Document:

saft_Exhibit_1028

		
			Exhibit 10.28
		

		
			 
		

		
			EMPLOYMENT AGREEMENT
		

		
			 
		

		
			This Employment Agreement, dated as of March 2, 2020 (this “Agreement”), is by and between Christopher T. Whitford (the “Executive”) and Safety Insurance Group, Inc., a Delaware corporation (the “Company”);
		

		
			 
		

		
			W I T N E S S E T H:
		

		
			 
		

		
			WHEREAS, the Company wishes to obtain the future services of the Executive for and on behalf of the Companies (as defined in Section 11);
		

		
			 
		

		
			WHEREAS, the Executive is willing upon the terms and conditions herein set forth, to provide services to the Companies hereunder; and
		

		
			 
		

		
			WHEREAS, the Company wishes to secure the Executive’s non-interference with the Companies’ business, upon the terms and conditions herein set forth;
		

		
			 
		

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

		
			 
		

		
			1. Nature of Employment
		

		
			 
		

		
			Subject to Section 3, the Company employ Executive, and Executive shall serve the Company, in accordance with the terms of this Agreement, during the Term of Employment (as defined in Section 3(a)), as Vice President, Chief Financial Officer and Secretary of the Company with such duties and responsibilities as are customarily assigned to an executive in such position and such other duties and responsibilities not inconsistent therewith as may from time to time reasonably be assigned to the Executive by the Board of Directors and/or Chairman of the Board, President and Chief Executive Officer of the Company.  The Executive also agrees to serve without additional compensation in such capacities (including, without limitation, as an officer or director) with Company affiliates as the Board of Directors and/or Chairman of the Board, President and Chief Executive Officer of the Company may prescribe.  Upon termination of the Executive’s employment with the Company, the Executive’s employment, board membership or other service relationship with any Company affiliate shall automatically terminate unless otherwise agreed to by the parties.
		

		
			 
		

		
			2.Extent of Employment
		

		
			 
		

		
			(a)During the Term of Employment, the Executive shall perform his or her obligations hereunder faithfully and to the best of his or her ability at the principal executive offices of the Company, under the direction of the Board of Directors and/or Chairman of the Board, President and Chief Executive Officer of the Company, and shall abide by the rules, customs and usages from time to time established by the Companies.
		

		
			 
		

		
			

		 

		

		
			(b)During the Term of Employment, the Executive shall devote all of his or her business time, energy and skill as may be reasonably necessary for the performance of his or her duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness or other incapacity), consistent with past practices and norms in similar positions.
		

		
			 
		

		
			(c)Nothing contained herein shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority (collectively, the “Regulations”).  Executive shall act in good faith in accordance with all Regulations.
		

		
			 
		

		
			3.Term of Employment; Termination
		

		
			 
		

		
			(a)The “Term of Employment” shall commence on the date hereof and shall continue until December 31, 2020; provided, that, should the Executive’s employment by the Company be earlier terminated pursuant to Section 3(b) or by the Executive pursuant to Section 3(c), the Term of Employment shall end on the date of such earlier termination.  The Company may extend the Term of Employment by an additional twelve months (“Additional Term”) pursuant to formal action by the Compensation Committee of the Board of Directors at least 90 days prior to the scheduled expiration date of the Term of Employment, unless the Executive notifies the Company of his or her decision to decline any additional term before at least 120 days prior to the scheduled expiration date of the Term of Employment.
		

		
			 
		

		
			 
		

		
			(b)Subject to the payments contemplated by Sections 3(f) through 3(i), the Term of Employment may be terminated at any time by the Company:
		

		
			 
		

		
			(i)upon the death of Executive;
		

		
			 
		

		
			(ii)in the event that because of physical or mental disability Executive is unable to perform, and does not perform, in the view of the Company and as certified in writing by a competent medical physician, his or her duties hereunder for a continuous period of three consecutive months or any sixty working days out of any consecutive six month period;
		

		
			 
		

		
			(iii)for Cause (as defined in Section 3(d)) or Material Breach (as defined in Section 3(e));
		

		
			 
		

		
			(iv)upon the continuous poor or unacceptable performance of the Executive’s duties to the Companies (other than due to a physical or mental disability), which has remained uncured for a period of 90 days after delivery of notice by the Company to the Executive of such dissatisfaction with Executive’s performance, which notice shall describe in reasonable detail the areas of dissatisfaction; or
		

		
			 
		

		
			

		 

		

		
			(v)for any other reason or no reason, it being understood that no reason is required.
		

		
			 
		

		
			Executive acknowledges that no representations or promises have been made concerning the grounds for termination or the future operation of the Companies’ business, and that nothing contained herein or otherwise stated by or on behalf of any of the Companies modifies or amends the right of the Company to terminate Executive at any time, with or without Material Breach or Cause.  Termination shall become effective upon the delivery by the Company to the Executive of notice specifying such termination and the reasons therefor (i.e., Section 3 (b)(i)-(v)), subject to the requirements for advance notice and an opportunity to cure provided in this Agreement, if and to the extent applicable.  Notwithstanding anything to the contrary in this Agreement, for purposes of this Agreement, any reference to “termination,” as it relates to a termination of the Executive’s employment, shall refer to a termination of employment which constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (“Section 409A”). 
		

		
			 
		

		
			(c)Subject to the payments contemplated by Section 3(f) and 3(i), the Term of Employment may be terminated at any time by the Executive:
		

		
			 
		

		
			(i)upon the death of Executive;
		

		
			 
		

		
			(ii)as a result of a material reduction in Executive’s authority, perquisites, position or responsibilities (other than such a reduction in perquisites which affects all of the Company’s senior executives on a substantially equal or proportionate basis), the relocation of the Company’s primary place of business or the relocation of Executive by any of the Companies to another office more than 75 miles from Boston, Massachusetts, or the Company’s willful, material violation of its obligations under this Agreement, in each case, after 60 days’ prior written notice to the Company and its Board of Directors and the Company’s failure thereafter to cure such reduction or violation; or
		

		
			 
		

		
			(iii)as a result of the Company’s willful and material violation of this Agreement, the 2018 Long-Term Incentive Plan (the “Incentive Plan”), or any agreement between Executive and any of the Companies pertaining to awards made pursuant to the Incentive Plan or the Executive Incentive Compensation Plan, in each case as such agreements or plans may be amended from time to time.
		

		
			 
		

		
			(d)For the purposes of this Section 3, “Cause” shall mean any of the following:
		

		
			 
		

		
			(i)Executive’s commission or conviction of any crime or criminal offense involving monies or other property or any felony;
		

		
			 
		

		
			(ii)Executive’s commission or conviction of fraud or embezzlement;
		

		
			 
		

		
			(iii)Executive’s material and knowing violation of any obligations imposed upon Executive, personally, as opposed to upon the Company, whether as a stockholder or otherwise, under this Agreement, the Incentive Plan or any other agreement between 

		 

the Executive, on the one hand, and any of the Companies, on the other hand, the Amended and Restated Certificate of Incorporation, or the By-Laws of the Company, in each case as may be amended from time to time; provided, that the Executive has been given written notice describing any such violation in reasonable detail and fails to cure the violation within 90 days from such notice; or
		

		
			 
		

		
			(iv)Executive engages in egregious misconduct involving serious moral turpitude to the extent that Executive’s credibility and reputation no longer conform to the standard of the Company’s executives.
		

		
			 
		

		
			(e)For the purposes of this Section 3, “Material Breach” shall mean any of the following:
		

		
			 
		

		
			(i)Executive’s breach of any of his or her fiduciary duties to the Companies or their stockholders or making of a willful misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of the Companies;
		

		
			 
		

		
			(ii)Executive’s willful, continual and material neglect or failure to discharge his or her duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Executive and any of the Companies (other than arising solely due to physical or mental disability);
		

		
			 
		

		
			(iii)Executive’s habitual drunkenness or substance abuse which materially interferes with Executive’s ability to discharge his or her duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Executive and any of the Companies; and
		

		
			 
		

		
			(iv)Executive’s willful and material violation of any non-competition, non-disparagement, or confidentiality agreement with any of the Companies, including without limitation, those set forth in Sections 7,  8 and 9 of this Agreement, or any other agreements with any of the Companies;
		

		
			 
		

		
			in each case, for purposes of clauses (i) through (iv), after the Company or the Board of Directors of the Company has provided Executive with 60 days’ written notice describing such circumstances and the possibility of a Material Breach in reasonable detail, and Executive fails to cure such circumstances and Material Breach within those 60 days.  No act or omission shall be deemed willful if done, or omitted to be done, in good faith by the Executive based upon a resolution duly adopted by the Company’s Board of Directors.
		

		
			 
		

		
			(f) In the event Executive’s employment is terminated by the Company under any circumstances described in Section 3(b)(v) or by Executive under the circumstances described in Section 3(c)(ii) or (iii),
		

		
			 
		

		
			

		 

		

		
			(i)the Company shall pay or cause to be paid to the Executive, (A) within five business days after the date of termination, any earned but unpaid base salary and, subject to the provisions of Section 5, any expense reimbursement payments owed to the Executive, and (B) any earned but unpaid annual bonus payments relating to the prior year to be paid in accordance with the terms and conditions of the Safety Insurance Group, Inc. Annual Performance Incentive Plan, or any successor plan thereto (collectively, the “Accrued Obligations”);
		

		
			 
		

		
			(ii)the Company shall pay or cause to be paid to the Executive, within thirty business days after the date of termination, a lump-sum payment equal to the annual base salary (in effect immediately prior to the date of termination) the Executive would have received (a) over the remaining Term of Employment or (b) in the event that Executive receives notification that the Term of Employment is extended by an Additional Term, the annual base salary Executive would have received through the end of the Additional Term.  “Severance Period” shall mean the period from the date of termination through the remaining current Term of Employment, or, in the event that Executive receives notification of an Additional Term, the period from the date of termination to the end of the Additional Term; and
		

		
			 
		

		
			(iii)subject to the provisions of Section 5, during the Severance Period, the Company will provide or cause to be provided to the Executive (and any covered dependents), with life and health insurance benefits (but not disability insurance benefits) substantially similar to those the Executive and any covered dependents were receiving immediately prior to the date of termination and at the same dollar cost to the Executive as in effect immediately prior to the termination of employment.  Nothing in this Section 3(f)(iii) will extend the COBRA continuation coverage period.
		

		
			 
		

		
			(g)In the event the Executive’s employment is terminated within three years after a Change of Control (provided the Term of Employment has not already expired) under any circumstances described in Section 3(b)(v) or by Executive under the circumstances described in Section 3(c)(ii) or (iii),
		

		
			 
		

		
			(i)the Company shall pay or cause to be paid to the Executive any Accrued Obligations in accordance with Section 3(f)(i);
		

		
			 
		

		
			(ii)the Company shall pay or cause to be paid to the Executive, within thirty business days after the date of termination, a lump-sum payment equal to three (3) times the sum of (A) the Executive’s annual base salary in effect immediately prior to the date of termination and (B) the most recent annual bonus paid to the Executive prior to the Change in Control; and
		

		
			 
		

		
			(iii)subject to the provisions of Section 5, for a three (3) year period after the date of termination, the Company will provide or cause to be provided to the Executive (and any covered dependents), with life and health insurance benefits (but not disability insurance benefits) substantially similar to those the Executive and any covered dependents were receiving immediately prior to the date of termination and at the same 

		 

dollar cost to the Executive as in effect immediately prior to the termination of employment.  Nothing in this Section 3(g)(iii) will extend the COBRA continuation coverage period.
		

		
			 
		

		
			(h)In the event Executive’s employment is terminated by the Company under the circumstances described in Section 3(b)(iv),
		

		
			 
		

		
			(i)the Company shall pay or cause to be paid to the Executive any Accrued Obligations in accordance with Section 3(f)(i);
		

		
			 
		

		
			(ii)the Company shall pay or cause to be paid to the Executive, within thirty business days after the date of termination, a lump-sum payment equal to three (3) months base salary, based on the Executive’s base salary in effect immediately prior to the date of termination; and
		

		
			 
		

		
			(iii)subject to the provisions of Section 5, for a three (3) month period after the date of termination, the Company will provide or cause to be provided to the Executive (and any covered dependents), with life and health insurance benefits (but not disability insurance benefits) substantially similar to those the Executive and any covered dependents were receiving immediately prior to the date of termination and at the same dollar cost to the Executive as in effect immediately prior to the termination of employment.  Nothing in this Section 3(h)(iii) will extend the COBRA continuation coverage period.
		

		
			 
		

		
			(i)In the event Executive’s employment is terminated by the Company under the circumstances described in Section 3(b)(i) or (ii) or by the Executive under Section 3(c)(i),
		

		
			 
		

		
			(i)the Company will pay or cause to be paid to the Executive (or the Executive’s estate or representative, as the case may be) any Accrued Obligations in accordance with Section 3(f)(i);
		

		
			 
		

		
			(ii)the Company will pay or cause to be paid to the Executive (or the Executive’s estate or representative, as the case may be), within thirty business days after the date of termination, a lump-sum payment equal to 100% of the Executive’s annual base salary in effect immediately prior to the date of termination; and
		

		
			 
		

		
			(iii)subject to the provisions of Section 5, for a one (1) year period after the date of termination, the Company will provide or cause to be provided to the Executive (and any covered dependents), with life and health insurance benefits (but not disability insurance benefits) substantially similar to those the Executive and any covered dependents were receiving immediately prior to the date of termination and at the same dollar cost to the Executive as in effect immediately prior to the termination of employment.  Nothing in this Section 3(i)(iii) will extend the COBRA continuation coverage period.
		

		
			 
		

		
			

		 

		

		
			(j)In the event Executive’s employment is terminated by the Company under any circumstances described in Section 3(b)(iii) or by Executive as a result of resignation or voluntary termination due to any circumstance other than the material reductions, relocation or violations described in Section 3(c)(ii) above, there will be no amounts owed to the Executive under Section 4 or any other part of this Agreement, from and after the effectiveness of termination.
		

		
			 
		

		
			(k)The payments and benefits required by Section 3(f), 3(g), 3(h) or 3(i), as applicable, constitute severance and liquidated damages, and, except for payments that may be required pursuant to Section 10, the Company will be obligated to pay or cause to be paid any further amounts to Executive under this Agreement or otherwise be liable to Executive in connection with any termination.
		

		
			 
		

		
			(l)All determinations pursuant to this Section 3 shall be made by the Company’s Board of Directors (not including Executive) in good faith.
		

		
			 
		

		
			(m)Termination of the Term of Employment will not terminate Sections 7 through 10 and 12 through 23, or any other provisions not associated specifically with the Term of Employment.
		

		
			 
		

		
			(n)In the event the Term of Employment is terminated and the Company is obligated to make or cause to be made payments pursuant to Section 3(f), the Executive will use his or her reasonable efforts to seek and obtain alternative employment; provided,  however, that the Executive shall not be required to accept a position or positions of a substantially different character than the position(s) held by him or her under this Agreement; and provided further, if the Executive shall become physically or mentally disabled, he or she will not be under such duty.  Moreover, in the event that after the Restricted Period pursuant to Section 8(a), Executive is employed by or engaged in a Competitive Business as contemplated by Section 8(a)(i), then the payments under Section 3(f) will thereupon cease.
		

		
			 
		

		
			(o)Notwithstanding any provision herein to the contrary, as a condition to payment of any amounts or provision of any benefits pursuant to Sections 3(f) through 3(i) or 10 of this Agreement (other than due to the Executive’s death), the Executive shall be required to have executed a complete release of the Companies and related parties in such form as is reasonably required by the Company.  Subject to Section 3(p), all payments and benefits under this Section 3 shall be paid or commenced on the sixtieth (60th) day following the date of termination of the Executive’s employment, provided that the release described in the preceding sentence becomes irrevocable prior to such sixtieth (60th) day.
		

		
			 
		

		
			(p)Notwithstanding the foregoing, if the Executive is a “specified employee” within the meaning of Section 409A at the time of a termination, any portion of the payments under this Section 3 due hereunder during the first six months following the date of the Executive’s termination, to extent that such payments constitute “deferred compensation” under Section 409A, shall not be paid during such six-month period and instead shall be paid on the first business day following the expiration of such six-month period.  The remaining portion of the payments due hereunder shall be paid as provided in the applicable provisions of this Section 3.
		

		
			

		 

		

		
			 
		

		
			4.Compensation
		

		
			 
		

		
			The Company shall pay or cause to be paid to Executive the following compensation:
		

		
			 
		

		
			(a)During the Term of Employment, the Company shall pay or cause to be paid to Executive as base compensation for his or her services hereunder, in monthly installments, a base salary at a rate of $275,000 per annum, as increased on an annual basis to reflect the increase in the United States Cost of Living Index for All Urban Consumer (CPI-U) for the Boston, Massachusetts area (the “CPI-U Index”).  The CPI-U Index shall provide the basis for calculations of such increases.  Notwithstanding the minimum increase set forth above, the Board of Directors of the Company or a committee thereof may establish a higher compensation level.
		

		
			 
		

		
			(b)During the Term of Employment, the Company shall pay or cause to be paid to Executive an annual bonus based on Executive’s performance, as determined and approved by the Board of Directors of the Company or a committee thereof under the Safety Insurance Group, Inc. Annual Performance Incentive Plan, or any successor thereto.  Such bonus will be at the full discretion of the Board of Directors of the Company or a committee thereof, and may not be paid at all.  Executive acknowledges that no bonus has been agreed upon or promised.  
		

		
			 
		

		
			5.Reimbursement of Expenses
		

		
			 
		

		
			During the Term of Employment, the Company shall reimburse or cause Executive to be reimbursed for documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of his or her duties hereunder and, in each case, in accordance with applicable rules, customs and usages promulgated by the Companies from time to time in effect.  All reimbursements and in-kind benefits provided under this Agreement, shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (a) any reimbursement shall be for expenses incurred during a specified period, (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 shall be made on or before the last day of the calendar year following the year in which the expense is incurred (or such earlier date if specified in this Agreement), and (d) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
		

		
			 
		

		
			6.Benefits
		

		
			 
		

		
			During the Term of Employment, the Executive shall be entitled to perquisites, paid vacations and benefits (including health, short and long term disability, pension and life insurance benefits consistent with past practice, or as increased from time to time) established from time to time, by the Board of Directors of the Company for executives of the Companies, subject to the policies and procedures in effect regarding participation in such benefits.
		

		
			 
		

		
			7.Confidential Information
		

		
			

		 

		

		
			 
		

		
			During and after the Term of Employment, Executive will not, directly or indirectly in one or a series of transactions, disclose to any person, or use or otherwise exploit for the Executive’s own benefit or for the benefit of anyone other than the Companies, any Confidential Information, whether prepared by Executive or not; provided,  however, that any Confidential Information may be disclosed to officers, representatives, employees and agents of the Companies who need to know such Confidential Information in order to perform the services or conduct the operations required or expected of them in the Business (as defined in Section 11).  Executive shall use his or her best efforts to prevent the removal of any Confidential Information from the premises of the Companies, except as required in his or her normal course of employment by the Company.  Executive shall use commercially reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by him or her hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby. Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure of any thereof is specifically required by law;  provided,  however, that in the event disclosure is required by applicable law, the Executive shall provide the Companies with prompt notice of such requirement, prior to making any disclosure, so that the Companies may seek an appropriate protective order.  At the request of the Companies, Executive agrees to deliver to the Companies, at any time during the Term of Employment, or thereafter, all Confidential Information which he or she may possess or control.  Executive agrees that all Confidential Information of the Companies (whether now or hereafter existing) conceived, discovered or made by him or her during the Term of Employment exclusively belongs to the Companies (and not to Executive).  Executive will promptly disclose such Confidential Information to the Companies and perform all actions reasonably requested by the Companies to establish and confirm such exclusive ownership.
		

		
			 
		

		
			8.Non-Interference
		

		
			 
		

		
			(a)Executive acknowledges that the services to be provided give him or her the opportunity to have special knowledge of the Companies and their Confidential Information and the capabilities of individuals employed by or affiliated with the Companies and that interference in these relationships would cause irreparable injury to the Companies.  In consideration of this Agreement, Executive covenants and agrees that:
		

		
			 
		

		
			(i)During the Restricted Period (which shall not be reduced by any period of violation of this Agreement by Executive or period which is required for litigation to enforce the rights hereunder), Executive will not, without the express written approval of the Board of Directors of the Company, anywhere in the Market, directly or indirectly, in one or a series of transactions, own, manage, operate, control, invest or acquire an interest in, or otherwise engage or participate in, whether as a proprietor, partner, stockholder, lender, director, officer, employee, joint venturer, investor, lessor, supplier, customer, agent, representative or other participant, in any business which competes, directly or indirectly, with the Business in the Market (“Competitive Business”) without regard to (A) whether the Competitive Business has its office, manufacturing or other business facilities within or without the Market, (B) whether any of the activities of the Executive referred to above occur or are performed within or without the Market or (C) 

		 

whether the Executive resides, or reports to an office, within or without the Market; provided,  however, that (x) the Executive may, anywhere in the Market, directly or indirectly, in one or a series of transactions, own, invest or acquire an interest in up to five percent (5%) of the capital stock of a corporation whose capital stock is traded publicly, or that (y) Executive may accept employment with a successor company to the Company.
		

		
			 
		

		
			(ii)During the Restricted Period (which shall not be reduced by any period of violation of this Agreement by Executive or period which is required for litigation to enforce the rights hereunder), Executive will not without the express prior written approval of the Board of Directors of the Company (A) directly or indirectly, in one or a series of transactions, recruit, solicit or otherwise induce or influence any proprietor, partner, stockholder, lender, director, officer, employee, sales agent, joint venturer, investor, lessor, supplier, customer, agent, representative or any other person which has a business relationship with the Companies or had a business relationship with the Companies within the 24 month period preceding the date of the incident in question, to discontinue, reduce or modify such employment, agency or business relationship with the Companies, or (B) employ or seek to employ or cause any Competitive Business to employ or seek to employ any person or agent who is then (or was at any time within 24 months prior to the date the Executive or the Competitive Business employs or seeks to employ such person) employed or retained by the Companies.  Notwithstanding the foregoing, nothing herein shall prevent the Executive from providing a letter of recommendation to an employee with respect to a future employment opportunity.
		

		
			 
		

		
			(iii)The scope and term of this Section 8 would not preclude Executive from earning a living with an entity that is not a Competitive Business.
		

		
			 
		

		
			(b)In the event that Executive breaches his or her obligations in any material respect under Section 7, this Section 8 or Section 9, the Company, in addition to pursuing all available remedies under this Agreement, at law or otherwise, and without limiting its right to pursue the same shall cease or cause to be ceased all payments to the Executive under this Agreement or any other agreement.
		

		
			 
		

		
			9.Non-Disparagement
		

		
			 
		

		
			During and after the Term of Employment, the Executive agrees that he or she shall not make any false, defamatory or disparaging statements about the Companies or the officers or directors of the Companies.  During and after the Term of Employment, the Company agrees, on behalf of the Companies that neither the officers nor the directors of the Companies shall make any false, defamatory or disparaging statements about the Executive.
		

		
			 
		

		
			10.Code Section 280G Cutback
		

		
			 
		

		
			(a)If any payments or benefits paid or provided or to be paid or provided to the Executive or for his or her benefit pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his or her employment with the Company or the termination 

		 

thereof (a “Payment”) would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the Payments shall be reduced to the extent necessary to prevent any portion of the Payments from becoming nondeductible by the Company under Section 280G of the Code or subject to the Excise Tax, but only if, by reason of that reduction, the net after-tax benefit received by the Executive exceeds the net after-tax benefit the Executive would receive if no reduction was made. For this purpose, “net after-tax benefit” means (i) the total of all Payments that would constitute “excess parachute payments” within the meaning of Section 280G of the Code, less (ii) the amount of all federal, state, and local income taxes payable with respect to the Payments calculated at the maximum marginal income tax rate for each year in which the Payments shall be paid to the Executive (based on the rate in effect for that year as set forth in the Code as in effect at the time of the first payment of the Payments), less (iii) the amount of the Excise Tax imposed on the Payments described in clause (i) above. If a reduction in Payments is necessary under this Section 10(a), the reduction shall be made in a manner set forth in (b).
		

		
			 
		

		
			(b)Any reduction of the Payments required under Section 10(a) shall be made in the following order: (i) first, any cash amounts payable to the Executive as a severance benefit as provided in Section 3(f)(ii), (g)(ii), (h)(ii), or (i)(ii) or otherwise; (ii) second, any amounts payable on behalf of the Executive for continued health insurance coverage under Section 3(f)(iii), g(iii), h(iii), or i(iii) or otherwise; (iii) third, any other cash amounts payable to or on behalf of the Executive under the terms of this Agreement or otherwise; (iv) fourth, any outstanding performance-based equity grants; and (v) finally, any time-vesting equity grants; in each case, the Payments shall be reduced beginning with Payments that would be made last in time.
		

		
			 
		

		
			(c)All determinations required to be made under this Section 10 shall be made by the public accounting firm that is retained by the Company (the “Accounting Firm”).  The Accounting Firm shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or Executive that there has been a Payment, or such earlier time as is requested by the Company.  All fees, costs and expenses (including, but not limited to, the costs of retaining experts) of the Accounting Firm shall be borne by the Company.  The determination by the Accounting Firm shall be binding upon the Company and Executive.
		

		
			 
		

		
			11.Definitions
		

		
			 
		

		
			Capitalized terms used in this Agreement but not otherwise defined shall have the meanings set forth below:
		

		
			 
		

		
			“Business” means any business conducted, or engaged in, by the Companies prior to the date hereof or at any time during the Term of Employment.
		

		
			 
		

		
			“Cause” is defined in Section 3(c).
		

		
			 
		

		
			“Change of Control” means any of the following: (i) the closing of any merger, combination, consolidation or similar business transaction involving the Company in which the 

		 

holders of Company Common Stock immediately prior to such closing are not the holders, directly or indirectly, of a majority of the ordinary voting securities of the surviving person in such transaction immediately after such closing, (ii) the closing of any sale or transfer by the Company of all or substantially all of its assets to an acquiring person in which the holders of Company Common Stock immediately prior to such closing are not the holders of a majority of the ordinary voting securities of the acquiring person immediately after such closings, or (iii) the closing of any sale by the holders of Company Common Stock of an amount of Company Common Stock that equals or exceeds a majority of the shares of Company Common Stock immediately prior to such closing to a person in which the holders of the Company Common Stock immediately prior to such closing are not the holders of a majority of the ordinary voting securities of such person immediately after such closing.
		

		
			 
		

		
			“Companies” means the Company and its successors or any of its direct or indirect parents or direct or indirect subsidiaries, now or hereafter existing.
		

		
			 
		

		
			“Company” is defined in the introduction.
		

		
			 
		

		
			“Competitive Business” is defined in Section 8(a)(i).
		

		
			 
		

		
			“Confidential Information” means any confidential information including, without limitation, any study, data, calculations, software storage media or other compilation of information, patent, patent application, copyright, trademark, trade name, service mark, service name, “know-how”, trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans or any portion or phase of any scientific or technical information, ideas, discoveries, designs, computer programs (including source of object codes), processes, procedures, formulas, improvements or other proprietary or intellectual property of the Companies, whether or not in written or tangible form, and whether or not registered, and including all files, records, manuals, books, catalogues, memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof.  The term “Confidential Information” does not include, and there shall be no obligation hereunder with respect to, information that becomes generally available to the public other than as a result of a disclosure by the Executive not permissible hereunder.
		

		
			 
		

		
			“Executive” means Christopher T. Whitford or his estate, if deceased.
		

		
			 
		

		
			“Market” means any state in the United States of America and each similar jurisdiction in any other country in which the Business was conducted by or engaged in by the Companies prior to the date hereof or is conducted or engaged in, or in which the Companies are seeking authorization to conduct Business at any time during the Term of Employment.
		

		
			 
		

		
			“Regulations” is defined in Section 2(c).
		

		
			 
		

		
			“Restricted Period” means the date commencing on the date of this Agreement and ending on the later of (x) the date of termination of the Term of Employment or (y) the end of the applicable severance period provided under Section 3(f);  provided,  however, that the “Restricted 

		 

Period” may be extended, in the sole discretion of the Company, for an additional period of up to twenty-four (24) months if the Company continues to pay or to cause to be paid to the Executive (i) the full amounts to which he or she would be entitled as base compensation under Section 4(a) and (ii) customary benefits, in each case during such extended period.
		

		
			 
		

		
			“Term of Employment” is defined in Section 3(a).
		

		
			 
		

		
			12.Notice
		

		
			 
		

		
			Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and if delivered personally, or sent by certified or registered mail, return receipt requested, as follows (or to such other addressee or address as shall be set forth in a notice given in the same manner):
		

		
			 
		

			
					
						If to Executive:

					
					
						Christopher T. Whitford

				
	
					
						 

					
					
						c/o Safety Insurance Group, Inc.

				
	
					
						 

					
					
						20 Custom House Street

				
	
					
						 

					
					
						Boston, Massachusetts 02110

				
	
					
						 

					
					
						 

				
	
					
						If to Company:

					
					
						Safety Insurance Group, Inc.

				
	
					
						 

					
					
						20 Custom House Street

				
	
					
						 

					
					
						Boston, Massachusetts 02110

				
	
					
						 

					
					
						Attention: George M. Murphy

				

		
			 
		

		
			Any such notices shall be deemed to be given on the date personally delivered or such return receipt is issued.
		

		
			 
		

		
			13.Executive’s Representation
		

		
			 
		

		
			Executive hereby warrants and represents to the Company that Executive has carefully reviewed this Agreement and has consulted with such advisors as Executive considers appropriate in connection with this Agreement, and is not subject to any covenants, agreements or restrictions, including without limitation any covenants, agreements or restrictions arising out of Executive’s prior employment which would be breached or violated by Executive’s execution of this Agreement or by Executive’s performance of his or her duties hereunder.
		

		
			 
		

		
			14.Other Matters
		

		
			 
		

		
			(a)Executive agrees and acknowledges that the obligations owed to Executive under this Agreement are solely the obligations of the Company, and that none of the Companies’ stockholders, directors, officers, affiliates, representatives, agents or lenders will have any obligations or liabilities in respect of this Agreement and the subject matter hereof.
		

		
			 
		

		
			(b)Notwithstanding anything contained herein to the contrary, the Companies may withhold from any amounts payable under, or benefits provided pursuant to, this Agreement all 

		 

federal, state, local, and foreign taxes that are required to be withheld by applicable laws or regulations.
		

		
			 
		

		
			(c)In addition to any obligations imposed by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
		

		
			 
		

		
			15.Validity
		

		
			 
		

		
			If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
		

		
			 
		

		
			16.Severability
		

		
			 
		

		
			Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.  If any court determines that any provision of Section 8 or any other provision hereof is unenforceable and therefore acts to reduce the scope or duration of such provision, the provision in its reduced form shall then be enforceable.
		

		
			 
		

		
			17.Waiver of Breach; Specific Performance
		

		
			 
		

		
			The waiver by the Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach of such other party.  Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its respective rights under this Agreement and to exercise all other rights existing in its favor.  The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Sections 7, 8 and 9 of this Agreement and that any party (and third party beneficiaries) may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in order to enforce or prevent any violations of the provisions of this Agreement.  In the event either party takes legal action to enforce any of the terms or provisions of this Agreement, the nonprevailing party shall pay the successful party’s costs and expenses, including but not limited to, attorneys’ fees, incurred in such action.  If the Executive prevails, the Company will reimburse the Executive’s legal fees no later than 60 days after the end of the taxable year following the year in which the Executive incurs such the costs and expenses.
		

		
			 
		

		
			18.Assignment; Third Parties
		

		
			

		 

		

		
			 
		

		
			Neither the Executive nor the Company may assign, transfer, pledge, hypothecate, encumber or otherwise dispose of this Agreement or any of his or her or its respective rights or obligations hereunder, without the prior written consent of the other.  The parties agree and acknowledge that each of the Companies and the stockholders and investors therein are intended to be third party beneficiaries of, and have rights and interests in respect of, Executive’s agreements set forth in Sections 7,  8 and 9.
		

		
			19.Amendment; Entire Agreement
		

		
			 
		

		
			This Agreement may not be changed orally but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.  This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior agreements, understandings and commitments with respect to such subject matter, including, without limitation, the Prior Employment Agreement and that certain Employment Agreement, dated October 16, 2001, between Executive and Safety Insurance Company.
		

		
			 
		

		
			20. Litigation
		

		
			 
		

		
			THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF MASSACHUSETTS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON.  EXECUTIVE AND THE COMPANY AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT SHALL BE COMMENCED IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON, MASSACHUSETTS OR THE UNITED STATES DISTRICT COURTS IN BOSTON, MASSACHUSETTS.  EXECUTIVE AND THE COMPANY CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.  THE CHOICE OF FORUM SET FORTH IN THIS SECTION 20 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.
		

		
			 
		

		
			21.Further Action
		

		
			 
		

		
			Executive and the Company agree to perform any further acts and to execute and deliver any documents which may be reasonable to carry out the provisions hereof.
		

		
			 
		

		
			22.Counterparts
		

		
			 
		

		
			

		 

		

		
			This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
		

		
			 
		

		
			 
		

		
			23.Section 409A
		

		
			 
		

		
			To the extent applicable, it is intended that this Plan comply with, and should be interpreted consistent with, the requirements of Section 409A.
		

		
			

		 

IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
		

		
			 
		

			
					
						 

					
					
						EXECUTIVE:

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						 Christopher T. Whitford

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						SAFETY INSURANCE GROUP, INC.:

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						Name:

					
					
						  George M. Murphy

				
	
					
						 

					
					
						Title:

					
					
						President, CEO and Directorpfsi_Ex4_1

		
			Exhibit 4.1
		

		
			 
		

		
			DESCRIPTION OF THE REGISTRANT’S SECURITIES
		

		
			REGISTERED PURSUANT TO SECTION 12 OF THE
		

		
			SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
		

		
			 
		

		
			As of December 31, 2019, PennyMac Financial Services, Inc. (the “Company”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: our common stock.
		

		
			 
		

		
			Throughout this exhibit, references to the “we,” “our,” and the “Company” herein are, unless the context otherwise indicates, only to PennyMac Financial Services, Inc. and not to any of its subsidiaries.
		

		
			 
		

		
			General
		

		
			 
		

		
			Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form. The following description of our capital stock is a summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation, as amended (the “Certificate of Incorporation”) and amended and restated bylaws, as amended (the “Bylaws”) which are filed as exhibits to our Annual Report on Form 10-K for the year ended December 31, 2019.
		

		
			 
		

		
			Common Stock
		

		
			 
		

		
			Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.  Holders of our common stock are entitled to receive dividends when and if declared by our board of directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.
		

		
			 
		

		
			Upon any dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of common stock will be entitled to receive pro rata the remaining assets available for distribution.
		

		
			 
		

		
			Holders of our common stock do not have preemptive, subscription, redemption or conversion rights.
		

		
			 
		

		
			Preferred Stock
		

		
			 
		

		
			Our Certificate of Incorporation authorizes our board of directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or by any stock exchange, the authorized shares of preferred stock will be available for issuance without further action by our stockholders. Our board of directors is able to determine, with respect to any series of preferred stock, the terms and rights of that series, including:
		

		
			 
		

		
			the designation of the series;
		

		
			the number of shares of the series, which our board may, except where otherwise provided in the preferred stock designation, increase or decrease, but not below the number of shares then outstanding;
		

		
			the voting rights, if any, of the holders of the series;
		

		
			whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series;
		

		
			the dates at which dividends, if any, will be payable;
		

		
			the rights of priority and amounts payable, if any, on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of our company;
		

		
			the redemption rights and price or prices, if any, for shares of the series;
		

		
			the terms of any purchase, retirement or sinking fund, if any, provided for shares of the series;
		

		
			the terms, if any, upon which the shares of the series will be convertible into or exchangeable for shares of any other class, classes or series or other securities, whether or not issued by our company or any other entity;
		

		
			
		

		
			

		 

		

		
			 
		

		
			restrictions, if any, upon issuance of indebtedness by us so long as any shares of the series are outstanding; and
		

		
			restrictions, if any, on the issuance of shares of the same series or of any other class or series.
		

		
			 
		

		
			We could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which our stockholders might receive a premium for their shares of common stock over the market price of the shares of common stock.
		

		
			 
		

		
			Authorized but Unissued Capital Stock
		

		
			 
		

		
			The Delaware General Corporation Law (the “DGCL”) does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the New York Stock Exchange (“NYSE”), which would apply so long as our common stock remains listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
		

		
			 
		

		
			One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.
		

		
			 
		

		
			Anti-Takeover Effects of Provisions of Delaware Law and Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
		

		
			 
		

		
			Undesignated Preferred Stock
		

		
			 
		

		
			Pursuant to our Certificate of Incorporation, our board of directors has the authority to issue preferred stock with super voting, special approval, dividend or other rights or preferences on a discriminatory basis that could impede the success of any attempt to acquire us or otherwise effect a change in control of us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.
		

		
			 
		

		
			Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
		

		
			 
		

		
			Our Certificate of Incorporation provides that, subject to the rights of the holders of any series of preferred stock, special meetings of the stockholders may be called only by, or at the direction of, our board of directors, two or more of our directors, the chairman of our board, our chief executive officer or one or more holders of at least a minimum percentage of the voting power of the outstanding shares of our capital stock. This minimum will initially be 25% and will automatically increase to 51% on the first date on which the holders of outstanding shares of our common stock (other than any holder that was, or whose affiliate was, a member of Private National Mortgage Acceptance Company, LLC (“PNMAC”) immediately prior to the initial public offering of our predecessor organization) hold more than 51% of the voting power of all outstanding shares of our capital stock. Our Bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.
		

		
			 
		

		
			Our Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made pursuant to our stockholder agreements with BlackRock Mortgage Ventures, LLC (“BMV”) and HC Partners, LLC, (“HCP”) or by or at the direction of the board of directors or a committee of the board of directors. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with the advance notice requirements and provide us with certain information. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
		

		
			
		

		
			

		 

		

			2

		

		

		
			 
		

		
			Filling of Vacancies and Newly Created Directorships; Conduct of Stockholder Meetings
		

		
			 
		

		
			Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though such directors may constitute less than a quorum of the board required for such action, and not by the stockholders. Our Bylaws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
		

		
			 
		

		
			No Cumulative Voting
		

		
			 
		

		
			The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our Certificate of Incorporation provides otherwise. Our Certificate of Incorporation does not expressly provide for cumulative voting.
		

		
			 
		

		
			Amendments to Certificate of Incorporation and Bylaws
		

		
			 
		

		
			The DGCL provides that, unless a corporation’s certificate of incorporation provides for a greater vote, the affirmative vote of holders of shares constituting a majority in voting power of the outstanding shares entitled to vote thereon is required to approve amendments to the certificate of incorporation. In addition to the stockholder approval required by the DGCL, our separate stockholder agreements with BMV and HCP provide that our Certificate of Incorporation may not be amended in any manner that is adverse to BMV or HCP without the consent of BMV or HCP, as applicable, as long as such stockholder, together with its affiliates, holds more than 5% of the voting power of all of our outstanding shares of capital stock.
		

		
			 
		

		
			Our Certificate of Incorporation authorizes our board of directors to amend or repeal our Bylaws, provided that, pursuant to our separate stockholder agreements with BMV and HCP, if that action by our board of directors amends the Bylaws in a manner adverse to BMV or HCP when that entity, together with its affiliates, holds at least 5% of the voting power of our outstanding shares of capital stock, such action must be approved by that entity.
		

		
			 
		

		
			Stockholder Action by Written Consent
		

		
			 
		

		
			Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our capital stock entitled to vote thereon were present and voted, unless our Certificate of Incorporation provides otherwise. Our Certificate of Incorporation prohibits the taking of any action of our stockholders by written consent without a meeting unless that action is taken with regard to a matter that has been approved by our board of directors or requires the approval only of certain series of our preferred stock pursuant to the terms thereof.
		

		
			 
		

		
			Delaware Anti-Takeover Statute
		

		
			 
		

		
			We have not opted out of, and therefore are subject to, Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified in the law, a publicly-held Delaware corporation shall not engage in certain “business combinations” with any “interested stockholder” for a three-year period after the date of the transaction in which the person became an interested stockholder. These provisions generally prohibit or delay the accomplishment of, among other things, mergers, assets or stock sales or other takeover or change-in-control attempts that are not approved by a company’s board of directors.
		

		
			 
		

		
			In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
		

		
			 
		

		
			
		

		
			

		 

		

			3

		

		

		
			 
		

		
			prior to the time the person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
		

		
			upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
		

		
			at, or subsequent to, the time that the person became an interested stockholder, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder.
		

		
			 
		

		
			Generally, a business combination includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, if such person is an affiliate or associate of the corporation, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect that Section 203 will have an anti-takeover effect with respect to transactions the board of directors does not approve in advance. In such event, we would also anticipate that Section 203 could discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
		

		
			 
		

		
			Under certain circumstances, Section 203 makes it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
		

		
			 
		

		
			Corporate Opportunity
		

		
			 
		

		
			Our Certificate of Incorporation provides that neither BMV nor HCP, or their respective affiliates, has any duty (fiduciary or otherwise) to refrain from engaging, directly or indirectly, in a corporate opportunity in the same or similar lines of business in which we now engage or propose to engage. In addition, in the event that either BMV or HCP, or either of their respective affiliates, acquires knowledge of a potential transaction or other matter which may be a corporate opportunity for themselves and for us, then (i) neither we nor our stockholders will have any expectancy in such opportunity and (ii) none of BMV, HCP or any of their respective affiliates will have any duty to communicate or offer such corporate opportunity to us or our stockholders and may pursue or acquire such corporate opportunity for itself or direct such corporate opportunity to another person or entity, unless such corporate opportunity is expressly offered to such affiliate in his or her capacity as our director or officer.
		

		
			 
		

		
			Registration Rights
		

		
			 
		

		
			Pursuant to an amended and restated registration rights agreement dated as of November 1, 2018 (the “Registration Rights Agreement”), BMV, HCP and certain of their permitted transferees have the right, under certain circumstances and subject to certain restrictions, to require us to file a prospectus supplement to register for resale the shares of common stock held by them.
		

		
			 
		

		
			Demand Registration Rights.  BMV and HCP and certain permitted transferees each have the right to demand that we register their shares of common stock for resale, subject to the conditions set forth in the Registration Rights Agreement, no more than three times in any twelve month period. Such registration demand must reasonably be expected to result in aggregate gross cash proceeds to such demanding stockholder in excess of $25 million. We will not be obligated to effect a demand registration within 120 days of the effective date of a registration statement filed
		

		
			
		

		
			

		 

		

			4

		

		

		
			 
		

		
			by us. We may postpone the filing of a registration statement for up to 60 days once in any 12-month period if our board of directors determines in good faith that the filing would reasonably be expected to materially and adversely affect any material financing or acquisition of us or require premature disclosure of information that would reasonably be expected to be materially adverse to us. The underwriters of any underwritten offering have the right to limit the number of shares of common stock to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters’ discounts and commissions, incurred in connection with these demand registration rights.
		

		
			 
		

		
			Piggyback Registration Rights.  BMV, HCP, certain of their permitted transferees and the minority stockholders which are parties to the Registration Rights Agreement will each have the right to “piggyback” on any registration statements that we file on an unlimited basis, subject to the conditions set forth in the Registration Rights Agreement.
		

		
			 
		

		
			S-3 Registration Rights.  If we are eligible to file a registration statement on Form S-3, the stockholders with Form S-3 registration rights under the Registration Rights Agreement and certain permitted transferees can request that we register their common stock for resale. Any registration must be reasonably expected by the demanding stockholder to result in aggregate gross cash proceeds to such demanding stockholder in excess of $10 million, and no more than three demands for a Form S-3 registration may be made in any 12-month period. If we are eligible as a Well-Known Seasoned Issuer (“WKSI”) the requesting stockholders may request that the shelf registration statement utilize the automatic shelf registration process. If we are not eligible as a WKSI or otherwise ineligible to utilize the automatic shelf registration process, then we are required to use our reasonable efforts to have the shelf registration statement declared effective.
		

		
			 
		

		
			Limitations of Liability and Indemnification
		

		
			 
		

		
			Section 145 of the DGCL authorizes a corporation’s board of directors to grant indemnification and advancement rights to current or former officers, directors, employees and other corporate agents.
		

		
			 
		

		
			As permitted by Delaware law, our Certificate of Incorporation provides that, no director will have any personal liability to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or is thereafter amended. Pursuant to Delaware law, such protection would be not available for liability:
		

		
			 
		

		
			for any breach of a duty of loyalty to us or our stockholders;
		

		
			for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
		

		
			for any transaction from which the director derived an improper benefit; or
		

		
			for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL.
		

		
			 
		

		
			Our Bylaws further provide that we must indemnify our current or former directors and officers to the fullest extent permitted by Delaware law. Our Bylaws permit us to secure insurance on behalf of any of our current or former officers or directors for any liability arising out of his or her action in that capacity, whether or not Delaware law would otherwise permit indemnification.
		

		
			 
		

		
			In addition, our Bylaws also provide that we are required to advance expenses to our current or former directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in our Bylaws are not exclusive.
		

		
			 
		

		
			Our Bylaws provide that, except for proceedings to enforce rights to indemnification or advancement, we are not required to indemnify or advance expenses to our current or former director or officer in connection with any action, suit or proceeding (or part thereof) commenced by such person unless such action, suit or proceeding (or part thereof) was authorized by our board of directors.
		

		
			 
		

		
			The fifth amended and restated limited liability company agreement of PNMAC provides that PNMAC will indemnify its officers, members, managers and other affiliates to the fullest extent permitted by Delaware law, and
		

		
			
		

		
			

		 

		

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			advance expenses to its officers, members, managers and other affiliates as incurred in connection with legal proceedings against them for which they may be indemnified. The rights conferred in the fifth amended and restated limited liability company agreement of PNMAC are not exclusive.
		

		
			 
		

		
			The indemnification agreements provide, among other things, that we are required to indemnify each director and officer to the fullest extent permitted by Delaware law, our Certificate of Incorporation and our Bylaws for expenses such as, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by the director or officer in any action or proceeding, including any action by or in our right, arising out of that person’s services as our director or officer or as the director or officer of our subsidiary or any other company or enterprise to which the person provides services at our request. In addition, the indemnification agreements also provide that we are required to advance expenses to our directors and officers as incurred in connection with legal proceedings against them for which they may be indemnified and that the rights conferred in the indemnification agreements are not exclusive. We maintain directors’ and officers’ liability insurance.
		

		
			 
		

		
			The Securities and Exchange Commission has taken the position that personal liability of directors for violation of the federal securities laws cannot be limited and that indemnification by us for any such violation is unenforceable.
		

		
			 
		

		
			The limitation of liability and indemnification provisions in our Certificate of Incorporation and our Bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, may benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
		

		
			 
		

		
			Market Listing
		

		
			 
		

		
			Our common stock is listed on the NYSE under the symbol “PFSI.”
		

		
			 
		

		
			Transfer Agent and Registrar
		

		
			 
		

		
			The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
		

		
			 
		

		 

		

			6

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