MGIC INVESTMENT CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(a) The
purpose of the MGIC Investment Corporation Deferred Compensation
Plan for Non-Employee Directors (the “Plan”) is to
promote the best interests of MGIC Investment Corporation, a
Wisconsin corporation (together with any successor thereto, the
“Company”), and its shareholders by providing a means
to attract and retain directors of the highest capabilities who are
not employees of the Company or of any Affiliate (as defined below)
through establishing a mechanism for annual grants of share units
to the Company’s Non-Employee Directors and to provide such
directors with an opportunity to defer all or any portion of their
compensation for services as a member of the Board of Directors of
the Company that would otherwise be paid currently for payment upon
death, disability, termination of services or a designated
distribution date.
(b) Effective
as of January 1, 2005, the Plan is divided into two
components. The Plan, as in effect on October 3, 2004 (the
“Predecessor Plan”), shall govern Share Accounts and
Interest-Bearing Accounts as of December 31, 2004, including
subsequent net changes in value and net earnings of such Accounts.
The Predecessor Plan, as set forth in Appendix 1 of this Plan,
governs all amounts considered by law to be deferred under the Plan
prior to January 1, 2005, and not subject to Section 409A
of the Internal Revenue Code of 1986, as amended (the
“Code”). If the Predecessor Plan is materially
modified, within the meaning of Code Section 409A and the
guidance thereunder, after October 3, 2004, the exemption from
regulation by Code Section 409A may be lost.
(c) Effective
as of January 1, 2005, the Plan is continued on a prospective
basis, as set forth herein.
As
used in the Plan, the following terms shall have the respective
meanings set forth below:
(a)
“Administrator” shall mean the Compensation
Committee.
(b)
“Affiliate” shall mean any entity that, directly or
through one or more intermediaries, is controlled by, controls, or
is under common control with, the Company.
(c)
“Annual Grant” is defined in Section 4(a)
hereof.
(d)
“Annual Grant Notice” is defined in Section 4(c)
hereof.
(e)
“Annual Grant Share Units” is defined in Section 4(a)
hereof.
(f)
“Change in Control” is defined in the Annex attached
hereto.
(g)
“Commission” shall mean the United States Securities
and Exchange Commission or any successor agency.
(h)
“Committee Action” is defined in Section 4(b)
hereof.
(i)
“Common Stock” shall mean the common stock, $1.00 par
value, of the Company.
(j)
“Company” is defined in Section 1
hereof.
(k)
“Compensation” shall mean those fees to which
Non-Employee Directors are entitled for services rendered on the
Board of Directors of the Company or any subsidiary or any
committee of such Board or subsidiary, including attendance fees,
fees for acting as committee chair or member, as well as annual
retainer fees, but excluding the Annual Grant.
(l)
“Compensation Committee” shall mean the Management
Development, Nominating and Governance Committee of the Board of
Directors of the Company or, if such committee shall cease to have
oversight responsibility for the compensation of the
Company’s Chief Executive Officer and other members of senior
management, the committee of the of Board of Directors of the
Company that succeeds the Management Development, Nominating and
Governance Committee with respect to such oversight.
(m)
“Disability” shall mean disability as set forth in Code
Section 409A(a)(2)(C)(i).
(n)
“Distribution Date” shall mean the first of the month
following the earliest to occur of the following:
(i)
The Non-Employee Director’s death.
(ii)
The Non-Employee Director’s Disability.
(iii)
The termination of the Non-Employee Director’s service as a
member of the Board of Directors of the Company, whether by
retirement or otherwise, provided the termination of service is a
good-faith and complete termination of the relationship with the
Company in accordance with Treasury Regulation 1.409A-1(h),
which is incorporated herein by this reference.
(iv)
The date (if any) specified by the Non-Employee Director in
accordance with Section 10 hereof.
(o)
“Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended from time to time.
(p)
“Interest-Bearing Account” is defined in Section 8
hereof.
(q)
“Non-Employee Director” is defined in Section 5
hereof.
2
(r)
“Notice” is defined in Section 6(a) hereof.
(s)
“Plan” is defined in Section 1 hereof.
(t)
“Plan Year” shall mean the calendar fiscal year of the
Company.
(u)
“Share Account” is defined in Section 7(a)
hereof.
Section 3.
Administration
(a) The
Plan shall be administered by the Administrator. Subject to the
terms of the Plan and applicable law, the Administrator shall have
full power and authority to interpret the Plan, to prescribe, amend
or rescind rules and regulations relating to it and to make all
other determinations necessary or advisable for the administration
of the Plan. The Plan shall be construed so that transactions under
the Plan will be exempt from Section 16(b) of the Exchange Act.
Unless otherwise expressly provided in the Plan, all
determinations, interpretations and other decisions by the
Administrator shall be final, conclusive and binding on all
persons.
(b) The
Plan is intended to comply with the provisions of Code
Section 409A. The Company does not guarantee the tax treatment
or tax consequences associated with any payment or benefit,
including but not limited to consequences related to Code
Section 409A. To the fullest possible extent permissible, the
terms of this Plan shall be interpreted in a manner which avoids
violation of Code Section 409A.
Section 4.
Annual Grant of Share Units
(a) Each
year, beginning in 2009, each Non-Employee Director shall receive a
grant (an “Annual Grant”) of share units, but subject
to the approval of the Annual Grant by the Compensation Committee.
Each Annual Grant shall be made on a date and valued in an amount
designated by the Compensation Committee. For each Annual Grant,
the number of share units credited to each Non-Employee
Director’s Share Account shall equal (i) the value of
the Annual Grant divided by (ii) the closing price per share of the
Common Stock as reported on the New York Stock Exchange on the date
of the Annual Grant. The share units awarded pursuant to this
Section 4 shall be referred to “Annual Grant Share
Units.”
(b) Annual
Grant Share Units granted to a Non-Employee Director shall vest as
provided in the action of the Compensation Committee approving the
Annual Grant (“Committee Action”).
For
purposes of the Plan and each Committee Action, except as provided
below in the last sentence of this paragraph,
“retirement” of a Non-Employee Director means
termination of service as a director of the Company, if
(a) the Non-Employee Director at the time of termination was
ineligible for continued service as a director under the
Company’s retirement policy; or (b) the Non-Employee
Director had served as a director of the Company for at least two
years (except that such two-year period shall not apply to a
retirement that occurs after a Change in Control) and such
termination is (i) due to the Non-Employee 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 of the Company;
(ii) due to the fact
3
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 Non-Employee Director. It is understood that
a termination of service as a director as a result of
(i) failure to get a Majority Vote, as defined in the
Company’s Articles of Incorporation or (ii) any
requirement under the Company’s Corporate Governance
Guidelines to offer to resign shall be described within clause
(iii) of the immediately preceding sentence. In the case of
any Annual Grant Notice that is delivered (or as provided in
subsection (c)(i), deemed delivered) with respect to an Annual
Grant during the calendar year in which such Annual Grant is made
(such Notice is a “Same Year Notice”), (i) termination
of service as director before the end of the vesting period shall
be deemed to be retirement only if due to death or Disability and
(ii) notwithstanding that service as a director continues
after a Change in Control, the occurrence of a Change in Control
shall be deemed to be retirement and a director shall be deemed to
have ceased to be a director of the Company after Change in
Control.
If
a Non-Employee Director ceases to be a director of the Company for
any reason other than retirement before the vesting date
established in accordance with Section 4(b), the applicable
Annual Grant Share Units shall be forfeited by the Non-Employee
Director unless the forfeiture is waived by the Compensation
Committee after considering the implications of such waiver under
Section 409A of the Code.
(c)
(i) Each Non-Employee Director shall elect, within the date or
dates set forth in the Annual Grant Notice, the date or dates upon
which Annual Grant Share Units shall be distributed. Such election
shall be made by written notice to the Company in substantially the
form attached hereto as Exhibit A (“Annual Grant
Notice”). Each Annual Grant Notice shall be delivered to the
Company as provided for in the applicable Committee Action. An
Annual Grant Notice (including an Annual Grant Notice deemed
delivered as provided in the next sentence and a Notice delivered
as provided in clause (ii) below) is irrevocable with respect
to the Annual Grant to which such Annual Grant Notice is effective
and will remain in effect as to all future Annual Grants, except
that if a Non-Employee Director delivers an Annual Grant Notice to
the Administrator in connection with a subsequent Annual Grant and
such Annual Grant Notice elects distribution on a date or dates
that are different from the last Annual Grant Notice delivered (or
deemed delivered as provided in the next sentence) to the
Administrator in connection with a prior Annual Grant, such new
Annual Grant Notice will apply to such subsequent Annual Grant and
remain in effect as contemplated above. If no Annual Grant Notice
is delivered by a Non-Employee Director to the Administrator in
connection with the first Annual Grant to such Non-Employee
Director, such Director shall be deemed to have delivered an Annual
Grant Notice electing distribution in a single installment on the
tenth business day after the vesting date provided in the Committee
Action with respect to such Annual Grant.
(ii) Notwithstanding
the election timing contemplated by clause (i) of subsection
(c), any Non-Employee Director may deliver an Annual Grant Notice
with respect to an Annual Grant for which there has not been any
Committee Action to the Company’s Secretary no later than
December 31 of the year prior to the year in which there is
Committee Action with respect to such Annual Grant.
4
(iii) In
the case of any Same Year Notice, notwithstanding the date or dates
on which the Annual Grant Share Units would otherwise be
distributed, if retirement occurs during the vesting period, the
date of distribution shall be the tenth business day after such
retirement.
Any
member of the Company’s Board of Directors who is not an
employee of the Company or of any Affiliate (a “Non-Employee
Director”) is eligible to participate in the Plan.
Section 6.
Election to Defer Compensation
(a) Each
Non-Employee Director may elect to defer all or any portion of his
or her Compensation for services rendered during a Plan Year
commencing on the first day of the Plan Year following the date
such Non-Employee Director’s deferral election is delivered
to the Administrator. Any such deferral election shall be made by
written notice to the Company in substantially the form attached
hereto as Exhibit B (“Notice”).
(b) A
deferral election (including, without limitation, the amount
deferred as specified in each Non-Employee Director’s Notice)
is irrevocable and will remain in effect as to all future Plan
Years and deferred amounts until a Non-Employee Director delivers
an amended Notice to the Administrator and such new irrevocable
election or revocation becomes effective. Any amended Notice shall
be effective with respect to Compensation earned on and after the
first day of the Plan Year beginning after the date the amended
Notice is delivered to the Administrator.
(c) The
most recent Notice provided under this Plan, or the Predecessor
Plan prior to January 1, 2005, shall be a Non-Employee
Director’s initial Notice under this Plan.
(d) If
a newly-elected Non-Employee Director completes his or her initial
Notice not later than thirty (30) days after the date of his
or her election as Director, such Notice shall be effective as to
Compensation earned for services performed on and after the first
day of the first Plan Year quarter beginning after such Notice is
delivered to the Administrator.
Section 7.
Bookkeeping Share Unit Accounts
(a) The
Company shall establish and maintain a bookkeeping share unit
account (“Share Account”) for each Non-Employee
Director participating in the Plan. The Share Account shall reflect
all entries required to be made pursuant to (i) Annual Grants
pursuant to Section 4, (ii) except as set forth in
Section 8(a), the Non-Employee Director’s Notice and
amended Notices, if any, and (iii) pursuant to this Plan.
Non-Employee Directors shall have no rights as stockholders of the
Company with respect to share units credited to their Share
Accounts.
(b) At
the end of each Plan Year quarter ending with the quarter ending
December 31, 2008, a Non-Employee Director’s Share
Account shall be credited with a number of share units equal to (i)
the portion of the Non-Employee Director’s Compensation for
such quarter designated in his or her then effective Notice to be
deferred and converted into share
5
units divided
by (ii) the closing price per share of the Common Stock on the
New York Stock Exchange on the last trading day of such
quarter.
(c) Whenever
cash dividends or other distributions are paid by the Company on
its outstanding Common Stock, there shall be credited to each
Non-Employee Director’s Share Account additional share units
equal to (i) the aggregate dividend or distribution that would
be payable on a number of outstanding shares of Common Stock equal
to the number of share units in such Non-Employee Director’s
Share Account on the record date for the dividend divided by
(ii) the closing price per share of the Common Stock as
reported on the New York Stock Exchange on the last trading day
immediately preceding the date of payment of the
dividend.
(d) The
number of share units credited to each Non-Employee
Director’s Share Account shall be adjusted as appropriate in
the event of any changes in the outstanding Common Stock by reason
of any stock dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of stock or other similar
corporate change.
Section 8.
Interest-Bearing Accounts
(a) The
Company shall establish and maintain a bookkeeping interest-bearing
account (“Interest-Bearing Account”) for each
Non-Employee Director participating in the Plan. The
Interest-Bearing Account shall reflect all entries required to be
made pursuant to the Non-Employee Director’s Notice and
amended Notices, if any, and pursuant to this Plan. Notwithstanding
any Notice and amended Notices, if any, effective on and after
January 1, 2009 that include an election to have amounts
credited to a Share Account, all such amounts shall be made
credited to such Non-Employee Director’s Interest-Bearing
Account.
(b) At
the end of each Plan Year quarter, a Non-Employee Director’s
Interest-Bearing Account shall be credited with the portion of the
Non-Employee Director’s Compensation for such quarter
designated in his or her then effective Notice to be deferred and
credited to his or her Interest-Bearing Account. A Non-Employee
Director’s Interest-Bearing Account balance at the beginning
of each Plan Year quarter shall also be credited at the end of such
quarter with interest for the quarter at a rate equal to the Six
Month U.S. Treasury Bill Rate determined at the closest preceding
January 1 or July 1 of each year.
Section 9.
Account Transfer
A
Non-Employee Director may not transfer or convert a Share Account
to an Interest-Bearing Account or vice versa.
Section 10. Distributions
(a) A
Non-Employee Director may designate on his or her initial Notice a
Distribution Date for the commencement of payment of amounts
credited to his or her Share Account and Interest-Bearing Account;
provided, however, that amounts associated with Annual Grant Share
Units shall be distributed in accordance with the applicable Annual
Grant Notice(s). All Distribution Date elections made by
Non-Employee Directors are irrevocable; provided, however, that
each Non-Employee Director who has an initial Notice on file with
the Plan before
6
January 1,
2009, may, not later than December 31, 2008, designate a
Distribution Date that shall supersede any previous designation of
a Distribution Date. Such designation shall be irrevocable
effective January 1, 2009.
(b) A
Non-Employee Director shall direct in his or her initial Notice
whether distributions of the amount(s) accumulated in his or her
Share Account (other than amounts associated with Annual Grant
Share Units, which shall be distributed in accordance with the
applicable Annual Grant Notice(s)) and/or Interest-Bearing Account
are to be made in (i) a lump sum, payable on the first
business day of the calendar month following the applicable
Distribution Date, or (ii) up to ten (10) annual
installments commencing on the first business day of the calendar
month following the applicable Distribution Date and continuing on
the appropriate number of consecutive anniversaries of such date.
If a Non-Employee Director receives distributions on an installment
basis, whether pursuant to a Notice or an Annual Grant Notice,
amounts remaining in his or her Share Account and/or
Interest-Bearing Account before payment in full is completed shall
continue to be credited, as appropriate, with (i) additional
share units in the event cash dividends are paid by the Company and
shall be appropriately adjusted in the event of any changes in the
outstanding Common Stock in accordance with Sections 7(c) and 7(d),
respectively, hereof and/or (ii) interest in accordance with
Section 8(b) hereof. All designations of a form of payment shall be
irrevocable; provided, however, that each Non-Employee Director who
has an initial Notice on file with the Plan before January 1,
2009, may, not later than December 31, 2008, designate a form
of payment that shall supersede any previous designation of a form
of payment. Such designation shall be irrevocable effective
January 1, 2009.
(c) All
distributions made pursuant to the Plan shall be made in cash and,
if appropriate, will be deemed to be made from the Share Accounts
and the Interest-Bearing Accounts pro rata, excluding, for purposes
of such pro rata calculations, the portion of the Share Accounts
attributable to Annual Grants. When distributions are made from a
Share Account, the Company shall pay on the applicable date an
amount in cash equal to the average of the closing price per share
of the Common Stock on the New York Stock Exchange for the five
(5) consecutive trading days immediately preceding the date of
distribution multiplied by the number of share units (i.e., shares
of Common Stock since each unit represents one share) that would be
otherwise distributable.
(d) If
the Distribution Date is the first day of the month following the
Non-Employee Director’s death or a fixed date which in fact
occurs after the Non-Employee Director’s death or if at the
time of death the Non-Employee Director was receiving distributions
in installments, the balance remaining in the Non-Employee
Director’s Share Account and/or Interest-Bearing Account
shall be distributed to such beneficiary or beneficiaries as such
Non-Employee Director shall have designated by an instrument in
writing filed with the Company prior to the Non-Employee
Director’s death. All distributions to the Non-Employee
Director’s beneficiary or beneficiaries shall be in a lump
sum and will be made as soon as practicable after the Non-Employee
Director’s death. In the absence of an effective beneficiary
designation, the Non-Employee Director’s Share Account and/or
Interest-Bearing Account balance(s) shall be distributed to his or
her estate.
7
Section 11.
Amendments and Termination.
The
Board of Directors of the Company hereby reserves the right to
amend this Plan from time to time and to terminate this Plan at any
time without the consent of the Non-Employee Directors or their
beneficiaries; provided, however, that no amendment or termination
may reduce any Share Account and/or Interest-Bearing Account
balance accrued on behalf of a Non-Employee Director based on
deferrals already made, or divest any Non-Employee Director of
rights to which he or she would have been entitled if the Plan had
been terminated immediately prior to the effective date of such
amendment.
(a) Assignment.
Neither the Non-Employee Director, nor his or her beneficiary, nor
his or her estate shall have any right or power to transfer,
assign, pledge, encumber or otherwise dispose of any rights
hereunder and any such attempt to assign, transfer, pledge or other
conveyance shall not be recognized by the Company. The rights of a
Non-Employee Director hereunder are exercisable during the
Non-Employee Director’s lifetime only by him or her or his or
her guardian or legal representative.
(b) Non-Employee
Directors’ Rights Unsecured. The right of any Non-Employee
Director or his or her beneficiary to receive a distribution
hereunder shall be an unsecured claim against the general assets of
the Company, and neither the Non-Employee Director nor any
beneficiary shall have any right, title or interest in or against
any amount credited to his or her Share Account, his or her
Interest-Bearing Account or any other specific assets of the
Company prior to the payment thereof to such person.
(c) Funding.
This Plan is unfunded and is maintained by the Company for the
purpose of providing deferred compensation to Non-Employee
Directors. Nothing contained in this Plan and no action taken
pursuant to its terms shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company
and any Non-Employee Director or his or her beneficiary, or any
other person. The Company may authorize the creation of a trust or
other arrangement to assist the Company in meeting the obligations
created under the Plan. Any liability to any person with respect to
the Plan shall be based solely upon any contractual obligations
that may be created pursuant to the Plan. No obligation of the
Company hereunder shall be deemed to be secured by any pledge of,
or other encumbrance on, any property of the Company.
(d) Withholding
for Taxes. No later than the date as of which an amount first
becomes includable in the gross income of the Non-Employee Director
for Federal income tax purposes with respect to any participation
under the Plan, the Non-Employee Director shall pay to the Company,
or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such
amount.
(e) Costs
of Administration. Costs of administration of the Plan will be paid
by the Company.
8
(f) Benefit
Statements. The Company shall provide statements with respect to
Share Accounts and/or Interest-Bearing Accounts to participating
Non-Employee Directors on a periodic basis, but not less than
annually, in such form and at such time as it deems
appropriate.
(g) Governing
Law. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Wisconsin and applicable
federal law.
(h) Severability.
If any provision of the Plan is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction, or as to any
person, or would disqualify the Plan under any law deemed
applicable by the Administrator, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be
so construed or deemed amended without, in the determination of the
Administrator, materially altering the intent of the Plan, such
provision shall be stricken as to such jurisdiction or person and
the remainder of the Plan shall remain in full force and
effect.
(i) Headings.
Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision
thereof.
|
