Document:

4.6 Warrant No. 2 MACFinancial.4.24.12

EXHIBIT 4.6

NEITHER THIS WARRANT (NOR THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF, EXCEPT AS PROVIDED FOR HEREIN) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, AS AMENDED, OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND THE HOLDER OF THIS WARRANT REPRESENTS  AND  WARRANTS  THAT  THIS  WARRANT  HAS  BEEN,  AND  THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RELEASE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SALE, ASSIGNMENT, TRANSFER, GIFT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF SUCH WARRANT OR SHARES MAY BE MADE (i) EXCEPT IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND (ii) UNLESS (A) SUCH WARRANT OR SHARES ARE COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) AN EXEMPTION FROM SUCH A REGISTRATION IS AVAILABLE.

Warrant No. 2

WARRANT to Purchase Common Stock of
NMI HOLDINGS, INC.

Date:  April 24, 2012

This certifies that, for value received, MAC Financial Ltd. is entitled, at any time and from time to time, beginning on the date hereof until 5:00 P.M., New York City time, on the Expiration Date (the “Warrant Exercise Period”) to purchase from NMI Holdings, Inc., a Delaware corporation, and any successor thereto (the “Company”), up to 678,295 Warrant Shares at the Exercise Price on the terms and conditions and pursuant to the provisions hereinafter provided.  This Warrant is issued pursuant to Section 2.1(a) of the Purchase Agreement (as defined below) as partial consideration for the sale of the Purchased Shares (as defined in the Purchase Agreement).

1.         Definitions.  The terms defined in this Section 1, whenever used in this Warrant, shall, unless the context otherwise requires, have the respective meanings hereinafter specified.

“Business Day” means a day other than a Saturday, a Sunday or a day on which commercial banks in the Commonwealth of Virginia or the State of New York are open for business.

“Commission” means the Securities and Exchange Commission or any other governmental body then administering the Securities Act.

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EXHIBIT 4.6

“Common Stock” means common stock, par value $0.01 per share, of the Company.

“date hereof”, “date of original issuance of this Warrant” and similar references mean the date identified on the first page of this Warrant.

“Exercise Price” means $10.00 per Warrant Share. “Expiration Date” means April 24, 2022.

“Fair Market Value” means the fair market value of a share of Common Stock as of a particular date, as determined in accordance with the following:

(i)        if the Common Stock is listed or admitted for trading on a national securities exchange, the average of the closing prices of the Common Stock for the five consecutive trading days immediately prior to (but excluding) the date in question; or

(ii)       if the foregoing clause (i) does not apply and the Common Stock is traded on the OTC Bulletin Board, the average of the closing prices of the Common Stock for the five consecutive trading days immediately prior to (but excluding) the date in question; or

(iii)     if the foregoing clauses (i) and (ii) do not apply and the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets”, the average of the closing prices of the Common Stock for the five consecutive trading days immediately prior to (but excluding) the date in question; or

(iv)      if the foregoing clauses (i), (ii) and (iii) do not apply and actual transactions in the Common Stock are reported through The PORTAL Market, which is operated by the Nasdaq Stock Market, Inc., or through the FBR PLUS System, which is operated by FBR Capital Markets & Co., the last sale price of the Common Stock on such market or system immediately prior to (but excluding) the date in question (provided such last sale price was not on a trading day in excess of 10 trading days prior to the date in question); or

(v)       if the Fair Market Value cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Fair Market Value of the Common Stock on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of the Common Stock under this clause (v), then such dispute shall be resolved pursuant to Section 16.

All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

“Form of Assignment” means the warrant assignment form attached to this Warrant as Exhibit B.

“Form of Subscription” means the exercise subscription form attached to this Warrant as Exhibit A.

“Holder” means a holder of this Warrant.

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EXHIBIT 4.6

“Purchase Agreement” means that certain Stock Purchase Agreement, dated as of November 30, 2011, by and between the Company and MAC Financial Ltd.

“Registrable Securities” means this Warrant and the Warrant Shares issuable under this Warrant.  Registrable Securities shall continue to be Registrable Securities (whether they continue to be held by MAC Financial Ltd. or they are sold) until (a) they are sold pursuant to an effective registration statement under the Securities Act or (b) they shall have otherwise been transferred (including pursuant to Rule 144 under the Securities Act) and new securities not subject to transfer restrictions under any federal securities laws and not bearing any legend restricting further transfer shall have been delivered by the Company, all applicable holding periods shall have expired, and no other applicable and legally binding restriction on transfer by the holder thereof shall exist.

“Rights to Purchase Voting Securities” means options, warrants and rights issued by the Company (whether presently exercisable or not) to purchase Voting Securities or securities of the Company that are convertible or exchangeable (whether presently convertible or exchangeable or not) into or exercisable (whether presently exercisable or not) for Voting Securities but, for the avoidance of doubt, not including a stockholders rights plan.

“Securities Act” means the Securities Act of 1933 (including any rules and regulations promulgated thereunder), as the same shall be amended and in effect from time to time.

“Voting Securities” means the Common Stock and any other securities of the Company of any kind or class having power generally to vote in the election of directors.

“Warrant” means this warrant and each warrant issued in replacement of or substitution therefor in accordance herewith or therewith, whether as a result of transfer, division or combination.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of this Warrant, including, at any time, any shares that have already been issued as a result of the exercise of this Warrant.

2.         Exercise of Warrant; Manner of Exercise.

(a)       Exercise of Warrant. Subject to the terms of this Warrant, including the transfer restrictions at the beginning of this Warrant, the Holder shall be entitled to exercise this Warrant, in whole or in part, subject to Section 2(d), on any Business Day (each, an “Exercise Date”) during the Warrant Exercise Period to, purchase up to the number of Warrant Shares set forth in the first paragraph of this Warrant at the Exercise Price, subject to all adjustments made on or prior to the date of exercise hereof as herein provided; provided that the Holder shall not be entitled to exercise any portion of this Warrant prior to the receipt of any required regulatory approvals or consents to the extent required.  To exercise this Warrant, the Holder shall provide notice to the Company of such Exercise Date at least two Business Days prior to such Exercise Date, which notice requirement may be waived by the Company in its sole discretion  (except that if the Holder has elected to receive payment of the Exercise Price as provided in Section 2(b)(i) below and the Holder and the Company have implemented or intend to implement the

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EXHIBIT 4.6

procedures set forth in Section 16 hereof to resolve a dispute over the Fair Market Value of the Common Stock , the notice period shall be 45 calendar days).

(b)       Method of Exercise; Payment of Exercise Price. In order to exercise this Warrant, the Holder hereof must surrender this Warrant to the Company, with the Form of Subscription duly executed.  With respect to payment of the Exercise Price, the Holder shall have two options:  (i) having the Company withhold, from the Warrant Shares that would otherwise be delivered to the Holder upon such exercise, Warrant Shares issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the last Business Day prior to such exercise equal to the aggregate Exercise Price that would otherwise be payable by the Holder upon such exercise or (ii) payment in full of the Exercise Price then in effect for the Warrant Shares as to which this Warrant is submitted for exercise.  Any such payment of the Exercise Price pursuant to clause (ii) above shall be payable in cash or other same-day funds.  Upon the surrender of this Warrant following one or more partial exercises, unless this Warrant has expired, a new Warrant of the same tenor representing the number of Warrant Shares, if any, with respect to which this Warrant shall not then have been exercised, shall promptly be issued and delivered to the Holder.  In the event of exercise of this Warrant, the Company shall promptly thereafter, (1) deliver the Warrant Shares issuable upon such exercise in book-entry form through the facilities of The Depositary Trust Company at the Company’s expense to the Holder or its designee or (2) execute and deliver to the Holder a certificate or certificates representing the aggregate number of Warrant Shares issuable upon such exercise registered in the name of the Holder or its designee and, unless otherwise specified in such notice, one certificate representing the aggregate number of Warrant Shares issued upon such exercise shall be so delivered.  Such Warrant Shares shall be free of restrictive legends unless (A) a registration statement covering the resale of the Warrant Shares by the Holder is not then effective and (B) the Warrant Shares are not eligible for sale pursuant to Rule 144 under the Securities Act, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such shares and without volume or manner-of-sale restrictions.

(c)       Effectiveness of Exercise.  This Warrant shall be deemed to have been exercised and such Warrant Shares shall be deemed to have been issued and delivered, and the Holder or any other person so designated to be named shall be deemed to have become a holder of record of such shares for all purposes immediately prior to the close of business on the Business Day on which (i) the Company shall have received a duly executed Form of Subscription and (ii) the Company shall have received payment of the Exercise Price in respect of the Warrant Shares being purchased (including payment in the form of a “cashless exercise” in accordance with Section 2(b)).

(d)       Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant. Instead, the Company shall pay to the Holder, in lieu of issuing any fractional share, a sum in cash equal to such fraction multiplied by the Fair Market Value of a share of Common Stock, as determined by the Company’s chief executive officer, chief financial officer or board of directors, on the Business Day or, if applicable, trading day immediately prior to the date of exercise.

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EXHIBIT 4.6

(e)       Payment of Taxes, etc. The Company shall pay all expenses in connection with, and governmental charges that may be imposed in respect of, the issuance or delivery thereof. The Holder shall pay all income, franchise and transfer taxes (other than any issuance taxes, which shall be paid by the Company) in connection with such issuance and delivery. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for Warrant Shares in any name other than that of the registered Holder of this Warrant (or any Affiliate thereof), and in such case the Company shall not be required to issue or deliver any stock certificate, if any, until such tax or other charge has been paid or it has been established to the Company’s reasonable satisfaction that no such tax or other charge is due.

3.         Expiration of Warrant.  This Warrant shall expire at, and shall no longer be exercisable after, 5:00 p.m., New York City time, on the Expiration Date.

4.         Transfer, Division and Combination.

(a)       Subject to the transfer restrictions set forth on the cover of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part (but not in denominations such that a replacement Warrant is exercisable for a non-integral number of Warrant Shares), on the books of the Company to be maintained for such purpose, upon surrender of this Warrant to the Company, together with the Form of Assignment (in whole or in part) of this Warrant duly executed by the Holder or its agent or attorney. Upon such surrender, the Company shall execute and deliver a new warrant or warrants in the name of the assignee or assignees (including, if such assignment is only a partial assignment by the Holder, in the name of the Holder), and each such warrant shall be identical in form and substance (including its date) to this Warrant except for the warrant number (which shall be as determined by the Company), the name of the named holder of the warrant (if an assignee of the Holder), and the actual number of Warrant Shares (each of which shall be as specified by the Holder), and this Warrant shall promptly be canceled.

(b)       This Warrant may be divided or combined with other Warrants upon surrender of this Warrant (and thereof, in the case of combination) to the Company, together with a written notice specifying the names and denominations in which new warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the preceding paragraph as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new warrant or warrants in exchange for the warrant or warrants to be divided or combined in accordance with such notice. Each such new warrant issued shall be issued in a denomination representing an integral number of Warrant Shares as of the date of issuance of the new warrant (except if this Warrant represents a non-integral number of Warrant Shares, then one new warrant may e issued for a non-integral number of Warrant Shares).

(c)       The Company shall pay all expenses and other charges payable in connection with the preparation, issuance and delivery of Warrants under this Section 4. The Holder shall pay all taxes (other than any issuance taxes, which shall be paid by the Company) in connection with such issuance and delivery.

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EXHIBIT 4.6

(d)       The Company agrees to maintain books for the registration and transfer of the Warrant.

(e)       Any Warrant issued in replacement of this Warrant, or as a result of combination, division, transfer or partial exercise, shall bear the legend set forth on the cover of this Warrant.

5.         Anti-Dilution Adjustments.  The Exercise Price and the number of Warrant Shares as to which this Warrant may be exercised are subject to adjustment from time to time upon the occurrence of the events set forth in this Section 5.

(a)       Adjustment for Change in Capital Stock.

During the Warrant Exercise Period, if the Company (1) pays a dividend or makes a distribution on its Common Stock, in either case, in shares of capital stock; (2) forward splits or subdivides its outstanding Common Stock into a greater number of Shares; or (3) reverse splits or combines its outstanding Common Stock into a small number of Shares; then (x) the Warrant will become exercisable for the aggregate number and kind of shares of capital stock of the Company which the Holder would have owned immediately following such action if the Warrant had been exercised immediately prior to such action and (y) the Exercise Price in effect immediately prior to such action shall be proportionately adjusted.

An adjustment made pursuant to this Section 5(a) shall become effective on the effective date of an event referred to in clauses (1), (2) and (3) above, retroactive to the record date (if any) for such event.

If, after an adjustment, the Holder of the Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Board shall determine in good faith the allocation of the adjusted Exercise Price between the classes of capital stock.  After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to the Warrant Shares in this Section.

Such adjustment shall be made successively whenever any event listed above shall occur.

(b)       Adjustment for Rights Issue.  During the Warrant Exercise Period, if the Company distributes (other than in a transaction referred to in Section 5(a)) any rights, options or warrants to all holders of its Common Stock entitling them to purchase Common Stock at a price per share which, together with the consideration (if any) paid to the Company for such right, option or warrant, is less than the Exercise Price in effect as of the record date established for such distribution, the Exercise Price shall be adjusted in accordance with the formula:
	
								
	 
	 
	 
	O
	+
	N
	x
	P

	E
	' = E
	x
	 
	 
	E

	 
	 
	 
	O + N

where:

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EXHIBIT 4.6

	
			
	E’

E
	=

=

	the adjusted Exercise Price.

the Exercise Price in effect as of the record date established for such distribution

	

O
	=
	

the number of Shares outstanding on the record date on a fully-diluted basis.

	

N
	=
	

the number of Shares issuable upon exercise of such rights, options or warrants.

	

P
	=
	

the exercise price per Share of the Shares issuable upon exercise of such rights, options or warrants plus the aggregate consideration received in respect of such rights, options or warrants for each Share issuable upon exercise of such rights, options or warrants.

Simultaneously with any adjustment of the Exercise Price pursuant to this Section 5(b), the number of Warrant Shares purchaseable upon the exercise hereof shall be increased by multiplying the number of Warrant Shares purchaseable upon exercise hereof immediately prior to such adjustment by the fraction equal to E/ E’.  An adjustment made pursuant to this Section 5(b) shall become effective when any such rights, options, or warrants are issued, retroactive to the record date for such issuance.

(c)       Adjustment for Issuance of Shares.

(1)       During the Warrant Exercise Period, if the Company, at any time and from time to time, issues or sells Common Stock for a consideration per share less than the Exercise Price then in effect as of the date the Company fixes the offering price of such additional shares, each Exercise Price shall be adjusted in accordance with the formula:
	
						
	 
	 
	 
	 
	 
	P

	E
	' = E
	x
	O
	+
	E

	 
	 
	 
	A

where:

E’    =    the adjusted Exercise Price.

E    =    the Exercise Price in effect immediately before such issuance.

O    =    the number of Shares outstanding on a fully-diluted basis immediately prior to the issuance of such additional Shares.

P    =    the aggregate consideration received for the issuance of such additional Shares.

A    =    the number of Shares outstanding on a fully-diluted basis immediately after the issuance of such additional Shares.

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EXHIBIT 4.6

Simultaneously with any adjustment of the Exercise Price pursuant to this Section 5(c)(1), the number of Warrant Shares purchaseable upon the exercise hereof shall be increased by multiplying the number of Warrant Shares purchaseable upon exercise hereof immediately prior to such adjustment by the fraction equal to E/ E’. Adjustments pursuant to this Section 5(c)(1) shall be made successively whenever any such issuance is made and shall become effective immediately after such issuance.  No adjustment shall be made under this Section 5(c)(1) upon the issuance of shares of Common Stock pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if an adjustment was made pursuant to Section 5(c)(2) in connection with the issuance of such Common Stock Equivalents.

(2)       If the Company, at any time and from time to time, issues or sells any securities convertible into or exchange for, directly or indirectly, Common Stock (“Convertible Securities”) or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, “Common Stock Equivalents”), and the aggregate of the price per share for which shares of common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “Aggregate Per Common Share Price”) shall be less than the Exercise price then in effect, or if, after any such issuance of Convertible Securities or Common Stock Equivalents, the price per share for which shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended or adjusted shall make the Aggregate Per Common Share Price less than the Exercise Price in effect at the time of such amendment or adjustment, then the Exercise Price then in effect shall be adjusted pursuant to the formula set forth in Section 5(c)(1) above assuming that all shares of Common Stock have been issued pursuant to the Convertible Securities or Common Stock Equivalents for a purchase price equal to the Aggregate Per Common Share Price.

Simultaneously with any adjustment of the Exercise Price pursuant to this Section 5(c)(2), the number of Warrant Shares purchaseable upon the exercise hereof shall be increased by multiplying the number of Warrant Shares purchaseable upon exercise hereof immediately prior to such adjustment by the fraction equal to E/ E’. Adjustments pursuant to this Section 5(c)(2) shall be made successively whenever any such issuance is made and shall become effective immediately after such issuance.

Sections 5(b) and 5(c) do not apply to:

(1)       any of the transactions described in subsection (a) of this Section 5;

(2)       the exercise of warrants, or the conversion or exchange of other securities convertible or exchangeable for Shares, which warrants or other securities are outstanding on the date hereof;

(3)       Shares issued to (x) shareholders of any person that merges with or into the Company, or with or into a subsidiary of the Company, in proportion to the stock holdings of such person immediately prior to such merger, upon such merger or (y) to any person in exchange for assets sold by such person to the Company;

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EXHIBIT 4.6

(4)       Shares of Common Stock issued in a bona fide public offering pursuant to a firm commitment underwriting in an aggregate offering amount of at least $50,000,000; or

(5)       Shares of Common Stock issuable to employees, directors or consultants of the Company under or pursuant to bona fide compensation plans approved by either the board of directors or stockholders of the Company.

(d)       Consideration Received, Occurrence of Transactions.  For purposes of any computation respecting consideration received pursuant to Section 5(c), the following shall apply:

(1)       In the case of the issuance of Common Stock or Common Stock Equivalents for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any underwriting commissions or discounts incurred by the Company for any underwriting of the issue;

(2)       in the case of the issuance of Common Stock or Common Stock Equivalents for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the Fair Market Value thereof, as determined in good faith by the board of directors of the Company;

For the purpose of any adjustment made pursuant to this Section 5, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

(e)       When De Minimis Adjustment May be Deferred.  No adjustment of the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1.00% in the Exercise Price.  Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 5 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be.

(f)        Notice of Pending and Actual Adjustments.  The Company shall give notice to the Holder at least five Business Days prior to the date of any event that will cause any adjustment to the Exercise Price and, if such event is a dividend or other event as to which a record date for the holders of Common Stock is established, at least five Business Days prior to any such record date.  Whenever any Exercise Price is adjusted, the Company, at its own expense, shall as promptly as reasonably practicable cause its Chief Financial Officer (or similar officer) to compute such adjustment and prepare a certificate setting forth such adjustment (including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant, as applicable), setting forth in reasonable detail the acts requiring such adjustment, and stating such other facts as shall be necessary to show the manner and figures used to compute such adjustment.  As promptly as reasonably practicable (but in no event more than 10 days) after each such adjustment, the Company shall give a copy of such certificate by certified mail to the Holder.

(g)       When Adjustment Not Required. If the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution,

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EXHIBIT 4.6

subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

(h)       Superseding Adjustment.  If at any time after an adjustment of the Exercise Price and/or Warrant shares shall have been made pursuant to Section 5(b) and the options, warrants or rights shall expire, or the right of exercise in respect of a portion of such securities shall expire, then to the extent that such options, warrants or rights shall have not been exercised, a recomputation shall be made of the effect of such options, warrants or rights on the basis of the issuance of only the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such right of conversion, exercise or exchange and for the consideration actually received and receivable therefor; and if and to the extent called for by the foregoing provisions of this Section on the basis aforesaid, a new adjustment shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled.

(i)        Reorganization, Reclassification, Consolidation, Merger or Sale.  If any reorganization or reclassification of outstanding shares of Common Stock, or any consolidation or merger of the Company with or into another entity, or the sale of all or substantially all of the Company’s assets to another entity (an “Extraordinary Transaction”) shall be effected in such a way that holders of Common Stock shall be entitled to receive cash, stock, securities or assets with respect to or in exchange therefor, then, as a condition of such Extraordinary Transaction, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right upon the terms and conditions specified in this Warrant to receive, in lieu of Warrant Shares upon the payment of the Exercise Price, solely such cash, stock, securities or assets as would have been issued or payable with respect to or in exchange for Warrant Shares pursuant to the terms hereof had the Holder exercised the Warrant in full immediately prior to the effective date of such Extraordinary Transaction, and in any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be possible and pertinent, in relation to any stock, securities or assets thereafter deliverable upon the exercise hereof, and appropriate adjustment shall be made to determine and provide for the price per Warrant Share, shares of stock or other security or asset deliverable hereunder, as well as the number of Warrant Shares, shares of stock or other securities, or the amount of assets, deliverable hereunder. In the event that in such Extraordinary Transaction holders of shares of Common Stock are entitled to elect to receive differing forms of consideration, the consideration that the Holder shall be entitled to receive upon payment of the Exercise Price shall be the kind and amount of consideration received by a majority of shares of Common Stock in such Extraordinary Transaction.

6.         Reservation and Authorization.  The Company shall at all times reserve and keep available for issuance upon the exercise of this Warrant such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. All shares of Common Stock which shall be so issuable, when issued upon exercise of this Warrant, shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions (other than encumbrances or restrictions imposed by this Warrant or Warrants issued in connection with divisions, combinations, transfers or replacements of this Warrant, and not including any liens

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EXHIBIT 4.6

granted by the Holder of this Warrant) and requirements of federal and state securities laws respecting restrictions on the subsequent transfer thereof.

7.         Registration.  If at any time the Company registers or intends to register shares of Common Stock, Rights to Purchase Voting Securities or any other securities convertible, exchangeable or exercisable for shares of Voting Securities on a registration statement under the Securities Act, or grants any demand or piggyback registration rights to any other holder of shares of Common Stock, Rights to Purchase Voting Securities or any other securities convertible, exchangeable or exercisable for shares of Voting Securities, the Company shall offer to the Holder of this Warrant to register the Registrable Securities of such Holder on no less favorable terms and conditions and/or enter into an agreement on customary terms and conditions with the Holder of this Warrant granting to such Holder pari passu registration rights with other holders of Common Stock with respect to the Registrable Securities of such Holder, as applicable.

8.         Warrant Holder.

(a)       No Stockholder Rights. Nothing contained in this Warrant shall be construed as conferring upon the Holder any voting rights or any other rights as a stockholder of the Company (except to the extent that this Warrant has been duly exercised or such Holder otherwise owns any Warrant Shares) or as imposing any liabilities on such Holder to purchase any securities or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise.

(b)       Limitation of Liability.  No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of the Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company or by anyone else.

9.         Taking of Record; Stock and Warrant Transfer Books.  In case of all dividends or other distributions by the Company to the holders of its Common Stock, the Company will in each such case take such a record and will take such record as of the close of business on a Business Day. The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or warrant transfer books so as to result in preventing or delaying the exercise or transfer of this Warrant.

10.       Loss or Mutilation.  Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of this Warrant and (in case of loss, theft or destruction) of indemnity satisfactory to it, and in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new warrant of like tenor and date.

11.       Office of the Company.  As long as this Warrant remains outstanding and subject to the following sentence, the Company shall maintain an office or agent at a location notice of which shall have been furnished to the Holder in writing where this Warrant may be

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EXHIBIT 4.6

presented for exercise, registration, transfer, division or combination as in this Warrant provided. Such office or agent shall be maintained at said address unless and until the Company shall designate and maintain another office or agent for such purposes and give written notice thereof to the Holder in accordance with Section 12.

12.       Notices Generally.  No notice or other communication shall be deemed given hereunder unless sent in any of the manners, and to the persons, specified in this Section 12. All notices and other communications hereunder will be in writing and will be deemed given (a) upon receipt if delivered personally, mailed by registered or certified mail, or sent by overnight courier or (b) upon dispatch if transmitted by facsimile, in any case to the Holder at the Holder’s last known address appearing on the books of the Company or to the Company at the following address (or at such other address for a party as specified in such a notice):

If to the Company to: 

NMI Holdings, Inc.
c/o FBR & Co.
1001 19th Street North, 11th Floor
Arlington, VA 22209
Attention:  John M. Sherwood
Facsimile:  (703) 312-9588 with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York  10019-6150
Attention:  David E. Shapiro
Facsimile:  (212) 403-2314
Attention: Alison M. Zieske
Facsimile:  (212) 403-2107

If to the Holder to: 

MAC Financial Ltd.
c/o Skadden, Arps, Slate Meagher & Flom LLP
155 North Wacker Drive
Chicago, Illinois 60606
Attention:  Peter C. Krupp
Facsimile:  (312) 402-8513

13.       Removal of Legend.  The Holder may surrender this Warrant or certificates evidencing Warrant Shares, if any, to the Company, which shall exchange such certificate for a certificate without the legend which appears on this Warrant; provided that the Holder has delivered evidence reasonably acceptable to the Company to the effect that this Warrant or the Warrant Shares, as the case may be, represented by this certificate are freely transferable under the Securities Act, as the case may be.

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EXHIBIT 4.6

14.       Survival.  All covenants and agreements of the Company, and all rights and duties of the Holder from time to time of this Warrant or any Common Stock issued pursuant to exercise of this Warrant (other than the right to receive Common Stock in exchange for this Warrant), shall be deemed to survive any surrender hereof to the Company upon exercise hereof by the Holder as contemplated by Section 2 or expiration of the right of the Holder to exercise any unexercised balance hereof on the Warrant Expiration Date.

15.       Certain Warrants Deemed Not Outstanding; Warrant Stock in Calls.  For the purposes of determining whether the Holder entitled to purchase a requisite number of Warrant Shares at any time has taken any action, any Warrants owned by the Company shall be deemed not to be outstanding.

16.       Dispute Resolution. In the case of a dispute as to the determination of the Exercise Price or the Fair Market Value or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two business days of receipt of the Form of Subscription giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation of the Warrant Price, Fair Market Value or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall within two business days submit via facsimile (a) the disputed determination of the Warrant Price or the Fair Market Value to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than 10 Business Days from the time it receives the disputed determinations or calculations.  Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

17.       Governing Law.  This Warrant and all rights arising hereunder shall be governed by the internal laws of the State of Delaware.

[Remainder of page left intentionally blank.]

13

EXHIBIT 4.6

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and issued by its officers thereunto duly authorized as of the date first written above.

NMI HOLDINGS, INC.

                 By:       /s/ Bradley M. Shuster
        Name:  Bradley M. Shuster
Title:    President and Chief Executive Officer

14

EXHIBIT 4.6

Exhibit A

FORM OF SUBSCRIPTION

(to be signed only upon payment of the Exercise Price pursuant to the Warrant)

To the Company:

1.         The undersigned, the holder of the within Warrant, hereby irrevocably elects to purchase           shares of Common Stock pursuant to the terms of the Warrant.

2.         Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as (check applicable ones):

a “Cash Exercise” with respect to       Warrant Shares; and/or

a “Cashless Exercise” with respect to       Warrant Shares.

3.         Payment of Exercise Price.  In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the aggregate Exercise Price in the sum of $                                         to the Company in accordance with the terms of the Warrant.

4.         Delivery of Warrant Shares.  The Company shall deliver to the Holder, or its designee or agent as specified below,                            Warrant Shares in book-entry form through the facilities of The Depositary Trust Company or certificate form in accordance with the terms of the Warrant.

	
	
	 

	 

	 

The undersigned represents (a) that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Common Stock; and (b) that it can bear the economic risk of its investment in the Common Stock and can afford to lose its entire investment in the Common Stock.  The undersigned agrees that the Common Stock may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such act.

The undersigned represents that it has tendered payment for such shares of Common Stock to the Company in the form indicated above.

If the number of shares of Common Stock purchased is less than all of the Warrant Shares evidenced hereby, and the undersigned is surrendering the Warrant in connection with the exercise hereof, the undersigned requests that a new Warrant representing the remaining shares of Common Stock subject to the Warrant be issued and delivered to the undersigned.

15

EXHIBIT 4.6

If the original Warrant is not surrendered in connection with the exercise hereof: (a) the undersigned represents that it has not sold, assigned, pledged, transferred, hypothecated, or otherwise disposed of the original Warrant or any interest therein or represented thereby and hereby agrees to fully and forever indemnify and hold harmless the Company and each of its successors, assigns and affiliates from any loss, cost, damages or expense (including reasonable attorneys’ fees) of any kind or nature whatsoever it may hereinafter suffer or incur in connection with or as a result of the undersigned’s failure to surrender the original Warrant in connection with such exercise; and (b) the undersigned will as promptly as reasonably practicable after the delivery of this Subscription to the Company (and in any event within five Business Days), deliver, or cause to be delivered, the original Warrant to the Company.

	
				
	DATED:
	 
	 
	 

	 
	 
	 
	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	(Address)

16

EXHIBIT 4.6

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned, the holder of the attached Warrant, hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant unto:

	
			
	Name of Assignee
	 
	Address

	 
	 
	 

	 
	 
	 

	 
	 
	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

	 
	 
	 

	 
	[Holder]
	 

	 
	 
	 

	 
	By:
	 

	 
	 
	Name:

	 
	 
	Title:

1710.8 Employment Agreement B.Shuster.3.6.12

EXHIBIT 10.8

EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of  March 6, 2012, by and between Bradley M. Shuster (the “Executive”) and NMI Holdings, Inc. (the “Company”), a Delaware corporation.
WITNESSETH THAT:
WHEREAS, the Company is desirous of employing the Executive in an executive capacity on the terms and conditions, and for the consideration, hereinafter set forth, and the Executive is desirous of being employed by the Company on such terms and conditions and for such consideration
WHEREAS, the Company is in the process of raising capital for the capitalization of its private mortgage insurance business;
WHEREAS, the parties intend that this Agreement shall become binding and enforceable when the Company receives cash proceeds (or irrevocable commitments therefor) of at least $500,000,000 in the aggregate (before discounts, placement agent fees and any expenses) (the “Capitalization of NMI”), and to commence business operations, following the Capitalization of NMI, the Company will need to obtain conditional approval by either Fannie Mae or Freddie Mac to permit the Company to write private mortgage insurance.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, it is hereby covenanted and agreed by the Executive and the Company as follows:
1.Effective Date.  This Agreement shall become binding and enforceable on the date of the Capitalization of NMI (the “Initial Effective Date”).  Notwithstanding any other provisions of this Agreement, if the Capitalization of NMI does not occur on or before April 30, 2012 (subject to extension upon the mutual agreement of the parties to this Agreement by a date that is no less than three (3) business days prior to such deadline), this Agreement shall not become effective, shall be null and void, and the Executive shall have no rights hereunder.
2.Employment Period.  The initial term of the Executive’s employment (the “Employment Period”) will commence on the Initial Effective Date and end on the third anniversary of the date on which the Company receives GSE Approval (as defined in the Stock Purchase Agreement, by and between the Company and MAC Financial Ltd., dated as of November 30, 2011) (the “Subsequent Effective Date”), unless the Employment Period is terminated earlier pursuant to Section 5 of this Agreement.  Notwithstanding anything to the contrary herein, if a Change in Control (as defined below) occurs during the Employment Period and before the third anniversary of the Subsequent Effective Date, the Employment Period shall end, unless terminated earlier pursuant to Section 5 of this Agreement, on the later of (a) the second anniversary of the closing of the Change in Control or (b) the third anniversary of the Subsequent Effective Date.  

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EXHIBIT 10.8

3.Position and Duties.  
(a)During the Employment Period, the Executive shall (i) serve as the President and  Chief Executive Officer of the Company, with such authority, power, duties and responsibilities as are commensurate with such positions and as are customarily exercised by a person holding such positions in a company of the size and nature of the Company, (ii) report directly to the Board of Directors of the Company (the “Board”), (iii) initially be appointed, and thereafter be nominated, to serve as a member of the Board, and (iv) perform his duties at the Company’s primary office location in or near San Francisco, California, subject to the Executive’s performance of duties at, and travel to, such other offices of the Company and subsidiaries and controlled affiliates (the “Affiliated Entities”) and/or other locations as shall be necessary to fulfill his duties.  
(b)The Executive, during the Employment Period, shall devote his full business time, energies and talents to serving in the positions described in this Section 3 and he shall perform his duties faithfully and efficiently subject to the directions of the Board.  Notwithstanding the foregoing provisions of this Section 3(b), the Executive may (i) serve as a director, trustee or officer or otherwise participate in not-for-profit educational, welfare, social, religious and civic organizations, (ii) subject to the written consent of the Board, serve on the board of directors of for-profit entities, provided, however, that the board positions set forth on Schedule A to this Agreement shall be deemed to have been approved by the Board, and (iii) acquire passive investment interests in one or more entities, to the extent that such other activities do not inhibit or interfere with the performance of the Executive’s duties under this Agreement, or conflict with the business or policies of the Company or any Affiliated Entities.  
4.Compensation.  Subject to the terms of this Agreement, Executive shall be entitled to receive compensation as follows:
(a)    During the portion of the Employment Period occurring prior to GSE Approval, while the Executive is employed by the Company, the Executive shall be entitled to (i) receive a monthly salary of $20,000 (the “Pre-GSE Base Salary”), payable in arrears on the last day of each calendar month during the Employment Period and, for the calendar month in which the GSE Approval occurs, Executive shall receive a prorated portion of his monthly Pre-GSE Base Salary, based on the number of days in the month that elapsed prior to the GSE Approval and (ii) participate in any health and welfare benefit programs adopted and maintained by the Company for its employees following the Initial Effective Date. 
(b)    Upon the Company’s receipt of GSE Approval, then during the period commencing on the Subsequent Effective Date and continuing through the Employment Period (the “Remuneration Period”), while the Executive is employed by the Company, the Executive shall be entitled to receive, and the Company shall compensate him for his services as follows:
(i)Base Salary.  During the Remuneration Period, the Executive shall receive an annual base salary (“Annual Base Salary”) of no less than $600,000.  The Executive’s Annual Base Salary shall be reviewed annually by the Compensation Committee of the Board (the “Compensation Committee”) pursuant to its normal performance 

2

EXHIBIT 10.8

review policies for senior executives and may be increased but not decreased.  The term “Annual Base Salary” as utilized in this Agreement shall refer to Annual Base Salary as in effect from time to time.  Such Annual Base Salary shall be payable in accordance with the Company’s payroll policies, as  in effect from time to time.  
(ii)    Annual Incentive Payment.  With respect to each fiscal year or portion of a fiscal year of the Company that ends during the Remuneration Period, the Executive shall be eligible to receive an annual incentive payment (the “Incentive Payment”) as determined by the Compensation Committee, subject to the following:
(A)    The Executive’s target Incentive Payment opportunity under the incentive plan applicable to the Executive for each fiscal year during the Remuneration Period shall be 100% of his Annual Base Salary (the “Target Incentive Payment”).  
(B)    Subject to Section 4(b)(ii)(D) below, if GSE Approval is obtained in the middle of calendar year 2012 or 2013, the Executive nevertheless will be entitled to receive an Incentive Payment of not less than 50% of the Target Incentive Payment for, (I) if the Remuneration Period commences in 2012, the portion of the period beginning on the Initial Effective Date and ending at the end of calendar year 2012, if any, falling in calendar year 2012 prorated for the portion of calendar year 2012 from the Initial Effective Date through the end of the applicable calendar year or, (II) if the Remuneration Period commences in calendar year 2013, the bonus shall not be prorated with respect to calendar year 2013.  
(C)    Any earned Incentive Payment shall be paid to the Executive pursuant to the terms of the applicable incentive plan; provided, however, that any such Incentive Payment for a fiscal year shall be paid to the Executive no later than the fifteenth (15th) day of the third month following the close of such fiscal year, or the calendar year where applicable, unless the Executive shall elect to defer the receipt of such Incentive Payment pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  
(D)    Notwithstanding the foregoing, in the event that the Company’s initial filing of a registration statement registering the resale of the Registrable Shares as defined in the Registration Rights Agreement by and between the Company and FBR & Co. (the “Public Filing”) does not occur (other than as a result of the Securities and Exchange Commission being unable to accept such filing) prior to the date (the “Public Filing Deadline”) that is (I) the date that is six (6) months following GSE Approval, or (II) such later public filing deadline as approved by a vote of stockholders holding at least seventy-five percent (75%) of the Registrable Shares, then the Executive’s Target Incentive Payment for the fiscal year during which the Public Filing Deadline occurs shall be immediately reduced to 50% of the Target Incentive Payment and such Target Incentive Payment (or any Target Incentive Payment relating to a fiscal year that begins following the Public Filing Deadline during which the Public Filing has not yet occurred) shall be reduced by a further 10% 

3

EXHIBIT 10.8

for each additional thirty (30) days following the Public Filing Deadline that elapses prior to the Public Filing occurring, but in no event shall be less than zero (0). 
(iii)    Annual Equity Awards.  With respect to each fiscal year or portion of a fiscal year of the Company ending during the Remuneration Period, the Executive shall be eligible to be considered for the grant of annual equity awards under any Company equity plans on terms and conditions no less favorable than those provided to other senior executives of the Company.  
(iv)    Initial Equity Awards.  The Company will grant to the Executive the following stock, restricted stock and stock options at the following times:
(A)    On or before the Initial Effective Date, the Company will adopt an omnibus stock incentive plan (the “Equity Plan”), which will, at a minimum, allow for the issuance of non-qualified stock options and restricted stock;  
(B)    Following the Initial Effective Date, the Executive will be granted 742,500 restricted stock units and stock options with respect to 907,500 shares of Company common stock (the “Initial Equity Awards”).  The Initial Equity Awards will be granted subject to terms and conditions set forth in an equity award agreement and the Equity Plan and will be subject to the following minimum vesting conditions, in each case, subject to the Executive’s continued employment with the Company through any such vesting date (unless provided otherwise in the applicable equity award agreement)  and the achievement of GSE Approval:  
(1)    the restricted stock (“performance shares”) will vest as follows:  1/3 of the performance shares will vest when the stock price equals or exceeds $12.50 per share, 1/3 of the performance shares will vest when the stock price equals or exceeds $14 per share and 1/3 of the performance shares will vest when the stock price equals or exceeds $16 per share. 
(2)    one-third (1/3) of the stock options will vest on the first anniversary of the Initial Effective Date, an additional 1/3 of the stock options will vest on the second anniversary of the Initial Effective Date and the final 1/3 of the stock options will vest on the third anniversary of the Initial Effective Date.
(C)    The price per share of Company common stock (the “Common Stock”) for determining the performance shares under the Equity Plan, and under Section 4(b)(iv) (D) will be determined as follows:

4

EXHIBIT 10.8

(1)    if the Common Stock is traded on an established securities exchange, such stock will vest when the average closing price of the shares on such exchange for any consecutive thirty- (30-) day trading period exceeds the price required for vesting;
(2)    if the Common Stock is actively traded over-the-counter, such stock will vest when the average of the closing bid price over any consecutive thirty- (30-) day trading period exceeds the price required for vesting;
(3)    if the Common Stock is traded on the FBR PlusTM System, such stock will vest when the average sales price reported on the FBR PlusTM System over any consecutive thirty- (30-) day trading period exceeds the price required for vesting; and
(4)    if, as of the third anniversary of the Subsequent Effective Date, the Common Stock is not traded on any market identified in Sections 4(d)(iv)(C)(1), (2) and (3), such stock will vest when the fair market value of the shares determined based on the procedures prescribed by Treas. Reg. Section 1.409A-1(b)(5)(iv)(B) (relating to stock not readily tradable on an established market) exceeds the price required for vesting. 
(D)    Despite any contrary provision of this Agreement, the performance targets used for vesting purposes under Section 4(b)(iv)(B)(1) assume a $10 per share price for the Company’s common stock on the date of the Capitalization of NMI.  Performance targets will be adjusted on the Initial Effective Date in proportion to the amount by which the per share price for the Company’s Common Stock is more or less than $10 per share; and
(E)    The grants of common stock, restricted stock and stock options set forth in this Section 4 shall be subject to and contingent upon the Executive entering into such agreements, as may be reasonably provided by the Company, and making such representations and warranties as the Company may reasonably require, including representing as to the Executive’s status as an “accredited investor” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”).    

5

EXHIBIT 10.8

(c)    Additional Bonuses.
(i)    GSE Approval Bonus.  If the Company obtains GSE Approval on or before the date (the “GSE Approval Deadline”) that is (A) nine (9) months immediately following the Initial Effective Date, or (B) such later deadline for GSE Approval as approved by a vote of stockholders holding at least a majority of the Registrable Shares, the Executive shall receive an additional lump sum cash payment from the Company equal to $300,000 (the “GSE Bonus”), to be paid as soon as practicable after the Subsequent Effective Date and in no event more than thirty (30) days thereafter.  Executive’s eligibility for the bonus described in this section is subject to Executive’s continuing employment through GSE Approval, provided that if the Company terminates Executive’s employment with the Company without “Cause” or he resigns for “Good Reason” prior to the GSE Approval Deadline, then Executive shall remain eligible to receive 50% of the GSE Bonus, subject to GSE Approval being achieved on or prior to the GSE Approval Deadline, with such portion of the GSE Bonus to be paid at the same time as if the Executive had remained employed by the Company through the achievement of GSE Approval.    
(ii)    Filing Date Bonus.  If the Public Filing (as defined in Section 4(b)(ii)(D) above) occurs on or prior to the Public Filing Deadline (as defined in Section 4(b)(ii)(D) above), the Executive shall receive an additional lump sum cash payment from the Company equal to $300,000 (the “Filing Date Bonus”), to be paid as soon as practicable after the Public Filing, but in no event shall it be paid more than thirty (30) days thereafter.  Executive’s eligibility for the bonus described in this section is subject to Executive’s continuing employment through the Public Filing, provided that if the Company terminates Executive’s employment with the Company without “Cause” or he resigns for “Good Reason” prior to the Public Filing, then Executive shall remain eligible to receive 50% of the Filing Date Bonus, subject to the Public Filing occurring on or prior to the Public Filing Deadline with such portion of the Filing Date Bonus to be paid at the same time as if the Executive had remained employed by the Company through the Public Filing.
(iii)    Filing Effective Date Bonus.  If the Company’s Public Filing becomes effective on or before the date (the “Public Filing Effective Deadline”) that is the latest of: (A) twelve (12) months immediately following GSE Approval, (B) six (6) months immediately following the Public Filing, or (C) such later Public Filing effective date as approved by a vote stockholders holding at least seventy-five percent (75%) of the Registrable Shares, the Executive shall receive an additional lump sum cash payment from the Company equal to $300,000 (“Effective Date Bonus”), to be paid as soon as practicable after the Public Filing becomes effective, but in no event shall it be paid more than thirty (30) days thereafter.  Executive’s eligibility for the bonus described in this section is subject to Executive’s continuing employment through the date that the Public Filing becomes effective, provided that if the Company terminates Executive’s employment with the Company without “Cause” or he resigns for “Good Reason” prior to the Public Filing Effective Deadline, then Executive shall remain eligible to receive 50% of the Effective Date Bonus, subject to the Public Filing becoming effective prior to the Public Filing Effective Date Deadline with such portion of the Effective Date Bonus to be paid at the same time as if the Executive had remained employed by the Company through the date that the Public Filing becomes effective.

6

EXHIBIT 10.8

(d)    Employee Benefits, Fringe Benefits and Perquisites.  During the Employment Period, the Executive shall be provided with employee benefits, fringe benefits and perquisites on a basis no less favorable than such benefits and perquisites are provided by the Company from time to time to the Company’s other senior executives, including, but not limited to, participation in a nonqualified deferred compensation plan, a 401(k) plan, health, dental, vision and life insurance, in each case to the extent otherwise maintained by the Company.  
(e)    Expense Reimbursement.  Subject to the requirements of Section 8(a)(ii) (relating to in-kind benefits and reimbursements), the Company will reimburse the Executive for all reasonable expenses incurred by him during the Employment Period in the performance of his duties in accordance with the Company’s policies applicable to senior executives.  
(f)    Stock Ownership Requirement.  During the Employment Period, the Executive shall be subject to the Company’s stock ownership policy in accordance with the guidelines as established by the Compensation Committee.    
(g)    Paid Time Off.  During the Employment Period, the Executive shall be entitled to thirty (30) days of personal time off (“PTO”) on an annual basis, which may be taken for any reason, including vacation and sick leave, in accordance with the Company’s PTO policy.  In addition, the Executive shall be entitled to all paid holidays given by the Company to its full-time employees.
(h)    Indemnification/Insurance.  The Company shall defend and indemnify the Executive and hold the Executive harmless against any and all third-party claims, losses, damages, expenses, judgments, fines or settlements, including without limitation attorneys’ fees and expenses of litigation (collectively, “Losses”) suffered or incurred by the Executive that directly or indirectly are based upon, arise out of or are in connection with any actual or alleged acts or omissions by the Executive and/or the Company (or its affiliates, employees, officers, directors or agents) in connection with this Agreement, the Executive’s relationship with the Company or its affiliates, the Executive’s services or obligations under this Agreement, or the fact that the Executive is an employee of the Company, to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit.  The foregoing obligations of the Company shall not apply (a) to acts or omissions by the Executive that (i) were not acted in good faith, (ii) the Executive knew or should have known were not in the best interests of the Company, (iii) with respect to any criminal action or proceeding, the Executive had no reasonable cause to believe the Executive’s conduct was lawful, or (iv) were effected without consultation with or under direction of the Company and create a conflict between the Executive’s interests and the interests of the Company ; and (b) to disputes between the Executive and the Company.  Upon the receipt by the Company of written notice from the Executive of any indemnified Losses, the Company shall have the obligation to employ counsel of its reasonable choosing to defend the Executive’s interests in any threatened, pending, or completed action or proceeding.  While the Executive also shall have the right to employ separate personal counsel, the expenses of such counsel incurred after written notice from the Company of its assumption of the defense of the action or proceeding shall be at the expense of and paid by the Executive unless (1) the Company shall not in fact have employed reasonable counsel to assume the defense within twenty (20) days of receipt of the notice of Losses for which the Executive is entitled to receive indemnification 

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EXHIBIT 10.8

under this Section 4 or (2) the Executive shall have reasonably concluded that there may be a conflict of interest if the Company were to assume the defense of the action or proceeding (excluding any conflict created by acts or omissions by the Executive effected without consultation with or under the direction of the Company), in which case the expenses of counsel shall be at the expense of the Company.  Notwithstanding anything to the contrary in this Agreement, this Section 4(h) shall survive the termination of this Agreement and shall continue thereafter so long as the Executive may be or is subject to possible Losses.
5.    Termination of Employment.  
(a)    Death or Disability.  The Executive’s employment with the Company 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 provide the Executive with written notice in accordance with Section 12(g) of this Agreement of its intention to terminate the Executive’s employment with the Company.  In such event, the Executive’s employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties and provided further that a Disability shall be determined to exist as provided hereinafter.  For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform the Executive’s duties with the Company on a full-time basis as a result of incapacity due to mental or physical illness, which inability exists for 180 days during any rolling 12-month period, as determined 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 with the Company during the Employment Period either with or without Cause.  For purposes of this Agreement, “Cause” shall mean: 
(i)    the continued failure of the Executive to perform substantially the Executive’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness);
(ii)    willful material misconduct or willful neglect by the Executive in the performance of his duties to the Company; 
(iii)    the Executive’s willful failure to adhere to the lawful directions of the Board, to adhere to the Company’s material written policies, or to devote substantially all of the Executive’s business time and efforts to the Company; 
(iv)    the Executive is subject to an action taken by a regulatory body or a self-regulatory organization which impairs the Executive from performing his duties to the Company; provided that a temporary suspension pending investigation or final resolution shall not be considered to impair the Executive from performing his duties to the Company for the purposes of this clause (iv);

8

EXHIBIT 10.8

(v)    the Executive’s indictment or formal admission to or plea of guilty or nolo contendere to a charge of commission of (A) a felony or (B) any crime involving moral turpitude; or 
(vi)    the Executive’s breach of any of the material terms or conditions of this Agreement.  
In order to invoke a termination for Cause on any of the grounds enumerated under Section 5(b)(i), (ii), (iii) or (vi) the Company must provide written notice to the Executive of the existence of such grounds within thirty (30) days following the Company’s knowledge of the existence of such grounds, specifying in reasonable detail the grounds constituting Cause, and the Executive shall have thirty (30) days following receipt of such written notice (the “Executive’s Cure Period”) during which he may remedy the grounds if such grounds are reasonably subject to cure.  
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 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 a majority 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 clauses (i), (ii), (iii) or (vi) above, and specifying the particulars thereof in detail.  
(c)    Good Reason.  The Executive’s employment with the Company may be terminated by the Executive during the Employment Period with or without Good Reason.  For purposes of this Agreement, “Good Reason” shall mean in the absence of the written consent of the Executive:
(i)    a material diminution (i.e., more than 10% aggregate reduction) in the Executive’s Annual Base Salary during the Employment Period; 
(ii)    a material diminution in the Executive’s title or position or the assignment to the Executive of any duties or responsibilities (including reporting responsibilities) materially inconsistent with the Executive’s position as President and Chief Executive Officer;
(iii)    any relocation of the Executive’s principal place of business to a location more than 30 miles from the Executive’s principal place of business prior to such relocation other than the initial relocation of the Executive’s principal place of business in connection with the establishment of the Company’s headquarters, which headquarters shall be within the California counties of San Francisco, Alameda or Contra Costa and in a location 

9

EXHIBIT 10.8

deemed by the Board, in its sole discretion, to be a reasonable and acceptable headquarters location for the Company; or
(iv)    any other material breach of this Agreement by the Company.
In order to invoke a termination for Good Reason, the Executive shall provide written notice to the Company of the existence of one or more of the conditions described in clauses (i) through (iii) within thirty (30) days following the Executive’s knowledge of the initial existence of such condition or conditions, specifying in reasonable detail the conditions constituting Good Reason, and the Company shall have thirty (30) days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition if such condition is reasonably subject to cure.  In the event that the Company fails to remedy the condition constituting Good Reason during the applicable Cure Period, the Executive’s “separation from service” (within the meaning of Section 409A of the Code) must occur, if at all, within 60 days following such Cure Period in order for such termination as a result of such condition to constitute a termination for Good Reason.  
(d)    Failure to Achieve GSE Approval.  The Executive’s employment with the Company shall terminate automatically upon the Company’s failure to achieve GSE Approval by the GSE Approval Deadline.
(e)    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(g) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice that (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 (30) days after the giving of such notice or thirty (30) days after the end of the Cure Period, if applicable, in the case of a termination by the Executive with Good Reason).  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.
(f)    Date of Termination.  “Date of Termination” means (i) if the Executive’s employment with the Company is terminated by the Company other than for Cause or Disability, or by the Executive without Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within thirty (30) days of such notice, as the case may be; (ii) if the Executive’s employment with the Company is terminated by the Executive with Good Reason, a date that is no later than thirty (30) days after the Cure Period, if applicable; (iii) if the Executive’s employment with the Company is terminated by the Company for Cause, the Date of Termination shall be the date on which the Company, after providing the Executive’s Cure Period, if applicable, notifies the Executive of such termination; and (iv) if the Executive’s employment with the Company is terminated by reason of death or Disability, the Date of 

10

EXHIBIT 10.8

Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.  
6.    Obligations of the Company Upon Termination.  
(a)    Cause; Failure to Achieve GSE Approval; Resignation Other Than for Good Reason.  If the Executive’s employment with the Company shall be terminated for Cause at any time or under Section 5(d) due to the Company’s failure to achieve GSE Approval by the GSE Approval Deadline or if the Executive terminates his employment with the Company without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide the following:
(i)    a lump sum cash payment consisting of:  (A) the Executive’s Annual Base Salary as in effect or Pre-GSE Base Salary, as applicable, through the Date of Termination to the extent not yet paid; and (B) any annual Incentive Payment earned by the Executive for a prior award period, but not yet paid to the Executive, provided that (other than any portion of such annual Incentive Payment that was previously deferred, which shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder) such payment shall be made no later than the fifteenth (15th) day of the third (3rd) month following the close of the fiscal year with respect to which such Incentive Payment is earned (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the “Accrued Obligations”); and
(ii)    to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy, practice, contract or agreement of the Company and the Affiliated Entities through the Date of Termination, including any unreimbursed expenses due and owing to the Executive under the Company’s expense reimbursement policy as of the Date of Termination (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).  
(b)    Prior to, or More Than Two Years Following, a Change in Control: Resignation for Good Reason; Termination Other than for Cause, Failure to Achieve GSE Approval by the GSE Approval Deadline, Death or Disability.  If, during the Employment Period and either prior to, or more than two years immediately following, a Change in Control, the Company shall terminate the Executive’s employment with the Company without Cause (excluding termination due to death, Disability or under Section 5(d) for failure to achieve GSE Approval by the GSE Approval Deadline), or if the Executive shall terminate his employment for Good Reason, subject to the Executive’s execution, delivery to the Company and non-revocation within 30 days of the Date of Termination of a release of claims against the Company and its Affiliated Entities substantially in the form used by the Company in connection with employment terminations (provided that such release shall not affect the rights of Executive to the stock options and performance shares surviving termination as set forth in the applicable award agreement), the Company shall pay to the Executive on the forty-fifth (45th) day after the Date of Termination (except as otherwise required by law or provided below) or provide, as applicable, the following:

11

EXHIBIT 10.8

(i)    a lump sum cash payment consisting of all of the following: (A) all Accrued Obligations as of the Date of Termination; (B) one times the Executive’s Annual Base Salary as set forth in Section 4(b)(i) of this Agreement; and (C) one times the Target Incentive Payment for the year in which the Date of Termination occurs (taking into account any reduction pursuant to Section 4(b)(ii)(D) of this Agreement) or if the Executive’s employment with the Company is terminated prior to the Subsequent Effective Date, the Target Incentive Payment set forth in Section 4(b)(ii)(A) of this Agreement; and
(ii)    to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive the Other Benefits.
(c)    During the Two-Year Period Immediately Following a Change in Control: Resignation for Good Reason; Termination Other Than for Cause or Death or Disability.  If, during the Employment Period and during the two-year period immediately following a Change in Control (as defined below), the Company shall terminate the Executive’s employment with the Company other than for Cause, death or Disability or if the Executive shall terminate his employment for Good Reason, subject to the Executive’s execution, delivery to the Company and non-revocation within thirty (30) days of the Date of Termination of a release of claims against the Company and its Affiliated Entities substantially in the form used by the Company in connection with employment terminations (provided that such release shall not affect the rights of Executive to the stock options and performance shares surviving termination as set forth in the applicable award agreement), the Company shall pay to the Executive on the forty-fifth (45th) day after the Date of Termination (except as otherwise required by law or provided below) or provide, as applicable, the following:
(i)    a lump sum cash payment consisting of:  (A) Accrued Obligations;  
and (B) three times the sum of (x) Executive’s Annual Base Salary as in effect immediately prior to the Date of Termination and (y) the Target Incentive Payment for the year in which the Date of Termination occurs (taking into account any reduction in the Target Incentive Payment based on Section 4(b)(ii)(D) of this Agreement); and
(ii)    to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive the Other Benefits.
(d)    Death or Disability.  If the Executive’s employment with the Company is terminated by reason of the Executive’s death or Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide all of the following: (i) the Accrued Obligations and (ii) the timely payment or provision of the Other Benefits.  The Accrued Obligations, in the event of death, shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the Date of Termination or, if earlier, as required by law.  With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6 shall include death or Disability benefits as in effect on the date of the Executive’s death or the Disability Effective Date, as applicable, with respect to senior executives of the Company and their beneficiaries.
(e)    Effect of Termination on Other Positions.  If, on the Date of Termination, the Executive is a member of the Board or the board of directors of any of the Company’s subsidiaries, or holds any other position with the Company or its subsidiaries, the Executive shall be deemed to have resigned from all such positions as of the date of his termination of employment with the Company.  The Executive agrees to execute such documents and take such other actions as the Company may request to reflect such resignation.

12

EXHIBIT 10.8

(f)    Full Settlement.  Except with respect to the payments specifically contemplated by Section 4(c) of this Agreement, the payments and benefits provided under this Section 6 (including, without limitation, the Other Benefits) shall be in full satisfaction of the Company’s obligations to the Executive upon his termination of employment, notwithstanding the remaining length of the Employment Period, and in no event shall the Executive be entitled to severance benefits (or other damages in respect of a termination of employment or claim for breach of this Agreement) beyond those specified in this Section 6.
(g)    “Change in Control” shall, for the purposes of Section 6 of this Agreement, be the first to occur following the Effective Date of:
(i)    the acquisition by any individual, entity or Group, as defined in Section 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of Beneficial Ownership (within the meaning given in Rule 13d-3 promulgated under the Exchange Act) (in a single transaction or a series of related transactions) of 35% or more (on a fully diluted basis) of either (A) the then outstanding shares of common stock of the Company, taking into account as outstanding for this purpose such common stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise or settlement of any similar right to acquire such common stock, or (B) 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 Agreement, the following acquisitions shall not constitute a Change in Control: (1) any acquisition by the Company or any Affiliated Entity, (2) any acquisition directly from the Company, (3) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliated Entity or (4) any acquisition by any person or entity that complies with clauses (A), (B) and (C) of subsection (iv) of this Section 6(g); 
(ii)    individuals who, on the Initial Effective Date, constitute the Company’s board of directors (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination), shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; 
(iii)    approval by the stockholders of the Company of a complete dissolution or liquidation of the Company; or 

13

EXHIBIT 10.8

(iv)    the consummation of a merger, consolidation, statutory share exchange, a sale or other disposition of all or substantially all of the assets of the Company or similar form of corporate transaction involving the Company that requires the approval of the  Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), in each case, unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Company”) or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the directors of the Surviving Company (the “Parent Company”) is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company), is or becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Company (or, if there is no Parent Company, the Surviving Company) and (C) at least two-thirds of the members of the board of directors of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination. 
For the avoidance of doubt, in no event shall (w) the Capitalization of NMI, (x) the Company’s  public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act, (y) any change in the composition of the Board resulting from a Special Election Meeting referred to in Section 2.2(b) of the Company’s By-Laws or (z) any transactions relating to the dissolution or liquidation of the Company resulting from the failure to receive GSE Approval, in the case of each of clause (i), (ii), (iii) or (iv), constitute or be deemed to constitute a Change in Control nor shall it be taken into account in determining whether a Change in Control occurred for purposes of this Agreement. 
7.    No Mitigation; No Offset.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. 
8.    Section 409A; Forfeiture.  
(a)    Section 409A.
(i)    General.  It is intended that this Agreement shall comply with the provisions of Section 409A of the Code and the Treasury regulations relating thereto, or an 

14

EXHIBIT 10.8

exemption to Section 409A of the Code.  Any payments that qualify for the “short-term deferral” exception under Treasury Regulations Sections 1.409A-1(b)(4), the “separation pay” exception under Treasury Regulations 1.409A-1(b)(9)(iii) or another exception under Section 409A of the Code will be paid under the applicable exception to the greatest extent possible.  For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A of the Code deferral election rules and the exclusion under Section 409A of the Code for certain short-term deferral amounts.  All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under Section 409A of the Code.  
(ii)    In-Kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, all (i) reimbursements and (ii) in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (A) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement); (B) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (C) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (D) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.   
(iii)    Delay of Payments.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive is considered a “specified employee” for purposes of Section 409A (as determined in accordance with the methodology established by the Company as in effect on the date of termination), (A) any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code that is otherwise due to the Executive under this Agreement during the six-month period following his separation from service (as determined in accordance with Section 409A of the Code) on account of his separation from service shall be accumulated and paid to Executive on the first business day of the seventh month following his separation from service (the “Delayed Payment Date”) and (B) in the event any equity compensation awards held by the Executive that vest or are to be settled upon termination of the Executive’s employment constitute nonqualified deferred compensation within the meaning of Section 409A of the Code, the delivery of shares of common stock (or cash) as applicable in settlement of such awards shall be made on the earliest permissible payment date (including the Delayed Payment Date) or event under Section 409A on which the shares (or cash) would otherwise be delivered or paid.  The Executive shall be entitled to interest on any delayed cash payments from the date of termination to the Delayed Payment Date at a rate equal to the applicable Federal short-term rate in effect under Code Section 1274(d) for the month in which the Executive’s separation from service occurs.  If the Executive dies during the postponement period, the amounts and entitlements delayed on account of Section 409A shall be paid to the personal representative of his estate on the first to occur of the Delayed Payment Date or 30 days after the date of the Executive’s death.
(iv)    Separation From Service.  Despite any contrary provision of this Agreement, any references to termination of employment or the Executive’s Date of Termination 

15

EXHIBIT 10.8

shall mean and refer to the date of his “separation from service,” as that term is defined in Section 409A of the Code and Treasury Regulation Section 1.409A-1(h).
(b)    Forfeiture.
(i)    Subject to judicial determination consistent with the Sarbanes-Oxley Act of 2002, if, after the Company’s Public Filing becomes effective and during the Employment Period, the Company is required to prepare an accounting restatement due to material noncompliance of the Company as a result of misconduct by Executive, with any financial reporting requirement under the Federal securities laws, the Executive shall reimburse the Company for all amounts received under any incentive compensation plans from the Company during the 12 month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial document embodying such financial reporting requirement, and any profits realized from the sale of securities of the Company during that 12-month period, unless the application of this provision has been exempted by the Securities and Exchange Commission.
(ii)    The Company and the Executive acknowledge and agree that the Executive shall be subject to any clawback, recoupment, forfeiture or any similar policy or program adopted by the Compensation Committee following the Initial Effective Date.

9.    Limitation on Certain Payments.  
(a)    Anything in this Agreement to the contrary notwithstanding, in the event the Accounting Firm (as defined in 9(e) below) shall determine that receipt of all Payments (as defined in 9(e) below) would subject the Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) so that the Parachute Value (as defined in 9(e) below) of all Payments, in the aggregate, equals the Safe Harbor Amount (as defined in 9(e) below).  The Agreement Payments shall be so reduced only if the Accounting Firm determines that the Executive would have a greater Net After-Tax Receipt (as defined in 9(e) below) of aggregate Payments if the Agreement Payments were so reduced.  If the Accounting Firm determines that the Executive would not have a greater Net After-Tax Receipt (as defined in 9(e) below) of aggregate Payments if the Agreement Payments were so reduced, the Executive shall receive all Agreement Payments to which the Executive is entitled hereunder. 
(b)    If the Accounting Firm determines that aggregate Agreement Payments should be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Company shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof.  All determinations made by the Accounting Firm under this Section 9 shall be binding upon the Company and the Executive and shall be made as soon as reasonably practicable and in no event later than fifteen (15) days following the Date of Termination.  For purposes of reducing the Agreement Payments so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Agreement Payments shall be reduced by reducing the payments and benefits under the following sections in the following order:  (i) first, any Payments under Section 6(b)(i); (ii) second, any other cash Payments that 

16

EXHIBIT 10.8

would be made upon a termination of the Executive’s employment, beginning with payments that would be made last in time; (iii) third, all rights to payments, vesting or benefits in connection with any options to purchase Common Stock; (iv) fourth, all rights to payments, vesting or benefits in connection with any restricted stock awards that are performance-based vesting awards; (v) fifth, all rights to payments, vesting or benefits in connection with any options to purchase Common Stock that are time-based vesting awards; and (vi) sixth, all rights to any other payments or benefits shall be reduced, beginning with payments or benefits that would be received last in time.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.
(c)    As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Safe Harbor Amount hereunder.  In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, the Executive shall pay promptly (and in no event later than 60 days following the date on which the Overpayment is determined) pay any such Overpayment to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Executive to the Company if and to the extent such payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of the Executive together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code.
(d)    To the extent requested by the Executive, the Company shall cooperate with the Executive in good faith in valuing, and the Accounting Firm shall take into account the value of, services provided or to be provided by the Executive (including without limitation, the Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant, including that set forth in Section 10(e) of this Agreement) before, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) of the final regulations under Section 280G of the Code), such that payments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9 and Q&A-40 to Q&A-44 of the final regulations under Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of the final regulations under Section 280G of the Code in accordance with Q&A-5(a) of the final regulations under Section 280G of the Code.    
(e)    Definitions.  The following terms shall have the following meanings for purposes of this Section 9.

17

EXHIBIT 10.8

(i)    “Accounting Firm” shall mean a nationally recognized certified public accounting firm that is selected by the Company for purposes of making the applicable determinations hereunder and is reasonably acceptable to the Executive, which firm shall not, without the Executive’s consent, be a firm serving as accountant or auditor for the individual, entity or group effecting the Change in Control.
(ii)    “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to the Executive in the relevant tax year(s). 
(iii)     “Parachute Value” of a Payment means the present value as of the date of the Change in Control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(iv)     “Payment” means any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
(v)    “Safe Harbor Amount” means (x) 3.0 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code, minus (y) $1.00.
10.    Restrictive Covenants.  
(a)    Return of Company Property.  Upon his termination of employment for any reason, the Executive shall promptly return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company, and the Executive shall also return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing confidential information or relating to the business or proposed business of the Company or the Affiliated Entities or containing any trade secrets relating to the Company or the Affiliated Entities except any personal diaries, calendars, rolodexes or personal notes or correspondence.  For purposes of the preceding sentence, the term “trade secrets” shall have the meaning ascribed to it under the Uniform Trade Secrets Act.  The Executive agrees to represent in writing to the Company upon termination of employment that he has complied with the foregoing provisions of this Section 10(a).
(b)    Mutual Nondisparagement.  The Executive and the Company each agree that, following the Executive’s termination of employment, neither the Executive nor the Company will make any public statements which materially disparage the other party.  

18

EXHIBIT 10.8

The Company shall not be liable for any breach of its obligations under this paragraph if it informs its directors and executive officers, as such term is defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, of the content of its covenant hereunder and takes reasonable measures to ensure that such individuals honor the Company’s agreement.  Notwithstanding the foregoing, nothing in this Section 10(b) shall prohibit any person from making truthful statements when required by order of a court or other governmental or regulatory body having jurisdiction or to enforce any legal right including, without limitation, the terms of this Agreement.  
(c)    Confidential Information.  The Executive acknowledges that he will have knowledge of certain trade secrets of the Company and its business plans and prospects. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company and its businesses or prospective businesses, including, without limitation, any trade secrets, research, secret data, business methods, operating procedures or programs which shall have been obtained by the Executive in connection with his services to the Company or any affiliates thereof and which shall not be or become public knowledge (other than by acts by the Executive in violation of this Agreement) (collectively, the “Trade Secrets and Confidential Information”); provided, however, that the parties acknowledge and agree that the Executive will be required to disclose Trade Secrets and Confidential Information to third parties in performing services for the Company under this Agreement, which the Executive may do only to the extent required, as determined within his reasonable discretion.  After termination of the Executive’s services with the Company for any reason, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.  
(d)    Nonsolicitation.  The Executive agrees that, while he is employed by the Company and during the (i) two-year period following his termination of employment with the Company for Cause or under Section 5(d) for failure to achieve GSE Approval by the GSE Approval Deadline or the Executive resigns without Good Reason, or (ii) eighteen-month period following his termination of employment by the Company without Cause, due to Disability or the Executive resigns with Good Reason, the Executive shall not directly or indirectly (A) solicit any individual who is, on the date of termination (or was, during the six-month period prior to the date of termination), employed by the Company or any of its Affiliated Entities to terminate or refrain from renewing or extending such employment or to become employed by or become a consultant to any other individual or entity other than the Company or the Affiliated Entities, or (B) solicit any investor or prospective investor in the Company or any business contact introduced to the Executive in connection with his employment by the Company hereunder to curtail or cease doing business with the Company or its Affiliated Entities or FBR & Co. and its affiliates.      
(e)    Noncompetition.  The Executive agrees that, while he is employed by the Company, he will not engage in Competition (as defined below).  The Executive shall be deemed to be engaging in “Competition” if he, directly or indirectly, anywhere in the continental United States, owns, manages, operates, controls or participates in the ownership, management, operation or control of or is connected as an officer, employee, partner, director, consultant or 

19

EXHIBIT 10.8

otherwise with, or has any financial interest in, any business (whether through a corporation or other entity) engaged in the private mortgage insurance business or related business in any geographic area in which the Company or one of its Affiliated Entities conducts such business.  Ownership for personal investment purposes only of not more than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof.  
(f)    Equitable Remedies.  The Executive acknowledges that the Company would be irreparably injured by a violation of Section 10(b), (c), (d) or (e) and he agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, on meeting the standards required by law, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 10(b), (c), (d) or (e).  If a bond is required to be posted in order for either party to secure an injunction or other equitable remedy in connection with Section 10(b), (d) or (e), the parties agree that said bond need not be more than a nominal sum.   
(g)    Severability; Blue Pencil.  The Executive acknowledges and agrees that he has had the opportunity to seek advice of counsel in connection with the Agreement and the restrictive covenants contained herein are reasonable in geographical scope, temporal duration and in all other respects.  If it is determined that any provision of this Section 10 is invalid or unenforceable, the remainder of the provisions of this Section 10 shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court or other decision-maker of competent jurisdiction determines that any covenant or covenants in this Section 10 is unenforceable because of the duration or geographic scope of such provision, then after such determination becomes final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable, and in its reduced form, such provision shall be enforced.
11.    Successors.  
(a)    This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs or legatees.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(b)    The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to satisfy all of the obligations under this Agreement in the same manner and to the same extent that the Company would be required to satisfy such obligations if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.
12.    Miscellaneous.  

20

EXHIBIT 10.8

(a)    Amendment.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.  
(b)    Withholding.  The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(c)    Applicable Law.  The provisions of this Agreement shall be construed in accordance with the internal laws of the State of California, without regard to the conflict of law provisions of any state.
(d)    Dispute Resolution.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than a controversy or claim arising under Section 10 of this Agreement) that is not resolved by the Executive and the Company shall be submitted to arbitration in the New York, New York area in accordance with California law and the procedures of the American Arbitration Association.  The determination of the arbitrator shall be conclusive and binding on the Company and the Executive and judgment may be entered on the arbitrator(s)’ award(s) in any court having competent jurisdiction.  
(e)    Severability.  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).
(f)    Waiver of Breach.  No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time.  The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.
(g)    Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice):
to the Company:
NMI Holdings, Inc.
c/o FBR Capital Markets & Co.,
1001 19th St. North 
Arlington, Virginia 22209
ATTENTION:  Secretary

or to the Executive:

21

EXHIBIT 10.8

Bradley M. Shuster

at the address last on the records of the Company.

Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.  Such notices, demands, claims and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; or in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received.
(h)    Survivorship.  Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
(i)    Entire Agreement.  From and after the Initial Effective Date, this Agreement shall supersede any other employment agreement or understanding, including, without limitation, the Consulting Agreement by and between the Executive and the Company, dated as of May 16, 2011, between the parties (except with respect to amounts owed as of the Initial Effective Date pursuant to Section 4(a) or 4(b) of the Consulting Agreement and Section 11, which shall survive with respect to actions taken in connection with the Executive providing services as a consultant) with respect to the subject matter hereof.  The obligations under this Agreement are enforceable solely against the Company and its Affiliated Entities, and in no event shall this Agreement be enforceable against FBR & Co. or any stockholder of, or investor in, the Company. 
(j)    Counterparts.  This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(k)    Authority.  The Executive represents and warrants that he has the full authority to execute and enter into this Agreement and has obtained all consents, approvals and authorities of any person, committee or entity necessary to make this Agreement binding and fully enforceable against the party for which he signs. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

22

EXHIBIT 10.8

IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.
	
		
	

Dated:  ____3/6/12_________________
	NMI HOLDINGS, INC.

By:   _/s/Joseph Kavanagh_____
Name:    Joseph Kavanagh
Title:    Vice President, Secretary

	

Dated:  ____3/6/12__________________
	BRADLEY M. SHUSTER

______ /s/ Bradley M. Shuster_____

23

EXHIBIT 10.8

SCHEDULE A
Luther Burbank Corporation

24

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