Document:

exv10w1

 

Exhibit 10.1

RESTRICTED STOCK AGREEMENT

          THIS RESTRICTED STOCK AGREEMENT is made and entered into as of the date indicated on the
signature page under “Date of Agreement” by and between MGIC Investment Corporation, a Wisconsin
corporation (the “Company”), and the employee of Mortgage Guaranty Insurance Corporation whose
signature is set forth on the signature page hereto (the “Employee”).

INTRODUCTION

          The Company is awarding shares of the Company’s Common Stock, $1.00 par value per share (the
“Stock”), and to the extent, if any, indicated in this instrument, Restricted Stock Units (“RSUs”),
to the Employee under the MGIC Investment Corporation 2002 Stock Incentive Plan (the “Plan”) and
this Agreement.

          This Agreement consists of this instrument and the Incorporated Terms Dated As of January ___,
200___to Restricted Stock Agreement (the “Incorporated Terms”), which although not attached to this
instrument, are part of this Agreement and were provided to the Employee as indicated in Paragraph
1(b) below.

          The parties mutually agree as follows:

          1. Award of Restricted Stock or RSUs; Incorporated Terms.

               (a) Subject to the terms and conditions set forth herein, the Company awards the Employee the
number of shares of Stock as follows: the number of shares set forth after “Shares of Base
Restricted Stock” on the signature page shall be the “Base Restricted Stock”; the number of shares
set forth after “Shares of Matching Restricted Stock” on the signature page shall be the “Matching
Restricted Stock”; the number of shares set forth after “Shares of Time Vested Restricted Stock”
shall be the “Time Vested Restricted Stock”; and the number of shares set forth after “Shares of
Performance Restricted Stock” shall be the “Performance Restricted Stock,” except that if after
“Restricted Stock Units” on the signature page “Yes” appears, then all shares of Stock indicated
after “Time Vested Restricted Stock” shall be awarded in the form of RSUs. The term “Restricted
Stock” as used in the remainder of this Agreement shall be applied separately to the Base
Restricted Stock, the Matching Restricted Stock, the Time Vested
Restricted Stock and the Performance Restricted Stock as if the term
“Restricted Stock” were the term “Base Restricted Stock,” “Matching Restricted Stock,” “Time Vested
Restricted Stock,” or “Performance Restricted Stock,” as the case may be.

               (b) The Incorporated Terms are incorporated in this instrument with the same effect as if they
were physically set forth in this instrument. The Incorporated Terms and this instrument
constitute a single agreement which is referred to as “this Agreement.” The terms “herein,”
“hereof,” “above” and similar terms used in this Agreement refer to this Agreement as a whole. The
Incorporated Terms were attached to an e-mail sent in ___, 2005 to the Employee from the
Company’s Secretary which included other documents relating to the Restricted Stock. The Company
is hereby advising the Employee to

 

 

print and retain a copy of the Incorporated Terms. The Employee agrees if there is any
difference between the text of the Incorporated Terms obtained as indicated above and the text of
the Incorporated Terms retained by the Company’s Secretary, the text of the copy retained by the
Secretary will control.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer, and the Employee has hereunto affixed his hand and seal, all as of the day and
year set forth below.

	 	 	 	 	 
	

	 	Date of Agreement:
	 	As of January ___, 200_
	 
	 	 	 	 
	

	 	 	 	MGIC INVESTMENT CORPORATION
	 
	 	 	 	 
	

	 	 	 	By:
	

	 	 	 	 
	

	 	 	 	Title:
	 
	

	 	Sign Here:     
ð
	 	(SEAL)
	

	 	 	 	 
	

	 	 	 	Name:
	 
	 	 	 	 
	

	 	 	 	Shares of Base Restricted Stock:                                    
	 
	 	 	 	 
	

	 	 	 	Shares of Matching Restricted Stock:                            
	 
	 	 	 	 
	

	 	 	 	Shares of Time Vested Restricted Stock:                       
	 
	 	 	 	 
	

	 	 	 	Shares of Performance Restricted Stock:                       
	 
	 	 	 	 
	

	 	 	 	Restricted Stock Units:                                                     
	 `
	 	 	 	 
	

	 	 	 	Base Restricted Stock
	

	 	 	 	Release Date:           January ___, 200_
	 
	 	 	 	 
	

	 	 	 	Matching Restricted Stock
	

	 	 	 	Release Date:                January ___, 200_
	 
	 	 	 	 
	

	 	 	 	Time Vested Restricted Stock
	

	 	 	 	Release Date:           Each of January ___, 200_ — 20___
	 
	 	 	 	 
	

	 	 	 	Restricted Stock Units
	

	 	 	 	Settlement Date:
	 
	 	 	 	 
	

	 	 	 	Performance Restricted Stock
	

	 	 	 	Release Date:           Each of January ___, 200_ — 20___
	 
	 	 	 	 
	

	 	 	 	Target: $___
	 
	 	 	 	 
	

	 	 	 	*   *  
*   *

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	 	 	 	Beneficiary:
	

	 	 	 	

	 
	 	 	 	 
	

	 	 	 	Address of Beneficiary:
	 
	 	 	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	 	 	

	 
	 	 	 	 
	

	 	 	 	Beneficiary Tax Identification
	

	 	 	 	No:
	

	 	 	 	

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Exhibit 10.2

INCORPORATED TERMS

DATED AS OF __________, 200_

TO

RESTRICTED STOCK AGREEMENT

          The following are the “Incorporated Terms” referred to in the instrument entitled “Restricted
Stock Agreement” which refers to these Incorporated Terms and which has been signed by the Company
and the Employee (the “Base Instrument”). The Incorporated Terms and the Base Instrument
constitute a single agreement and that agreement consists of the Base Instrument and the
Incorporated Terms. The Incorporated Terms dovetail with the Base Instrument; because the last
paragraph of the Base Instrument is Paragraph 1, the Incorporated Terms begin with Paragraph 2.

               2. Restrictions. (a) Except as otherwise provided herein, the Base Restricted Stock,
the Matching Restricted Stock and the Time Vested Restricted Stock may not be sold, transferred or
otherwise alienated or hypothecated until, in the case of the Base Restricted Stock, the date set
forth after “Base Restricted Stock Release Date” on the signature page; in the case of the Matching
Restricted Stock, the date set forth after “Matching Restricted Stock Release Date” on the
signature page; and in the case of the Time Vested Restricted Stock, until the Release Date
determined as follows. For each date set forth after “Time Vested Restricted Stock Release Date”
on the signature page, divide the number of shares set forth after “Shares of Time Vested
Restricted Stock” by the sum of one and the difference between the latest year set forth after “Time Vested Restricted
Stock Release Date” on the signature page and the earliest year set forth thereafter. The
resulting quotient, rounded down to the nearest whole share, is the number of shares of Restricted
Stock that shall be released on each date set forth after “Time Vested Restricted Stock Release
Date” and such date shall be the Release Date for such shares (and only for such shares). The term
“Release Date” shall be applied separately to the Base Restricted Stock, the Matching Restricted
Stock and the Time Vested Restricted Stock as if the term “Release Date” were the term “Base
Restricted Stock Release Date,” the term “Matching Restricted Stock Release Date,” or the term
“Time Vested Restricted Stock Release Date,” as the case may be, and such application shall
correspond to the application of the term “Restricted Stock” as set forth in Paragraph 1(a) of the
Base Instrument.

          (b) The Release Date for RSUs shall be the same as the Release Date for the Time Vested
Restricted Stock. Except as otherwise provided herein, RSUs may not be sold, transferred or otherwise alienated or hypothecated
regardless of the occurrence of the Release Date.

          (c) Except as otherwise provided herein, the Performance Restricted Stock may not be sold,
transferred or otherwise alienated or hypothecated until the Release Date determined as follows.
For each date set forth after “Performance Restricted Stock Release Date” on the signature page,
multiply the number of shares set forth after “Shares of Performance Restricted Stock” on the
signature page by the quotient of dividing the EPS for the fiscal year of the Company ended on the
December 31 immediately preceding such date by the amount set forth after “Target” on the signature
page. The resulting product, rounded down to the nearest

 

 

whole share, is the number of shares of Restricted Stock that shall be released on the
corresponding date set forth after “Performance Restricted Stock Release Date” and such date shall
be the Release Date for such shares (and only for such shares). “EPS” means the Company’s diluted
earnings per share, determined in accordance with generally accepted accounting principles and
adjusted to exclude the after-tax effect of (i) realized gains and losses, and (ii) extraordinary
items, except that there shall not be excluded such items attributable to joint ventures. If by
any date set forth after “Performance Restricted Stock Release Date” the Company has not publicly
announced its diluted earnings per share, such date shall be two business days after such earnings
are publicly announced.

               3. Escrow. (a) Shares of Restricted Stock shall be issued (in certificate or
electronic form, at the discretion of the Company) as soon as practicable in the name of the
Employee but shall be held in an escrow arrangement by the transfer agent for the Stock, as escrow
agent. The Employee shall give the Company a stock power for such Stock duly endorsed in blank
which will be held in escrow for use in the event such Stock is forfeited in whole or in part.
Unless forfeited as provided herein, Restricted Stock shall cease to be held in escrow and
certificates for such Stock shall be delivered to the Employee, or in the case of his death, to his
Beneficiary (as hereinafter defined) on the Release Date or upon any other termination of the
restrictions imposed by Paragraph 2 hereof.

               (b) Unless forfeited as provided herein, on the Restricted Stock Units Release Date set forth
on the signature page or determined as provided thereon, RSUs shall be settled by the issuance of
shares of Stock and certificates for such Stock shall be delivered to the Employee, or in the case
of his death, to his Beneficiary.

               4. Transfer After Release Date; Securities Law Restrictions. Except as otherwise
provided herein, Restricted Stock shall become free of the restrictions of Paragraph 2 and be
freely transferable by the Employee on the Release Date. Notwithstanding the foregoing or anything
to the contrary herein, the Employee agrees and acknowledges with respect to any Restricted Stock
and any Stock delivered in settlement of RSUs that has not been registered under the Securities Act
of 1933, as amended (the “Act”) (i) he will not sell or otherwise dispose of such Stock except
pursuant to an effective registration statement under the Act and any applicable state securities
laws, or in a transaction which, in the opinion of counsel for the Company, is exempt from such
registration, and (ii) a legend will be placed on the certificates or other evidence for the
Restricted Stock to such effect.

               5. Termination of Employment Due to Death. If the Employee’s employment with the
Company or any of its subsidiaries is terminated because of death
prior to the Release Date, (i) the
restrictions of Paragraph 2 applicable to the Restricted Stock shall terminate on the date of death
and such Restricted Stock shall be free of such restrictions and, except as otherwise provided in
Paragraph 4 hereof, freely transferable and (ii) a Release Date
shall be deemed to have occurred for all RSUs.

               6. Forfeiture of Restricted Stock. (a) If the Employee’s employment with the Company
and all of its subsidiaries is terminated prior to the Release Date for any reason (including
without limitation, disability or termination by the Company and all subsidiaries

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thereof, with or without cause) other than death, all Restricted Stock and all RSUs shall be
forfeited to the Company on the date of such termination unless otherwise provided in subparagraph
(b) below, or unless the Management Development, Nominating and Governance Committee of the
Company’s Board of Directors (the “Management Development Committee”) or other Committee of such
Board administering the Plan (the Management Development Committee or such other Committee is
herein referred to as the “Committee”) determines, on such terms and conditions, if any, as the
Committee may impose, that all or a portion of the Restricted Stock and/or Stock deliverable on
settlement of RSUs shall be released to the Employee and the restrictions of Paragraph 2 applicable
thereto shall terminate. Absence of the Employee on leave approved by a duly elected officer of
the Company, other than the Employee, shall not be considered a termination of employment during
the period of such leave.

               (b) If the Employee’s employment with the Company and all of its subsidiaries terminates by
reason of retirement after reaching age 62 and after having been employed by the Company or any
subsidiary thereof for an aggregate period of at least seven years, such retirement shall not
result in forfeiture of the Performance Restricted Stock or of any RSUs (this provision does not
apply to the Base or Matching Restricted Stock nor does it apply to Time Vested Restricted Stock
not awarded in the form of RSUs) if no later than the date on which employment terminates, the
Employee enters into an agreement with the Company (which agreement shall be drafted by and
acceptable to the Company) under which the Employee agrees not to compete with the Company and its
subsidiaries during a period ending one year after the latest of the dates set forth after (i)
“Time Vested Restricted Stock Release Date” on the signature page, and (ii) “Performance Restricted
Stock Release Date” on the signature page, and the Employee complies with such agreement. If the
Employee enters into such a non-competition agreement and thereafter breaches the terms thereof,
the Restricted Stock and RSUs shall be forfeited. If the conditions in the second preceding
sentence are satisfied and the Employee complies with the terms of such agreement, upon the
Employee’s death, the provisions of Paragraph 5 shall apply as if the Employee’s employment with
the Company and its subsidiaries terminated because of such death.

               (c) Any shares of the Performance Restricted Stock for which a Release Date has not occurred
by the latest date set forth after “Performance Restricted Stock Release Date” on the signature
page (such date being subject to extension as contemplated in the last sentence of paragraph 2(b))
shall be forfeited to the Company, unless the Committee determines otherwise as contemplated in
subparagraph (a) above.

               (d) If Restricted Stock is forfeited, the Employee hereby appoints the Company, acting through
any Senior Vice President or more senior officer, as the Employee’s attorney-in-fact to transfer
such forfeited Restricted Stock to the Company.

               7. Beneficiary. (a) The person whose name appears on the signature page hereof after
the caption “Beneficiary” or any successor designated by the Employee in accordance herewith (the
person who is the Employee’s Beneficiary at the time of his death herein referred to as the
“Beneficiary”) shall be entitled to receive the Restricted Stock to be released to the Beneficiary
under Paragraphs 3 and 5 as a result of the death of the Employee and the Stock to be

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delivered in settlement of RSUs. The Employee may from time to time revoke or change his
Beneficiary without the consent of any prior Beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Employee’s death, and in no event shall any
designation be effective as of a date prior to such receipt.

                    (b) If no such Beneficiary designation is in effect at the time of an Employee’s death, or if
no designated Beneficiary survives the Employee or if such designation conflicts with law, upon the
death of the Employee, the Employee’s estate shall be entitled to receive the Restricted Stock and
the Stock to be delivered in settlement of RSUs. If the Committee is in doubt as to the right of
any person to receive such Restricted Stock or Stock, the Company may retain the same and any
distributions thereon, without liability for any interest thereon, until the Committee determines
the person entitled thereto, or the Company may deliver such all of such property and any
distributions thereon to any court of appropriate jurisdiction and such delivery shall be a
complete discharge of the liability of the Company therefor.

               8. Restricted Stock Legend. In addition to any legends placed on certificates for
Restricted Stock, each certificate or other evidence for shares of Restricted Stock shall bear the
following legend:

“The sale or other transfer of these shares of stock, whether voluntary, or by
operation of law, is subject to certain restrictions set forth in the MGIC
Investment Corporation 2002 Stock Incentive Plan and a Restricted Stock Agreement
between MGIC Investment Corporation and the registered owner hereof. A copy of
such Plan and such Agreement may be obtained from the Secretary of MGIC Investment
Corporation.”

When the restrictions imposed by Paragraph 2 hereof terminate, the Employee shall be entitled to
have the foregoing legend removed from such Stock.

               9. Voting
Rights; Dividends and Other Distributions; Rights of RSUs. (a) While the Restricted Stock
is subject to restrictions under Paragraph 2 and prior to any forfeiture thereof, the Employee may
exercise full voting rights for the Restricted Stock.

               (b) While the Restricted Stock is subject to the restrictions under Paragraph 2 and prior to
any forfeiture thereof, the Employee shall be entitled to receive all dividends and other
distributions paid with respect to the Restricted Stock. If any such dividends or distributions
are paid in Stock, such shares shall be subject to the same restrictions as the shares of
Restricted Stock with respect to which they were paid, including the requirement that Restricted
Stock be held in escrow pursuant to Paragraph 3 hereof.

               (c) Subject to the provisions of this Agreement, the Employee shall have, with respect to the
Restricted Stock, all other rights of holders of Stock.

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               (d) RSUs represent only the right to receive as Stock, on the terms provided herein, the
number of shares indicated after “Shares of Time Vested Restricted Stock” on the signature page,
and the Employee with respect to RSUs shall have no rights as a holder of Stock, including the
right to vote or to receive dividends, until certificates for such Stock are actually delivered in
settlement of the RSU. Notwithstanding the preceding sentence, on each date on which the Company
pays a dividend in cash on the Stock, the Company shall make a
payment in cash on the RSUs that are outstanding on the record date
for such dividend equal to
the dividend that would have been paid on the number of shares indicated after “Shares of Time
Vested Restricted Stock” on the signature page had such shares been outstanding.

               10. Tax Withholding. (a) It shall be a condition of the obligation of the Company to
release from escrow Restricted Stock to the Employee or the Beneficiary or to deliver Stock in
settlement of RSUs, and the Employee agrees, that the Employee shall pay to the Company upon its
demand, such amount as may be requested by the Company for the purpose of satisfying its liability
to withhold federal, state, or local income or other taxes incurred by reason of the award of the
Restricted Stock or RSUs, as a result of the termination of the restrictions on Restricted Stock
hereunder or the delivery of Stock in settlement of RSUs.

               (b) If the Employee does not make an election under Section 83(b) of the Internal Revenue Code
of 1986, as amended, with respect to the Restricted Stock awarded hereunder, the Employee may
satisfy the Company’s withholding tax requirements by electing to have the Company withhold that
number of shares of Restricted Stock otherwise deliverable to the Employee from escrow hereunder or
that number of shares of Stock that would otherwise be issued in settlement of RSUs, or to deliver
to the Company a number of shares of Stock, in each case, having a Fair Market Value on the day
prior to the Tax Date (as defined below) equal to the amount required to be withheld as a result of
the termination of the restrictions on such Restricted Stock. The election must be in writing and
be delivered to the Company prior to the Tax Date. If the number of shares so calculated to be
withheld shall include a fractional share, the Employee shall deliver cash in lieu of such
fractional share. All elections shall be made in a form approved by the Company. As used herein,
“Tax Date” means the date on which the Employee must include in his gross income for federal income
tax purposes the fair market value of the Restricted Stock, or Stock delivered in settlement of the
RSUs, over the purchase price therefor.

               11. Adjustments in Event of Change in Stock or Fiscal Year. In the event of any
change in the outstanding shares of Stock (“capital adjustment”) for any reason, including but not
limited to, any stock splits, stock dividend, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares or other similar event which, in the judgment of
the Committee, could distort the implementation of the award of Restricted Stock or the award of
RSUs or the realization of the objectives of such award, the Committee may make such adjustments in
the shares of Restricted Stock subject to this Agreement or in the shares deliverable on settlement
of RSUs, or in the terms, conditions or restrictions of this Agreement, including the Target set
forth on the signature page, as the Committee deems equitable. In addition, if the Company changes
its fiscal year from a year ending December 31, the Committee

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may make such adjustments in the Performance Restricted Stock Release Date and the Target as
the Committee deems equitable.

               12. Change in Control. If a “Change in Control of the Company” (as defined in the
Annex attached hereto) occurs, notwithstanding anything herein, the restrictions of Paragraph 2
applicable to the Restricted Stock shall terminate on the date of the Change in Control of the
Company and a Release Date shall be deemed to have occurred for all RSUs.

               13. Powers of Company Not Affected; No Right to Continued Employment.

               (a) The existence of the Restricted Stock or RSUs shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any combination, subdivision or
reclassification of the Stock or any reorganization, merger, consolidation, business combination,
exchange of shares, or other change in the Company’s capital structure or its business, or any
issue of bonds, debentures or stock having rights or preferences equal, superior or affecting the
Restricted Stock or any Stock to be issued in settlement of RSUs or, in both cases, the rights
thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding, whether of a similar character
or otherwise. The determination of the Committee as to any such adjustment shall be conclusive and
binding for all purposes of this Agreement.

               (b) Nothing herein contained shall confer upon the Employee any right to continue in the
employment of the Company or any subsidiary or interfere with or limit in any way the right of the
Company or any subsidiary to terminate the Employee’s employment at any time, subject, however, to
the provisions of any agreement of employment between the Company or any subsidiary and the
Employee. The Employee acknowledges that a termination of his or her employment could occur at a
time before which the restrictions referred to in Paragraph 2 above have lapsed, resulting in the
forfeiture of the Restricted Stock and RSUs by the Employee, unless otherwise provided herein. In
such event, the Employee will not be able to realize the value of the Restricted Stock or of the
Stock that underlies the RSUs nor will the Employee be entitled to any compensation on account of
such value.

               14. Interpretation by Committee. The Employee agrees that any dispute or disagreement
which may arise in connection with this Agreement shall be resolved by the Committee, in its sole
discretion, and that any interpretation by the Committee of the terms of this Agreement or the Plan
and any determination made by the Committee under this Agreement or the Plan may be made in the
sole discretion of the Committee and shall be final, binding, and conclusive. Any such
determination need not be uniform and may be made differently among Employees awarded Restricted
Stock and RSUs.

               15. Miscellaneous. (a) This Agreement shall be governed and construed in accordance
with the laws of the State of Wisconsin applicable to contracts made and to be performed therein
between residents thereof.

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               (b) The waiver by the Company of any provision of this Agreement shall not operate or be
construed to be a subsequent waiver of the same provision or waiver of any other provision hereof.

               (c) The Restricted Stock and RSUs shall be deemed to have been awarded pursuant to the Plan
and is subject to the terms and conditions thereof. In the event of any conflict between the terms
hereof and the provisions of the Plan, the terms and conditions of the Plan shall prevail. Any and
all terms used herein, unless specifically defined herein shall have the meaning ascribed to them
in the Plan. A copy of the Plan is available on request of the Employee made in writing or by
e-mail to the Company’s Secretary.

               (d) Any notice, filing or delivery hereunder or with respect to Restricted Stock shall be
given to the Employee at either his usual work location or his home address as indicated in the
records of the Company, and shall be given to the Committee or the Company at 250 East Kilbourn
Avenue, Milwaukee 53202, Attention: Secretary. All such notices shall be given by first class
mail, postage pre-paid, or by personal delivery.

               (e) This Agreement shall be binding upon and inure to the benefit of the Company and its
successors and assigns and shall be binding upon and inure to the benefit of the Employee, the
Beneficiary and the personal representative(s) and heirs of the Employee, except that the Employee
may not transfer any interest in any Restricted Stock prior to the release of the restrictions
imposed by Paragraph 2 and nor may the Employee transfer any interest in any RSUs.

               (f) As a condition to the grant of the Restricted Stock and RSUs, the Employee must execute an
agreement not to compete in the form provided to the Employee by the Company.

               The end of Paragraph 15 is the end of the Incorporated Terms. The remainder of the Agreement
is contained in the Base Instrument.

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ANNEX

Definition of “Change in Control of the Company” and Related Terms

     1 Change in Control of the Company. A “Change in Control of the Company” shall be
deemed to have occurred if an event set forth in any one of the following paragraphs shall have
occurred:

     (i) any Person (other than (A) the Company or any of its subsidiaries, (B) a
trustee or other fiduciary holding securities under any employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock in the Company (“Excluded Persons”)) is or
becomes the Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after July 22, 1999, pursuant
to express authorization by the Board of Directors of the Company (the “Board”) that
refers to this exception) representing more than 50% of the total fair market value
of the stock of the Company or representing 50% or more of the total voting power of
the stock of the Company; or

     (ii) the following individuals cease for any reason to constitute a majority of
the number of directors of the Company then serving: (A) individuals who, on July
22, 1999, constituted the Board and (B) any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the Act) whose appointment or election by the Board or
nomination for election by the Company’s shareholders was approved by a vote of at
least a majority of the directors then still in office who either were directors on
July 22, 1999, or whose initial appointment, election or nomination for election as a
director which occurred after July 22, 1999 was approved by such vote of the
directors then still in office at the time of such initial appointment, election or
nomination who were themselves either directors on July 22, 1999 or initially
appointed, elected or nominated by such majority vote as described above ad infinitum
(collectively the “Continuing Directors”); provided, however, that individuals who
are appointed to the Board pursuant to or in accordance with the terms of an
agreement relating to a merger, consolidation, or share exchange involving the
Company (or any direct or indirect subsidiary of the Company) shall not be Continuing
Directors for purposes of this Agreement until after such individuals are first
nominated for election by a vote of at least a majority of the then Continuing
Directors and are thereafter elected as directors by the

Annex - Page 1 of 4

 

 

shareholders of the Company at a meeting of shareholders held following
consummation of such merger, consolidation, or share exchange; and, provided further,
that in the event the failure of any such persons appointed to the Board to be
Continuing Directors results in a Change in Control of the Company, the subsequent
qualification of such persons as Continuing Directors shall not alter the fact that a
Change in Control of the Company occurred; or

     (iii) a merger, consolidation or share exchange of the Company with any other
corporation is consummated or voting securities of the Company are issued in
connection with a merger, consolidation or share exchange of the Company (or any
direct or indirect subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (A) a merger, consolidation or share exchange which would
result in the voting securities of the Company entitled to vote generally in the
election of directors outstanding immediately prior to such merger, consolidation or
share exchange continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent thereof) at
least 50% of the combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof entitled to vote generally in the
election of directors of such entity or parent outstanding immediately after such
merger, consolidation or share exchange, or (B) a merger, consolidation or share
exchange effected to implement a recapitalization of the Company (or similar
transaction) in which no Person (other than an Excluded Person) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after July 22, 1999, pursuant
to express authorization by the Board that refers to this exception) representing at
least 50% of the combined voting power of the Company’s then outstanding voting
securities entitled to vote generally in the election of directors; or

     (iv) the sale or disposition by the Company of all or substantially all of the
Company’s assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), other than a sale or disposition by the Company of
all or substantially all of the Company’s assets to an entity of which at least 75%
of the combined voting power of the voting securities entitled to vote generally in
the election of directors (or such lower percentage as is determined under the IRS
Notice) immediately after such sale are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such sale. It is
understood that in no event shall a sale or disposition of assets be considered to
be a sale of substantially all of the assets unless the assets sold or disposed of
have a total gross fair market value of at least 40% of the total gross fair market
value of all of the Company’s assets immediately prior to such sale or disposition.

Annex - Page 2 of 4

 

 

     2 Related Definitions. For purposes of this Annex, the following terms, when
capitalized, shall have the following meanings:

     (i) Act. The term “Act” means the Securities Exchange Act of 1934, as
amended.

     (ii) Affiliate and Associate. The terms “Affiliate” and “Associate”
shall have the respective meanings ascribed to such terms in Rule l2b-2 of the
General Rules and Regulations under the Act.

     (iii) Beneficial Owner. A Person shall be deemed to be the “Beneficial
Owner” of any securities:

     (a) which such Person or any of such Person’s Affiliates or Associates
has the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, (A)
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person’s Affiliates or Associates until
such tendered securities are accepted for purchase, or (B) securities
issuable upon exercise of Rights issued pursuant to the terms of the
Company’s Rights Agreement, dated as of July 22, 1999, between the Company
and Wells Fargo Bank Minnesota, National Association (as successor Rights
Agent), as amended from time to time (or any successor to such Rights
Agreement), at any time before the issuance of such securities;

     (b) which such Person or any of such Person’s Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has
“beneficial ownership” of (as determined pursuant to Rule l3d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this Subsection 1 (c) as a result of an agreement,
arrangement or understanding to vote such security if the agreement,
arrangement or understanding: (A) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules
and regulations under the Act and (B) is not also then reportable on a
Schedule l3D under the Act (or any comparable or successor report); or

     (c) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person’s Affiliates or

Annex - Page 3 of 4

 

 

Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in Subsection 1(c) (ii) above) or disposing of any voting
securities of the Company.

     (iv) IRS Notice. The term “IRS Notice” shall mean the IRS Notice
2005-1, which was issued with respect to the American Jobs Creation Act of 2004.

     (v) Person. The term “Person” shall mean any individual, firm,
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in concert.

     (vi) Stock. The term “stock” shall have the meaning contemplated by
the IRS Notice.

Annex - Page 4 of 4

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