Exhibit 10.26a

 

FIRST AMENDMENT

 

TO THE

 

STOCKHOLDERS AGREEMENT

 

DATED AS OF DECEMBER 18, 2003

 

BETWEEN

 

FALCONS ACQUISITION CORP.

 

THE PMI GROUP, INC.,

 

BLACKSTONE CAPITAL PARTNERS IV L.P.,

 

BLACKSTONE CAPITAL PARTNERS IV-A L.P.,

 

BLACKSTONE FAMILY INVESTMENT PARTNERSHIP IV-A L.P.,

 

CYPRESS MERCHANT BANKING PARTNERS II L.P.,

 

CYPRESS MERCHANT BANKING II C.V.,

 

CYPRESS SIDE-BY-SIDE LLC,

 

55TH STREET PARTNERS II L.P.,

 

CYPRESS FGIC INVESTORS LLC,

 

CIVC/FGIC INVESTMENT COMPANY LLC

 

CIVC PARTNERS FUND III, L.P.

 

CIVC PARTNERS FUND IIIA, L.P.

 

AND THE

 

MANAGEMENT INVESTORS

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FIRST AMENDMENT TO THE STOCKHOLDERS AGREEMENT

 

This FIRST AMENDMENT TO THE STOCKHOLDERS AGREEMENT (this “Amendment”) is made as
of December 18, 2003, and is between Falcons Acquisition Corp., a Delaware
corporation (the “Company”), The PMI Group, Inc., a Delaware corporation
(together with any Affiliated transferee within the contemplation of Section 2.5
of the Agreement (as defined below), “PMI”), Blackstone Capital Partners IV
L.P., a Delaware limited partnership (“BCP IV”), Blackstone Capital Partners
IV-A L.P., a Delaware limited partnership (“BCP IV-A”) and Blackstone Family
Investment Partnership IV-A L.P., a Delaware limited partnership (“BFIP IV-A,”
and together with BCP IV, BCP IV-A and any other Affiliated transferee within
the contemplation of Section 2.5, “Blackstone”), Cypress Merchant Banking
Partners II L.P., a Delaware limited partnership (“Cypress Onshore”), Cypress
Merchant Banking II C.V., a Netherlands limited partnership (“Cypress
Offshore”), Cypress Side-by-Side LLC, a Delaware limited liability company
(“Cypress Side-by-Side”), 55th Street Partners II L.P., a Delaware limited
partnership (“Cypress 55th Street”), Cypress FGIC Investors LLC, a Delaware
limited liability company, as a “Cypress Vehicle” (as described below)
(“Cypress/FGIC,” and together with Cypress Onshore, Cypress Offshore, Cypress
Side-by-Side, Cypress 55th Street, any other “Cypress Vehicle,” any “Cypress
Coinvestor” (as described below) and any other Affiliated transferee within the
contemplation of Section 2.5 of the Agreement, “Cypress”), CIVC/FGIC Investment
Company LLC, a Delaware limited liability company, as a “CIVC Vehicle” (as
described below) (“CIVC/FGIC”), CIVC Partners Fund III, L.P., a Delaware limited
partnership (“CIVC Fund III”), CIVC Partners Fund IIIA, L.P., a Delaware limited
partnership (“CIVC Fund IIIA”, and together with CIVC/FGIC, CIVC Fund III, any
other “CIVC Vehicle” and any other Affiliated transferee within the
contemplation of Section 2.5 of the Agreement, “CIVC”; and together with PMI,
Blackstone and Cypress, the “Investors”) and the management investors listed on
Annex A and any other management investors who subsequently become a party to
this Agreement (the “Management Investors”) pursuant to the Agreement.
Capitalized terms used and not otherwise defined herein have the meanings set
forth in the Stockholders Agreement dated as of August 3, 2003, by and among the
Company, PMI, Blackstone and Cypress (the “Agreement”).

 

BACKGROUND

 

1. Cypress/FGIC has agreed to become party to the Agreement as a Cypress Vehicle
and each of the Management Investors listed on Exhibit A hereto (amending Annex
A to the Agreement) have agreed to become party to the Agreement as a Management
Investor.

 

2. The parties hereto desire to amend the rights and obligations of the
Management Investors under the Agreement.

 

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NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties, intending legally to be bound, agree as follows:

 

1. Amendments to Article I.

 

(a) Section 1.2 of the Agreement is hereby amended by adding the following
definitions in their proper alphabetical order, which, in the event of a
conflict with the definitions of terms in the Agreement, shall control:

 

“Cause” means, with respect to a Management Investor, “Cause” as defined in an
employment agreement between the Company or any of its subsidiaries and such
Management Investor which is entered into as of or after the Closing Date (as
the same may be amended in accordance with the terms thereof, an “Employment
Agreement”) or, if not defined therein or if there is no such agreement, “Cause”
means (i) such Management Investor’s continued failure substantially to perform
his or her duties (other than as a result of total or partial incapacity due to
physical or mental illness) for a period of 10 days following written notice by
the Company to such Management Investor of such failure, (ii) dishonesty in the
performance of such Management Investor’s duties, (iii) such Management
Investor’s conviction of, or plea of nolo contendere to, a crime constituting
(A) a felony under the laws of the United States or any state thereof or (B) a
misdemeanor involving moral turpitude, (iv) such Management Investor’s willful
malfeasance or willful misconduct in connection with such Management Investor’s
duties hereunder or any act or omission which is injurious to the financial
condition or business reputation of the Company or any of its Affiliates or (v)
such Management Investor’s breach of the provisions of Section 9.15 (Covenant
Not to Compete; Nonsolicitation) or Section 9.16 (Confidentiality) of this
Agreement or the breach of any other confidentiality, non-competition,
non-solicitation or proprietary information agreement between such Management
Investor and the Company or any of its Affiliates from time to time.

 

“Fair Market Value” means, on a given date, (i) if there is a public market for
the shares on such date, the arithmetic mean of the high and low prices of the
shares as reported on such date on the composite tape of the principal national
securities exchange on which such shares are listed or admitted to trading, or,
if no composite tape exists for such national securities exchange on such date,
then on the principal national securities exchange on which such shares are
listed or admitted to trading, or, if the shares are not listed or admitted on a
national securities exchange, the arithmetic mean of the per share closing bid
price and per share closing asked price on such date as quoted on the Nasdaq
National Market System or such market in which such prices are regularly quoted,
or, if no sale of shares shall have been reported on such composite tape or such
national securities exchange on such date or quoted on an above referenced
market, then the immediately preceding date on which sales of the shares have
been so reported or quoted shall be used, and (ii) if there is no public market
for the shares on such date, the Fair Market Value shall be the value
established by the Company Board in good faith.

 

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“Family Group Members” means, with respect to a Management Investor, such
Management Investor’s spouse, parent, descendant, stepchild or stepgrandchild or
any executor, estate, guardian, committee, trustee or other fiduciary acting as
such solely on behalf or solely for the benefit of any such spouse, parent,
descendant, stepchild or stepgrandchild.

 

“Management Entity” means, with respect to a Management Investor, (i) such
Management Investor, (ii) such Management Investor’s Management Trust, and (iii)
the conservators, guardians, executors, administrators, testamentary trustees,
legatees or beneficiaries of such Management Investor.

 

“Management Trust” means, with respect to a Management Investor, a limited
partnership, limited liability company, trust or custodianship, the
beneficiaries of which may include only such Management Investor, his spouse (or
ex-spouse) or his lineal descendants (including adopted) or, if at any time
after any such transfer there shall be no then living spouse or lineal
descendants, then to the ultimate beneficiaries of any such trust or to the
estate of a deceased beneficiary.

 

“Permanent Disability” means, with respect to a Management Investor, such
Management Investor becomes physically or mentally incapacitated and is
therefore unable for a period of at least 180 days in any 12 consecutive month
period, to perform the Management Investor’s duties with the Company or any
subsidiary or Affiliate thereof. Any question as to the existence of the
Permanent Disability of the Management Investor as to which the Management
Investor and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to the Management Investor
and the Company. If the Management Investor and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and those
two physicians shall select a third who shall make such determination in
writing. The determination of Permanent Disability made in writing to the
Company and the Management Investor shall be final and conclusive for all
purposes of this Agreement.

 

(b) Section 1.2 of the Agreement is hereby amended by adding the following
information to the table in Section 1.2 in the proper alphabetical order:

 

Term

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   Section

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Call Commencement Date

   2.14(b)

Call Option Period

   2.14(c)

Call Rights

   2.14(a)

Competitive Business

   9.15(b)

Confidential Information

   9.16(a)

Employment Agreement

   1.2

Lapse Date

   2.2(a)

Process

   9.16(e)

Put Period

   2.15(a)

Redemption Price

   2.15(a)

Redemption Notice

   2.15(b)

Repurchase Price

   2.15(a)

Restricted Period

   9.15(b)

Termination

   2.14(a)

 

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2. Amendments to Article II.

 

(a) Section 2.2(a) of the Agreement is hereby amended by deleting it in its
entirety and replacing it with following Section 2.2(a):

 

(a) The “Transfer Restriction Period” shall begin on the Closing Date and shall
end: (i) with respect to any Investor, on the later to occur of (Y) the earlier
to occur of the date of consummation of the Qualified IPO and the fifth
anniversary of the Closing Date and (Z) the date that the Preferred Shares (and
any shares of the Class B Common Stock into which such Preferred Shares may have
been converted) are redeemed in full (or otherwise cease to be outstanding) and
(ii) with respect to any Management Investor, on the later to occur of (Y) the
date of the earliest to occur (the “Lapse Date”) of (1) Blackstone and Cypress,
collectively, ceasing to Control Equity Securities representing at least 50% of
Blackstone’s and Cypress’ aggregate Original Equity Stake, (2) the occurrence of
a Company Sale and (3) the fifth anniversary of the Closing Date, and (Z) the
date that the Preferred Shares (and any shares of the Class B Common Stock into
which such Preferred Shares may have been converted) are redeemed in full (or
otherwise cease to be outstanding); provided, however, that the restrictions set
forth in clause (ii) shall lapse prior to the Lapse Date in connection with, and
following, a Qualified IPO such that the restrictions set forth in clause (ii)
shall only continue to apply in connection with, and following, a Qualified IPO
to, a number of shares of Equity Securities owned or Controlled by such
Management Investor, from time to time, that is equal to the product of (y) the
number of shares of Equity Securities owned or Controlled by such Management
Investor immediately prior to the Qualified IPO and (z) the percentage of
Blackstone’s and Cypress’ aggregate Original Equity Stake then Controlled by
Blackstone and Cypress in the aggregate. During the Transfer Restriction Period,
none of the Investors, the Management Investors or any of their respective
Permitted Transferees shall, directly or indirectly, Transfer any Equity
Securities except in accordance with Sections 2.3, 2.5, 2.13, 2.14 or 2.15.
Registrable Securities may, subject to the preceding sentence, be Transferred by
Investors in the Qualified IPO in accordance with the piggyback registration
rights described in Section 6.2.

 

(b) Section 2.5(a) of the Agreement is hereby amended by deleting the words “any
other Investor” in the first sentence of Section 2.5(a) and replacing such words
with “any other party hereto”.

 

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(c) Section 2.7(a) of the Agreement is hereby amended by deleting it in its
entirety and replacing it with the following Section 2.7(a):

 

(a) In the event that the rights of first offer set forth in Section 2.9 are not
exercised, any Investor or Permitted Transferee of any Investor proposing to
Transfer any Equity Securities (a “Transferring Investor”) after the end of the
Transfer Restriction Period, or as otherwise permitted under Section 2.2(c), but
prior to the Qualified IPO, shall be entitled to Transfer such Equity Securities
during the time periods set forth in Section 2.9(e) and (f) subject to the
following. The Transferring Investor shall have the obligation, and each other
Investor, Management Investor and Permitted Transferee (for purposes of this
Section 2.7, the “Other Investors”) who is not then in breach of this Agreement
shall have the right, to include a number of shares of each class of Equity
Securities in such proposed Transfer, at the same price per security and upon
the same terms and conditions as to be paid and given to the Transferring
Investor(s), equal to the product (rounded up to the nearest whole number) of
(i) a fraction, the numerator of which is the number of shares of such class of
Equity Securities being Transferred held by such Other Investor and the
denominator of which is the number of shares of such class of Equity Securities
held by the Transferring Investor and all of the Investors seeking to exercise
tag-along rights pursuant to this Section 2.7, multiplied by (ii) the number of
shares of such class of Equity Securities proposed to be sold in the
contemplated sale. The Other Investors must agree to make substantially the same
representations, warranties, covenants and indemnities and other similar
agreements as the Transferring Investor(s) agree to make in connection with the
proposed Transfer of the Equity Securities of the Transferring Investor(s).

 

(d) Section 2.9(a) of the Agreement is hereby amended by deleting the first
sentence of such section it in its entirety and replacing it with the following
first sentence of Section 2.9(a):

 

Except as set forth in Section 2.9(h), and subject to the last sentence of
Section 8.2, each Investor, Management Investor, Management Entity, and Family
Group Member seeking to Transfer any shares of Common Stock held by it prior to
the Qualified IPO and after its respective Transfer Restriction Period or as
otherwise permitted under Section 2.2(c) (a “Selling Investor”) must first
comply with the provisions of this Section 2.9 and, if applicable, Section 2.7
(Tag-Along Rights).

 

(e) Section 2.9(f) of the Agreement is hereby amended by replacing the words
“selling Investor” with “Selling Investor”.

 

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(f) Article II of the Agreement is hereby amended by adding, immediately
following Section 2.12, the following new Sections 2.13, 2.14 and 2.15:

 

2.13 Certain Transfers by Management Investors.

 

(a) Notwithstanding anything in this Agreement to the contrary, each Management
Investor is entitled, from time to time, without the consent of any other party
hereto, to Transfer any or all of the Common Stock owned by it to a Family Group
Member or Management Trust. As a condition to any such Transfer, any such
transferee must execute and deliver to the Company an instrument in form and
substance reasonably satisfactory to the Company agreeing to be bound hereby as
a Permitted Transferee.

 

(b) Notwithstanding any provision in the Agreement to the contrary, the Company
may, from time to time, permit any Management Investor to Transfer any shares
held by such Management Investor to the Company without complying with the
requirements set forth in this Article II other than the requirements set forth
in Section 2.4.

 

2.14 Call Rights.

 

(a) If, prior to the Lapse Date, a Management Investor ceases to be employed by
the Company or any subsidiary of the Company for any reason (a “Termination”),
the Company and the Investors will have the rights (the “Call Rights”) specified
below to purchase the Common Stock held by such Management Investor and his
Permitted Transferees.

 

(b) In the event of a Termination of a Management Investor for any reason other
than Cause, the Company will have the right (but not the obligation) to purchase
from such Management Investor and his Permitted Transferees, and such Management
Investor and his Permitted Transferees will be required to sell to the Company
any or all of the Common Stock held by such Management Investor and his
Permitted Transferees at a price per share equal to the Fair Market Value as of
the date the Company first exercises such Call Right with respect to such
Management Investor. In the event of a Termination of such Management Investor
for Cause, the Company (or any of its assignees) will have the right (but not
the obligation) to purchase from such Persons, and such Persons will be required
to sell to the Company (or to any such assignee) any or all of his Common Stock
(including any fractional shares) at a price per share equal to the lower of (i)
the price per share paid for such Common Stock by such Management Investor,
provided that if the price per share paid for such Common Stock is zero, then
the price per share paid will be deemed to be the par value and (ii) the Fair
Market Value as of the date the Company first exercises such Call Right with
respect to such Management Investor. With respect to any particular shares of
Common Stock, the Company will have such Call Rights for a period commencing on
the date (the “Call Commencement Date”) that is the later of (A) the date of the
Termination, and (B) in the case of Common Stock received upon the exercise of
Common Stock Equivalents, the date of the exercise of such Common Stock
Equivalents.

 

(c) The Company will be entitled to exercise its rights hereunder with respect
to any particular shares of Common Stock by sending

 

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written notice, not later than 181 days after the Call Commencement Date (the
“Call Option Period”), to such Management Investor of its intention to purchase
the Common Stock.

 

(d) If, with respect to any particular shares of Common Stock, the Company fails
to exercise the Call Rights during the applicable Call Option Period, the
Investors will have the Call Rights specified in this Section 2.14 for a period
commencing on the date of the expiration of the Call Option Period, and ending
30 days thereafter and each Investor may exercise the Call Rights by sending
written notice to such Management Investor within such time period. If the
Investors, in the aggregate, elect to exercise Call Rights with respect to a
number of shares of Common Stock greater than the number of such shares held by
such Management Investor and his Permitted Transferees, each Investor shall be
entitled to exercise the Call Rights in relative proportions to the percentage
ownership of the shares of Equity Securities of the Investors electing to
exercise Call Rights. With respect to any particular shares of Common Stock, the
purchase price payable by the Investors shall be determined in accordance with
Section 2.14(b); provided that Fair Market Value shall be determined if
applicable as of the date the first Investor exercises a Call Right with respect
to such shares of Common Stock. The Company agrees to promptly provide, upon
request, the address of any Management Investor listed in the personnel records
of the Company.

 

(e) The closing of any purchase pursuant to this Section 2.14 will take place at
the principal office of the Company on the 30th day after the giving of the
applicable notice. In the event of any purchase by Investors, such Investors
will pay the purchase price for such Common Stock by delivery of a bank
cashier’s check or a certified check for the purchase price. In the event of any
purchase by the Company, the Company will pay the purchase price for such Common
Stock (i) by delivery of a bank cashier’s check or a certified check of the
Company for the purchase price or (ii) if the Company is prohibited from paying
cash under any financing arrangement or otherwise, by delivery of a note payable
in installments of up to five years, bearing interest at the Settlement Rate (as
defined in the Purchase Agreement) in effect as of the date of the closing of
the purchase; provided that in the event of any such prohibition, the Company
will have the option of delaying the exercise of the Call Rights until 60 days
after the financing and other restrictions lapse in which case the Call Rights
shall remain in full force and effect until such time.

 

2.15 Put Rights.

 

(a) If the Termination of a Management Investor is as a result of the death or
Permanent Disability of such Management Investor, then the applicable Management
Entities, shall, for 60 days (the “Put Period”) following the date of such death
or Permanent Disability, have the right to sell to the Company, and the Company
shall be required to purchase, on one occasion, all of the shares of Common
Stock then held by the applicable Management Entities, at a per share price
equal to the Fair Market Value per share as of the date the Management Entities
exercise such right (the “Repurchase Price”).

 

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(b) In the event the applicable Management Entities intend to exercise their
rights pursuant to Section 2.15(a), such Management Entities shall send written
notice to the Company, at any time during the Put Period, of their intention to
sell shares of Common Stock in exchange for the payment referred in Section
2.15(a) (the “Redemption Notice”).

 

(c) The closing of the purchase will take place at the principal office of the
Company on the 30th day after the giving of notice. The Company will pay the
Repurchase Price for such Common Stock, against delivery of certificates or
other instruments representing the Common Stock so purchased appropriately
endorsed or executed by the applicable Management Entities or any duly
authorized representative, (i) by delivery of a bank cashier’s check or a
certified check of the Company for the Repurchase Price or (ii) if the Company
is prohibited from paying cash under any financing arrangement or otherwise, by
delivery of a note payable in installments of up to five years, bearing interest
at the Settlement Rate (as defined in the Purchase Agreement) in effect as of
the date of the closing of the purchase; provided that in the event of any such
prohibition, the Company will have the option of delaying the repurchase until
60 days after the financing and other restrictions lapse in which case the
repurchase rights shall remain in full force and effect until such time.

 

3. Amendments to Article V. Article V of the Agreement is hereby amended by
deleting clauses (c) and (d) of Section 5.2 in their entirety.

 

4. Amendments to Article VI. Article VI of the Agreement is hereby amended by
adding, immediately following Section 6.8, the following new Section 6.9.

 

6.9 Form S-8. No later than 190 days following the IPO, the Company shall file a
registration statement on Form S-8 (or any successor or, if Form S-8 is not
available, other appropriate forms) with respect to the Common Stock subject to
the Company’s 2003 Stock Incentive Plan.

 

5. Amendments to Article IX. Article IX of the Agreement is hereby amended by
adding, immediately following Section 9.14, the following new Sections 9.15,
9.16 and 9.17:

 

9.15 Covenant Not to Compete; Non-Solicitation. Each Management Investor
acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its subsidiaries and accordingly agrees that, if such Management
Investor is subject to an Employment Agreement, he will abide by the
non-competition and non-solicitation covenants contained therein which are
incorporated herein by reference with respect to such Management Investor. If no
such covenants are contained in the Employment Agreement or if there is no such
agreement, then the Management Investor agrees as follows:

 

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(a) During the term of employment by the Company or any of its Affiliates and
for a period of two years following the date the Management Investor ceases to
be employed by the Company (the “Restricted Period”), such Management Investor
will not, whether on his/her own behalf or on behalf of or in conjunction with
any Person, directly or indirectly, solicit or assist in soliciting, in any
manner, in competition with the Company, the business of any client or
prospective client:

 

(i) with whom the Management Investor had personal contact or dealings on behalf
of the Company or its subsidiaries during the one year period preceding the
Management Investor’s termination of employment;

 

(ii) with whom employees reporting to the Management Investor have had personal
contact or dealings on behalf of the Company during the one year immediately
preceding the Management Investor’s termination of employment; or

 

(iii) for whom the Management Investor had direct or indirect responsibility
during the one year immediately preceding the Management Investor’s termination
of employment.

 

(b) During the Restricted Period, the Management Investor will not directly or
indirectly:

 

(i) engage in any business that competes with the business of the Company or its
Affiliates (including, without limitation, businesses which the Company or its
Affiliates have specific plans to conduct in the future and as to which the
Management Investor is aware of such planning) in any country in which the
Company or its Affiliates generate at least $10 million in gross premiums
written (or, pursuant to the Company’s business plan, expects to generate at
least $10 million in gross premiums written in the calendar year following the
year of the Management Investor’s termination of employment) (a “Competitive
Business”);

 

(ii) enter the employ of, or render any services to, any Person (or any division
or controlled or controlling Affiliate of any Person) who or which engages in a
Competitive Business;

 

(iii) form, acquire a financial interest in, or otherwise become actively
involved with, any Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent, trustee
or consultant; or

 

(iv) interfere with, or attempt to interfere with, business relationships
(whether formed before, on or after the date of this Agreement) between the
Company or any of its subsidiaries and customers, clients, suppliers partners,
members or investors of the Company or its subsidiaries.

 

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(c) Notwithstanding anything to the contrary in this Agreement, such Management
Investor may, directly or indirectly own, solely as an investment, securities of
any Person engaged in the business of the Company or its subsidiaries which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market if such Management Investor (i) is not a Controlling
person of, or a member of a group which Controls, such Person and (ii) does not,
directly or indirectly, own 5% or more of any class of securities (including
stock options, whether or not exercisable) of such Person.

 

(d) During the Restricted Period, such Management Investor will not, whether on
such Management Investor’s own behalf or on behalf of or in conjunction with any
Person, directly or indirectly:

 

(i) solicit or encourage in any manner any employee of the Company or its
subsidiaries to leave the employment of the Company or its subsidiaries or to
apply for or accept employment with any other Person; or

 

(ii) hire any such employee who was employed by the Company or its subsidiaries
as of the date of the termination of such Management Investor’s employment or
who left the employment of the Company or its subsidiaries coincident with, or
within one year prior to or after, the termination of such Management Investor’s
employment with the Company (other than any such employee whose employment with
the Company is terminated by the Company without cause).

 

(e) During the Restricted Period, such Management Investor will not, directly or
indirectly, encourage or solicit to cease to work with the Company or its
subsidiaries any consultant then under contract with the Company or its
subsidiaries.

 

(f) It is expressly understood and agreed that although such Management Investor
and the Company consider the restrictions contained in this Section 9.15 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against the Management Investor,
the provisions of this Agreement will not be rendered void but will be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding will not affect the
enforceability of any of the other restrictions contained herein.

 

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9.16 Confidentiality.

 

(a) No Management Investor will at any time (whether during or after such
Management Investor’s employment with the Company) (i) retain or use for the
benefit, purposes or account of such Management Investor or any other Person; or
(ii) disclose, divulge, reveal, communicate, share, transfer or provide access
to any Person outside the Company (other than its professional advisers who are
bound by confidentiality obligations), any non-public, proprietary or
confidential information – including without limitation trade secrets, know-how,
research and development, software, databases, inventions, processes, business
strategies, formulae, technology, designs and other intellectual property,
information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel,
compensation, recruiting, training, advertising, sales, marketing, promotions,
government and regulatory activities and approval – concerning the past, current
or future business, activities and operations of the Company, its subsidiaries,
Affiliates or any third party that has disclosed or provided any of same to the
Company on a confidential basis (“Confidential Information”) without the prior
written authorization of the Company Board.

 

(b) For purposes of the confidentiality obligations of Management Investors
under this Section 9.16, “Confidential Information” will not include any
information that is (i) generally known to the industry or the public other than
as a result of such Management Investor’s breach of this covenant or any breach
of other confidentiality obligations by third parties; (ii) made legitimately
available to the Management Investor by a third party without breach of any
confidentiality obligation; or (iii) required by law or a court of competent
jurisdiction to be disclosed; provided that such Management Investor will give
prompt written notice to the Company of such requirement, disclose no more
information than is so required, and cooperate with any attempts by the Company
to obtain a protective order or similar treatment.

 

(c) Except as required by law or a court of competent jurisdiction, no
Management Investor will disclose to anyone, other than a Management Investor’s
immediate family and legal, tax or financial advisors, the existence or contents
of this Agreement; provided that each Management Investor may disclose to any
prospective future employer the provisions of Sections 9.15 and 9.16(a)-(d) and
(g) of this Agreement, provided that they agree to maintain the confidentiality
of such terms.

 

(d) Upon termination of such Management Investor’s employment for any reason,
the Management Investor will (i) cease and not thereafter commence use of any
Confidential Information or intellectual property (including without limitation,
any patent, invention, copyright, trade secret, trademark, trade name, logo,
domain name or other source indicator) owned or used by the Company, its
subsidiaries or Affiliates; (ii) immediately destroy, delete, or return to the
Company, at the Company’s option, all originals and

 

11

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copies in any form or medium (including memoranda, books, papers, plans,
computer files, letters and other data) in such Management Investor’s possession
or control (including any of the foregoing stored or located in the Management
Investor’s office, home, laptop or other computer, whether or not Company
property) that contain Confidential Information or otherwise relate to the
business of the Company, its Affiliates and subsidiaries, except that such
Management Investor may retain only those portions of any personal notes,
notebooks and diaries that do not contain any Confidential Information; and
(iii) notify and fully cooperate with the Company regarding the delivery or
destruction of any other Confidential Information of which the Management
Investor is or becomes aware.

 

(e) No Investor shall, and each Investor shall cause its directors, officers,
employees, affiliates, representatives and each of its director-designees not
to, disclose any Confidential Information regarding the Company obtained by such
Investor in its capacity as an Investor (including in its capacity as a VCOC
Investor) or by a director-designee of such Investor in such director-designees’
capacity as a director of the Company or by an observer of such Investor under
Section 3.1(e); provided that any Investor may disclose such information to any
of its directors, officers, employees, affiliates, auditors, attorneys and other
representatives or agents, provided that such Investor shall be responsible for
any breach by any such Person of the provisions hereof; and provided further
that PMI may disclose such information (i) to any lender to PMI or any of its
subsidiaries or any rating agency, (ii) to the extent PMI determines after
consultation with counsel it is required to do so to comply with its disclosure
obligations under applicable Law (including, without limitation, in connection
with any public or private financing transaction that PMI or any of its
subsidiaries may elect to consummate but excluding disclosure in connection with
Process which is covered separately below) or any applicable rule of any
national securities exchange or self regulatory organization, (iii) to the
extent PMI determines it is required to do so in connection with any
extraordinary corporate transaction involving PMI or any of its subsidiaries and
(iv) to any regulatory agency or other governmental authority with jurisdiction
over PMI or any of its subsidiaries to the extent that PMI determines after
consultation with counsel that it is necessary or appropriate to make such
disclosure in connection with a regulatory report, examination, inquiry or
investigation of PMI or any of its subsidiaries or to the extent that any such
regulatory agency or governmental authority requests such Confidential
Information and PMI determines that the failure to provide such Confidential
Information would be reasonably likely to have an adverse effect on PMI or any
of its subsidiaries. With respect to any disclosure contemplated by clause (i),
(iii) or (iv) in the immediately preceding sentence, PMI agrees to use its
reasonable best efforts to obtain assurances that confidential treatment will be
accorded to such information. In the event that any Investor or any Person to
whom such Investor is entitled to disclose information hereunder is required to
disclose any Confidential Information in connection with any judicial or
administrative proceedings (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) (collectively, “Process”), such Investor shall in advance of such

 

12

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disclosure provide the Company with prompt notice of such requirement(s). Such
Investor shall, to the extent legally permissible, provide the Company, in
advance of any such disclosure, with a list of any Confidential Information
intended to be disclosed (and, if applicable, the text of the disclosure
language itself) and to cooperate with the Company to the extent it may seek to
limit such disclosure, including, if requested, taking all reasonable steps to
resist or avoid any such Process. If, in the absence of a protective order or
the receipt of a waiver from the Company after a request in writing therefor is
made by such Investor (such request to be made as soon as reasonably practicable
to allow the Company a reasonable amount of time to respond thereto), such
Investor or other Person is legally required to disclose Confidential
Information to any tribunal, such Investor or other Person may disclose such
information without liability hereunder. For purposes of the confidentiality
obligations of Investors under this Section 9.16, the term Confidential
Information shall not include information (i) which is or becomes generally
available to the public other than as a result of disclosure of such information
by any Investor or any Person to whom such Investor is entitled to disclose such
information hereunder or (ii) which is or becomes available to the recipient of
such information on a non-confidential basis from a source which is not, to the
recipient’s knowledge, bound by a confidentiality or other similar agreement or
any other legal or fiduciary obligation which prohibits disclosure of such
information.

 

(f) The Company agrees to abide by the following parameters as they relate to
its disclosure practices and PMI, as applicable, agrees as follows: (i) the
Company and PMI shall use their reasonable best efforts to coordinate their
contacts with analysts regarding the Company or any of its Subsidiaries and
shall advise each other reasonably promptly following any such contacts; (ii)
the Company and PMI shall coordinate their quarterly and annual earnings
releases; and (iii) the Company shall advise the Investors of any material
information before the Company otherwise releases such information and shall
then use its reasonable best efforts to avoid selective disclosure of such
information. Clauses (i) and (ii) of this paragraph (f) shall terminate upon
consummation by the Company of an IPO.

 

(g) Notwithstanding anything herein to the contrary, any party to this Agreement
(and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all Persons, without limitation of any kind,
the tax treatment and tax structure of transactions entered into by the Company
or any of its subsidiaries and all materials of any kind (including opinions or
other tax analyses) that are provided to it relating to such tax treatment and
tax structure. However, any such information relating to the tax treatment or
tax structure is required to be kept confidential to the extent necessary to
comply with any applicable federal or state securities laws.

 

13

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9.17 Advice of Counsel.

 

Each Management Investor acknowledges that, in executing this Agreement, he or
she has had the opportunity to seek the advice of independent legal counsel, and
has read and understood all of the terms and provisions of this Agreement.

 

6. Amendments to Article IX. Section 9.3(a) of the Agreement is hereby amended
by adding, immediately following the first sentence of Section 9.3(a), the
following sentence:

 

Amendments to this Agreement that diminish the rights of Management Investors
differently than Investors holding the same class or series of Equity Securities
as the Management Investors shall require the separate written approval of the
Management Investors holding a majority of the Common Stock held by the
Management Investors.

 

7. Amendments to Annexes to the Agreement.

 

(a) Annex A to the Agreement is hereby amended by deleting it in its entirety
and replacing it with contents of Exhibit A attached hereto.

 

(b) Annex D to the Agreement is hereby amended by deleting the Cypress notice
provision in its entirety and replacing it with the following Cypress notice
provision:

 

If to Cypress:

 

Cypress Merchant Banking Partners II L.P.

Cypress Merchant Banking II C.V.

55th Street Partners II L.P.

Cypress Side-By-Side LLC

Cypress FGIC Investors LLC

c/o The Cypress Group L.L.C.

65 East 55th Street, 28th Floor

New York, New York 10022

Attn: William L. Spiegel

Facsimile: 212-705-0198

 

with required copy (which shall not constitute notice) to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attn: Wilson S. Neely

Facsimile: (212) 455-2502

 

(c) Annex D to the Agreement is hereby amended by deleting the Management
Investors notice provision in its entirety and replacing it with the following
Management Investors notice provision:

 

If to Management Investors:

 

To the address listed in the personnel records of the Company.

 

14

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8. Miscellaneous.

 

(a) Sections 9.4 through 9.12 of the Agreement are incorporated herein by
reference, and references to the Agreement in such sections shall apply to this
Amendment as the context requires.

 

(b) Except as specifically amended by this Amendment, the provisions of the
Agreement shall remain in full force and effect.

 

(c) Cypress/FGIC shall be deemed a party to the Agreement as a Cypress Vehicle
as of the date of this Amendment. Each of the Management Investors listed on
Exhibit A hereto (amending Annex A to the Agreement) shall be deemed a party to
the Agreement as a Management Investor as of the date of this Amendment.

 

15

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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the
individuals whose names appear below and by the duly authorized representatives
of each party hereto as of the first date written.

 

FALCONS ACQUISITION CORP. By:  

/s/ Frank Bivona

--------------------------------------------------------------------------------

Name:     Title:     THE PMI GROUP, INC. By:  

/s/ Bradley M. Shuster

--------------------------------------------------------------------------------

Name:     Title:     BLACKSTONE CAPITAL PARTNERS IV L.P. By:  

Blackstone Management Associates IV L.L.C.,

its General Partner

By:  

/s/ Bret Pearlman

--------------------------------------------------------------------------------

Name:     Title:     BLACKSTONE CAPITAL PARTNERS IV-A L.P. By:  

Blackstone Management Associates IV L.L.C.,

its General Partner

By:  

/s/ Bret Pearlman

--------------------------------------------------------------------------------

Name:     Title:     BLACKSTONE FAMILY INVESTMENT PARTNERSHIP IV-A, L.P. By:  

Blackstone Management Associates IV L.L.C.,

its General Partner

By:  

/s/ Bret Pearlman

--------------------------------------------------------------------------------

Name:     Title:    

--------------------------------------------------------------------------------

CYPRESS MERCHANT BANKING PARTNERS II L.P. By:   Cypress Associates II LLC,    
as general partner By:  

/s/ James A. Stern

--------------------------------------------------------------------------------

Name:     Title:     CYPRESS MERCHANT BANKING II C.V. By:   Cypress Associates
II LLC,     as managing general partner By:  

/s/ James A. Stern

--------------------------------------------------------------------------------

Name:     Title:     CYPRESS SIDE-BY-SIDE LLC By:  

/s/ James A. Stern

--------------------------------------------------------------------------------

Name:     Title:     55TH STREET PARTNERS II L.P. By:   Cypress Associates II
LLC,     as general partner By:  

/s/ James A. Stern

--------------------------------------------------------------------------------

Name:     Title:     CYPRESS FGIC INVESTORS LLC By:   Cypress Merchant Banking
Partner II L.P.,     as Managing Member By:   Cypress Associates II LLC,     as
general partner By:  

/s/ James A. Stern

--------------------------------------------------------------------------------

Name:     Title:    

 

2

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CIVC/FGIC INVESTMENT COMPANY LLC as a CIVC Vehicle (as defined herein) By:  
CIVC Partners, L.P.,     its Managing Member By:   CIVC Management GP, LLC,    
its General Partner By:  

/s/ Dan Helle

--------------------------------------------------------------------------------

Name:     Title:     CIVC PARTNERS FUND III, L.P. By:   CIVC GP III, L.P.,    
its General Partner By:   GP III, LLC,     its General Partner By:  

/s/ Dan Helle

--------------------------------------------------------------------------------

Name:     Title:     CIVC PARTNERS FUND IIIA, L.P. By:   CIVC GP IIIA, L.P.,    
its General Partner By:   CIVC GP, LLC,     its General Partner By:  

/s/ Dan Helle

--------------------------------------------------------------------------------

Name:     Title:    

 

3

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Thomas Adams

/s/ Thomas Adams

--------------------------------------------------------------------------------

 

4

--------------------------------------------------------------------------------

Frank Bivona

/s/ Frank Bivona

--------------------------------------------------------------------------------

 

5

--------------------------------------------------------------------------------

Jeffrey Fried

/s/ Jeffrey Fried

--------------------------------------------------------------------------------

 

6

--------------------------------------------------------------------------------

Howard Pfeffer

/s/ Howard Pfeffer

--------------------------------------------------------------------------------

 

7

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Timothy Travers

/s/ Timothy Travers

--------------------------------------------------------------------------------

 

8