Fiscal Price tion Exercise
Name Year ($/Share)(1) Date Price
William H. Lacy 15.1 36.4375 1/22/07 4,108,800
Curt S. Culver 12.6 36.4375 1/22/07 3,424,000
J. Michael Lauer 5.0 36.4375 1/22/07 1,369,600
Lawrence J.
Pierzchalski 5.0 36.4375 1/22/07 1,369,600
Gordon H. Steinbach 3.8 36.4375 1/22/07 1,027,200
(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 $36.4375 per share, which was the
closing price of the Common Stock on the New York Stock Exchange on
the date of grant. The options become immediately vested and
exercisable upon a change in control of the Corporation, or as and to
the extent determined by the Management Development Committee upon
the occurrence of certain specified transactions affecting the
Corporation.
(2) Grant date present values were determined under the Black-Scholes
option pricing model using the following assumptions: expected stock
price volatility of 0.2418; all options are exercised at the end of
the ninth year of the option term; a divided yield of 0.50%; and a
risk-free rate of return of 6.60%, which was the yield on a U.S.
Government Zero Coupon Bond with a maturity equal to the term of the
grant. No adjustments are made for risk of forfeiture or non-
transferability. Determining the grant date present value by use of
this model is permitted by rules of the Securities and Exchange
Commission; however, use of this model does not constitute an
endorsement or an acknowledgement that such model can accurately
determine the value of options. The actual value realized from an
option will be measured by the difference between the stock price and
the exercise price on the date the option is exercised.
Aggregated Stock Option Exercises in the Last Fiscal Year and Option
Values at December 31, 1997
The following table summarizes information with respect to stock options
held at December 31, 1997, and stock options exercised during 1997 by the
Chief Executive Officer of the Corporation and the four other most highly
compensated executive officers of the Corporation or MGIC.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1997 December 31, 1997
Shares
Acquired
on Exercise Value Exer- Unexer- Exer- Unexer-
During Realized cisable cisable cisable cisable
Name 1997(#) ($)(1) (#) (#)(2) ($)(2) ($)(2)(3)
William H. Lacy 201,480 5,993,113 201,480 329,040 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
Gordon H.
Steinbach 40,000 1,410,852 170,320 89,680 10,126,330 3,313,720
____________
(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"). Each eligible employee, including the
executive officers named in the above tables, earns 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 $_____________ 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.
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 $____________
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 Steinbach as of December 31, 1997 were $________,
$________, $________, $________ and $________ 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 Steinbach would have been entitled to receive
supplementary annual benefits under the Supplemental Plan of $________,
$________, $________, $________ and $________ 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 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 $________ 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, the Corporation's principal subsidiary, MGIC, purchased
long-term disability coverage for its employees from NML, and MGIC paid
NML an aggregate of $________ 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 $________ 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 Steinbach 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.
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 did not make any reimbursements to NML under the tax
sharing agreement.
During 1997, MGIC paid NML $________ 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 are 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. aggregating
$_____. 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.
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 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 to 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.
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.
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 3,000,000 shares of Preferred
Stock $1.00 par value. The resolutions to be voted upon to effect the
Preferred Stock amendment are 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
and as a separate series); 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. Shares of
Preferred Stock could also 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 shares that would dilute the interest in
the equity and voting power of a party seeking to gain control. The
Corporation is not aware of any effort to obtain control.
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 just the holders of shares of
Common Stock. The current provision of the Articles of Incorporation
providing 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.
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 THE 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.
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 __, 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 $5,500, 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.
EXHIBIT A
TEXT OF PROPOSED SHAREHOLDER RESOLUTIONS TO AMEND
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:
Designation Par Value Authorized
of Class Per Share Number of Shares
Common Stock $1.00 300,000,000 1
Preferred Stock $1.00 3,000,000
1 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 authorized Common Stock. If such amendment
is not approved, the number of shares of authorized Common Stock will
be 150,000,000.
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; 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.
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 term 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.
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, 9:00 a.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.
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
3 - Daniel Gross 4 - Sheldon B. Lubar
5 - Edward J. Zore
/__/ FOR all listed nominees /__/ WITHHOLD AUTHORITY to vote
for all listed nominees
(Instructions: To withhold authority to vote for any indicated nominee,
write the numbers 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.
Address Change? Date _______________ NO. OF SHARES
Mark Box /__/
Indicate changes below: _______________________
/ /
/_____________________/
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.
