EXHIBIT 10.5
FORM OF
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
2008 Form, as revised November 19, 2008
AGREEMENT by and between The PMI
Group, Inc., a Delaware corporation (the “Company”),
and
(“Executive”), dated as of the
day of
,
, and superseding, as of this
date, any prior change of control employment agreement between the
Company and Executive.
The Board of Directors of the
Company (the “Board”), has determined that it is in the
best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company. The Board believes it
is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the
Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and
benefits arrangements upon a Change of Control which ensure that
the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED
AS FOLLOWS:
1. Certain Definitions .
(a) The “Effective Date” shall mean the first date
during the Change of Control Period (as defined in
Section 1(b)) on which a Change of Control (as defined in
Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding if (A) the Executive’s employment with
the Company is terminated by the Company, (B) the Date of
Termination (as defined herein) is prior to the date on which the
Change of Control occurs, and (C) it is reasonably
demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the
“Effective Date” shall mean the date immediately prior
to such Date of Termination.
(b) The “Change of
Control Period” shall mean the period commencing on the date
hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date
and each annual anniversary thereof shall be hereinafter referred
to as the “Renewal Date”), unless previously
terminated, the Change of Control Period shall be automatically
extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of Control
Period shall not be so extended.
2. Change of Control .
For the purpose of this Agreement, a “Change of
Control” shall mean:
(a) The acquisition by any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock
of the Company (the “Outstanding Company Common Stock”)
or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
subsection (a), the following shall not constitute a Change of
Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition pursuant to
a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2.
Notwithstanding the foregoing, in its sole discretion, the Board
may increase the 20% threshold set forth above in this subsection
(a) prior to any acquisition of 20% or more beneficial
ownership of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; provided, that (i) such
increased threshold shall apply only to the acquisition and
maintenance of beneficial ownership by any Person eligible to
report such beneficial ownership at the time of such acquisition on
Schedule 13G under the Exchange Act, and (ii) in the
event that any Person initially eligible to so report on
Schedule 13G thereafter ceases to be eligible to so report on
Schedule 13G, the occurrence of the event causing such Person
no longer to be eligible to so report shall be deemed an
acquisition by such Person of all of the Outstanding Company Common
Stock and Outstanding Company Voting Securities beneficially owned
by such Person immediately prior to such occurrence; or
(b) Individuals who, as of the
date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation by the Company
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another entity (a
“Business Combination”), in each case, unless,
following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because any Person acquires beneficial
ownership of 20% or more of the Outstanding Company Voting
Securities or Outstanding Company Common Stock as a result of the
acquisition of such securities or stock by the Company, which
acquisition reduces the number of the Outstanding Company Voting
Securities or Outstanding Company Common Stock; provided, that if
after such acquisition by the Company such Person (while such
Person remains the beneficial owner of 20% or more of the
Outstanding Company Voting Securities or Outstanding Company Common
Stock) becomes the beneficial owner of additional shares of such
Outstanding Company Voting Securities or Outstanding Company Common
Stock (as the case may be), a Change of Control shall then
occur.
3. Employment Period .
The Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for
the period commencing on the Effective Date and ending on the third
anniversary of such date (the “Employment Period”).
4. Terms of Employment .
(a) Position and Duties . (i) During the Employment
Period, (A) the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned to the Executive at any time during the 90-day period
immediately preceding the Effective Date and (B) the
Executive’s services shall be performed at the location where
the Executive was employed immediately preceding the Effective Date
or any office or location less than 50 miles from such
location.
(ii) During
the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments,
so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Company.
(b) Compensation . (i)
Base Salary . During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base
Salary”), which shall be paid at a monthly rate, at least
equal to twelve times the highest monthly base salary paid or
payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at least
annually. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term “affiliated companies”
shall include any company controlled by, controlling or under
common control with the Company.
(ii) Annual
Bonus. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the “Annual Bonus”) in cash at
least equal to the Executive’s highest bonus earned under the
Company’s annual incentive plans, or any comparable bonus
under any predecessor or successor plan, for the last three full
fiscal years prior to the Effective Date (or for such lesser number
of full fiscal years prior to the Effective Date for which the
Executive was eligible to earn such a bonus, and annualized in the
case of any bonus earned for a partial fiscal year) (the
“Recent Annual Bonus”). If the Executive has not been
eligible to earn such a bonus for any period prior to the Effective
Date, the Recent Annual Bonus shall mean the Executive’s
target Annual Bonus for the year in which the Effective Date
occurs. Each such Annual Bonus shall be paid no later than two and
a half months after the end of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus
pursuant to an arrangement that meets the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”).
(iii)
Incentive, Savings and Retirement Plans . During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of the
Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs (other than equity-based
incentives) provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company
and its affiliated companies.
(iv) Welfare
Benefit Plans . During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
peer executives of the Company and its affiliated companies, but in
no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of the
Company and its affiliated companies.
(v)
Expenses . During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) Fringe
Benefits . During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs
and policies of the Company and its affiliated companies in effect
for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(vii) Office
and Support Staff . During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(viii)
Vacation . During the Employment Period, the Executive shall
be entitled to paid vacation or paid-time off in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the Executive
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
5. Termination of
Employment . (a) Death or Disability . The
Executive’s employment shall terminate automatically upon the
Executive’s death during the Employment Period. If the
Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive’s
employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the “Disability Effective
Date”), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time
performance of the Executive’s duties. For purposes of this
Agreement, “Disability” shall mean the absence of the
Executive from the Executive’s duties with the Company on a
full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to
be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the
Executive’s legal representative.
(b) Cause . The Company
may terminate the Executive’s employment during the
Employment Period for Cause. For purposes of this Agreement,
“Cause” shall mean:
(i) the
willful and continued failure of the Executive to perform
substantially the Executive’s duties with the Company or one
of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by
the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially
performed the Executive’s duties, or
(ii) the
willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered “willful”
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive’s
action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the Company or
based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason . The
Executive’s employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, “Good
Reason” shall mean:
(i) the
assignment to the Executive of any duties inconsistent in any
substantial respect with the Executive’s position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in a
substantial diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any
failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the
Company’s requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B)
hereof or the Company’s requiring the Executive to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any
purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement;
or
(v) any
failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith
determination of “Good Reason” made by the Executive
shall be conclusive.
(d) Notice of
Termination . Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment
under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
(e) Date of Termination
. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for
Cause, o
