DATED AS OF DECEMBER 2,
2008
KEY EXECUTIVE EMPLOYMENT AND
SEVERANCE AGREEMENT
The
following are the “Incorporated Terms” referred to in
the instrument entitled “Key Executive Employment and
Severance 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 section of the Base Instrument is Section 1, the
Incorporated Terms begin with Section 2.
(a)
409A Affiliate . The term “409A Affiliate” means
each entity that is required to be included in the Company’s
controlled group of corporations within the meaning of Section
414(b) of the Code, or that is under common control with the
Company within the meaning of Section 414(c) of the Code;
provided, however, that the phrase “at least
50%” shall be used in place of the phrase “at least
80%” each place it appears therein or in the regulations
thereunder.
(b)
Act . For purposes of this Agreement, the term
“Act” means the Securities Exchange Act of 1934, as
amended.
(c)
Affiliate and Associate . For purposes of this Agreement,
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.
(d)
Beneficial Owner . For purposes of this Agreement, a Person
shall be deemed to be the “Beneficial Owner” of any
securities:
(i)
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
Firstar Bank Milwaukee, N.A., as amended from time to time (or any
successor to such Rights Agreement), at any time before the
issuance of such securities;
(ii)
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 2(d) 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
(iii)
which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in Subsection 2(d)(ii)
above) or disposing of any voting securities of the
Company.
(e)
Cause . “Cause” for termination by the Employer
of the Executive’s employment shall, for purposes of this
Agreement, be limited to (i) the engaging by the Executive in
intentional conduct not taken in good faith which has caused
demonstrable and serious financial injury to the Employer, as
evidenced by a determination in a binding and final judgment, order
or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative; (ii) conviction of a felony
(as evidenced by binding and final judgment, order or decree of a
court of competent jurisdiction, in effect after exhaustion of all
rights of appeal) which substantially impairs the Executive’s
ability to perform his duties or responsibilities; and
(iii) continuing willful and unreasonable refusal by the
Executive to perform the Executive’s duties or
responsibilities (unless significantly changed without the
Executive’s consent)
(f)
Change in Control of the Company . A “Change in
Control of the Company” shall mean the occurrence of any one
of the following events:
(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
-2-
acquired
directly from the Company or its Affiliates after October 1,
2008, pursuant to express authorization by the Board of Directors
of the Company (the “Board”) that refers to this
exception) representing 50% or more of either the then outstanding
shares of common stock of the Company or the combined voting power
of the Company’s then outstanding voting securities entitled
to vote generally in the election of directors; 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 October 1, 2008, 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), whose appointment or election by the Board or nomination
for election by the Company’s shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on October 1, 2008, or whose
initial appointment, election or nomination for election as a
director which occurred after October 1, 2008 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 October 1, 2008 or initially appointed,
elected or nominated by such two-thirds (2/3) 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 two-thirds (2/3) of
the then Continuing Directors and are thereafter elected as
directors by the 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), 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
-3-
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 October 1, 2008,
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
immediately after such sale are owned by Persons in substantially
the same proportions as their ownership of the Company immediately
prior to such sale.
(g)
Code . For purposes of this Agreement, the term
“Code” means the Internal Revenue Code of 1986,
including any amendments thereto or successor tax codes
thereof.
(h)
Covered Termination . Subject to Subsection 3(b) hereof, for
purposes of this Agreement, the term “Covered
Termination” means any Termination of Employment during the
Employment Period where the Notice of Termination is delivered on,
or the Termination Date is, any date prior to the end of the
Employment Period.
(i)
Employment Period . Subject to Subsection 3(b) hereof, for
purposes of this Agreement, the term “Employment
Period” means a period commencing on the date of a Change in
Control of the Company, and ending at 11:59 p.m. Central Time
on the earlier of the third anniversary of such date or the
Executive’s Normal Retirement Date.
(j)
Good Reason . For purposes of this Agreement, the Executive
shall have “Good Reason” for Termination of Employment
in the event of:
(i)
A material diminution in the Executive’s annual base
salary;
(ii)
A material diminution in the Executive’s authority, duties,
or responsibilities;
(iii)
A material diminution in the authority, duties, or responsibilities
of the supervisor to whom the Executive is required to report,
including a requirement that the Executive report to a corporate
officer or employee instead of reporting directly to the Board of
Directors of the Employer.
-4-
(iv)
A material diminution in the budget over which the Executive
retains authority.
(v)
Any other action or inaction that constitutes a material breach by
the Employer of this Agreement.
Good Reason
shall not exist for a Termination of Employment unless the
Executive provides notice to the Employer of the existence of the
condition described in (i) through (v) above within a
period not to exceed 90 days of the initial existence of the
condition, upon which the Employer has thirty days during which it
may remedy the condition and not be required to pay the Termination
Payment.
(k)
MGIC . For purposes of this Agreement, the term
“MGIC” means Mortgage Guaranty Insurance
Corporation.
(l)
Normal Retirement Date . For purposes of this Agreement, the
term “Normal Retirement Date” means the date on which
the Executive can retire from service with the Employer and
commence receiving retirement payments within 31 days
thereafter, without any reduction in such payments on account of
early retirement, under the primary qualified defined benefit
pension plan applicable to the Executive, or any successor plan, as
in effect on the date of the Change in Control of the
Company.
(m)
Person . For purposes of this Agreement, 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.
(n)
Prime . “Prime” means the rate of interest
announced by U.S. Bank, National Association, Milwaukee, Wisconsin,
from time to time as its prime or base lending rate, such rate to
be determined on the Termination Date.
(o)
Termination Date . Except as otherwise provided in
Subsection 3(b), Subsection 11(b), and Subsection 18(a) hereof, the
term “Termination Date” means (i) if the
Executive’s Termination of Employment is by the
Executive’s death, the date of death; (ii) if the
Executive’s Termination of Employment is by reason of
voluntary early retirement, as agreed in writing by the Employer
and the Executive, the date of such early retirement which is set
forth in such written agreement; (iii) if the Termination of
Employment is by reason of disability pursuant to Section 13
hereof, the earlier of thirty days after the Notice of Termination
is given or one day prior to the end of the Employment Period;
(iv) if the Termination of Employment is by the Executive
voluntarily (other than for Good Reason), the date the Notice of
Termination is given; (v) if the Termination of Employment is
by the Employer for Cause, the earlier of ten days after the Notice
of Termination is given or one day prior to the end of the
Employment Period; and (vi) if the Executive’s
Termination of Employment is by the Employer (other than for Cause
or by reason of disability pursuant to Section 13 hereof) or
by the Executive for Good Reason, the earlier of thirty days after
the Notice of Termination is given or one day prior to the end of
the Employment Period. Notwithstanding the foregoing,
(1) If termination
is for Cause pursuant to Subsection 2(e)(iii) of this Agreement and
if the Executive has cured the conduct constituting such Cause as
described by the Employer in its Notice of Termination within such
ten-day or shorter period, then the Executive’s employment
hereunder shall continue as if the Employer had not delivered its
Notice of Termination;
-5-
provided,
however , the right of
the Executive to cure such conduct shall apply only to the first
Notice of Termination indicating that the termination is for
Cause.
(2) If the party
receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the appropriate
period following receipt thereof and it is finally determined that
the reason asserted in such Notice of Termination did not exist,
then (i) if such Notice was delivered by the Executive, the
Executive will be deemed to have voluntarily terminated his
employment and the Termination Date shall be the earlier of the
date fifteen days after the Notice of Termination is given or one
day prior to the end of the Employment Period and (ii) if
delivered by the Company, the Company will be deemed to have
terminated the Executive other than by reason of death, disability
or Cause.
(p)
Termination of Employment . For purposes of this Agreement,
the Executive’s Termination of Employment shall be presumed
to occur (A) when the Company and Executive reasonably
anticipate that no further services will be performed by the
Executive for the Company and its 409A Affiliates or that the level
of bona fide services the Executive will perform as an employee of
the Company and its 409A Affiliates will permanently decrease to no
more than 20% of the average level of bona fide services performed
by the Executive (whether as an employee or independent contractor)
for the Company and its 409A Affiliates over the immediately
preceding 36-month period (or such lesser period of services) or
(B) when the Company determines in good faith based on the
facts and circumstances in accordance with Code Section 409A,
upon a decrease in services by the Executive that is no more than
20% of such average level of bona fide services but less than 50%,
that a Termination of Employment has occurred. The
Executive’s Termination of Employment shall be presumed not
to occur where the level of bona fide services performed by the
Executive for the Company and its 409A Affiliates continues at a
level that is 50% or more of the average level bona fide services
performed by the Executive (whether as an employee or independent
contractor) for the Company and its 409A Affiliates over the
immediately preceding 36-month period (or such lesser period of
service). No presumption applies to a decrease in services that is
more than 20% but less than 50%, and in such event, whether the
Executive has had a Termination of Employment will be determined in
good faith by the Company based on the facts and circumstances in
accordance with Code Section 409A. Notwithstanding the
foregoing, if Executive takes a leave of absence for purposes of
military leave, sick leave or other bona fide leave of absence, the
Executive will not be deemed to have incurred a Termination of
Employment for the first six months of the leave of absence, or if
longer, for so long as the Executive’s right to reemployment
is provided either by statute or by contract, including this
Agreement; provided that if the leave of absence is due to a
medically determinable physical or mental impairment that can be
expected to result in death or last for a continuous period of not
less than six months, where such impairment causes the Executive to
be unable to perform the duties of his or her position of
employment or any substantially similar position of employment, the
leave may be extended for up to twenty-nine months without causing
a Termination of Employment. No Termination of Employment shall be
deemed to have occurred under this Agreement unless there has been
a “separation from service” as defined under Code
Section 409A and Termination of Employment shall be construed
to mean “separation from service” as so
defined.
-6-
3.
Termination or Cancellation Prior to Change in Control
.
(a) Subject
to Subsection 3(b) hereof, the Employer and the Executive shall
each retain the right to terminate the employment of the Executive
at any time prior to a Change in Control of the Company. Subject to
Subsection 3(b) hereof, in the event the Executive’s
employment is terminated prior to a Change in Control of the
Company, this Agreement shall be terminated and cancelled and of no
further force and effect, and any and all rights and obligations of
the parties hereunder shall cease.
(b) Anything
in this Agreement to the contrary notwithstanding, if a Change in
Control of the Company occurs and if the Executive’s
employment with the Employer is terminated (other than a
termination due to the Executive’s death or as a result of
the Executive’s disability) during the period of 90 days
prior to the date on which the Change in Control of the Company
occurs, and if 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 in Control of the Company or (ii) was by the Executive
for Good Reason or was by the Employer for other than Cause and
otherwise arose in connection with or in anticipation of a Change
in Control of the Company, then for all purposes of this Agreement
such termination of employment shall be deemed a “Covered
Termination,” “Notice of Termination” shall be
deemed to have been given, and the “Employment Period”
shall be deemed to have begun on the date of such termination which
shall be deemed to be the “Termination Date” and the
date of the Change of Control of the Company for purposes of this
Agreement.
4.
Employment Period; Vesting of Certain Benefits . If a Change
in Control of the Company occurs when the Executive is employed by
the Employer, (a) the Employer will continue thereafter to
employ the Executive during the Employment Period, and the
Executive will remain in the employ of the Employer in accordance
with and subject to the terms and provisions of this Agreement, and
(b) (i) the Company shall cause all restrictions on restricted
stock awards made to the Executive prior to the Change in Control
to lapse such that the Executive is fully and immediately vested in
his or her restricted stock at the time at which the Change in
Control of the Company occurs, and (ii) the Company shall
cause all unexercised stock options granted to the Executive prior
to the Change in Control to be fully vested and exercisable in full
at such time. Any Termination of Employment of the Executive during
the Employment Period, whether by the Company or the Employer,
shall be deemed a Termination of Employment by the Company for
purposes of this Agreement.
5.
Duties . During the Employment Period, the Executive
(a) shall devote the Executive’s best efforts and all of
the Executive’s business time, attention and skill to the
business and affairs of the Employer and (b) shall be entitled
to materially the same job function as held by the Executive at the
time of the Change in Control of the Company or in such other job
function or functions as shall be mutually agreed upon in writing
by the Executive and the Employer from time to time. The services
which are to be performed by the Executive hereunder are to be
rendered in the same metropolitan area in which the Executive was
employed at the date of such Change in Control of the Company, or
in such other place or places as shall be mutually agreed upon in
writing by the Executive and the Employer from time to time. Any
travel incident to the Executive’s job function shall not be
deemed to result in a breach of the immediately preceding sentence
by the Company.
6.
Compensation . During the Employment Period, the Executive
shall be compensated as follows:
-7-
(a) The
Executive shall receive, at reasonable intervals (but not less
often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Change in Control of
the Company, an annual base salary in cash equivalent of not less
than the Executive’s highest annual base salary in effect at
any time during the 90-day period immediately prior to the Change
in Control of the Company, or if prior to the Change in Control of
the Company, the Employer had approved an increase in such base
salary to take effect after the Change in Control of the Company,
at such higher rate beginning on the date on which such increase
was to take effect (determined prior to any reduction for amounts
deferred under Section 401(k) of the Code or otherwise, or deducted
pursuant to a cafeteria plan or qualified transportation benefit
under Sections 125 and 132(f) of the Code), subject to
adjustment as hereinafter provided in Section 7 (such salary
amount as adjusted upward from time to time is hereafter referred
to as the “Annual Base Salary”).
(b) The
Executive shall be reimbursed, at such intervals and in accordance
with such standard policies that were in effect at any time during
the 90-day period immediately prior to the Change in Control of the
Company, for any and all monies advanced in connection with the
Executive’s employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Employer, including
travel expenses.
(c) The
Executive and/or the Executive’s family, as the case may be,
shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive’s
salary grade or on any other requirement which excludes persons of
comparable status to the Executive unless such exclusion was in
effect for such plan or an equivalent plan at any time during the
90-day period immediately prior to the Change in Control of the
Company), in any and all plans providing benefits for the
Employer’s salaried employees in general, including but not
limited to group life insurance, hospitalization, medical, dental,
profit sharing and stock bonus plans.
(d) The
Executive shall annually be entitled to not less than the amount of
paid vacation and not fewer than the highest number of paid
holidays to which the Executive was entitled annually at any time
during the 90-day period immediately prior to the Change in Control
of the Company.
(e) The
Executive shall be included in all plans providing additional
benefits to executives of the Employer of comparable status and
position to the Executive, including but not limited to deferred
compensation, split-dollar life insurance, supplemental retirement,
stock option, stock appreciation, stock bonus and similar or
comparable plans, and shall receive fringe benefits made available
to executives of the Employer of comparable status and position to
the Executive; provided, that the Employer’s
obligation to include the Executive in bonus or incentive
compensation plans shall be determined by Subsection 6(g)
hereof.
(f)
The aggregate annual value of the benefits made available to the
Executive pursuant to Subsections 6(c) and (e) shall not be
less than 75% of the highest aggregate annual value of the benefits
of the type referred to in such Subsections that were made
available to the Executive at any time during the 90-day period
immediately prior to the Change in Control of the Company, except
that if executives based in the United States of Affiliated
Companies whose status and position with such Companies are
approximately comparable to the Executive do not generally receive
stock options, restricted stock or other stock-based compensation,
during any period in which the Executive does not receive such
benefits, (i) the highest aggregate value of the benefits
during such 90-day period shall be computed without regard the
value of stock options, restricted stock or other stock-based
compensation, and (ii) the percentage in the preceding portion
of this sentence
-8-
shall be
increased to 100% from 75%. The term “Affiliated
Companies” means companies that become Affiliates of the
Employer as a result of the Change in Control of the
Company.
(g) (i) To
assure that the Executive will have an opportunity to earn annual
incentive compensation after a Change in Control of the Company,
the Executive shall be included in a bonus plan of the Employer
which shall satisfy the standards described below (such plan, the
“Post-Change Bonus Plan”). Bonuses under the
Post-Change Bonus Plan shall be payable annually with respect to
achieving such annual financial or other goals reasonably related
to the business of the Employer (or, in the case of an Executive
whose primary responsibility is sales of the products of the
Employer or an Affiliate, to the extent so provided by the Employer
or the Affiliate, reasonably related to such sales) as the Employer
shall establish (the “Goals”), all of which Goals that
are determinable under objective standards shall be attainable on
an annual basis with approximately the same degree of probability
as the comparable goals under the Employer’s bonus plan or
plans as in effect at any time during the 90-day period immediately
prior to the Change in Control of the Company (whether one or more,
the “Pre-Change Company Bonus Plan”) and in view of the
Employer’s existing and projected financial and business
circumstances applicable at the time. The determination of whether
any of the Goals that are determinable under subjective standards
has been achieved shall be made by the Compensation Committee (as
hereinafter defined). In the event a majority of the members of the
Compensation Committee are not persons who were on the Compensation
Committee or were officers of MGIC during the 90-day period prior
to the date of the Change in Control of the Company or the highest
ranking member of the Compensation Committee is not a person who
was on the Compensation Committee during such 90-day period, none
of the Goals shall be subjective. The term “Compensation
Committee” means the Board of Directors of the Company, an
appropriate committee thereof or a committee comprised of members
of management of the Employer, in each case, in accordance with the
Company’s practice prior to the Change in Control of the
Company with respect to executives of comparable position to the
Executive.
|
