EXHIBIT 10.3
THE PMI GROUP, INC.
BONUS INCENTIVE PLAN
(September 20, 2006 Amendment and
Restatement)
SECTION 1
BACKGROUND, PURPOSE AND
DURATION
1.1 Effective Date . The Plan
originally was effective as of February 18, 1999. This
amendment and restatement is effective as of September 20,
2006, subject to ratification by an affirmative vote of the holders
of a majority of the Shares that are present in person or by proxy
and entitled to vote at the 2007 Annual Meeting of Stockholders of
the Company.
1.2 Purpose of the Plan . The
Plan is intended to increase shareholder value and the success of
the Company by motivating key executives (a) to perform to the
best of their abilities, and (b) to achieve the
Company’s objectives. The Plan’s goals are to be
achieved by providing such executives with incentive awards based
on the Company’s net income. The Plan is further intended to
permit the grant of awards that qualify as performance-based
compensation under section 162(m) of the Code.
SECTION 2
DEFINITIONS
The following words and phrases
shall have the following meanings unless a different meaning is
plainly required by the context:
2.1 “ Actual Award
” means as to any Performance Period, the actual award (if
any) payable to a Participant for the Performance Period, subject
to the Committee’s authority under Section 3.5 to reduce
the award.
2.2 “ Affiliate ”
means any corporation or other entity (including, but not limited
to, partnerships and joint ventures) controlled by the Company
(within the meaning of section 414(b), (c) or (m) of the
Code).
2.3 “ Base Salary
” means as to any Performance Period, the Participant’s
annualized salary rate on the last day of the Performance Period.
Such Base Salary shall be before both (a) deductions for taxes
or benefits, and (b) deferrals of compensation pursuant to
Company-sponsored plans.
2.4 “ Board ”
means the Board of Directors of the Company.
2.5 “ Change of Control
” means a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the assets
of the Company (as determined in accordance with section
409A(a)(2)(A)(v) of the Code and the applicable regulations issued
there under).
2.6 “ Code ”
means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include
such section or regulation, any valid regulation promulgated
thereunder, and any comparable provision of any future legislation
or regulation amending, supplementing or superseding such section
or regulation.
2.7 “ Committee ”
means the committee appointed by the Board (pursuant to
Section 5.1) to administer the Plan. Until otherwise
determined by the Board, the Company’s Compensation Committee
shall constitute the Committee.
2.8 “ Company ”
means The PMI Group, Inc., a Delaware corporation, or any successor
thereto.
2.9 “ Disability
” or “ Disabled ” means (a) the
inability of a Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months, or (b) the Participant is, by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering
employees of the Employer. Notwithstanding the foregoing, a
Participant shall be deemed Disabled if he or she is determined to
be totally disabled by the Social Security Administration. The
Committee shall determine whether or not a Participant is Disabled
based on such evidence as the Committee deems necessary or
advisable.
2.10 “ Employee ”
means any employee of the Company or of an Affiliate, whether such
employee is so employed at the time the Plan is adopted or becomes
so employed subsequent to the , adoption of the Plan.
2.11 “ Employee Performance
Pool ” means the pool of funds available for distribution
to Participants. Subject to the terms of the Plan, the Committee
establishes the Employee Performance Pool for each Performance
Period.
2.12 “ Fair Market
Value ” means the arithmetic mean of the highest and
lowest per share selling prices of the Shares, as quoted in the New
York Stock Exchange Composite Transactions Index for the date in
question.
2.13 “ Participant
” means as to any Performance Period, an Employee who has
been selected by the Committee for participation in the Plan for
that Performance Period.
2.14 “ Performance
Period ” means any period of not less than twelve
consecutive calendar months, as determined by the Committee in its
sole discretion. No more than three Performance Periods may be in
effect at any one time.
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2.15 “ Plan ”
means The PMI Group, Inc. Bonus Incentive Plan, as set forth in
this instrument and as hereafter amended from time to
time.
2.16 “ Retirement
” means (a) a Termination of Service occurring on or
after age sixty-five, (b) a Termination of Service at or after
age fifty-five with at least ten years of Benefit Accrual
Service (as defined under The PMI Group, Inc. Retirement Plan, as
amended), or (c) a Termination of Service approved by the
Company as an early retirement; provided that in the case of a
person subject to Section 16 of the Exchange Act, such early
retirement must be approved by the Committee.
2.17 “ Shares ”
means shares of the Company’s common stock, $0.01 par
value.
2.18 “ Target Award
” means the target award payable under the Plan to a
Participant for the Performance Period, expressed as a percentage
of his or her Base Salary, as determined by the Committee in
accordance with Section 3.2.
2.19 “ Termination of
Service ” means a cessation of the employee-employer
relationship between an Employee and the Company or an Affiliate
for any reason, (as determined in accordance with section
409A(a)(2)(A) of the Code), including, but not by way of
limitation, a termination by resignation, discharge, death,
Disability, Retirement, or the disaffiliation of an Affiliate, but
excluding any such termination where there is a simultaneous
reemployment by the Company or an Affiliate. For this purpose, the
employment relationship shall be treated as continuing intact while
the Participant is on military leave, sick leave or other bona fide
leave of absence (such as temporary employment by the government),
except that if the period of such leave exceeds six (6) months
and the Participant’s right to reemployment is not provided
for by statute or contract, then the employment relationship shall
be deemed to have terminated on the first day immediately following
such six-month period.
SECTION 3
SELECTION OF PARTICIPANTS AND
DETERMINATION OF AWARDS
3.1 Selection of Participants
. The Committee, in its sole discretion, shall select the Employees
who shall be Participants for any Performance Period. Participation
in the Plan is in the sole discretion of the Committee, and on a
Performance Period by Performance Period basis. Accordingly, an
Employee who is a Participant for a given Performance Period in no
way is guaranteed or assured of being selected for participation in
any subsequent Performance Period or Periods.
3.2 Determination of Target
Awards . Subject to the limitations of Section 3.4 below,
the Committee, in its sole discretion, shall establish a Target
Award for each Participant. Each Participant’s Target Award
shall be determined by the Committee in its sole discretion, and
each Target Award shall be set forth in writing.
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3.3 Employee Performance Pool
. Each Performance Period, an amount equal to no more than 5% of
the Company’s net income shall be allocated to the Employee
Performance Pool. The Committee, in its sole discretion, shall
determine the size of the Employee Performance Pool, subject to the
limitation in the preceding sentence.
3.4 Determination of Awards for
Covered Employees . Each year the maximum Actual Award payable
under the Plan to a Participant shall be no more than 30%
of
