EXHIBIT 10.1

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Share Sale Agreement

PMI Mortgage Insurance Co

QBE Holdings (AAP) Pty Limited

QBE Insurance Group Limited

Allens Arthur Robinson

Deutsche Bank Place

Corner Hunter and Phillip Streets

Sydney NSW 2000

Tel 61 2 9230 4000

Fax 61 2 9230 5333

www.aar.com.au

© Copyright Allens Arthur Robinson, Australia 2008

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Table of Contents

 

1.

  

Definitions and Interpretation

   1   

1.1

  

Definitions

   1   

1.2

  

Interpretation

   10   

1.3

  

Consents or approvals

   11   

1.4

  

Method of payment

   11   

1.5

  

Interest on amounts payable

   12   

1.6

  

Withholding Taxes

   12   

1.7

  

Exchange rate

   12

2.

  

Sale and purchase of Shares

   12   

2.1

  

Agreement to sell and purchase the Shares

   12   

2.2

  

Title and property

   12

3.

  

Conditions Precedent

   12   

3.1

  

Conditions Precedent

   12   

3.2

  

Benefit and waiver of Conditions Precedent

   14   

3.3

  

Reasonable endeavours and co-operation

   14   

3.4

  

Notifications

   15   

3.5

  

Reimbursement of transaction costs for investments

   15

4.

  

Purchase Price

   15

5.

  

Adjustment for Pre-Completion Interest Amount

   16

6.

  

Loss Development Cover and Adjustment to Value of the Note

   16

7.

  

Reinsurance Premium

   16

8.

  

Adjustment for Pre-Completion Claims

   17   

8.1

  

Increase in RBA Cash Rate

   17   

8.2

  

Breach of Vendor’s Warranties

   17   

8.3

  

Breach of Vendor’s obligations

   17   

8.4

  

Material Adverse Effect

   18   

8.5

  

Determination of any Pre-Completion Claim

   18   

8.6

  

Full and final settlement

   19   

8.7

  

Aggregate Pre-Completion Claims in excess of limit

   19

9.

  

Adjustment for Portfolio Difference

   20

10.

  

Transitional Services

   21

11.

  

Completion

   21   

11.1

  

Time and Place

   21   

11.2

  

Notice to Vendor

   21   

11.3

  

Deliveries by the Purchaser

   21   

11.4

  

Deliveries by the Vendor

   22   

11.5

  

Power of Attorney

   23   

11.6

  

Interdependence

   24

12.

  

Conduct of Business pending Completion

   24

 

 

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12.1

  

Vendor obligations

   24   

12.2

  

Vendor obligations in respect of Permanent

   26   

12.3

  

Consultation and consent

   26   

12.4

  

Factors relevant to Vendor’s obligations

   26   

12.5

  

Access and information

   26

13.

  

Inter-company Agreements

   27

14.

  

Transaction Bonuses and COC Payments

   28

15.

  

Non-competition

   29

16.

  

Vendor Warranties

   31   

16.1

  

Warranties regarding the Vendor and the Company

   31   

16.2

  

Other Warranties excluded

   31   

16.3

  

When Warranties given

   31   

16.4

  

Knowledge, belief or awareness as to Warranties

   31   

16.5

  

Disclosures

   32   

16.6

  

Separate Warranty

   32   

16.7

  

Purchaser’s acknowledgement

   32   

16.8

  

Liabilities indemnity

   33   

16.9

  

Conditions of payment and Claims for breach

   33   

16.10

  

Acknowledgments

   35   

16.11

  

Dealing with Warranty breach after Completion and Third Party Claims

   36   

16.12

  

Proceedings in respect of a Claim

   38   

16.13

  

Taxation offset

   38   

16.14

  

Restructure or disposal of the Business

   38   

16.15

  

Reduction of Purchase Price

   39   

16.16

  

Adjustment to the Note

   39   

16.17

  

Remedies for breach of Warranty

   39   

16.18

  

Control of taxation returns, etc

   39   

16.19

  

Tax relief

   41   

16.20

  

No Liability where breach

   41   

16.21

  

Independent limitations

   42   

16.22

  

Data room CD-ROM

   42

17.

  

Vendor Marks

   42

18.

  

Personal Liability

   43

19.

  

Note Issuer and Purchaser Warranties

   44

20.

  

GST

   44   

20.1

  

GST to be added to amounts payable

   44   

20.2

  

Liability net of GST

   44   

20.3

  

Timing of the payment of the GST Amount

   44   

20.4

  

Revenue exclusive of GST

   44   

20.5

  

Cost exclusive of GST

   45   

20.6

  

GST obligations to survive termination

   45

21.

  

Costs and Duty

   45

22.

  

Communications

   45

 

 

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22.1

  

Public and other announcements

   45   

22.2

  

Agreement on Communications

   45

23.

  

Confidentiality

   46

24.

  

Termination

   47   

24.1

  

Termination

   47   

24.2

  

Effect of Termination

   47

25.

  

Claims in relation to Permanent

   48

26.

  

Merger

   48

27.

  

Further Actions

   48

28.

  

Entire Agreement

   48

29.

  

No representation or reliance

   48

30.

  

Assignment

   48

31.

  

Amendment and Waiver

   49

32.

  

Severability of Provisions

   49

33.

  

Notices

   49

34.

  

Governing Law and Jurisdiction

   50

35.

  

Counterparts

   51

Schedule 1

     

Company

  

Schedule 2

     

Company Subsidiary

  

Schedule 3

     

Permanent

  

Schedule 4

     

Form of Note Deed

  

Schedule 5

     

Form of Software Licence Agreement

  

Schedule 6

     

Loss Development Cover and Adjustment to Value of the Note

  

Schedule 7

     

Note Issuer and Purchaser Warranties

  

Schedule 8

     

Vendor Warranties

  

Schedule 9

     

Disclosure Material

  

Schedule 10

     

Transitional Services Principles

  

 

 

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Date   

14 August 2008

Parties   

1.

   PMI Mortgage Insurance Co. of 3003 Oak Road, Walnut Creek, CA 94597, United
States of America (the Vendor).

2.

   QBE Holdings (AAP) Pty Limited ABN 26 000 005 881 of Level 2, 82 Pitt Street,
Sydney NSW 2000, Australia (the Purchaser).

3.

   QBE Insurance Group Limited ABN 28 008 485 014 of Level 2, 82 Pitt Street,
Sydney NSW 2000, Australia (the Note Issuer). Recitals   

A

   PMI Mortgage Insurance Australia (Holdings) Pty Limited ABN 98 087 483 958 is
a company registered in the Australian Capital Territory (the Company).

B

   The Vendor is the registered holder and beneficial owner of all issued shares
in the capital of the Company (the Shares).

C

   The Vendor has agreed to sell the Shares to the Purchaser, and the Purchaser
has agreed to purchase the Shares from the Vendor on the terms of this
Agreement.

D

   The Note Issuer will provide the Note Deed as part of the consideration
pursuant to this Agreement.

E

   The PMI Group, Inc. has also agreed in-principle to sell the shares in PMI
Mortgage Insurance Asia Limited, a company incorporated in Hong Kong, to the
Purchaser, and the Purchaser has agreed in-principle to purchase the shares in
that company from The PMI Group, Inc. on the terms of a share sale agreement to
be agreed (the HK Sale Agreement). The transaction under the HK Sale Agreement
would only complete on or after completion under this Agreement.

It is agreed as follows.

 

1. Definitions and Interpretation

 

1.1 Definitions

The following definitions apply unless the context requires otherwise.

ACCC means the Australian Competition and Consumer Commission.

 

 

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Accrued Entitlements means the total amount of accrued but untaken annual leave,
annual leave loading, long service leave, sick leave and any other employee
entitlement calculated in accordance with any of the accrual policies of the
Company or relevant leave legislation applying as at the date of Completion
(whichever results in the greater calculation).

Adviser means, in relation to an entity, a financier, financial adviser,
corporate adviser, accounting adviser, auditor, legal adviser, or technical or
other expert adviser or consultant who provides advisory services in a
professional capacity to the market in general and who has been engaged by that
entity.

AGAAP means generally accepted accounting standards in Australia, being the
requirements of the Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board and Urgent Issues
Group Consensus Views, the requirements of the Corporations Act in relation to
the preparation and content of accounts and, to the extent that any matter is
not covered by them, means generally accepted accounting principles applied from
time to time in Australia for companies similar to the Consolidated Companies.

APRA means the Australian Prudential Regulation Authority.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the
financial market operated by it.

ASX Listing Rules means the official listing rules of ASX.

Assessment means, in relation to Tax or Duty, any notice of assessment or
amended assessment or other document of any kind issued or served or deemed to
be issued or served by a Taxation Authority which notifies or imposes, or is
deemed to notify or impose, a Liability to pay Tax or Duty.

Audit means, in relation to Tax or Duty, any audit, investigation, review,
information request or other enquiry of any kind undertaken by a Taxation
Authority.

Audited AGAAP 2007 Financial Statements means the consolidated statements of
income, changes in equity and cash flows of the Consolidated Companies for the
fiscal year ended 31 December 2007 and consolidated balance sheets of the
Consolidated Companies as at such date, together with the notes thereto,
prepared in accordance with AGAAP and audited by Ernst & Young as set out in
Schedule 2 of the Disclosure Letter.

Audited USGAAP 2007 Financial Statements means the consolidated statements of
income, changes in equity and cash flows of the Company Subsidiary for the
fiscal year ended 31 December 2007 and consolidated balance sheets of the
Company Subsidiary as at such date, together with the notes thereto, prepared in
accordance with USGAAP for the purposes of SEC Reports and audited by Ernst &
Young LLP as set out in Schedule 3 of the Disclosure Letter.

Business means the business carried on by the Consolidated Companies as
described in clause 13(e).

Business Day means any day other than Saturday, Sunday or any other day on which
banks in the city of New York, USA or Sydney, Australia are required to close.

Capital Support Agreements means:

 

  (a) the Support Agreement dated 6 August 1999 between PMI Mortgage Insurance
Co. and MGICA Ltd. (now PMI Mortgage Insurance Ltd);

 

 

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  (b) the First Amendment to Support Agreement dated 14 May 2001 between PMI
Mortgage Insurance Co. and PMI Mortgage Insurance Ltd (formerly MGICA Ltd.); and

 

  (c) the Guarantee dated 14 May 2001 executed by The PMI Group, Inc. in favour
of PMI Mortgage Insurance Ltd (formerly MGICA Ltd.), in connection will all
obligations of PMI Mortgage Insurance Co. to PMI Mortgage Insurance Ltd.

Cash Purchase Price means the sum of US$736,393,282, subject to adjustment under
this Agreement.

Claim means, in relation to a party, a demand, claim, action or Legal Proceeding
made or brought by or against the party, however arising and whether present,
unascertained, immediate, future or contingent.

Communications means all forms of communications, whether written, oral, in
electronic format or otherwise, and whether direct or indirect via agents or
Representatives.

Company Group means the Company and the Company Subsidiary.

Company Group Member means any member of the Company Group.

Company Securities means any shares or other equity interests in, or securities
of, the Company or the Company Subsidiary or any securities, rights or
obligations convertible into, exchangeable for or exercisable to acquire any
securities of the Company or the Company Subsidiary.

Company Subsidiary means the wholly owned subsidiary of the Company, being PMI
Mortgage Insurance Ltd (ACN 000 511 071), described in Schedule 2.

Completion means completion by the parties of the sale and purchase of the
Shares under this Agreement as provided in clause 11.

Completion Date means, unless otherwise agreed in writing by the parties, the
third Business Day after:

 

  (a) where none of clauses 8.1, 8.2, 8.3, 8.4 or 8.7 are triggered, the
Conditions Precedent Satisfaction Date; or

 

  (b) where any of clauses 8.1, 8.2, 8.3 or 8.4 is triggered, the later of the
Conditions Precedent Satisfaction Date and the date that all Pre-Completion
Claims are determined in accordance with clause 8.5; or

 

  (c) where clause 8.7 is triggered, the later of the Conditions Precedent
Satisfaction Date and the date agreed between the parties under that clause.

Conditions Precedent has the meaning given in clause 3.

Conditions Precedent Satisfaction Date means the date on which all the
Conditions Precedent are satisfied or waived in accordance with this Agreement.

Confidentiality Agreement means the confidentiality agreement entered into on
15 May 2008 by and between the PMI Group, Inc., the Note Issuer, the Company,
PMI Mortgage Insurance Asia Limited and PMI Europe Holdings Limited.

 

 

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Consideration has the meaning given by the GST Law.

Consent means any consent, approval, clearance, compliance, exemption,
authorization, order, filing, registration or qualification of or with any
person.

Consolidated Companies means the Company, the Company Subsidiary and Permanent.

Contract means any agreement, contract, lease, note, mortgage, indenture or
license, whether written or oral.

Control (including the terms “controlled by” and “under common control with”)
means the possession, directly or indirectly, of the power to direct or cause
the direction of the decision making or management policies of a person, whether
through the ownership of voting securities, by contract or credit arrangement,
as trustee or executor, or otherwise.

Corporations Act means the Corporations Act 2001 (Cth).

Data Room means the electronic data room maintained by IntraLinks, Inc. on
behalf of the Vendor, in which the Purchaser and its Representatives have had
access to information and materials relating to, among other things, the Company
Group and the Shares.

Data Room CD ROM means the CD ROM confirmed in writing by the Vendor and
Purchaser in accordance with clause 16.22.

Data Room Documentation means:

 

  (a) all documentation contained in the Data Room and provided to the Purchaser
and its officers, employees, agents, advisers and financiers up to and including
7pm (AEST) 13 August 2008 as evidenced by the Data Room CD ROM, or if a Data
Room CD ROM has not been confirmed in accordance with clause 16.22, by accessing
the Data Room; and

 

  (b) any other documents agreed between the Purchaser and the Vendor in writing
as being Data Room Documentation.

Disclosure Letter means the letter executed by the Vendor and delivered to the
Purchaser on or prior to the date of this Agreement in relation to the
Warranties.

Disclosure Material means an item of information, communication or disclosure
contained in the categories of information referred to in Schedule 9.

Duty means any stamp, transaction or registration duty or similar charges
imposed by any Governmental Entity and includes any interest, fine, penalty,
charge or other amount imposed in respect of them, but excludes Tax.

Effective Date means 30 June 2008.

Employee means any current or former employee of the Company or the Company
Subsidiary.

End Date means the date which is 5 months following the date of execution of
this Agreement or such later date as may be agreed by the parties.

Environment means components of the earth, including:

 

  (a) land, air and water, and

 

  (b) any layer of the atmosphere, and

 

 

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  (c) any organic or inorganic matter and any living organism, and

 

  (d) human-made or modified structures and areas,

and includes interacting natural ecosystems that include components referred to
in paragraphs (a)–(c).

FATA means the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Final Portfolio Value means the aggregate value of the investment portfolio of
the Consolidated Companies as at the Conditions Precedent Satisfaction Date.

Financial Sector Act means the Financial Sector (Shareholdings) Act 1998 (Cth).

Governmental Entity means any government or representative of a government or
any governmental, semi-governmental, administrative, fiscal, regulatory or
judicial body, department, commission, authority, agency, instrumentality, board
or tribunal, whether federal, state, territorial or local and whether Australian
or foreign. It includes ASIC, ACCC, APRA and ASX (and any other securities
exchange).

Governmental Order means any order, writ, judgment, injunction, decree,
declaration, stipulation, determination or award entered by or with any
Governmental Entity.

GST has the meaning given by the GST Law.

GST Amount means in relation to a Taxable Supply the amount of GST payable in
respect of that Taxable Supply.

GST Group has the meaning given by the GST Law.

GST Law has the meaning given by the A New Tax System (Goods and Services Tax)
Act 1999 (Cth), or, if that Act does not exist means any Act imposing or
relating to the imposition or administration of a goods and services tax in
Australia and any regulation made under that Act.

Income Tax means tax imposed on income, profits or gains (including capital
gains).

Income Year means a financial year or other period of 12 months in respect of
which Income Tax is payable, or any period in lieu thereof.

Information Memorandum means the Confidential Information Memorandum in relation
to, amongst other things, the Company Group, dated 9 May 2008.

Input Tax Credit has the meaning given by the GST Law and a reference to an
Input Tax Credit entitlement of a party includes an Input Tax Credit for an
acquisition made by that party but to which another member of the same GST Group
is entitled under the GST Law.

Insolvency Event in relation to a party, means any of the following:

 

  (a) a petition is presented, or a meeting is convened for the purpose of
considering a resolution or other steps are taken by any person with a view to
the appointment of an administrator (whether out of court or otherwise) or for
the winding up of the party or an administration order or a winding up order is
made against or a provisional liquidator appointed with respect to the party;

 

  (b) an encumbrancer takes possession of, or a trustee or administrative
receiver or similar officer is appointed in respect of, all or any part of the
business or assets of the party, or distress or any form of execution is levied
or enforced upon or sued out against any of those assets and is not discharged
within seven days of being levied, enforced or sued out;

 

 

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  (c) the party is unable to pay its debts as they fall due or the value of its
assets is less than the amount of its liabilities, taking into account its
contingent and prospective liabilities, or it suspends or threatens to suspend
making payments with respect to all or any class of its debts;

 

  (d) the party proposes or makes any composition or arrangement or composition
with, or any assignment for the benefit of, its creditors;

 

  (e) anything analogous to any of the events described in paragraphs (a) – (d),
inclusive, occurs under the laws of any applicable jurisdiction, including
insurance laws, in which the party conducts business; or

 

  (f) the party ceases to carry on the whole or any material part of its
business and that cessation would be reasonably likely to affect adversely the
party’s ability to observe and perform properly and punctually any of its
obligations under this Agreement.

Insurance Acquisitions Act means the Insurance Acquisitions and Takeovers Act
1991 (Cth).

Intellectual Property means all trademarks, service marks, logos, trade names,
corporate names, brand names, trade dress, Internet domain names and the
goodwill of any business symbolized thereby (Trademarks), inventions,
discoveries, patents, confidential information, trade secrets, know-how and
copyrights and copyrightable works and all applications and registrations for
any of the foregoing.

Inter-company Agreements means the agreements listed in Schedule 12 of the
Disclosure Letter.

KPMG means KPMG Sydney.

Law means any statute, ordinance, rule, regulation, ruling, judgment, order,
prudential standard, injunction, decree, declaration, arbitral award,
requirement or permit of a Governmental Entity, which exists and is enforceable.

Legal Proceeding means any foreign or domestic judicial, administrative or
arbitration actions, suits, proceedings (public, private, civil or criminal),
claims, complaints, disputes, investigations, actions or governmental
proceedings.

Liabilities means Claims, Losses, liabilities, costs or expenses of any kind and
however arising, including penalties, fines and interest and including those
which are prospective or contingent and those the amount of which for the time
being is not ascertained or ascertainable.

Loss means any and all losses, Liabilities, Claims, fines, damages, obligations,
payments (including, without limitation, those arising out of any settlement,
judgment or compromise relating to any Legal Proceeding), reasonable costs and
expenses (including, without limitation, interest and penalties with respect
thereto and reasonable attorneys’ fees and any other reasonable out-of-pocket
expenses incurred in investigating, preparing, defending, avoiding or settling
any Legal Proceeding), including without limitation any of the foregoing arising
under, out of or in connection with any Legal Proceeding, Governmental Order or
award of any arbitrator of any kind, or any Law or Contract; provided, however,
that such Loss excludes any loss that has been accrued for or reserved against
in the Unaudited Financial Statements (to the extent of such existing reserves).

 

 

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Loss Development Cover means the arrangements to be put in place pursuant to
clause 6.

Material Adverse Effect means any event, circumstance or matter (or series of
events, circumstances or matters) that would reasonably be expected to have a
material adverse effect on:

 

  (a) in the case of the Vendor, the ability of the Vendor to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby; or

 

  (b) in the case of the Company, the Company Subsidiary, or Permanent, the
business, assets, financial condition or results of operations of the Company,
the Company Subsidiary or Permanent respectively;

 

  (c) in the case of the Purchaser, the business, assets, financial condition or
results of operations of the Purchaser, or the ability of the Purchaser to
perform its obligations under this Agreement or to consummate the transactions
contemplated by this Agreement; and

 

  (d) in the case of the Note Issuer, the business, assets, financial condition
or results of operations of the Note Issuer, or the ability of the Note Issuer
to perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement,

provided, however, that any such effect resulting or arising from or relating
to:

 

  (i) any change in Law or interpretations thereof post Completion;

 

  (ii) any change in general economic or political conditions (including acts of
war, declared or undeclared, armed hostilities, sabotage and terrorism) that in
each case are not targeted specifically at the Company, the Company Subsidiary
or Permanent and do not directly affect the assets of the Company, the Company
Subsidiary or Permanent;

 

  (iii) any change in financial, securities or other market conditions
(including prevailing interest rates) generally;

 

  (iv) any adverse development with respect to the Vendor’s Subsidiaries (other
than the Company, the Company Subsidiary and Permanent) including, without
limitation, further downgrades of any of their insurer financial strength
ratings or the failure to re-obtain AA category ratings from a Rating Agency; or

 

  (v) any change resulting from or arising out of the announcement of, or
actions taken in accordance with, the provisions of this Agreement,

shall not be considered when determining if a Material Adverse Effect has
occurred or would be reasonably expected to occur unless such matters would be
reasonably expected to have a materially greater adverse effect on the relevant
person referred to in paragraphs (a), (b), (c) or (d) above (as the case may be)
than on the participants in the mortgage insurance industry generally in
Australia or New Zealand.

Material Contracts means the contracts listed in Schedule 11 of the Disclosure
Letter.

Net Tangible Assets means US$920,491,602, being the value of net tangible assets
of the Consolidated Companies as at the Effective Date which has been calculated
as the Consolidated Companies’ shareholders’ equity as of that date, minus the
Consolidated Companies’ intangible assets of that date, using USGAAP, as
adjusted by agreement of the parties for the value of the investment portfolio
of the Consolidated Companies and using an agreed exchange rate of A$1/US$0.95.

 

 

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Note means the note with the initial principal outstanding of US$184,098,320,
subject to adjustment under this Agreement, issued under, and evidenced by, the
Note Deed.

Note Deed means the note deed substantially in the form set out in Schedule 4
duly issued by the Note Issuer.

Officer means, in relation to an entity, its directors, officers and employees.

Permanent means Permanent LMI Pty. Limited (ACN 076 974 000) of Level 21, 50
Bridge Street, Sydney NSW 2000, Australia, in respect of which the Company
Subsidiary holds 50.08% of its issued share capital.

Permitted Security Interest means:

 

  (a) a charge or lien arising in favour of a Governmental Entity by operation
of statute unless there is default in payment of money secured by that charge or
lien;

 

  (b) any mechanics’, workmen’s or other like lien arising in the ordinary
course of business;

 

  (c) any retention of title arrangement undertaken in the ordinary course of
day-to-day trading.

Pre-Completion Claim means a Pre-Completion RBA Cash Rate Increase Claim,
Pre-Completion Warranty Claim, Pre-Completion Performance Claim and
Pre-Completion Material Adverse Effect Claim.

Pre-Completion Interest Amount has the meaning given in clause 5.

Pre-Completion Material Adverse Effect Claim has the meaning given in clause
8.4(b).

Pre-Completion Performance Claim has the meaning given in clause 8.3(a).

Pre-Completion RBA Cash Rate Increase Claim has the meaning given in clause
8.1(b).

Pre-Completion Warranty Claim has the meaning given in clause 8.2(a).

Preliminary Portfolio Value means A$1,493,717,669, the agreed value of the
investment portfolio of the Consolidated Companies as at the Effective Date.

Purchaser Group means the Purchaser and its Related Bodies Corporate (including
members of the Company Group after Completion).

Purchaser Group Member means any member of the Purchaser Group.

Purchase Price means US$920,491,602, being the Net Tangible Assets, subject to
adjustment under this Agreement.

Purchaser Warranties means the representations and warranties set out in
Schedule 7.

Rating Agencies means Fitch Ratings Ltd., Standard and Poor’s Ratings Services
and Moody’s Investor Service; and Rating Agency means any of these.

RBA Cash Rate means the official published cash rate target of the Reserve Bank
of Australia which is in effect from time to time.

Records, in relation to the Consolidated Companies, means the Disclosure
Material and all original and copy records, documents, books, files, reports,
accounts, plans, correspondence, letters and

 

 

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papers of every description and other material regardless of their form or
medium and whether coming into existence before, on or after the date of this
Agreement, belonging or relating to or used by the Consolidated Companies in
connection with the Business including (without limitation) certificates of
registration, minute books, statutory books and registers, books of account, Tax
returns, title deeds and other documents of title, customer lists, insured
lists, intermediary lists, and price lists, whether written, on computer disks
or tapes or other machine readable form.

Related Body Corporate has the meaning given in the Corporations Act.

Representative means, in relation to a party:

 

  (a) a Related Body Corporate of the party;

 

  (b) an Officer of the party or any of the party's Related Bodies Corporate; or

 

  (c) an Adviser to the party or any of the party's Related Bodies Corporate.

Representatives means in relation to a person or entity, its officers,
employees, agents, advisers or financiers.

SEC Reports means the Vendor's forms, statements, reports and other documents
filed with or furnished to the U.S. Securities and Exchange Commission prior to
the date of this Agreement.

Security Interest includes any mortgage, pledge, lien or charge or any security
or preferential interest or arrangement of any kind or any other right of, or
arrangement with, any creditor to have its claim satisfied in priority to other
creditors with, or from the proceeds of, any asset but it excludes a Permitted
Security Interest.

Shares means all the issued shares in the capital of the Company agreed to be
sold under this Agreement and Share means any one of those shares.

Software Licence Agreement means the software licence substantially in the form
contained at Schedule 5 which is to be delivered by the Vendor to the Purchaser
at Completion.

Specified Material Contracts means the Material Contracts listed in Section 1.2
of Schedule 11 of the Disclosure Letter.

Subsidiary has the meaning given in the Corporations Act.

Tax:

 

  (a) means a tax, levy, impost, fee, deduction, compulsory loan, charge,
withholding or duty of any nature, including, without limitation, any Income
Tax, value added, consumption or goods and services tax (including GST), gross
receipts, franchise, withholding, unemployment insurance, social security,
sales, use, excise, real and personal property, municipal, payroll or workers'
compensation tax, or any liability for any of the foregoing (including all
fines, additional tax, interest or penalties) which is assessed, levied, imposed
or collected by a Governmental Entity under the Tax Act or any other statute,
ordinance or law, in Australia or elsewhere;

 

  (b) includes any Liability for the payment of any amounts of the kind
described in paragraph (a) as a result of being a transferee or successor or a
party to any agreement or any express or implied obligation to indemnify another
person;

 

  (c) excludes Duty.

 

 

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Tax Act means the Income Tax Assessment Act 1936 (Cth) and the Income Tax
Assessment Act 1997 (Cth).

Taxable Supply has the meaning given by the GST Law excluding the reference to
section 84-5 of A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Tax Warranty means a warranty given in paragraphs 34 to 52 inclusive of
Schedule 8.

Taxation Authority means any person or agency authorised by law to impose,
collect or otherwise administer any Tax or Duty.

Tax Return means all returns, certifications, forms, reports or other
information required to be supplied to any Taxation Authority relating to Taxes.

Third-Party Claim means any Claim made by any person other than a party, or a
Related Body Corporate of a party, to this Agreement.

Unaudited Financial Statements means the unaudited consolidated statements of
income, changes in equity and cash flows of the Consolidated Companies for the
six months ended 30 June 2008 and unaudited consolidated balance sheets of the
Consolidated Companies as at such date, prepared in accordance with USGAAP for
the purposes of SEC Reports, as set out in Schedule 4 of the Disclosure Letter.

USGAAP means generally accepted accounting principles in the United States of
America.

Vendor Group means the Vendor and each other entity that is or has been
connected (for the purpose of any Tax Law) with the Company or the Company
Subsidiary, other than the Company and the Company Subsidiary.

Vendor Group Member means any member of the Vendor Group.

Vendor Marks means any and all Trademarks owned by the Vendor or any of its
Related Bodies Corporate including without limitation, (in block letters or
otherwise) “PMI , “TPG” and "PMI Australia", either alone or in combination with
other Trademarks or words, and all Trademarks and other source indicators
similar to any of the foregoing or embodying any of the foregoing, alone or in
combination with other Trademarks or words.

Vendor Parent means The PMI Group, Inc.

Vendor Parent Credit Agreement means that certain Revolving Credit Agreement
dated as of 24 October 2006 among the Vendor Parent, the lenders referred to
therein, and Bank of America, N.A., as Administrative Agent, as amended.

Warranties means the representations, warranties, undertakings and other
obligations of the parties of whatever kind contained in this Agreement
(including those set out in Schedules 7 and 8).

 

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The
following rules apply unless the context requires otherwise.

 

  (a) The singular includes the plural, and the converse also applies.

 

  (b) A gender includes all genders.

 

  (c) If a word or phrase is defined, its other grammatical forms have a
corresponding meaning.

 

 

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  (d) A reference to a person includes a corporation, trust, partnership,
unincorporated body or other entity, whether or not it comprises a separate
legal entity.

 

  (e) A reference to a clause or schedule is a reference to a clause of or a
schedule of this Agreement.

 

  (f) A reference to an agreement or document (including a reference to this
Agreement) is to the agreement or document as amended, supplemented, novated or
replaced except to the extent prohibited by this Agreement or that other
agreement or document.

 

  (g) A reference to writing includes any method of representing or reproducing
words, figures, drawings, or symbols in a visible or tangible form.

 

  (h) A reference to a party to this Agreement or another agreement or document
includes the party's successors, permitted substitutes and permitted assigns
(and, where applicable, the party's legal personal representatives).

 

  (i) A reference to legislation or to a provision of legislation includes a
modification or re-enactment of it, a legislative provision substituted for it
and a regulation or statutory instrument issued under it.

 

  (j) A reference to Australian dollars and A$ is to the currency of Australia
and a reference to US dollars or US$ is to the currency of the United States of
America.

 

  (k) Mentioning anything after includes, including, for example, or similar
expressions, does not limit what else might be included.

 

  (l) Nothing in this Agreement is to be interpreted against a party solely on
the ground that the party put forward this Agreement or any part of it.

 

1.3 Consents or approvals

Except as otherwise expressly set out in this Agreement or the Disclosure
Materials, if the doing of any act, matter or thing under this Agreement is
dependent on the consent or approval of a party or is within the discretion of a
party, the consent or approval may be given or the discretion may be exercised
conditionally or unconditionally or withheld by the party in its absolute
discretion.

 

1.4 Method of payment

 

  (a) All payments required to be made under this Agreement must be tendered at
the recipient’s option by way of direct transfer of immediately available funds
to the bank account(s) nominated in writing by the party to whom the payment is
due.

 

  (b) Any payment tendered under this Agreement after 4.00pm Pacific Standard
Time or Australian Eastern Standard Time as applicable on any date will be taken
to have been made on the next succeeding Business Day in the location where the
funds are, or are to be received (the deemed payment date) after the date on
which payment was tendered, and if the deemed payment date is after the relevant
due date for payment, interest will accrue under clause 1.5 accordingly unless
due to delay or other default of the other party.

 

 

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1.5 Interest on amounts payable

If a party fails to pay any amount payable by it under or in accordance with
this Agreement (including the Cash Purchase Price or the Note), the party must,
if demand is made, pay simple interest on that amount from the due date for
payment until that amount is paid in full at the rate per annum which is the sum
of the Pre-Completion Interest Rate (as defined in clause 5(c)(ii)), plus an
additional margin of 1%, calculated daily. The right to require payment of
interest under this clause is without prejudice to any other rights the party
may have against the other party at law or in equity.

 

1.6 Withholding Taxes

If the Purchaser is required by law to deduct or withhold any amount on account
of Australian withholding tax from any payment, or part of any payment, made to
the Vendor in accordance with this Agreement or the Software Licence Agreement,
the Purchaser shall:

 

  (a) promptly pay the amount deducted or withheld to the relevant Taxation
Authority; and

 

  (b) within 20 Business Days of the end of the month in which the deduction or
withholding is made, deliver to the Vendor official receipts or other evidence
of payment of that amount;

 

1.7 Exchange rate

For the purposes of clause 8 and 9, the A$/US$ exchange rate shall be taken to
be A$1/US$0.95.

 

2. Sale and purchase of Shares

 

2.1 Agreement to sell and purchase the Shares

Upon the terms and subject to the conditions described in this Agreement, the
Vendor agrees to sell and transfer to the Purchaser the Shares, and the
Purchaser agrees to purchase the Shares from the Vendor free and clear of any
Security Interests (in this instance, including free and clear of any Permitted
Security Interest) for the Purchase Price.

 

2.2 Title and property

Title to and property in the Shares:

 

  (a) until Completion, remain solely with the Vendor; and

 

  (b) subject to the provisions of this Agreement, pass to the Purchaser with
effect from Completion.

 

3. Conditions Precedent

 

3.1 Conditions Precedent

Clause 2.1 will not bind the parties and Completion under clause 11 will not
proceed unless and until the following conditions (the Conditions Precedent) are
satisfied or waived in accordance with this Agreement.

 

  (a)

(Financial Sector Act approval) – the Treasurer of the Commonwealth of Australia
(or his delegate) consents to the implementation of the proposed transaction set
out in this

 

 

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Agreement in accordance with its terms under the Financial Sector Act, either
unconditionally or on terms that would not reasonably be expected to have a
Material Adverse Effect with respect to the Company, the Company Subsidiary, the
Note Issuer or the Purchaser, or the Treasurer ceases to be empowered to make
any order under Part 2 of the Financial Sector Act in relation to the proposed
transaction, notice of the proposed transaction having been given to the
Treasurer under the Financial Sector Act, and in such event, consent is given by
the Governmental Entity then empowered to consent to the implementation of the
proposed transaction set out in this Agreement.

 

  (b) (Insurance Acquisitions Act approval) – the Treasurer of the Commonwealth
of Australia (or his delegate) consents to the implementation of the transaction
set out in this Agreement in accordance with its terms under the Insurance
Acquisitions Act either unconditionally or on terms that would not reasonably be
expected to have a Material Adverse Effect with respect to the Company, the
Company Subsidiary, the Note Issuer or the Purchaser, or the Treasurer ceases to
be empowered to make any order under Part 4 of the Insurance Acquisitions Act in
relation to the proposed transaction, notice of the proposed transaction having
been given to the Treasurer under the Insurance Acquisitions Act, and in such
event, consent is given by the Governmental Entity then empowered to consent to
the implementation of the proposed transaction set out in this Agreement.

 

  (c) (Third Party Consents) – All third party consents required to be obtained
under the Specified Material Contracts due to a change of control of the Company
or the Company Subsidiary as a result of Completion have been obtained either
unconditionally or on terms that would not reasonably be expected to have a
Material Adverse Effect with respect to the Company, the Company Subsidiary,
Permanent, the Note Issuer or the Purchaser.

 

  (d) (Investments) – Any securities held in the investment portfolio of the
Consolidated Companies (other than those exempted under Schedule 5 of the
Disclosure Letter or otherwise by the agreement of the Purchaser and Vendor in
writing) must be in cash, cash equivalent (being on deposit with a
deposit-taking institution authorised in Australia or New Zealand for a term of
no more than 3 months), short term money market investments or fixed interest
paper with a minimum rating of Aa3 or better by Moody's Investor Services (or
equivalent), with a maturity of up to 12 months in Australian Dollars.

 

  (e) (FATA Approval) – if consent is required under the FATA, the Treasurer of
the Commonwealth of Australia (or his delegate) consents to the implementation
of the proposed transaction set out in this Agreement in accordance with its
terms under FATA, either unconditionally or on terms that would not reasonably
be expected to have a Material Adverse Effect with respect to the Company, a
Company Subsidiary, the Note Issuer or the Purchaser, or the Treasurer ceases to
be empowered to make any order under Part II of the FATA in relation to the
proposed transaction, notice of the proposed transaction having been given to
the Treasurer under the FATA, and in such event, consent from the Governmental
Entity then empowered to consent to the implementation of the proposed
transaction set out in this Agreement.

 

  (f)

(Credit Agreement) – The Vendor Parent shall have received a written notice,
executed by the Agent and the Required Lenders (in each case, as defined in the
Vendor Parent Credit

 

 

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Agreement), in form and substance reasonably satisfactory to the Vendor Parent,
acknowledging compliance with the provisions of Section 7.03 of the Vendor
Parent Credit Agreement with respect to the proposed transaction.

 

3.2 Benefit and waiver of Conditions Precedent

 

  (a) The Conditions Precedent in clauses 3.1(a), 3.1(b) and 3.1(e) are for the
benefit of both parties, and any breach or non-fulfilment of any of those
Conditions Precedent may only be waived by both parties giving their written
consent.

 

  (b) The Conditions Precedent in clauses 3.1(c) and 3.1(d) are for the sole
benefit of the Purchaser, and any breach or non-fulfilment of any of those
Conditions Precedent may only be waived by the Purchaser giving its written
consent.

 

  (c) The Condition Precedent in clause 3.1(f) is for the sole benefit of the
Vendor, and any breach or non-fulfilment of that Condition Precedent may only be
waived by the Vendor giving its written consent.

 

  (d) A party entitled to waive the breach or non-fulfilment of a Condition
Precedent pursuant to this clause 3.2 may do so in its absolute discretion.

 

  (e) If a waiver by a party of a Condition Precedent is itself conditional and
the other party accepts the condition, the terms of that condition apply
accordingly. If the other party does not accept a conditional waiver of the
Condition Precedent, the Condition Precedent has not been waived.

 

  (f) If a party waives the breach or non-fulfilment of a Condition Precedent,
that waiver will not preclude it from suing the other party or parties for any
breach of this Agreement, including a breach that resulted in the non-fulfilment
of the Condition Precedent that was waived.

 

  (g) Waiver of a breach or non-fulfilment in respect of one Condition Precedent
does not constitute:

 

  (i) waiver of breach or non-fulfilment of any other Condition Precedent
resulting from the same event; or

 

  (ii) waiver of breach or non-fulfilment of that Condition Precedent resulting
from any other event.

 

3.3 Reasonable endeavours and co-operation

 

  (a) The Vendor must use its reasonable endeavours to satisfy, or procure the
satisfaction of, the Conditions Precedent in clauses 3.1(c), 3.1(d) and 3.1(f);
provided, however, that, with respect to clause 3.1(f), neither the Vendor nor
the Vendor Parent shall be required, in connection with the acknowledgement
referred to in clause 3.1(f) to agree to make any payment or provide any
financial or other accommodation to any lender under the Vendor Parent Credit
Agreement or to any other person (other than customary reimbursement of
reasonable legal fees and disbursements incurred by the lenders under the Vendor
Parent Credit Agreement in connection with such waiver), incur any liability or
agree to any burdensome condition or to any modification of the Vendor Parent
Credit Agreement adverse to the Vendor Parent.

 

 

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  (b) Each of the Purchaser and the Vendor must use their respective reasonable
endeavours to:

 

  (i) satisfy, or procure the satisfaction of, the Conditions Precedent in
clauses 3.1(a), 3.1(b) and 3.1(e); and

 

  (ii) procure that there is no occurrence within the reasonable control of the
Purchaser or the Vendor (as applicable) or their respective Related Bodies
Corporate that would prevent any Condition Precedent from being satisfied.

 

  (c) If any of the approvals under clause 3.1(a), 3.1(b) or 3.1(e) is on terms
that would reasonably be expected to have a Material Adverse Effect with respect
to Permanent, then the parties will use their best endeavours to resolve the
issue, and otherwise to negotiate in good faith any appropriate amendments to
this Agreement.

 

3.4 Notifications

Each party must:

 

  (a) promptly notify the other in writing if it becomes aware that any
Condition Precedent has been satisfied;

 

  (b) promptly notify the other in writing if it becomes aware that any
Condition Precedent has failed to be satisfied or of any material development of
which it becomes aware that may lead to a Condition Precedent not being
reasonably capable of being satisfied or incapable of being satisfied; and

 

  (c) after having given or received a notice in accordance with clause
(b) above in relation to a Condition Precedent that it is entitled under clause
3.2 to waive, give notice to the other party as soon as possible (and in any
event no later than 5 Business Days) as to whether or not it waives the breach
or non-fulfilment of the relevant Condition Precedent, specifying that Condition
Precedent.

 

3.5 Reimbursement of transaction costs for investments

If this Agreement is terminated and Completion does not occur, the Purchaser
shall promptly reimburse the Vendor and its Related Bodies Corporate for 50% of
any reasonable third party transaction costs, including brokerage fees, incurred
by any of them for the purpose of satisfying, procuring or attempting to satisfy
or procure the satisfaction of the Condition Precedent in clause 3.1(d).

 

4. Purchase Price

 

  (a) The Purchase Price shall be payable by way of the Cash Purchase Price and
the Note in accordance with this Agreement.

 

  (b) The Purchase Price is apportioned as follows:

 

  (i) Net Tangible Assets – Australia: US$883,008,004

 

  (ii) Net Tangible Assets – New Zealand: US$37,483,598

 

 

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5. Adjustment for Pre-Completion Interest Amount

 

  (a) The Cash Purchase Price and the initial principal outstanding on the Note
will be increased pro rata by the Pre-Completion Interest Amount.

 

  (b) The Pre-Completion Interest Amount is equal to the amount of interest that
would have been payable at the Pre-Completion Interest Rate for the period
beginning on 1 July 2008 and ending on the Completion Date as if:

 

  (i) a sum equal to the Net Tangible Assets were a principal outstanding;

 

  (ii) interest were calculated on the daily principal outstanding balance on
the basis of the actual number of days elapsed in each Pre-Completion Interest
Period and a year of 360 days (including the first day of the Pre-Completion
Interest Period but excluding the last); and

 

  (iii) interest which accrues at the end of each Pre-Completion Interest Period
is capitalised, unless the last interest period is less than six months’
duration. The principal outstanding will increase accordingly.

 

  (c) For the purposes of this clause 5:

 

  (i) Pre-Completion Interest Period means:

 

  (A) in relation to each such period other than the last, the 6 month period
commencing on the date of this Agreement and each 6 month period thereafter;

 

  (B) in relation to the last such period, the period commencing on the first
day of such period and ending on the Completion Date.

 

  (ii) Pre-Completion Interest Rate means 3.7875% being 3 month US LIBOR plus
1% per annum as at 1 July 2008.

 

6. Loss Development Cover and Adjustment to Value of the Note

 

  (a) The parties shall arrange the Loss Development Cover in accordance with
the provisions of Schedule 6.

 

  (b) The parties acknowledge that the Vendor contemplates transferring,
assigning, novating, or sub-participating the Note in accordance with its terms
at an appropriate time in the future to potential investors and that for this
purpose the Vendor requires access to information regarding the Loss Development
Cover in accordance with Schedule 6, and may need to share this information with
potential investors in order to market and otherwise comply with its disclosure
obligations to potential investors but will do so on a confidential basis.

 

7. Reinsurance Premium

The Purchaser may, to the extent permitted by Law and with the consent of the
Vendor and applicable Governmental Entities and upon confirmation from the
Rating Agencies that no downgrade in insurer financial strength ratings will
occur as a result thereof, request the Company

 

 

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Subsidiary to pay on or before the Completion Date a reinsurance premium to
Equator Re or other reinsurer for reinsurance cover as contemplated by and in
accordance with Schedule 6. If any such premium is paid, the Cash Purchase Price
and the initial principal outstanding on the Note will not be reduced by the
amount of the premium paid.

 

8. Adjustment for Pre-Completion Claims

 

8.1 Increase in RBA Cash Rate

 

  (a) If:

 

  (i) the RBA Cash Rate as at the Conditions Precedent Satisfaction Date is in
excess of 7.75% per annum (being 0.5% plus the RBA Cash Rate as at the Effective
Date (being 7.25% per annum)) (the RBA Cash Rate Increase); and

 

  (ii) no later than 1 Business Day after the Conditions Precedent Satisfaction
Date, the Purchaser notifies the Vendor in writing that it proposes to make a
Pre-Completion RBA Cash Rate Increase Claim,

the Cash Purchase Price and the initial principal outstanding on the Note will
be reduced, unless otherwise agreed by the parties, pro rata by the amount of
the Pre-Completion RBA Cash Rate Increase Claim, as determined in accordance
with clause 8.5.

 

  (b) Pre-Completion RBA Cash Rate Increase Claim means the diminution in value
of the investment portfolio of the Consolidated Companies between the Effective
Date and the Conditions Precedent Satisfaction Date notified by the Purchaser to
the Vendor as being attributable to the RBA Cash Rate Increase.

 

8.2 Breach of Vendor's Warranties

If

 

  (a) any of the Warranties of the Vendor contained in this Agreement is not
true as at the Conditions Precedent Satisfaction Date and, if Completion had
occurred on that day, the Purchaser would have been entitled to make a Claim for
a breach of Warranty in excess of US$10,000,000 (Pre-Completion Warranty Claim);
and

 

  (b) no later than 1 Business Day after the Conditions Precedent Satisfaction
Date, the Purchaser notifies the Vendor in writing that it proposes to make a
Pre-Completion Warranty Claim,

the Cash Purchase Price and the initial principal outstanding on the Note will
be reduced, unless otherwise agreed by the parties, pro rata by the amount of
the Pre-Completion Warranty Claim, as determined in accordance with clause 8.5.

 

8.3 Breach of Vendor's obligations

If:

 

  (a) the Vendor has not duly performed and complied with all its obligations
under this Agreement that are required to be performed or complied with by it at
or before the Conditions Precedent Satisfaction Date and, if Completion had
occurred on that day, the Purchaser would have been entitled to make a Claim for
a breach of the Vendor's obligations under this Agreement in excess of
US$10,000,000 (Pre-Completion Performance Claim); and

 

 

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  (b) no later than 1 Business Day after the Conditions Precedent Satisfaction
Date, the Purchaser notifies the Vendor in writing that it proposes to make the
Pre-Completion Performance Claim,

the Cash Purchase Price and the initial principal outstanding on the Note will
be reduced, unless otherwise agreed by the parties, pro rata by the amount of
the Pre-Completion Performance Claim, as determined in accordance with clause
8.5.

 

8.4 Material Adverse Effect

 

  (a) If:

 

  (i) a Material Adverse Effect has occurred in relation to the Company, the
Company Subsidiary or Permanent between the date of this Agreement and the
Conditions Precedent Satisfaction Date other than:

 

  (A) as expressly provided for under this Agreement or as fairly disclosed in
the Disclosure Materials; or

 

  (B) a circumstance, event or matter that would trigger a Pre-Completion RBA
Cash Rate Increase Claim, a Pre-Completion Warranty Claim or a Pre-Completion
Performance Claim; and

 

  (ii) the Pre-Completion Material Adverse Effect Claim is in excess of
US$10,000,000; and

 

  (iii) no later than 1 Business Day after the Conditions Precedent Satisfaction
Date, the Purchaser notifies the Vendor in writing that it proposes to make a
Pre-Completion Material Adverse Effect Claim,

the Cash Purchase Price and the initial principal outstanding on the Note will
be reduced, unless otherwise agreed by the parties, pro rata by the amount of
the Pre-Completion Material Adverse Effect Claim, as determined in accordance
with clause 8.5.

 

  (b) Pre-Completion Material Adverse Effect Claim means the diminution in value
of the net tangible assets of the Consolidated Companies between the Effective
Date and the Conditions Precedent Satisfaction Date attributable to the Material
Adverse Effect.

 

8.5 Determination of any Pre-Completion Claim

 

  (a) The determination of any Pre-Completion Claim will be subject to agreement
by the parties. In the event a dispute arises concerning the reaching of
agreement by the Vendor and Purchaser as to any Pre-Completion Claim, the Vendor
and the Purchaser will work together, diligently in good faith and acting
reasonably, to investigate and resolve the dispute through the chief executive
officers:

 

  (i) Purchaser – Frank O'Halloran;

 

  (ii) Vendor – Steve Smith;

or in each case, their respective successor or senior executive nominee, as
applicable.

 

 

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  (b) A dispute between the parties as to the amount of a Pre-Completion Claim
which is not resolved following referral to the chief executive officers or
nominees within 10 Business Days of such referral, must be submitted to an
independent expert for determination as follows.

 

  (c) The independent expert will be KPMG or, if KPMG is unable or unwilling to
act, such other expert as the parties may agree, or if such other expert
otherwise agreed by the parties is unable or unwilling to act within 10 Business
Days of notice to them, the expert will be nominated by the President or senior
officer of the Institute of Chartered Accountants or his nominee.

 

  (d) The independent expert must have no direct or indirect personal interest
in the outcome of the decision or determination he is requested to make.

 

  (e) The parties must submit the dispute in writing to the independent expert
on or promptly after appointment of the independent expert. The submission shall
state the specific matter to be determined and all other reasonably relevant
matters.

 

  (f) Each party shall direct the independent expert to act expeditiously and to
give reasons for his determination, and shall supply the independent expert with
any information, assistance and co-operation which he may request in connection
with his determination.

 

  (g) Unless the independent expert, in his absolute discretion, determines that
the conduct of any disputing party is such that it should bear all or a greater
proportion, the fees and expenses of the independent expert shall be borne by
the Vendor and Purchaser in equal shares.

 

  (h) The independent expert is an independent expert, not an arbitrator. The
independent expert's decision will be conclusive and final and binding on the
parties except in the case of manifest error.

 

8.6 Full and final settlement

Any adjustment to the Purchase Price for a Pre-Completion Claim under this
clause 8 shall be taken to be full and final settlement of any Claim for breach
of any Warranty by or obligation of the Vendor under this Agreement in respect
of the known matter, circumstance or event to which the Claim relates.

 

8.7 Aggregate Pre-Completion Claims in excess of limit

 

  (a) If the final aggregate value of all Pre-Completion Claims determined in
accordance with clause 8.5 exceeds US$120,000,000, then within 2 Business Days
of the date that all such Pre-Completion Claims have been determined, either the
Vendor or the Purchaser may by written notice to the other require the other
party to consult in good faith with a view to determining whether it continues
to be commercially desirable for the transaction contemplated by this Agreement
to proceed after any terms of this Agreement have been amended, including a
purchase price reduction.

 

  (b) If the Vendor and the Purchaser are unable to reach agreement under
sub-paragraph (a) within the Required Consultation Period (as defined below),
either of them may, provided that that party has otherwise fully complied with
its obligations under this clause 8.7, terminate this Agreement by notice in
writing to the other in which case clause 24.1 will have effect.

 

 

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  (c) For the purposes of clause 8.7(b), the Required Consultation Period is 10
Business Days after the parties becoming aware that sub-paragraph (a) above is
triggered.

 

9. Adjustment for Portfolio Difference

 

  (a) As soon as practicable, the parties shall determine the difference between
the Preliminary Portfolio Value and the Final Portfolio Value (the Portfolio
Difference).

 

  (b) The determination of the Final Portfolio Value will be subject to
agreement by the parties. In the event a dispute arises concerning the reaching
of agreement by the Vendor and Purchaser as to the Final Portfolio Value, the
process under clause 8.5 shall apply as if the dispute as to the Final Portfolio
Value is a Pre-Completion Claim for the purposes of that clause.

 

  (c) If the Final Portfolio Value is greater than the Preliminary Portfolio
Value, the Cash Purchase Price and the initial principal outstanding on the Note
will be increased, unless otherwise agreed by the parties, pro rata in
accordance with the following provisions:

 

  (i) where the Portfolio Difference is A$3,000,000 or more, by A$1,050,000
being the amount of A$1,500,000 as adjusted for the company tax rate of 30%; and

 

  (ii) where the Portfolio Difference is less than A$3,000,000, by an amount
calculated as follows:

 

Portfolio Difference

  X    70%

2

    

 

  (d) If the Preliminary Portfolio Value is greater than the Final Portfolio
Value, the Cash Purchase Price and the initial principal outstanding on the Note
will be reduced, unless otherwise agreed by the parties, pro rata in accordance
with the following provisions:

 

  (i) where the Portfolio Difference is A$3,000,000 or more, by A$1,050,000
being the amount of A$1,500,000 as adjusted for the company tax rate of 30%; and

 

  (ii) where the Portfolio Difference is less than A$3,000,000, by an amount
calculated as follows:

 

Portfolio Difference

  X    70% 2     

 

  (e) If the Final Portfolio Value is equal to the Preliminary Portfolio Value,
no adjustment to the Cash Purchase Price or the initial principal outstanding on
the Note will be made under this clause 9.

 

  (f) In the period between the Effective Date and Completion, the Vendor will
procure that Aberdeen Fund Managers Australia Limited disposes of the assets in
the investment portfolio of the Consolidated Companies in accordance with the
letter of instruction in Schedule 6 of the Disclosure Letter and otherwise in
accordance with any guidelines agreed to between the Vendor and the Purchaser
from time to time.

 

 

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10. Transitional Services

The Vendor and the Purchaser will work together, diligently in good faith and
acting reasonably (elevating any disagreement through to the parties’ respective
chief executive officers), to finalise the transitional services for, but not
limited to, those arrangements detailed in Schedule 10 to be provided by the
Vendor Group to the Consolidated Companies after Completion Date including
pricing, and the extent to which the arrangements in relation to the provision
of those services should be formally documented. If the Vendor and the Purchaser
agree that a formally documented transitional services agreement is required,
the parties will negotiate in good faith and finalise by the Completion Date the
terms of such transitional services agreement.

 

11. Completion

 

11.1 Time and Place

Completion will take place on the Completion Date at the offices of Allens
Arthur Robinson, Deutsche Bank Place, corner Hunter and Phillip Streets, Sydney,
at 10.00am., Australian Eastern Standard Time or at such other place, time and
date as the parties may agree.

 

11.2 Notice to Vendor

At least two Business Days before the Completion Date, the Purchaser must give
the Vendor a notice setting out details of:

 

  (a) the persons who will be appointed as the new directors, secretaries and
public officers of the Company and the Company Subsidiary from Completion
together with original signed consents to act of such persons;

 

  (b) the persons who will be required to resign as directors, secretaries and
public officers of the Company and the Company Subsidiary;

 

  (c) the proposed new registered offices of the Company and the Company
Subsidiary from Completion; and

 

  (d) subject to clause 17, the proposed new names of the Company and the
Company Subsidiary from Completion, which must not include the word “PMI”.

 

11.3 Deliveries by the Purchaser

At Completion, the Purchaser must:

 

  (a) pay the Cash Purchase Price to the Vendor;

 

  (b) deliver to, or at the direction of, the Vendor a signed counterpart to the
Note Deed;

 

  (c) deliver to, or at the direction of, the Vendor a signed counterpart to the
Software Licence Agreement.

 

 

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11.4 Deliveries by the Vendor

On or prior to the Completion Date, the Vendor must:

 

  (a) ensure that the following resolutions are duly passed, conditional on and
with effect from Completion, by the board of directors of each of the Company
and the Company Subsidiary (whether by way of meeting or circular resolution in
accordance with the Corporations Act and the relevant company’s constitution):

 

  (i) that such persons as the Purchaser notifies to the Vendor under
clause 11.2(a) are appointed as directors of the Company or of the Company
Subsidiary (as the case may be), subject to the receipt of duly signed consents
to act of such persons;

 

  (ii) that such persons as the Purchaser notifies to the Vendor under
clause 11.2(a) are appointed as the secretaries and public officers of the
Company or of the Company Subsidiary (as the case may be), subject to the
receipt of duly signed consents to act of such persons;

 

  (iii) noting that such persons as the Purchaser notifies to the Vendor under
clause 11.2(b) has resigned as directors, secretaries and public officers of the
Company and of the Company Subsidiary (as the case may be);

 

  (iv) that in the case of the Company only, the transfer of the Shares to the
Purchaser (subject to the payment of stamp duty on the instruments of transfer
which must be borne by the Purchaser), the cancellation of the existing share
certificates for the Shares and delivery by the Company to the Purchaser of new
share certificates for the Shares in the name of the Purchaser are each
approved;

 

  (v) that the registered office of the Company and the Company Subsidiary be
changed to Level 2, 82 Pitt Street, Sydney, NSW 2000; and

 

  (vi) that PricewaterhouseCoopers are appointed as the Company’s auditors,
subject to the receipt of their written consent to act,

 

  (b) procure that the shareholder of the Company and the Company Subsidiary
passes a resolution in accordance with the Corporations Act and the relevant
company’s constitution approving the change of name of the Company and the
Company Subsidiary in accordance with clause 11.2(d);

 

  (c) deliver to the Purchaser duly executed instruments of transfer of the
Shares in favour of the Purchaser together with the share certificates relating
to the Shares;

 

  (d) deliver to, or at the direction of, the Purchaser a signed counterpart to
the Note Deed;

 

  (e) deliver to, or at the direction of, the Purchaser a signed counterpart to
the Software Licence Agreement;

 

  (f) produce to the Purchaser any power of attorney or other authority under
which the transfers of the Shares are executed;

 

  (g)

deliver to the Purchaser a resignation (in the agreed form) from each resigning
officer of the Company and Company Subsidiary as notified by the Purchaser under
clause 11.2(b) acknowledging that he or she has no Claim against the Company or
Company Subsidiary

 

 

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for breach of contract, loss of office, redundancy, compensation, payment or
repayment of loans or otherwise, except for payments (if any) properly payable
to that officer as an Employee of the Company or Company Subsidiary for accrued
salary, and Accrued Entitlements up to the Completion Date;

 

  (h) cause the revocation, with effect from Completion, of all authorities of
Officers of the members of the Vendor Group relating to bank accounts of the
Consolidated Companies;

 

  (i) cause the persons notified in writing by the Purchaser to the Vendor in
writing at least two Business Days before Completion to be appointed as
signatories to the bank accounts of the Consolidated Companies conditional on
and with effect from Completion;

 

  (j) deliver to (or at the direction of) the Purchaser all Records in the
possession or control of the Vendor or any member of the Vendor Group;

 

  (k) if requested by the Purchaser in writing at least two Business Days prior
to Completion, do all other things necessary to transfer the Shares, to complete
any other transaction contemplated by this Agreement and to place the Purchaser
in effective control of the Consolidated Companies and the Business;

 

  (l) deliver to, or at the direction of, the Purchaser lists of claims,
premiums, reinsurance proceeds, other receivables and investments together with
the unearned premiums calculation and management accounts as at the month end
prior to Completion in a form reasonably acceptable to the Purchaser;

 

  (m) provide any transitional services agreement agreed to under clause 10
which has been executed by the Vendor and the Purchaser;

 

  (n) provide agreements agreed to under clause 13 terminating the participation
of the Consolidated Companies in relation to the Inter-company Agreements, which
has been executed by the Vendor and the Purchaser; and

 

  (o) deliver the ASIC Corporate Key for each Group Company.

 

11.5 Power of Attorney

The Vendor appoints the Purchaser to be its attorney from the Completion Date
until the Shares are registered in the name of the Purchaser. Under this power
of attorney, the Purchaser may do in the name of the Vendor and on its behalf
everything necessary or desirable, in the Purchaser’s sole discretion, to:

 

  (a) transfer the Shares;

 

  (b) exercise any rights, including rights to appoint a proxy or representative
and voting rights, attaching to the Shares;

 

  (c) receive any dividend or other entitlement paid or credited to the Vendor
in respect of the Shares; and

 

  (d) do any other act or thing in respect of the Shares or the Company or the
Company Subsidiary.

 

 

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The Vendor declares that all acts and things done by the Purchaser in exercising
powers under this power of attorney will be as good and valid as if they had
been done by the Vendor and agrees to ratify and confirm whatever the Purchaser
does in exercising power under this power of attorney.

The Vendor will ensure that the Purchaser is the sole person (including to the
exclusion of the Vendor) entitled to the rights and powers in clauses 11.5(b),
(c) and (d).

 

11.6 Interdependence

 

  (a) The obligations of the Purchaser and the Vendor under this clause 11 are
interdependent.

 

  (b) Completion will not occur unless all of the obligations of the Purchaser
and the Vendor under this clause 11 are complied with and are fully effective.

 

12. Conduct of Business pending Completion

 

12.1 Vendor obligations

In this clause 12.1, a reference to “consistent with past practice” is to be
interpreted having regard to the changed circumstances arising from the
transaction contemplated under this Agreement and the fact that the Shares will
be sold to the Purchaser at Completion.

From the date of this Agreement to the Completion Date, except as expressly
disclosed in this Agreement or the Disclosure Materials or consented to by the
Purchaser in writing or as required by Law or any applicable Governmental
Entity, the Vendor must ensure that:

 

  (a) the Business of the Company and the Company Subsidiary is conducted only
in the ordinary course consistent with past practice (but subject to the
restrictions in this clause 12.1) using its reasonable endeavours to maintain
the profitability of the Company Group;

 

  (b) no member of the Company Group will merge or consolidate with any other
corporation or acquire all or substantially all of the shares or the business or
assets of any other person, firm, association, corporation or business
organisation (in each case, other than for transactions wholly among the Company
and the Company Subsidiary) enter into any form of joint venture, or agree to do
any of the foregoing;

 

  (c) no change is made to the constitution of any member of the Company Group;

 

  (d) no member of the Company Group will reduce its share capital, or transfer
an amount to its share capital account from any of its other accounts, or allot
or issue any shares or any securities or loan capital convertible into shares,
or purchase, redeem, retire or acquire any such shares or securities, or agree
to do so, or sell or give any option or right to purchase or wilfully give any
mortgage, charge, pledge or other form of security or encumbrance over any such
shares or securities or pay or agree to pay any dividend or other distribution
on any Shares or share in the Company Subsidiary;

 

  (e) no member of the Company Group will enter into a capital commitment
exceeding A$750,000 or dispose of or deal with any assets other than in the
ordinary course of business consistent with past practice and for full market
value and other than Permitted Security Interests;

 

 

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  (f) no member of the Company Group will:

 

  (i) other than in the ordinary course, either validly terminate or materially
breach any Material Contract;

 

  (ii) cancel or waive any material claims having a value in excess of A$750,000
or settle any litigation or other proceedings before a Governmental Entity for
an amount in excess of such amount;

 

  (iii) create, incur or assume any indebtedness for borrowed money, or
guarantee any obligations of any other person, except for, any such indebtedness
not to exceed A$750,000 in the aggregate, any such indebtedness in replacement
of existing indebtedness or any such indebtedness incurred in the ordinary
course of business consistent with past practice;

 

  (iv) make any material adverse changes or modifications to any underwriting or
claims management policies other than in the ordinary course of business
consistent with past practice;

 

  (v) settle or commute any claims made on an insurance contract or reinsurance
contract for, in the case of a settlement, any sums in excess of A$750,000 or,
in the case of a commutation deal, aggregate sums in excess of A$750,000;

 

  (vi) make any material change in accounting or actuarial practices, methods or
principles, except as required by AGAAP or USGAAP;

 

  (vii) make any change in the remuneration or emoluments or benefits of
Officers;

 

  (viii) enter into or agree to enter into any contract, involving obligations
or liabilities in excess of A$750,000 or periods in excess of 6 months other
than in the ordinary course of business consistent with past practice (excluding
contracts with the Vendor Group unless required by this Agreement); and

 

  (ix) commence Legal Proceedings or threaten to commence Legal Proceedings
against any person other than in the ordinary course of business consistent with
past practice;

 

  (g) all authorisations and licences required for or in connection with the
Business are maintained in full force and effect;

 

  (h) the Company Group fully complies with all material laws binding on it or
affecting the Business including Laws in relation to Tax; and

 

  (i) it meets the Company Group liabilities as they fall due including
liabilities under Laws in relation to Tax and make no change to its existing
policy or manner of collection of accounts receivable.

 

 

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12.2 Vendor obligations in respect of Permanent

Prior to the Completion Date, except as expressly disclosed in this Agreement or
the Disclosure Materials or consented to by the Purchaser in writing or as
required by Law or any applicable Governmental Entity, the Vendor will cause
Permanent to comply with this clause 12 as if it were the Company Subsidiary.

 

12.3 Consultation and consent

The Vendor must consult with and keep the Purchaser informed in relation to
material decisions about the Company Group and its management, and must consider
any reasonable suggestions and advice provided by the Purchaser. The Purchaser
must not unreasonably withhold or delay any consent required under this clause
12.

 

12.4 Factors relevant to Vendor’s obligations

In complying with its obligations under clause 12.1 and 12.5, the Vendor is not
required to do, to omit to do, or to allow to be done anything which would, in
the Vendor’s reasonable opinion:

 

  (a) materially disrupt or adversely impact on the Company Group or the
operation of any aspect of the businesses of the Company Group, including
disclosing any trade secrets;

 

  (b) materially breach any obligations (including obligations of
confidentiality) that the Vendor or any member the Company Group owe to any
third party or under any applicable Law; or

 

  (c) materially prejudice the likelihood of Completion occurring.

 

12.5 Access and information

 

  (a) Subject to applicable Laws, prior to Completion upon reasonable notice:

 

  (i) the Vendor must provide to the Purchaser and its Representatives after the
date of execution of this Agreement any information and documents reasonably
requested by the Purchaser primarily relating to the Company, the Company
Subsidiary and their respective businesses, operations, affairs, properties,
books and records that are not readily available at or through the Company or
the Company Subsidiary;

 

  (ii) the Vendor must cause the Company and the Company Subsidiary to permit
the Purchaser and its Representatives after the date of execution of this
Agreement to have reasonable access at reasonable times to the personnel,
properties, books and records and, if consented to by the auditors, the auditors
of the Company and the Company Subsidiary, provided that any such access may not
unreasonably interfere with the conduct of the business of the Vendor or the
Company or the Company Subsidiary;

 

  (iii) the Vendor must use reasonable endeavours to arrange access for the
Purchaser to the external and internal actuaries of the Company and the Company
Subsidiary.

All information provided or obtained pursuant to the foregoing clause 12.5(a)
shall be held by the Purchaser in accordance with and subject to the terms of
the Confidentiality Agreement.

 

 

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  (b) Subject to any applicable Law, from and after Completion upon reasonable
notice, the Purchaser shall provide promptly to the Vendor and its Subsidiaries
and its Subsidiaries’ agents such information and reasonable access at
reasonable times to the personnel, properties, books, records and auditors of
the Company and the Company Subsidiary in each case to the extent reasonably
required by the Vendor for financial reporting and accounting matters,
litigation, indebtedness for borrowed money and regulatory filings and the
preparation and filing of any Tax Returns for any period ending on or before the
Completion Date or any taxable period beginning on or before the Completion
Date; provided that any such access by the Vendor and its Subsidiaries and its
Subsidiaries’ agents may not unreasonably interfere with the conduct of the
business of the Purchaser, the Company or the Company Subsidiary . All
information provided or obtained pursuant to the foregoing clause 12.5(b) shall
be held by the Vendor and its Subsidiaries and its Subsidiaries’ agents on a
confidential basis subject to any disclosure required by applicable law.

 

  (c) The Purchaser shall retain, and cause the Company and the Company
Subsidiary to retain, all books and records for any period prior to the
Completion for a period at least in accordance with the Corporations Act.

 

  (d) Without limiting clause 3.1(c), prior to Completion, the parties shall use
their reasonable endeavours by working together, diligently in good faith and
acting reasonably to obtain confirmation under contracts to which the
Consolidated Companies are party that the counterparty does not intend to
significantly reduce the amount of LMI business which it provides to
Consolidated Companies under a Material Contract or require the Consolidated
Companies to participate in any tender process in order to obtain LMI business
from the counterparty;

 

  (e) Prior to Completion, the Vendor shall use it reasonable endeavours to
procure that the principal contract for the key customer and supplier
arrangements in relation to the Business are introduced to the Purchaser for the
purpose of facilitating an orderly handover of the Business.

 

13. Inter-company Agreements

 

  (a) Effective as of the Completion Date, all Inter-company Agreements will be
terminated to the extent that they relate to arrangements in relation to the
Consolidated Companies.

 

  (b) The Vendor will procure that all net Liabilities under the Inter-company
Agreements, regardless of whether such net Liabilities arise before or after
Completion, will be paid to the relevant party at or prior to Completion and
will provide the Purchaser with a list of the Liabilities and on Completion will
provide a list of the net amounts paid.

 

  (c) The Purchaser agrees that from the date of this Agreement it must
cooperate with the Vendor to effect such terminations, including, without
limitation, taking all reasonable actions to implement capital support,
reinsurance or other arrangements in order to permit such terminations effective
as of the Completion Date.

 

 

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  (d) From and after the Completion Date, the Purchaser shall indemnify and save
and hold harmless the Vendor, its Related Bodies Corporate and its and their
respective Officers from and against any Loss or Liability suffered by any such
person under or as a result of any call on the Capital Support Agreements as
they relate to policies written prior to the Completion Date.

 

  (e) The Consolidated Companies have only provided:

 

  (i) residential lenders mortgage insurance and related activities permitted by
APRA under its licence conditions, reinsurance to financial institutions and
their captive insurers and residential mortgage backed securities programs; and

 

  (ii) management services to customers’ captive lenders mortgage insurance
companies,

in each case solely in relation to Australian and New Zealand mortgage risks.
The Vendor shall indemnify and save and hold harmless the Purchaser, its Related
Bodies Corporate and its and their respective Officers from and against any Loss
or Liability suffered by any such person arising from or in relation to any of
the Consolidated Companies carrying on any business prior to Completion other
than as described above.

 

  (f) The Vendor and the Purchaser will work together, diligently in good faith
and acting reasonably (elevating any disagreement through to the parties’
respective chief executive officers), to finalise contracts terminating the
Inter-Company Agreements by Completion.

 

14. Transaction Bonuses and COC Payments

 

  (a) Effective as of Completion, the Vendor shall reimburse the Purchaser:

 

  (i) for any bonuses paid to Employees of the Company or the Company Subsidiary
by those entities as a result of the proposed transaction set out in this
Agreement and which are paid pursuant to arrangements confirmed or approved by
the Vendor prior to the Completion Date; and

 

  (ii) for any payments made under the COC Plan by the Company or the Company
Subsidiary to any person specified in the notice referred to in paragraph
(b) below as a result of that person’s employment with any of those companies
being terminated on or after Completion, subject to the COC Plan not being
amended on or after the Completion Date to improve the terms of the COC Plan for
such person without the written consent of the Vendor. The Purchaser
acknowledges that payments under the COC Plan are in lieu of any amount that the
Company or the Company Subsidiary would otherwise have had to pay in relation to
the termination of employment under an industrial instrument (including without
limitation an award), legislation, contract, policy or otherwise (other than
untaken statutory annual leave and long service leave) and accordingly, any
reimbursement by the Vendor for this payment will be reduced by such amount.

Such reimbursements will take into account any tax benefit available to the
Purchaser as a result of the Company or the Company Subsidiary making these
payments. The Vendor will pay the reimbursement to the Purchaser within 20
Business Days of receiving written notice by the Purchaser of payment having
been made by the Company or Company Subsidiary (as the case may be).

 

 

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  (b) All the Employees to whom the arrangements referred to in paragraph
(a) above apply have been notified in writing by the Vendor to the Purchaser.
Permanent has no obligation to make payments to its employees under such
arrangements.

 

  (c) For the purposes of this clause, “COC Plan” means the arrangement approved
by the Vendor as the sole shareholder of the Company by way of written
resolution dated 30 July 2008 under which a minimum termination payment is made
in the event of a termination of employment in certain circumstances within 12
months of a change of control as described in Annexure A to the explanatory
memorandum to that resolution.

 

15. Non-competition

 

  (a) The Vendor must not, and must cause its Related Bodies Corporate (other
than the Company or the Company Subsidiary or Permanent) not to, for a period of
3 years after the Completion Date, directly or indirectly in Australia or New
Zealand through any person;

 

  (i) compete with the Business of any of the Company Subsidiary or Permanent,
including insuring any form of mortgage insurance policies, reinsuring any
fronting arrangement that provides mortgage insurance policies or own, acquire,
manage, operate, control or participate in the ownership, management, operation
or control of any person which engages in the business of writing any form of
mortgage insurance policies;

 

  (ii) approach, canvass or contact any person with a view to enticing away from
the Company Subsidiary or Permanent a client of the Business with whom the
Company Subsidiary or Permanent had dealt at any time in the 12 month period
ending on the Completion Date or soliciting or procuring from such a client
transactions which otherwise would be or would be likely to be provided to the
Company Subsidiary or Permanent in connection with the conduct of the Business;

 

  (iii) approach, canvass or contact any employee or contractor in the Business
with a view to inducing that person to leave his or her employment or contract;
or

 

  (iv) approach, canvass or contact any intermediary or supplier with a view to
inducing that person to either cease or reduce its relationships with the
Company Subsidiary or Permanent.

 

  (b) Notwithstanding paragraph (a):

 

  (i) the Vendor and its Related Bodies Corporate may, without violating clause
15(a) own an investment in shares amounting to not more than 5% of the issued
capital of a corporation which engages in a business of writing mortgage
insurance policies, if such shares are securities traded on an established
securities exchange; and

 

  (ii) the restrictions contained in clause 15(a) shall not apply following any
change of control transaction in which:

 

 

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  (A) the Vendor or any of its Related Bodies Corporate owning all or
substantially all of the combined assets of the Vendor and its Related Bodies
Corporate is acquired, directly or indirectly, by a Third-Party US MI, or

 

  (B) the Vendor or any of its Related Bodies Corporate owning all or
substantially all of the combined assets of the Vendor and its Related Bodies
Corporate is merged or otherwise combined with a Third-Party US MI, unless the
primary effect of such merger is to circumvent clause 15(a).

 

  (c) Each of the obligations set out in this clause 15 is severable and
independent so that, without limiting the operation of the Restraint of Trade
Act 1976, if:

 

  (i) any of the restrictions contained in this clause are judged to be
unenforceable by a court because they go beyond what is reasonable to protect
the Business; and

 

  (ii) those restrictions would be judged reasonable by that court if the extent
of the restrictions (including the time periods or geographical areas) were
reduced,

then those restrictions will be reduced to the minimum extent required by that
court to make them enforceable.

 

  (d) The undertakings in this clause 15 apply to activities within:

 

  (i) Australia or New Zealand; or

 

  (ii) Queensland, New South Wales, Victoria, South Australia, Western
Australia, Tasmania, Australian Capital Territory and the Northern Territory,

and to time periods of 3, 2 and 1 year respectively after the Completion Date.

 

  (e) The Vendor acknowledges that:

 

  (i) all the prohibitions and restrictions in this clause are reasonable in the
circumstances and necessary to protect the Business;

 

  (ii) any failure to comply would diminish the value of the Business;

 

  (iii) damages may not be an adequate remedy if a person breaches this clause;

 

  (iv) the Purchaser may apply for injunctive relief if:

 

  (A) a person breaches or threatens to breach this clause; or

 

  (B) it believes a person referred to in clause is likely to breach this
clause; and

 

  (v) it has received legal advice on this clause.

 

  (f) For the purposes of this clause, Third-Party US MI has the meaning given
in Schedule 7 of the Disclosure Letter.

 

 

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16. Vendor Warranties

 

16.1 Warranties regarding the Vendor and the Company

 

  (a) The Vendor hereby represents and warrants to the Purchaser that each of
the statements made in Schedule 8 is correct as at the date that the Warranty is
given. The Vendor acknowledges that the Purchaser has entered into this
Agreement upon reliance on the Vendor’s Warranties.

 

  (b) The parties acknowledge that, as the Purchaser is a wholly-owned
subsidiary of the Note Issuer, where the Purchaser makes a Claim in relation to
a breach of a Vendor’s Warranty, that Claim may be satisfied by the Note Issuer
recovering the amount of that Claim by way of the adjustment to the Note in
accordance with clause 16.16.

 

16.2 Other Warranties excluded

Except as expressly set out in this Agreement, all terms, conditions, warranties
and statements, (whether express, implied, written, oral, collateral, statutory
or otherwise) are excluded to the maximum extent permitted by Law and, to the
extent they cannot be excluded, the Vendor disclaims all Liability in relation
to them to the maximum extent permitted by Law.

 

16.3 When Warranties given

Each of the Warranties given under clause 16.1:

 

  (a) is given as at the date of this Agreement and as at the time immediately
before Completion; and

 

  (b) if marked with a double asterisk in parentheses (“(**)”) is also made by
the Vendor in relation to Permanent only on the basis of the knowledge, belief
or awareness of the persons, specified in Schedule 8 of the Disclosure Letter,
their having made reasonable enquiries.

 

16.4 Knowledge, belief or awareness as to Warranties

 

  (a) If a Warranty in Schedule 8 is marked with a hash mark (“#”), the Warranty
is made by the Vendor only on the basis of its knowledge, belief or awareness.
For the purposes of this Agreement, the Vendor’s knowledge, belief or awareness
is limited to such knowledge, belief or awareness of the persons, specified in
Schedule 9 of the Disclosure Letter, having made reasonable enquiries.

 

  (b) The knowledge, belief or awareness of any person other than the persons
specified in Schedule 9 of the Disclosure Letter will not be imputed to the
Vendor.

 

  (c) Without limiting clause 18, none of the persons specified in Schedules 8,
9 and 10 of the Disclosure Letter will bear any personal liability in respect of
the Warranties or otherwise under this Agreement.

 

 

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16.5 Disclosures

The Purchaser cannot Claim that the Vendor is in breach of any Warranty in
respect of any fact, matter or circumstance:

 

  (a) provided for in this Agreement;

 

  (b) fairly disclosed in the Disclosure Material;

 

  (c) relating to any Liability in respect of which there is an accrual,
allowance, provision or reserve for that Liability specifically, or for
Liabilities generally of that type or nature, in the Unaudited Financial
Statements (to the extent of such existing accrual, allowance, provision or
reserve);

 

  (d) within the knowledge, belief or awareness of the Purchaser. For the
purposes of this Agreement, the Purchaser’s knowledge, belief or awareness is
limited to such knowledge, belief or awareness of the persons, specified in
Schedule 10 of the Disclosure Letter, their having made reasonable enquiries in
respect of the Disclosure Materials; or

 

  (e) as a result of any change in Law after Completion.

 

16.6 Separate Warranty

Each of the Warranties in Schedule 8 is to be treated as a separate
representation and warranty. The interpretation of any statement made may not be
restricted by reference to or inference from any other statement.

 

16.7 Purchaser’s acknowledgement

Without limiting the generality of clauses 16.3 and 16.10, the Purchaser
acknowledges that:

 

  (a) the tender sale process leading to the execution of this Agreement was
conducted on the basis that the participants, including the Purchaser, were
required to rely on their own enquiries and investigations during that process,
and the Purchaser has had the opportunity to make and has made such enquiries
and investigations in relation to all matters material to it as it requires;

 

  (b) neither the Vendor nor any of its Representatives has made or makes any
representation or warranty as to the accuracy or completeness of any disclosures
regarding the Consolidated Companies or information except as expressly set out
in this Agreement;

 

  (c) the disclosures regarding the Consolidated Companies may include
projections, forward looking statements or estimates (Forward Looking
Information) and the Purchaser accepts that there is no warranty whatsoever that
any Forward Looking Information will be realised and no obligation to update any
Forward Looking Information;

 

  (d) none of the Warranties nor any other provision of this Agreement shall be
construed as a representation or warranty as to any judgment based on actuarial
principles, practices or analyses by whomsoever made or as to the future
fulfilment of any assumption except as expressly set out in this Agreement;

 

 

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  (e) neither the Vendor nor any of its Representatives makes any representation
or warranty as to the adequacy of the amount of the reserves of the Consolidated
Companies or of any of the Consolidated Companies’ members, except as expressly
set out in this Agreement; and

 

  (f) based on the Disclosure Material and the express terms of this Agreement,
it has formed its own view, with the benefit of its own due diligence and the
advice of its own Advisers, of the extent of:

 

  (i) the contractual insurance or reinsurance rights or commitments of the
Consolidated Companies;

 

  (ii) contingent liabilities relating to insurance liabilities; and

 

  (iii) claims under policies of insurance issued or assumed before Completion.

 

16.8 Liabilities indemnity

Subject to this clause 16, the Vendor must indemnify the Purchaser against all
Loss which is incurred by the Purchaser as a result of a breach of any of the
Warranties contained in this Agreement.

 

16.9 Conditions of payment and Claims for breach

Despite any other provision of this Agreement, each of the following applies in
respect of this Agreement.

 

  (a) (Notice of Claims)

 

  (i) The Vendor is not liable to make any payment (whether by way of damages or
otherwise) for breach of any Warranty unless a Claim is made in writing by the
Purchaser against the Vendor (setting out the known details such as details of
the fact, circumstance or matter giving rise to the breach, the nature of the
breach and the Purchaser’s calculation of the Loss suffered) and, in any event,
on or before:

 

  (A) 1 April 2010; or

 

  (B) in the case of a Claim in connection with a Tax Warranty, on or before the
date that is six years after the Completion Date.

The Purchaser will make a written Claim for a breach of Warranty as soon as
reasonably practicable after the Purchaser becomes aware of the fact,
circumstance or matter on which the Claim is based.

 

  (ii) The Purchaser must also, on an on-going basis, keep the Vendor informed
of all material developments.

 

  (b) (Maximum Liability) The maximum aggregate amount that the Purchaser may
recover from the Vendor for a breach of Warranty (whether by way of damages or
otherwise) must never exceed US$160,000,000, except in the case of the
Warranties in items 3 to 22 (excluding 14) and items 97 to 101 of Schedule 8
(the Title Warranties) in which case there is no limit on the maximum aggregate
amount that the Purchaser may recover from the Vendor.

 

 

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  (c) (Thresholds) The Vendor is not liable to make any payment (whether by way
of damages or otherwise) for any breach of any Warranty if the amount finally
adjudicated or agreed against the Vendor in respect of a single breach or a
series of breaches relating to the same or substantially similar facts, matters
or circumstances is less than US$500,000 and:

 

  (i) in respect of any breaches of Tax Warranties, until the total of all
amounts finally adjudicated or agreed against the Vendor in respect of breaches
of Tax Warranties exceeds US$2,500,000; and

 

  (ii) in respect of any breaches of Warranties (other than Tax Warranties),
until the total of all amounts finally adjudicated or agreed against the Vendor
in respect of breaches of such Warranties exceeds US$8,500,000,

 

  (iii) in either of which event the Purchaser may claim the whole amount.

 

  (d) (Actions of the Purchaser) The Vendor’s Liability in respect of any breach
of any Warranty will be reduced or extinguished (as the case may be) to the
extent that the breach has arisen as a result of any act or omission after
Completion by or on behalf of the Purchaser Group.

 

  (e) (Actions of the Vendor) The Vendor’s Liability in respect of any breach of
any Warranty will be reduced or extinguished (as the case may be) to the extent
that the breach has arisen as a result of any act or omission by or on behalf of
the Vendor where the Purchaser has expressly requested or consented in writing
to that act or omission under clause 12.

 

  (f) (Credit) If after the Vendor has made any payment to the Purchaser for any
breach of any Warranty, a member of the Purchaser Group receives any benefit or
credit by reason of matters to which the breach relates then the Purchaser must
immediately repay to the Vendor a sum corresponding to the amount of the payment
or (if less) the amount of the benefit or credit to the extent that such amount
would represent a gain to the Purchaser in excess of the Loss suffered as a
result of the breach of the Warranty.

 

  (g) (No multiple Claims) The Vendor is not liable to make any payment (whether
by way of payment of damages or otherwise), for any breach of any Warranty to
the extent that a Purchaser Group Member recovers, or is compensated for
Liability arising out of that breach of Warranty, under the Loss Development
Cover or pursuant to an agreement entered into pursuant to this Agreement. This
clause does not prevent the Purchaser Group Member entitled to make a Claim
under an agreement entered into pursuant to this Agreement from commencing that
Claim. However, if for any reason more than one amount is paid in respect of the
same Liability, the Purchaser must ensure that the additional amount is
immediately repaid to the Vendor.

 

  (h) (General limitations) The Vendor is not liable to make any payment
(whether by way of payment of damages or otherwise), for any breach of any
Warranty to the extent that any Liability:

 

  (i) (contingent liability) is contingent, prospective, not ascertained or
ascertainable, unless and until such liability becomes an actual liability and
is due and payable;

 

 

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  (ii) (breach of Law or contract) could only have been avoided by the Vendor
breaching its obligations at Law or under this Agreement or an agreement entered
into pursuant to this Agreement;

 

  (iii) (change in law or interpretation) arises from:

 

  (A) any legislation not in force at the Completion Date including legislation
which takes effect retrospectively;

 

  (B) a change in the judicial interpretation of the Law in any jurisdiction
after the Completion Date; or

 

  (C) a change in the administrative practice of, or interpretation of the Law
by, any Governmental Entity after the Completion Date including any change which
takes effect retrospectively.

 

  (iv) (change in accounting policy) would not have arisen but for a change
after Completion in any accounting policy or practice of the Company or the
Company Subsidiary that applied before Completion unless the change is necessary
to ensure that those accounting policies or practices comply with AGAAP as at
the date of Completion in relation to a business of the type carried on by the
Company or the Company Subsidiary;

 

  (v) (change of Business) arises out of the cessation or alteration of the
Business after Completion;

 

  (vi) (remediable loss) is remediable, provided it is remedied to the
satisfaction of the Purchaser, acting reasonably, within 30 Business Days after
the Vendor receives written notice of the Claim in accordance with
clause 16.9(a); or

 

  (vii) (failure to mitigate) arises as a consequence of the Purchaser Group
failing to take reasonable steps to mitigate the relevant Loss, the cost of
which steps will be indemnified by the Vendor.

 

16.10 Acknowledgments

The Purchaser acknowledges and agrees that:

 

  (a) except as expressly set out in this Agreement, neither the Vendor, the
Vendor's Representatives nor any other person acting on behalf of or associated
with the Vendor has made any representation, given any advice or given any
warranty or undertaking, promise or forecast of any kind in relation to the
Shares, the Consolidated Companies, the Disclosure Material or this Agreement;

 

  (b) without limiting paragraph (a), no representation, no advice, no warranty,
no undertaking, no promise and no forecast is given in relation to:

 

  (i) any economic, fiscal or other interpretations or evaluations by the Vendor
or any person acting on behalf of or associated with the Vendor or any other
person;

 

  (ii) future matters, including future or forecast costs, prices, revenues or
profits;

 

  (iii) the principles to be applied by Rating Agencies, the ACCC or APRA or
their successor(s) or any other Governmental Entities with respect to the
regulation or rating of the lenders mortgage insurance industry and, in
particular, matters affecting capital requirements, revenue, prices and charges
and service levels;

 

 

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  (iv) the regulation of the lenders mortgage insurance industry (including any
act or omission by the ACCC, APRA or any other Governmental Entity) or the
relationship of other industry regulation to the lenders mortgage insurance
industry; or

 

  (v) the result of any reviews by the ACCC, APRA or any other Governmental
Entity or any policies or procedures which they adopt.

 

  (c) without limiting paragraphs (a) or (b), and except for the statements made
in this Agreement, no statement or representation:

 

  (i) has induced or influenced the Purchaser to enter into this Agreement or
agree to any or all of its terms;

 

  (ii) has been relied on in any way as being accurate by the Purchaser;

 

  (iii) has been warranted to the Purchaser as being true; or

 

  (iv) has been taken into account by the Purchaser as being important to the
Purchaser’s decision to enter into this Agreement or agree to any or all of its
terms; and

 

  (d) it has competently and diligently carried out reasonable investigations
and has examined and acquainted itself concerning:

 

  (i) the contents of the Disclosure Material;

 

  (ii) all written information which has been fairly disclosed by the Vendor;
and

 

  (iii) all amounts payable by the parties under this Agreement.

 

16.11 Dealing with Warranty breach after Completion and Third Party Claims

 

  (a) If the Purchaser becomes aware after Completion of any fact, circumstance
or matter which constitutes or would (whether alone or with any other fact,
circumstance or matter) constitute a breach of any Warranty, including (without
limitation) a Claim against a member of the Purchaser Group which, if satisfied,
would result in a breach of any Warranty, the Purchaser must do each of the
following:

 

  (i) promptly give the Vendor details of the fact, circumstance or matter known
to the Purchaser giving rise to the breach, the nature of the breach and the
Purchaser’s calculation of the Loss suffered and any further related information
of which the Purchaser becomes aware;

 

  (ii) not make, and ensure each Purchaser Group Member does not make, any
admission of liability, agreement or compromise with any person in relation to
the fact, circumstance or matter without first consulting with and obtaining the
approval of the Vendor (which will not be unreasonably withheld or delayed);

 

  (iii) give, and ensure that each Purchaser Group Member gives, the Vendor and
its Advisers reasonable access to:

 

  (A) the personnel and premises of the Purchaser Group; and

 

 

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  (B) relevant chattels, accounts, documents and records within the possession,
custody or power of the Purchaser Group,

to enable the Vendor and its Advisers to examine the personnel, premises,
chattels, accounts, documents and records and to take copies or photographs of
them at the Vendor’s expense on a confidential basis; and

 

  (iv) subject to paragraph (b) and (c), at the Vendor's expense, take, and
ensure each Purchaser Group Member takes, all action in good faith and with due
diligence that the Vendor (acting reasonably, having regard to maintaining the
good reputation of the Purchaser and in consultation with the Purchaser) directs
to avoid, remedy or mitigate the breach, including legal proceedings and
disputing, defending, appealing or compromising the Claim and any adjudication
of it.

 

  (b) If any Third-Party Claim is brought against any Purchaser Group Member in
respect of which any Purchaser Group Member seeks or may seek to bring any Claim
against the Vendor or any of its Related Bodies Corporate:

 

  (i) The Vendor at its expense will be entitled to participate in the defence
against the Third-Party Claim with counsel selected by the Vendor and reasonably
satisfactory to the Purchaser.

 

  (ii) If the Vendor elects to assume the defence of a Third-Party Claim, no
Vendor Group Member will be liable to any Purchaser Group Member for legal
expenses subsequently incurred by any Purchaser Group Member in connection with
the defence of the Third-Party Claim, unless the Third-Party Claim involves
potential conflicts of interest, in which case the Purchaser must promptly
advise the Vendor of the cause of such conflicts of interest before any
Purchaser Group Member incurs any such subsequent legal expenses.

 

  (iii) If the Vendor assumes the defence of a Third-Party Claim, the Purchaser
Group Member(s) against which the Third-Party Claim was brought will have the
right to participate in such defence and to employ counsel, at its or their own
expense, separate from the counsel employed by the Vendor, it being understood
that the Vendor will control such defence, acting reasonably, including having
regard to maintaining the good reputation of the Purchaser, and in consultation
with the Purchaser.

 

  (iv) If the Vendor chooses to defend any Third-Party Claim, all the parties to
this Agreement agree to cooperate in the defence and such cooperation will
include the retention and (upon the Vendor's request) the provision to the
Vendor of records and information that are reasonably relevant to such
Third-Party Claim on a confidential basis, and use reasonable efforts to make
Employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.

 

  (v) Whether or not the Vendor shall have assumed the defence of a Third-Party
Claim, in any such Claim, the Purchaser shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim without
the Vendor's prior written consent, after reasonable consultation (which consent
shall not be unreasonably withheld or delayed).

 

 

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  (vi) The Vendor may pay, settle or compromise a Third-Party Claim with the
written consent of any Purchaser Group Member, so long as such settlement:

 

  (A) includes an unconditional release of the Purchaser Group Member from all
liability in respect of such Third-Party Claim;

 

  (B) does not subject the Purchaser Group Member to any injunctive relief or
other equitable remedy;

 

  (C) does not include a statement or admission of fault, culpability or failure
to act by or on behalf of any Purchaser Group Member; and

 

  (D) does not unreasonably interfere with the Business.

 

  (c) For the avoidance of any doubt, any Claim relating to any Tax or Duty will
be governed solely by clause 16.18.

 

  (d) The Vendor must indemnify the Purchaser Group against its reasonable
out-of-pocket expenses incurred in providing assistance to the Vendor under this
clause 16.11. The Purchaser acts as agent for the benefit of this indemnity
relating to the other Purchaser Group Members and is entitled to enforce this
indemnity on their behalf.

 

16.12 Proceedings in respect of a Claim

Unless the Vendor otherwise agrees, any Claim by the Purchaser against the
Vendor for any breach of any Warranty will be taken to be waived or withdrawn
and will be barred and unenforceable (if such Claim has not been previously
satisfied, settled or withdrawn) unless legal proceedings in respect of the
Claim have been issued and served on the Vendor within 18 months of the service
of the notice of such Claim on the Vendor and for this purpose legal proceedings
will not be deemed to have been commenced unless they have been properly issued
and validly served upon the Vendor.

 

16.13 Taxation offset

In calculating the Liability of the Vendor for any breach of any Warranty ,
account must be taken of the amount by which any Tax or Duty for which the
Purchaser, the Company or the Company Subsidiary or any of them is reduced or
extinguished as a result of the matter giving rise to such Liability.

 

16.14 Restructure or disposal of the Business

The Vendor is not liable to the Purchaser (or any person deriving title from the
Purchaser) for any breach of Warranty:

 

  (a) if the Company, the Company Subsidiary or Permanent in respect of which
the Claim arises has ceased to be a subsidiary of the Purchaser or its Related
Bodies Corporate;

 

  (b) if a majority of the Business, or the operating assets of the Company, the
Company Subsidiary or Permanent in respect of which the Claim arises, has or
have ceased to be owned and controlled by the Purchaser or its Related Bodies
Corporate; or

 

 

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  (c) to the extent that the breach would not have arisen but for any
restructure of the Company Group after Completion.

 

16.15 Reduction of Purchase Price

Any monetary compensation received by the Purchaser Group as a result of any
breach by the Vendor of any Warranty will be in reduction and refund of the
Purchase Price.

 

16.16 Adjustment to the Note

 

  (a) If any Claim for a breach by the Vendor of any Warranty is agreed by the
Vendor and the Purchaser or finally adjudicated by a competent court and not
appealable and such Claim has not been paid in full by the Vendor by 1 April
2010, then on the following Business Day, the value of the Note (principal and
interest) will be reduced by an amount equal to the amount unpaid in respect of
the Claim and the Claim shall be taken to be paid in full and the Vendor
released from any Liability to the Purchaser or the Note Issuer in respect of
the Claim.

 

  (b) By 1 March 2010, the parties shall meet to discuss in good faith whether
the time period under clause 16.9(a)(i)(B) for Claims in connection with Tax
Warranties may be abridged. If agreement cannot be reached, the Purchaser may
require that the Vendor provide a letter of credit or some other collateral to a
value of up to US$10,000,000 in a form satisfactory to the Vendor and the
Purchaser to secure payment of any Claim for breach of the Vendor's Warranty for
the time period then remaining within which the Purchaser may be entitled to
make a Claim in connection with a Tax Warranty under clause 16.9(a)(i)(B).

 

16.17 Remedies for breach of Warranty

The Purchaser acknowledges that its sole remedy for a breach of a Warranty is
damages.

 

16.18 Control of taxation returns, etc

 

  (a) The Vendor must at its own cost and expense have the sole conduct and
control of:

 

  (i) the preparation and filing of all Income Tax returns of the Company and
the Company Subsidiary for Income Years ending on or before the Effective Date
(pre-Effective Date returns);

 

  (ii) the preparation and filing of all Income Tax returns of the Company and
the Company Subsidiary for Income Years commencing before but ending on or after
the Effective Date (straddle returns), to the extent such straddle returns
relate to income, profits or gains derived, or transactions occurring, before
the Effective Date;

 

  (iii) the preparation and filing of all other Tax or Duty returns of the
Company and the Company Subsidiary to the extent they relate to any act, matter
or transaction occurring before the Effective Date (other relevant returns).

 

  (b)

The Purchaser must procure that the Company Group, to the extent as the Vendor
may reasonably require in each case, furnishes all information, executes all
documents, gives or makes all notices, consents, claims, elections, selections
and declarations, makes available

 

 

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(and permits the Vendor to take copies of at the Vendor's expense) all books and
records of the Company Group, gives reasonable access to all relevant employees
and officers of the Company Group, and otherwise provides all such assistance as
the Vendor may reasonably require in relation to the preparation and filing of
pre-Effective Date returns, straddle returns and other relevant returns, in each
case on a confidential basis.

 

  (c) The Purchaser must procure that the Company Group does not, without the
prior consent of the Vendor (such consent not to be unreasonably withheld or
delayed):

 

  (i) file any pre-Effective Date return, straddle return or other relevant
return with any Taxation Authority;

 

  (ii) amend, or request or permit the amendment of, or make or lodge any
objection or appeal in relation to, any pre-Effective Date return, straddle
return or other relevant return;

 

  (iii) apply to any Taxation Authority for any binding or non-binding opinion,
ruling or other determination in relation to any act, matter or transaction
covered by a pre-Effective Date return, straddle return or other relevant
return, or to any act, matter or transaction occurring before the Effective
Date; or

 

  (iv) furnish to any Taxation Authority any information (in writing or
otherwise) in relation to any pre-Effective Date return, straddle return or
other relevant return, or to any act, matter or transaction occurring before the
Effective Date unless required by Law.

 

  (d) If any Taxation Authority undertakes an Audit of the Company Group, or
issues an Assessment to the Company Group, which relates to any pre-Effective
Date return, straddle return or other relevant return, or to any act, matter or
transaction occurring before the Effective Date (Warranty Items):

 

  (i) the Purchaser must as soon as reasonably practicable give the Vendor
written notice of the Audit or Assessment (together with copies of all documents
received from the Taxation Authority) and provide full written details (to the
extent to which the Purchaser has such details) of the Audit or Assessment to
the extent it relates to Warranty Items;

 

  (ii) the Vendor at its own cost and expense shall have the sole conduct and
control of all action taken by the Company Group in respect of the Audit or
Assessment to the extent it relates to Warranty Items. The Vendor will act
reasonably, having regard to the good reputation of the Purchaser and in
consultation with the Purchaser;

 

  (iii) the Purchaser must procure that the Company Group furnishes all
assistance the Vendor may reasonably require in relation to action taken in
respect of the Audit or Assessment to the extent it relates to Warranty Items;
and

 

  (iv)

the Purchaser must procure that the Vendor is authorised to take such action on
behalf of and in the name of the Company and the Company Subsidiary as the
Vendor may reasonably require, having regard to the good reputation of the
Purchaser and in consultation with the Purchaser in respect of the Audit or

 

 

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Assessment to the extent it relates to Warranty Items, including without
limitation responding (in writing or otherwise) to any audit enquiry from any
Taxation Authority, attending and conducting interviews, meetings, discussions
and negotiations with any Taxation Authority, negotiating and concluding
compromises, agreements and settlements with any Taxation Authority, lodging
requests for rulings, opinions or determinations with any Taxation Authority and
lodging or instituting objections, applications, appeals and other litigation
with any Taxation Authority, tribunal or court.

 

  (e) The Purchaser must procure that the Company and the Company Subsidiary use
to the full extent possible any deduction, rebate, credit, allowance, rollover,
refund or other relief of any kind in respect of Tax or Duty for which there is
a reasonably arguable position to reduce, limit, defer or otherwise mitigate a
Liability to Tax or Duty which otherwise would or may give rise to a breach of a
Tax Warranty. In this clause in relation to Income Tax, relief includes, without
limitation, relief available from use of their current or prior year losses.

 

  (f) The Vendor must indemnify the Purchaser Group against its reasonable
out-of-pocket expenses incurred in providing assistance to the Vendor under this
clause 16.18. The Purchaser acts as agent for the benefit of this indemnity
relating to the other Purchaser Group Members and is entitled to enforce the
indemnity on their behalf.

 

  (g) Nothing in this clause 16.18 will be taken to limit the Purchaser’s or the
Vendor's obligations under other provisions of this Agreement.

 

16.19 Tax relief

The Purchaser must pay to the Vendor an amount equal to any credit, refund,
rebate, reimbursement or other form of relief allowed by or received from a
Taxation Authority in respect of:

 

  (a) any Tax or Duty paid by the Company or the Company Subsidiary before the
Effective Date or provided for in the Unaudited Financial Statements except to
the extent that the credit, refund, rebate, reimbursement or other form of
relief is already provided for (to the extent such provision exists); or

 

  (b) any Tax or Duty paid by the Company or the Company Subsidiary after
Completion to the extent the Purchaser has received an amount under a Tax
Warranty for such Tax or Duty, in which case, account must be taken of the
amount by which the Purchaser was subject to Tax or Duty in respect of the
amount received under a Tax Warranty.

Any amount paid by the Purchaser to the Vendor under this clause 16.19 will be
in addition to and an increase in the Purchase Price.

 

16.20 No Liability where breach

Without limiting the operation of any other provision of this Agreement, the
Vendor’s Liability in respect of any breach of any Warranty will be reduced or
extinguished to the extent the Vendor’s position is prejudiced or compromised by
any breach by the Purchaser of any provision of this Agreement.

 

 

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16.21 Independent limitations

Each qualification and limitation in this clause 16 is to be construed
independently of the others and is not limited by any other qualification or
limitation.

 

16.22 Data room CD-ROM

 

  (a) The Data Room has been electronically frozen with effect from 7pm (AEST)
13 August 2008. The Vendor warrants and undertakes that no documents or other
information have been or will be added to the Data Room after that time and
agrees that no such documents or other information will be treated as fairly
disclosed for the purposes of this Agreement unless the relevant documents or
information have been expressly agreed in writing between the Purchaser and the
Vendor as being Data Room Documentation, as contemplated by paragraph (b) of the
definition of Data Room Documentation.

 

  (b) Within 5 Business Days after the execution of this Agreement, the Vendor
shall deliver to the Purchaser a CD ROM which the Vendor believes in good faith
contains all the information made available to the Purchaser in the Data Room.

 

  (c) Within 15 Business Days after receipt of the CD ROM, the Purchaser shall
confirm in writing to the Vendor whether it believes the CD-ROM contains all the
information made available to the Purchaser in the Data Room or, if not, what
documents should be included or excluded from the CD ROM so that it will contain
all the information made available to the Purchaser in the Data Room. If no
notice is received by the Vendor within this time period, the CD ROM is taken to
be confirmed in writing by the Purchaser and the Vendor to contain all the
information made available to the Purchaser in the Data Room.

 

  (d) The parties shall work together in good faith to ensure that the CD ROM
contains all the information made available to the Purchaser in the Data Room.

 

  (e) Once the CD-ROM is confirmed in writing by the Vendor and the Purchaser to
contain all the information made available to the Purchaser in the Data Room,
the CD ROM shall be taken to be the Data Room CD ROM for the purposes of this
Agreement and a copy of it shall be kept by each of the Purchaser and the
Vendor.

 

  (f) Following 7pm (AEST) 13 August 2008, no documents can be included or
removed from the Data Room without the written consent of all the parties. The
Data Room must be kept open and accessible to the Vendor and Purchaser until the
earlier of the Data Room CD ROM being confirmed in accordance with this clause
and 36 months after the date of this Agreement.

 

17. Vendor Marks

 

  (a) As promptly as practicable and without unreasonable expense but in no
event later than thirteen months after the Completion Date, the Purchaser shall,
subject to the rest of this clause 17, completely and permanently cease and
shall cause the Company and the Company Subsidiary to cease any and all use of
any Vendor Marks.

 

  (b) Purchaser acknowledges that, as between the parties, all Vendor Marks are
owned by and shall remain owned by the Vendor, and the Purchaser, the Company or
the Company Subsidiary shall not obtain any right, title or interest in, or to,
any Vendor Marks other than as specifically granted in this clause 17.

 

 

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  (c) The Purchaser agrees not to, and must cause the Company and the Company
Subsidiary not to, directly or indirectly, attack, contest, question or in any
manner impugn the value, validity and/or enforceability of the Vendor Marks or
the Vendor’s or its Related Bodies Corporate’s rights in and with respect to the
Vendor Marks, including without limitation, in any action in which enforcement
of a provision of this Agreement is sought.

 

  (d) The Purchaser agrees not to, and must cause the Company and the Company
Subsidiary not to, willingly become a party adverse to the Vendor or any of its
Related Bodies Corporate in any Legal Proceeding in which a third party contests
the value, validity and/or enforceability of the Vendor Marks or the Vendor's or
a Related Body Corporate’s rights therein.

 

  (e) Neither the Purchaser nor the Company or the Company Subsidiary shall at
any time adopt, use, reserve, register or attempt to register (or allow others
to do the same) any Trademark confusingly similar to any Vendor Mark.

 

  (f) The Purchaser acknowledges and agrees that neither it nor the Company, the
Company Subsidiary or any of its or their Related Bodies Corporate shall acquire
any goodwill, rights or benefits arising from its or their use of Vendor Marks
in accordance with clause 17 and that all such goodwill, rights and benefits
shall accrue exclusively to the Vendor.

 

  (g) Following the Completion, the Purchaser must not, and must not permit the
Company or Company Subsidiary to, do business as, or in any way represent or
imply that it or the Company or the Company Subsidiary is, or otherwise hold
itself or the Company or Company Subsidiary out as being or affiliated with the
Vendor or any Related Bodies Corporate thereof.

 

  (h) As soon as practicable after the Completion Date and in any event not
later than 180 days thereafter, the Vendor will make all filings with any
office, agency or body necessary to effect the termination of any use of any
Vendor Marks from the businesses of the Company and the Company Subsidiary.

 

  (i) The Vendor acknowledges for the purposes of a claim under a policy
together with other dealings with Governmental Entities, insureds and suppliers,
the Purchaser, the Company and the Company Subsidiary may refer to the Vendor
Marks in the context of their prior involvement in the Business pre Completion.

 

18. Personal Liability

Each party agrees that:

 

  (a) no Officer or any member of its corporate group will bear any Liability to
the other party or any of its Related Bodies Corporate in respect of this
Agreement or the proposed transaction set out in this Agreement, other than for
an act of fraud by that person; and

 

  (b)

no existing or former Officer of any member of its corporate group, and no
Adviser of any member of the group advising in its capacity as such in relation
to the proposed transaction

 

 

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set out in this Agreement, will be liable to the other party or any of its
Related Bodies Corporate (including after Completion any member of the Company
Group) in respect of any act, matter or thing which occurred before, at or after
Completion, other than an act of fraud by that person; and

 

  (c) for the avoidance of doubt, clause 18 includes the Company Group; and

 

  (d) the persons referred to in paragraphs (a), (b) and (c) are entitled to the
benefit of this clause 18 and the Purchaser or the Vendor (as the case may be)
holds such benefit as agent for those persons and is entitled to enforce this
clause 18 on behalf of those persons.

 

19. Note Issuer and Purchaser Warranties

The Note Issuer and the Purchaser each represents and warrants to the Vendor
that, as at the date of this Agreement and the Completion Date, each of the
statements made in Schedule 7 is correct.

 

20. GST

 

20.1 GST to be added to amounts payable

If GST is payable on a Taxable Supply made under, by reference to or in
connection with this Agreement, the party providing the Consideration for that
Taxable Supply must also pay the GST Amount as additional Consideration. This
clause does not apply to the extent that the Consideration for the Taxable
Supply is expressly stated to be GST inclusive.

 

20.2 Liability net of GST

Any reference to the calculation of Consideration or of any indemnity,
reimbursement or similar amount to a cost, expense or other liability incurred
by a party, must exclude the amount of any Input Tax Credit entitlement of that
party in relation to the relevant cost, expense or other liability. A party will
be assumed to have an entitlement to a full Input Tax Credit unless it
demonstrates otherwise prior to the date on which the Consideration must be
provided.

 

20.3 Timing of the payment of the GST Amount

The GST Amount is payable on the earlier of:

 

  (a) the first date on which all or any part of the Consideration for the
Taxable Supply is provided; and

 

  (b) the date five Business Days after the date on which an Invoice is issued
in relation to the Taxable Supply.

 

20.4 Revenue exclusive of GST

Any reference in this Agreement to price, value, sales, revenue or a similar
amount (Revenue), is a reference to that Revenue exclusive of GST.

 

 

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20.5 Cost exclusive of GST

Any reference in this Agreement (other than in the calculation of Consideration)
to cost, expense or other similar amount (Cost), is a reference to that Cost
exclusive of GST.

 

20.6 GST obligations to survive termination

This clause will continue to apply after expiration or termination of this
Agreement.

 

21. Costs and Duty

 

  (a) Except as otherwise specifically provided in this Agreement, each party
must bear its own expenses, costs and fees arising out of or in connection with
the negotiation, preparation and execution of this Agreement (including any fees
paid or payable to its Advisers).

 

  (b) The Purchaser must pay all duty (including fines, penalties and interest)
that may be payable on or in connection with this Agreement, any transaction
evidenced by this Agreement and any instrument or transaction entered into under
this Agreement unless due to delay or other default of the Vendor or its Related
Bodies Corporate.

 

22. Communications

 

22.1 Public and other announcements

 

  (a) The initial public announcements of the transaction contemplated under
this Agreement will be agreed between the parties in writing.

 

  (b) Subject to paragraph (c), each party must consult with the other party
prior to making any other public announcement in connection with the proposed
transaction set out in this Agreement.

 

  (c) Where a party is required by applicable law, the ASX Listing Rules or any
other applicable stock exchange regulation or listing standards to make any
public announcement or make any public disclosure relating to matters the
subject of this Agreement, it may do so only after it has given the other party
as much notice as is reasonably practicable in the context of any deadlines
imposed by Law or a Governmental Entity or such stock exchange and has consulted
with the other party as to the content of that announcement or disclosure.

 

  (d) Except to the extent prohibited by applicable Law, the Purchaser and the
Vendor must consent to any written material communication to employees of the
Company or Company Subsidiary in connection with the proposed transaction set
out in this Agreement. The Purchaser and the Vendor must not unreasonably
withhold or delay any consent required under this clause.

 

22.2 Agreement on Communications

Subject to the following conditions, each party agrees that the other may
discuss the transaction contemplated under this Agreement with applicable Rating
Agencies and Governmental Entities.

 

 

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Except in relation to Communications regulated by clause 22.1 and to the extent
permitted by applicable Law:

 

  (a) Each party will discuss in advance the timing of meetings with such
entities, as well as with relevant financiers, and the information or documents
to be provided to such entities.

 

  (b) Each party will provide the other with the opportunity to be present at
meetings with applicable Rating Agencies and Governmental Entities (or other
material Communications with such entities) in relation to the transaction
contemplated under this Agreement, but notwithstanding the provisions of this
clause 22.2(b), each party acknowledges that the other party will, as reasonably
required, meet with such entities without the other party present to the extent
that the issues involved only affect that party.

 

  (c) Either party will take reasonable steps to ensure the confidentiality of
information provided to any such entities.

 

23. Confidentiality

 

  (a) Other than clause 22.1, nothing in this Agreement affects the terms of the
Confidentiality Agreement except that in the event of inconsistency this
Agreement takes precedence to the extent of the inconsistency.

 

  (b) Prior to Completion, the Vendor must protect the Confidential Information
and must ensure that its Related Bodies Corporate, its Officers and Advisers and
the Officers and Advisers of its Related Bodies Corporate do not use or disclose
the Confidential Information, except for the benefit of the Consolidated
Companies in the ordinary course of business consistent with past practice or as
necessary for the Vendor to perform its obligations or to enforce its rights
under this Agreement or as permitted under this Agreement or as required by law.
The Purchaser acknowledges that the Vendor has entered into confidentiality
agreements with other potential bidders of the Shares and if the Vendor enforces
those agreements to prevent the use or disclosure of Confidential Information by
the other potential bidders, the disclosure by the Vendor of the Confidential
Information to those potential bidders will not constitute a breach of this
clause.

 

  (c) After Completion, the Vendor must protect the Confidential Information and
must ensure that its Related Bodies Corporate, its Officers and Advisers and the
Officers and Advisers of its Related Bodies Corporate do not use or disclose the
Confidential Information without the prior written consent of the Purchaser,
except as necessary to perform the Vendor’s obligations or enforce its rights
under this Agreement or as required by law.

 

  (d) In this clause, “Confidential Information” means the information of each
and all of the Consolidated Companies, including all knowledge of secret
processes, technical know how, techniques, discoveries, ideas, research,
practices, systems, models, trade secrets, special purpose computer programs,
information in the Records and other data subsisting in or relating to the
Business other than information that is already in the public domain or to
enforce the extent it enters the public domain otherwise than through a breach
of confidentiality.”

 

 

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24. Termination

 

24.1 Termination

This Agreement may be terminated at any time prior to the Completion Date as
follows:

 

  (a) by mutual written consent of the Vendor and the Purchaser;

 

  (b) by the Vendor or the Purchaser, by written notice to the other party, if
the Completion has not occurred by the End Date, unless such date is extended by
the mutual written consent of the Vendor and the Purchaser; provided, that no
party may terminate this Agreement pursuant to this clause 24.1(b) if that party
has breached its obligations under this Agreement in a manner that shall have
proximately contributed to the failure of Completion to occur by the End Date;

 

  (c) by either the Vendor or the Purchaser, by written notice to the other
party, if:

 

  (i) a Governmental Order has been issued by a Governmental Entity permanently
restraining, or otherwise prohibiting, Completion, and such Governmental Order
shall have become final and non-appealable; or

 

  (ii) any Law has been enacted by any Governmental Entity which prohibits the
consummation of Completion; or

 

  (d) in accordance with clause 8.7.

 

24.2 Effect of Termination

 

  (a) In the event of the termination of this Agreement pursuant to the
provisions of clause 24.1, this Agreement shall become void and have no effect,
without any Liability to any person, in connection with this Agreement or the
transactions contemplated by it, including any party hereto, or any of its
Officers agents, legal and financial advisors, representatives, stockholders or
Related Bodies Corporate; provided, however, that the agreements contained in
the Confidentiality Agreement, clause 3.5, clause 21, clause 23, and this clause
24.1 shall survive the termination of this Agreement; and provided, further,
that except as otherwise provided herein, no such termination shall relieve any
party to this Agreement of any Liability or damages resulting from any wilful or
intentional breach of this Agreement prior to the time of such termination.

 

  (b) In the event of the termination of this Agreement pursuant to the
provisions of clause 24.1,

 

  (i) the Purchaser shall return to the Vendor all documents and other materials
received from the Vendor, the Company, the Company Subsidiary, their Related
Bodies Corporate or their agents (including all copies of or materials except
board papers or minutes of the Purchaser Group developed from any such documents
or other materials) relating to the proposed transaction set out in this
Agreement, whether obtained before or after the execution of this Agreement; and

 

  (ii) all confidential information received by the Purchaser with respect to
the Company and its Related Bodies Corporate shall be treated in accordance with
the Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.

 

 

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25. Claims in relation to Permanent

Any Claim for a breach of Warranty arising from a fact, matter or circumstance
or undertaking by the Vendor in relation to Permanent (other than the Vendor’s
Warranties in items 102 to 106 of Schedule 8) is limited to 50.08% of the Loss
in relation to such breach.

 

26. Merger

The rights and obligations of the parties, including under clause 8, will not
merge on the completion of any transaction contemplated by this Agreement. They
will survive the execution and delivery of any assignment or other document
entered into for the purpose of implementing any such transaction.

 

27. Further Actions

Each party shall execute and deliver such certificates and other documents and
take such other actions as may reasonably be required pursuant to this Agreement
(including without limitation the actions pursuant to clause 6) or as requested
by the other party in order to carry out the provisions of this Agreement and
consummate and make effective the proposed transaction set out in this
Agreement.

 

28. Entire Agreement

This Agreement (including the Schedules referenced in this Agreement or
delivered under it), the Disclosure Letter and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject
matter and set out the only conduct relied on by the parties and supersede all
earlier conduct and prior agreements and understandings, both written and oral,
between the parties in connection with the subject matter.

 

29. No representation or reliance

 

  (a) Each party acknowledges that neither party (nor any person acting on its
behalf) has made any representation or other inducement to it to enter into this
Agreement, except for representations or inducements expressly set out in this
Agreement, including clause 16 and the Warranties.

 

  (b) Each party acknowledges and confirms that it does not enter into this
Agreement in reliance on any representation or other inducement by or on behalf
of any other party, except for any representation or inducement expressly set
out in this Agreement.

 

30. Assignment

 

  (a) Subject to paragraph (b), neither party may assign, sub-contract, charge,
encumber or otherwise deal with any rights and obligations under this Agreement,
or attempt or purport to do so, without the prior written consent of any other
party.

 

 

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  (b) Any attempt by a party to assign or otherwise deal with its rights under
this Agreement without the consent of any other party shall be void and of no
effect, except that the Purchaser may assign its rights under this Agreement to
any Subsidiary of the Note Issuer, provided that no such assignment shall
relieve the Purchaser of its obligations under this Agreement .

 

  (c) Other than as provided for in this Agreement, this Agreement shall inure
to the benefit of, and be binding on and enforceable against, the successors and
permitted assigns of the respective parties to it. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
person other than the parties and the successors and assigns permitted by this
clause any right, remedy or claim under or by reason of this Agreement except as
expressly stated herein.

 

31. Amendment and Waiver

 

  (a) No amendment, modification or discharge of this Agreement, and no waiver
under this Agreement, shall be valid or binding unless in writing and duly
executed by the party against whom enforcement of the amendment, modification,
discharge or waiver is sought.

 

  (b) Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights
of the party granting such waiver in any other respect or at any other time. The
waiver by any of the parties of a breach of or a default under any of the
provisions of this Agreement or to exercise any right or privilege under it,
shall not be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges under
this Agreement. The rights and remedies provided in this Agreement are
cumulative and none is exclusive of any other, or of any rights or remedies that
any party may otherwise have at law or in equity.

 

  (c) No failure to exercise nor any delay in exercising any right, power or
remedy under this Agreement operates as a waiver.

 

32. Severability of Provisions

Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction is ineffective as to that jurisdiction to the extent of the
prohibition or unenforceability. That does not invalidate the remaining
provisions of this Agreement nor affect the validity or enforceability of that
provision in any other jurisdiction.

 

33. Notices

Any notice, demand, consent or other communication (a Notice) given or made
under this Agreement:

 

  (a) must be in writing and signed by the sender or a person duly authorised by
the sender;

 

 

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  (b) must be addressed to the intended recipient at the address or fax number
below or the address or fax number last notified by the intended recipient to
the sender after the date of this Agreement:

 

(i)    to the Vendor:   

PMI Mortgage Insurance Co.

3003 Oak Road

Walnut Creek, CA 94597

United States of America

Attention: General Counsel

Fax No: +1-925-658-6175

(ii)    to either the Note Issuer or the Purchaser:   

QBE Insurance Group Limited

Level 2, 82 Pitt Street

Sydney NSW 2000

Australia

Attention: Company Secretary

Fax No: +61 2 9231 6104

 

  (c) subject to paragraph (d), is deemed to be received:

 

  (i) if personally delivered, when delivered to the addressee;

 

  (ii) if sent by certified or registered mail, on the earlier of the date of
receipt and the seventh business day after the mailing thereof;

 

  (iii) if sent by air mail or delivery, on the day delivered; or

 

  (iv) if sent by fax, on the day on which such fax was sent, provided that a
copy is also sent by certified or registered mail;

 

  (d) if either delivery or sending occurs on a day which is not a business day
in the place to which the Notice is sent or is later than 4pm at that place, it
will be taken to have been duly given or made at the commencement of business on
the next business day in that place.

 

34. Governing Law and Jurisdiction

 

  (a) This Agreement is governed by the laws of the State of New South Wales.

 

  (b) Each party irrevocably and unconditionally:

 

  (i) submits to the non-exclusive jurisdiction of the courts of New South Wales
in connection with any suit, action or proceeding arising out of or relating to
this Agreement;

 

  (ii) waives, to the fullest extent it may legally and effectively do so, any
defence or objection based on absence of jurisdiction or inconvenient forum; and

 

 

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  (iii) consents to service of process in the manner provided for Notices in
clause 33, provided that nothing in this Agreement will affect the right of any
party to serve process in any other manner permitted by law.

 

  (c) The Vendor appoints Allens Arthur Robinson or their successor in Australia
as its agent for service.

 

35. Counterparts

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

 

 

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Schedule 1

Company

PMI Mortgage Insurance Australia (Holdings) Pty Limited

 

No of shares on issue

  

Class of shares

  

Fully paid?

  

Shares held by

(immediately prior to

Completion)

285,486,406    Ordinary    Yes    PMI Mortgage Insurance Co.

 

 

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Schedule 2

Company Subsidiary

PMI Mortgage Insurance Ltd

 

No of shares on issue

  

Class of shares

  

Fully paid?

  

Shares held by

(immediately prior to

Completion)

327,799,486    Ordinary    Yes    PMI Mortgage Insurance Australia (Holdings)
Pty Limited

 

 

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Schedule 3

Permanent

Permanent LMI Pty. Limited

 

No of shares on issue

  

Class of shares

  

Fully paid?

  

Shares held by

(immediately prior to
Completion)

1,752,800    A    Yes    PMI Mortgage Insurance Ltd 1,747,200    B    Yes   
Heritage Building Society Limited

 

 

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Schedule 4

Form of Note Deed

 

Table of Contents

1.

   Definitions and Interpretation      

1.1    Definitions

     

1.2    Interpretation

  

2.

   Creation of Note   

3.

   Term   

4.

   Purpose   

5.

   Interest      

5.1    Calculation of Interest

     

5.2    Overdue Payments

  

6.

   Payment Obligations      

6.1    Repayment at end of Term

     

6.2    Voluntary prepayment

     

6.3    Method of payment

  

7.

   Adjustments to Principal and Interest   

8.

   Taxation      

8.1    Payments made free and clear

     

8.2    Additional payments

  

9.

   Representations and Warranties   

10.

   Notices   

11.

   Conditions   

12.

   Events of Default   

13.

   Entire Deed   

14.

   Amendment   

15.

   Assignment   

16.

   Set-off   

17.

   Further actions   

18.

   Counterparts   

19.

   Confidentiality   

20.

   Governing Law   

 

 

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Date    Parties   

4.

   QBE Insurance Group Limited of Level 2, 82 Pitt Street, Sydney, NSW, 2000,
Australia (the Note Issuer).

5.

   PMI Mortgage Insurance Co. of 3003 Oak Road, Walnut Creek, CA 94597, United
States (the Noteholder). Recitals   

F

   The Note Issuer, QBE Holdings (AAP) Pty Limited (the Purchaser) and the
Noteholder are parties to a Share Sale Agreement dated [*] 2008, pursuant to
which the Purchaser has agreed to purchase all of the shares in PMI Mortgage
Insurance Australia (Holdings) Pty Limited ABN 98 087 483 958 (the Share Sale
Agreement).

G

   Pursuant to the Share Sale Agreement, the Note Issuer agrees to issue the
Note (as defined below) to the Noteholder in relation to that part of the
purchase price payable by the Purchaser under the Share Sale Agreement, on the
following terms and conditions.

It is agreed as follows.

 

1. Definitions and Interpretation

 

1.1 Definitions

The following definitions apply unless the context requires otherwise:

Business Day means any day other than Saturday, Sunday or any other day on which
banks in the city of New York, USA or Sydney, Australia are required to close.

Governmental Entity means any government or representative of a government or
any governmental, semi-governmental, administrative, fiscal, regulatory or
judicial body, department, commission, authority, agency, instrumentality, board
or tribunal, whether federal, state, territorial or local and whether Australian
or foreign. It includes the Australian Securities and Investments Commission,
the Australian Competition and Consumer Commission, the Australian Prudential
Regulation Authority and the Australian Securities Exchange (and any other
securities exchange).

Insolvency Event in relation to a party, means any of the following:

 

  (a)

a petition is presented, or a meeting is convened for the purpose of considering
a resolution or other steps are taken by any person with a view to the
appointment of an administrator

 

 

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(whether out of court or otherwise) against or for the winding up of the other
party or an administration order or a winding up order is made against or a
provisional liquidator appointed with respect to the other party;

 

  (b) an encumbrancer takes possession of, or a trustee or administrative
receiver or similar officer is appointed in respect of, all or any part of the
business or assets of the other party, or distress or any form of execution is
levied or enforced upon or sued out against any of those assets and is not
discharged within seven days of being levied, enforced or sued out;

 

  (c) the other party is unable to pay its debts as they fall due or the value
of its assets is less than the amount of its liabilities, taking into account
its contingent and prospective liabilities, or it suspends or threatens to
suspend making payments with respect to all or any class of its debts;

 

  (d) the other party proposes or makes any composition or arrangement or
composition with, or any assignment for the benefit of, its creditors;

 

  (e) anything analogous to any of the events described in paragraphs (a) – (d),
inclusive, occurs under the laws of any applicable jurisdiction including
insurance laws; or

 

  (f) the other party ceases to carry on the whole or any material part of its
business and that cessation, in the reasonable opinion of the first party, would
be reasonably likely to affect adversely the other party’s ability to observe
and perform properly and punctually any of its obligations under this Deed.

Interest Period means:

 

  (a) in relation to each such period other than the last, the 6 month period
commencing on the date of this Deed and each 6 month period thereafter;

 

  (b) in relation to the last such period, the period commencing on the first
day of such period and ending on the Repayment Date.

Interest Rate means 3.7875%, being 3 month US LIBOR plus 1% per annum as at
1 July 2008.

Issue Date means the date of this Deed.

Note means the debt obligation of the Note Issuer representing the right of the
Noteholder to receive the Principal under the terms and conditions of, and as
evidenced by, this Deed.

Principal means the amount specified in clause 37, as adjusted in accordance
with clauses 40.1 and 42.

Repayment Date means:

 

  (a) the date elected by the Note Issuer for repayment of the Principal under
clause 41.2; and

 

  (b) the date on which the Principal must be repaid under clause 47; and

 

  (c) the expiry of the Term.

Tax includes any tax, levy, impost, deduction, charge, rate, duty, GST or
withholding which is levied or imposed by the Commonwealth of Australia or any
political subdivision or taxing authority in it, and any related interest,
penalty, charge, fee or other amount.

Term has the meaning given to that term in clause 3.

 

 

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1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The
following rules apply unless the context requires otherwise.

 

  (a) The singular includes the plural and conversely.

 

  (b) A gender includes all genders.

 

  (c) If a word or phrase is defined, its other grammatical forms have a
corresponding meaning.

 

  (d) A reference to a person, corporation, trust, partnership, unincorporated
body or other entity includes any of them.

 

  (e) A reference to a clause or schedule is a reference to a clause of, or a
schedule to, this Deed.

 

  (f) A reference to an agreement or document (including a reference to this
Deed) is to the agreement or document as amended, varied, supplemented, novated
or replaced, except to the extent prohibited by this Deed or that other
agreement or document.

 

  (g) A reference to a party to this Deed or another agreement or document
includes the party’s successors and permitted substitutes and permitted assigns
(and, where applicable, the party’s legal personal representatives).

 

  (h) A reference to legislation or to a provision of legislation includes a
modification or re-enactment of it, a legislative provision substituted for it
and a regulation or statutory instrument issued under it.

 

  (i) A reference to dollars or $ or US$ is to United States currency.

 

  (j) A reference to conduct includes an omission, statement or undertaking,
whether or not in writing.

 

  (k) Mentioning anything after includes, including, for example, or similar
expression does not limit what else might be included.

 

2. Creation of Note

By this Deed, the Note Issuer creates the Note on the date of this Deed in
favour of the Noteholder with an initial principal amount outstanding on the
date of this Deed of US$[*]. The principal outstanding and interest payable
under the Note may be adjusted in accordance with the terms and conditions of
this Deed and the Share Sale Agreement.

 

3. Term

The Note will continue on the following terms during the period until its
redemption in full on 30 September 2011 (the Term), subject to the terms and
conditions of this Deed.

 

4. Purpose

The purpose of the Note is to satisfy the relevant part of the purchase price
payable by the Purchaser under the Share Sale Agreement.

 

 

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5. Interest

 

5.1 Calculation of Interest

 

  (a) The Note Issuer shall pay interest on the Principal at the Interest Rate
calculated in accordance with clause 5.1(b).

 

  (b) Interest shall be calculated on the daily Principal balance outstanding on
the basis of the actual number of days elapsed in each Interest Period and a
year of 360 days (including the first day of the Interest Period but excluding
the last).

 

  (c) Interest which accrues at the end of each Interest Period will be
capitalised, except in relation to the last Interest Period where that Interest
Period is less than six months. The Principal will increase accordingly.

 

5.2 Overdue Payments

Interest on overdue amounts shall accrue from the due date up to but excluding
the date of actual payment, before and (as a separate and independent
obligation) after judgment at the Interest Rate above plus 1% per annum unless
otherwise agreed between the parties. The basis of calculation of interest as
set out in clause 5.1 will also apply to any calculation under this clause.

 

6. Payment Obligations

 

6.1 Repayment at end of Term

Subject to clause 41.2 and clause 47, the Note Issuer must repay the Principal
(including Interest accrued) on the Repayment Date.

 

6.2 Voluntary prepayment

The Note Issuer may only prepay all or some of the Principal with prior written
notice to the Noteholder.

 

6.3 Method of payment

The Note Issuer must make all payments to the account specified in writing by
the Noteholder. Payments must be in cleared funds and free of any set-off or
deduction, except for taxes where required by law or adjustment to Principal and
Interest in accordance with clause 7 of this Deed.

 

7. Adjustments to Principal and Interest

The parties agree that:

 

  (a) to the extent there are losses which exceed the Performance Metric as
defined in the Share Sale Agreement, then the Principal and Interest will be
reduced to the extent and in accordance with the mechanism provided for in
Schedule 6 of the Share Sale Agreement; and

 

  (b) to the extent the Noteholder either agrees or is required to satisfy any
claims for any breach of Warranties under the Share Sale Agreement, then the
Principal and Interest will be reduced to the extent and in accordance with the
mechanism provided for in clauses 16.1(b) and 16.16 of the Share Sale Agreement.

 

 

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8. Taxation

 

8.1 Payments made free and clear

Payments in respect of the Note are subject in all cases to applicable
provisions of fiscal and other laws and regulations. All payments under the Note
must be made free and clear of, and without deduction for, or by reference to,
any present or future taxes of any Governmental Entity of any jurisdiction or
any political subdivision or taxing authority in it unless required by law.

 

8.2 Additional payments

If the Note Issuer is obliged to make a deduction in respect of Tax from any
payment (including the capitalisation of interest under clause 40.1(c)):

 

  (a) it shall promptly pay the amount deducted to the appropriate Governmental
Entity; and

 

  (b) within 30 days of the end of the month in which the deduction is made, it
shall deliver to the Noteholder, for collection, official receipts or other
evidence of payment of that amount.

 

9. Representations and Warranties

Each party makes the following representations and warranties to the other party
as at the date of this Deed as follows:

 

  (a) (Incorporation) It is duly incorporated and validly existing under the
laws of its place of incorporation, with full power and authority to own its
properties and to conduct its business as currently conducted.

 

  (b) (Power of authority) It has the power and authority to execute and
exchange this Deed and perform and observe all its terms. This Deed has been
duly executed by it and is a legal, valid and binding Deed of it enforceable
against it.

 

  (c) (Solvency) No step has been taken in relation to it to wind it up, appoint
a controller or administrator, seize or take possession of any of its assets or
make an arrangement, compromise or composition with any of its creditors. It is
able to pay all its debts as and when they become due and payable.

 

10. Notices

Unless otherwise agreed between the parties, any notice, demand, consent or
other communication (a Notice) given or made under this Deed:

 

  (a) must be in writing and signed by a person duly authorised by the sender;

 

 

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  (b) must either be delivered to the intended recipient by prepaid post (if
posted to an address in another country, by registered airmail) or by hand or
fax to the address or fax number below or the address or fax number last
notified by the intended recipient to the sender:

 

(i)     to Noteholder:

    

3003 Oak Road

Walnut Creek, CA 94597

United States

     Attention: General Counsel      Fax No: +1-925-658-6175

(ii)    to the Note Issuer:

    

Level 2, 82 Pitt Street

Sydney NSW 2000

Australia

     Attention: Company Secretary      Fax No: +61 2 9231 6104

 

  (c) will be taken to be duly given or made:

 

  (i) in the case of delivery in person, when delivered;

 

  (ii) in the case of delivery by post two business days after the date of
posting (if posted to an address in the same country) or seven business days
after the date of posting (if posted to an address in another country); and

 

  (iii) in the case of fax, on receipt by the sender of a transmission control
report from the despatching machine showing the relevant number of pages and the
correct destination fax machine number or name of recipient and indicating that
the transmission has been made without error,

but if the result is that a Notice would be taken to be given or made on a day
which is not a business day in the place to which the Notice is sent or is later
than 4pm (local time) it will be taken to have been duly given or made at the
commencement of business on the next business day in that place.

 

11. Conditions

The Note is being issued on the condition that the liability of the Note Issuer
under this Deed ranks and will rank at least equally and ratably (pari passu) in
point and security with all its other respective unsecured and unsubordinated
liabilities (both actual and contingent) other than liabilities mandatorily
preferred by law.

 

12. Events of Default

The Note may be cancelled at any time by the Noteholder if:

 

  (a) the Note Issuer fails to pay any amount when due under this Deed and that
amount remains unpaid for a period of five Business Days from the date of notice
of that non-payment by the Noteholder to the Note Issuer;

 

 

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  (b) the Note Issuer fails duly to perform any of its other obligations under
this Deed within 20 Business Days of the Noteholder notifying the Note Issuer of
such failure or is otherwise in breach of any representation or warranty which
it has given under this Deed;

 

  (c) the Note Issuer ceases to be a member or comprise members of the QBE
Group; or

 

  (d) an Insolvency Event occurs in respect of the Note Issuer,

whereupon, all monies owing under this Deed shall be deemed to be due and
payable and the Note Issuer shall immediately repay all monies owing to the
Noteholder under the Note.

 

13. Entire Agreement

This Deed and the Share Sale Agreement contain the entire agreement of the
parties with respect to the Note. They set out the only conduct relied on by the
parties and supersede all earlier conduct by the parties with respect to the
Note.

 

14. Amendment

This Deed may be amended only by another Deed executed by all parties.

 

15. Assignment

 

  (a) The Note Issuer may only assign or transfer any of its rights or
obligations under this Deed with the prior written consent of the Noteholder.

 

  (b) The Noteholder may transfer, assign, novate, sub-participate or otherwise
deal with all or any of its rights or obligations under this Deed for any reason
at any time.

 

16. Set-off

 

  (a) If the Note Issuer is in default of its obligations under this Deed, the
Note Issuer authorises the Noteholder to apply any amounts payable by the
Noteholder to the Note Issuer in or towards satisfaction of the amount
(including Principal) payable by the Note Issuer to the Noteholder.

 

  (b) If the circumstances contemplated by clauses 7(a) and 7(b) of this Deed
both occur, at the Note Issuer’s option, it may choose to apply the adjustment
under clause 7 in full or in part, first under clause 7(a) and secondly under
clause 7(b).

 

17. Further actions

Each party shall execute and deliver such certificates and other documents and
take such other actions as may reasonably be required pursuant to this Deed or
as requested by the other party in order to carry out the provisions of this
Deed.

 

 

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18. Counterparts

This Deed may be executed in any number of counterparts. All counterparts taken
together will be taken to constitute one Deed.

 

19. Confidentiality

 

  (a) Subject to paragraph (b) below, each party must keep the terms of this
Deed confidential.

 

  (b) A party may make any disclosures in relation to this Deed as it thinks
necessary to:

 

  (i) its professional advisers, insurers, bankers, financial advisers and
financiers, if those persons undertake to keep information disclosed
confidential;

 

  (ii) comply with any applicable law or requirement of any Governmental Entity;
or

 

  (iii) any of its directors or employees to whom it is necessary to disclose
the information if that person undertakes to keep the information confidential.

 

20. Governing Law

This Deed is governed by the laws of New South Wales, Australia. The parties
submit to the non-exclusive jurisdiction of courts exercising jurisdiction
there.

 

 

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Executed and delivered as a Deed in [*]

NOTE ISSUER

 

Executed as a deed in accordance with

section 127 of the Corporations Act 2001 by

QBE Insurance Group Limited:

     

 

     

 

Director Signature       Director/Secretary Signature

 

     

 

Print Name       Print Name

NOTEHOLDER

 

Executed as a deed by PMI Mortgage Insurance Co.:      

 

     

 

Director Signature       Director/Secretary Signature

 

     

 

Print Name       Print Name

 

 

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Schedule 5

Form of Software Licence Agreement

Table of Contents

 

1.    Definitions and Interpretation      

1.1      Definitions

     

1.2      Interpretation

   2.    Grant of Licence      

2.1      Grant

     

2.2      Conditions

     

2.3      Terms governing copies

     

2.4      Related Bodies Corporate and existing third party obligations

   3.    Term of the Licence    4.    Delivery    5.    Assistance and Support
     

5.1      No maintenance

     

5.2      Support Services

     

5.3      Initial Support

     

5.4      Support costs

  

6.

   Liability      

6.1      Representation as to third party rights

     

6.2      No warranty as to suitability

     

6.3      Exclusion of terms and warranties

     

6.4      Statutory warranties

     

6.5      Indemnity

   7.    Acknowledgements and Warranties      

7.1      Licensee’s acknowledgements

     

7.2      Licensee’s warranties

     

7.3      Licensor’s warranties

     

7.4      Licensor’s Acknowledgements

   8.    Intellectual Property Infringements      

8.1      Notification of infringements

     

8.2      Proceedings to enforce intellectual property rights

   9.    Confidential Information      

9.1      Acknowledgement

     

9.2      Obligation of non-disclosure

     

9.3      Security

  

 

 

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     9.4      Survival and conflict      10.    Termination      
10.1    Termination by the Licensor       10.2    Additional termination actions
      10.3    Termination by the Licensee       10.4    Copies of Software and
Documentation    11.    Subcontracting    12.    GST       12.1    GST to be
added to amounts payable       12.2    Liability net of GST       12.3    GST
obligations to survive termination       12.4    Definitions    13.    Specific
Performance and Injunctive Relief    14.    Further Assurance    15.   
Governing Law    16.    No Waiver    17.    Notices    18.    Stamp Duty and
Costs    19.    Assignment    20.    Severance    21.    No Merger    22.   
Entire Agreement    23.    Amendment    24.    Counterparts    25.    Dispute
Resolution   

 

 

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Date    2008 Parties   

1.

   PMI Mortgage Insurance Co., incorporated in the United States of America of
3003 Oak Road, Walnut Creek, California 94597, United States of America (the
Licensor); and

2.

   PMI Mortgage Insurance Ltd ABN 70 000 511 071, registered in the New South
Wales of Level 2, 82 Pitt Street, Sydney New South Wales 2000, Australia (the
Licensee). Recitals   

H

   The Licensor is the owner or licensed distributor of the Software.

I

   The Licensee has requested the Licensor to license the Licensee to use the
Software.

J

   The Licensor agrees to grant and the Licensee agrees to accept a licence to
use the Software on the terms and conditions set out in this Agreement.

It is agreed as follows.

 

1. Definitions and Interpretation

 

1.1 Definitions

The following definitions apply unless the context requires otherwise.

Affiliates means PMI Mortgage Insurance Australia (Holdings) Pty Limited ABN 98
087 483 958 of Level 2, 82 Pitt Street, Sydney NSW 2000, Australia and Permanent
LMI Pty Limited (ABN 79 076 974 000) of Level 2, 82 Pitt Street, Sydney NSW
2000, Australia.

Commencement Date means the Completion Date (as that term is defined in the
Share Sale Agreement).

Confidential Information in relation to the Licensee means all information in
connection with the business of the Licensee or the Affiliates, including all
information:

 

  (a) conveyed by either the Licensee or the Affiliates to the Licensor as part
of receiving the Support Services;

 

  (b) in relation to the customers of the Licensee or the Affiliates; and

 

  (c) personnel, policies or strategies of the Licensee or the Affiliates.

Confidential Information in relation to the Licensor means all information
contained or embodied in the Software and Documentation and all information
conveyed by the Licensor to the Licensee under the Support Services or
otherwise, including information about:

 

  (d) design, specification and content of the Software; and

 

 

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  (e) personnel, policies or strategies of the Licensor.

Documentation means all available reference manuals, user instructions,
technical literature and all other related materials supplied to the Licensee in
any format by the Licensor for aiding the installation, use and application of
the Software, including updates to the Documentation up to and including the
Commencement Date.

Information Memorandum means the Confidential Information Memorandum in relation
to, amongst other things, the Licensor, dated 9 May 2008 (including any
supplement to it, or replacement of it).

Licence means the licence granted to the Licensee by the Licensor under
clause 2.

Model Code means all available code and explanatory documents relating to the
methodology used to develop the model forming the basis of the Software.

Related Bodies Corporate has the meaning given in section 50 of the Corporations
Act 2001 (Cth) and without limitation includes QBE Management Services Pty Ltd
(ABN 92 004 800 131) of 82 Pitt Street, Sydney, New South Wales 2000, Australia.

Share Sale Agreement means the agreement entitled “Share Sale Agreement” dated
             2008 between the Licensor, QBE Holdings (AAP) Pty Limited and QBE
Insurance Group Limited.

Software means all of the source and object code of the software known as
“pmiAURA,” including code written in SAS and Java, provided to the Licensee by
the Licensor in accordance with this Agreement, which:

 

  (f) is used in the Licensee’s and Affiliates’ business as at the Commencement
Date; and

 

  (g) the features of which are summarised on page 39 of the Information
Memorandum.

Statistical Validation Process means all available explanatory documents
(including descriptions and examples of code used) relating to the methodology
by which the model forming the basis of the Software is re-validated from time
to time.

Sub-licensee means ARES Capital Management Pty Limited.

Support Services means making available one appropriately qualified
representative of the Licensor with requisite knowledge of the Software for up
to 10 hours per month for consultation at reasonable times bearing in mind the
time difference between California and New South Wales to assist in the
correction of errors or bugs in the Software. For the avoidance of doubt, the
Support Services do not include:

 

  (h) conducting statistical validation or making modifications to the Software
on behalf of the Licensee;

 

  (i) any of the services described in clause 5.1.

Support Term means 12 months from the Commencement Date.

Territories mean Australia and New Zealand.

 

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The
following rules of interpretation apply unless the context requires otherwise.

 

 

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  (a) The singular includes the plural and conversely.

 

  (b) A gender includes all genders.

 

  (c) Where a word or phrase is defined, its other grammatical forms have a
corresponding meaning.

 

  (d) A reference to a person includes a body corporate, an unincorporated body
or other entity and conversely.

 

  (e) A reference to a clause is to a clause of this Agreement.

 

  (f) A reference to any party to this Agreement or any other agreement or
document includes the party’s successors and permitted assigns.

 

  (g) A reference to any agreement or document is to that agreement or document
as amended, novated, supplemented, varied or replaced from time to time, except
to the extent prohibited by this Agreement.

 

  (h) A reference to any legislation or to any provision of any legislation
includes any modification or re-enactment of it, any legislative provision
substituted for it and all regulations and statutory instruments issued under
it.

 

  (i) A reference to dollars or $ is to Australian currency.

 

  (j) A reference to conduct includes any omission and any statement or
undertaking, whether or not in writing.

 

2. Grant of Licence

 

2.1 Grant

The Licensor grants to the Licensee and its Related Bodies Corporate and the
Licensee accepts a perpetual, non-exclusive, non-transferable,
non-sub-licensable, royalty-free licence to use the Software and Documentation
in the Territories, subject to the terms and conditions of this Agreement.

 

2.2 Conditions

 

  (a) The Licensee agrees:

 

  (i) to use and modify the Software and Documentation solely for its own
internal purposes in respect of loans and portfolios originating in the
Territories;

 

  (ii) to include on all copies of the Software and Documentation the copyright,
trade mark and proprietary rights notices of the Licensor;

 

  (iii) not in any circumstances to sell, offer for sale, sub-license, dispose
of, pledge, underlet, lend or part with possession of the Software and
Documentation;

 

  (iv) subject to clause 2.4, not to allow any person to use or have the benefit
of the Software and Documentation or any part or parts of the Software and
Documentation;

 

  (v) ensure its Related Bodies Corporate and Affiliates comply with this
Agreement;

 

 

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  (vi) not to use the Software on a time-share, service bureau, or application
service provider basis; and

 

  (vii) if the Software is modified in anyway as contemplated in this clause,
any costs associated with the modification will be borne by the Licensee and the
Licensee will indemnify the Licensor against any claims, actions or demands made
by any third party against the Licensor if the Licensee’s modifications infringe
any third party’s intellectual property rights or otherwise cause the Licensor
to suffer loss or damage.

 

  (b) For the avoidance of doubt, provided the Licensee complies with the terms
of this Agreement, the Licensee may use the Software with other data or programs
from the Affiliates or the Licensee’s Related Bodies Corporate without affecting
its entitlement to the Support Services unless such use prevents the Licensor
from performing the Support Services.

 

2.3 Terms governing copies

All copies of the Software and Documentation made by the Licensee are subject to
the terms of this Agreement.

 

2.4 Related Bodies Corporate and existing third party obligations

 

  (a) Provided that the Affiliates remain as Related Bodies Corporate of the
Licensee, nothing in this Agreement will prevent the Licensee or its other
Related Bodies Corporate from:

 

  (i) using the Software to provide services to the Affiliates; or

 

  (ii) allowing the Affiliates to use the Software on the terms of this
Agreement; or

 

  (iii) allowing the Affiliates to use the Software for the purpose of
discharging and continuing to discharge and/or meet any contractual obligations
owed to the Sub-licensee as at the Commencement Date where it is necessary for
the Affiliates to do so in order to discharge and/or meet such obligations,

and the Licensor accordingly grants the Licensee the Licence for those purposes
subject to the terms and conditions of this Agreement. If any of the Affiliates
ceases to be a Related Body Corporate of the Licensee, the Licensee must
immediately cease using the Software as permitted by this clause 2.4 in
connection with such Affiliate.

 

  (b) Nothing in this Agreement will prevent the Licensee from using the
Software for the purpose of discharging and continuing to discharge and/or meet
any contractual obligations owed to the Sub-licensee as at the Commencement Date
where it is necessary for the Licensee to do so in order to discharge and/or
meet such obligations, and the Licensor accordingly grants the Licensee the
Licence for those purposes subject to the terms and conditions of this
Agreement.

 

3. Term of the Licence

The Licence granted under this Agreement will commence on the Commencement Date
and will continue unless terminated pursuant to the terms of this Agreement.

 

 

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4. Delivery

At the Commencement Date, the Licensor will deliver to the Licensee:

 

  (a) the Software as defined in clause 1.1;

 

  (b) any Documentation relating to the Software;

 

  (c) the Statistical Validation Process; and

 

  (d) the Model Code.

 

5. Assistance and Support

 

5.1 No maintenance

Except as provided in clauses 5.2 and 5.3, the Licensor has no obligation to
support and maintain the Software, and the Licensee acknowledges that the
Licensor will not:

 

  (a) provide upgrades or new releases of the Software, or updates of the
Documentation; and

 

  (b) provide remote software diagnostics, onsite support or helpdesk services.

 

5.2 Support Services

The Licensor will provide the Support Services for the Support Term by telephone
or email unless otherwise agreed by the parties.

 

5.3 Initial Support

Within 6 weeks of the Commencement Date, the Licensor will cause one
appropriately qualified representative of the Licensor with requisite experience
of the Software to train representatives of the Licensee on how to conduct
statistical validations and how to make modifications to the Software on behalf
of the Licensee for a period of no more than 10 business days in Sydney. The
parties will negotiate in good faith with respect to the timing and format of
the training workshops. If the parties cannot agree on the timing and format of
the workshops within 20 business days of a party notifying the other party, the
chief executive officers of each party, or nominated alternatives of similar
authority, must meet and use all reasonable endeavours acting in good faith to
agree the timing and format of such training workshops by joint discussions.

 

5.4 Support costs

The Licensee will pay to the Licensor the reasonable out-of-pocket costs and
expenses of the Licensor’s representative provided pursuant to clause 5.3
including travel, accommodation and daily living expenses.

 

 

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6. Liability

 

6.1 Representation as to third party rights

Subject to clause 6.4, but without limiting clause 6.3, the Licensor represents
that the use of the Software or the provision of the Support Services will not
infringe any third person’s rights, including, without limitation, any third
person’s patent rights or copyright.

 

6.2 No warranty as to suitability

 

  (a) Subject to clauses 6.2(b) and 6.4, but without limiting clause 6.3, the
Licensee acknowledges that the Software is supplied ‘as is’ and that the
Licensor has not made, and that no person acting on behalf of the Licensor has
made, any representation as to the Software’s merchantability or suitability for
any particular purpose or any representation that the Software is error free.

 

  (b) The Licensor warrants that:

 

  (i) the Software is capable of producing scoring output that estimates the
likelihood of a loss resulting from mortgage default with respect to a mortgage
loan; and

 

  (ii) the last statistical validation of the model was performed between
December 2006 and March 2007.

 

6.3 Exclusion of terms and warranties

 

  (a) Subject to clause 6.4, and to the maximum extent permitted by law:

 

  (i) all terms and warranties expressed or implied by any legislation, the
common law, equity, trade, custom or usage or otherwise in relation to the
Licence of the Software, the supply of Support Services under this Agreement or
otherwise in connection with this Agreement, are expressly excluded; and

 

  (ii) the Licensor is not liable in any way for any direct or indirect or
consequential loss or loss of profit or damage (including loss of data or damage
that may reasonably be supposed to have been in the contemplation of the parties
as at the date of this Agreement as a probable result of any act or omission)
arising out of or in connection with the Licence of the Software, the supply of
Support Services under this Agreement or otherwise in connection with this
Agreement (including, without limitation, any claim, or loss or damage suffered,
by a third party or any computer virus stored on any disk supplied to the
Licensee).

 

  (b) If there is a dispute or dissatisfaction between the parties in connection
with the Support Services or the initial support under clause 5.3 (Dispute),
then:

 

  (i) within 5 business days of a party notifying the other party in writing of
the Dispute, a senior representative from each party must meet and use all
reasonable endeavours acting in good faith to resolve the Dispute by joint
discussions; and

 

  (ii) if the Dispute is not settled with 20 business days (or any other period
agreed to in writing between the parties) of notification under paragraph
(i) above, the parties will refer the Dispute to the chief executive officers of
each party, or nominated alternatives of similar authority, for settlement.

 

 

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6.4 Statutory warranties

 

  (a) Subject to paragraph (b), if any legislation implies in this Agreement any
term or warranty and also prohibits provisions in a contract excluding or
modifying the application of or exercise of, or liability under, that term or
warranty, that term or warranty is deemed to be included in this Agreement.

 

  (b) The liability of the Licensor for a breach of a term or warranty implied
by paragraph (a) is limited, at the option of the Licensor, to any one or more
of the following:

 

  (i) if the breach relates to goods:

 

  (A) the replacement of the goods or the supply of equivalent goods;

 

  (B) the repair of such goods;

 

  (C) the payment of the cost of replacing the goods or of acquiring equivalent
goods; or

 

  (D) the payment of the cost of having the goods repaired; and

 

  (ii) if the breach relates to services:

 

  (A) the supplying of the services again; or

 

  (B) the payment of the cost of having the services supplied again.

 

6.5 Indemnity

 

  (a) The Licensee agrees to release, hold harmless and indemnify the Licensor
to the maximum extent permitted by law from and against any liability in
connection with any breach by it of this Agreement. This indemnity does not
apply to the other party’s acts of wilful default or fraud.

 

  (b) The Licensor agrees to release, hold harmless and indemnify the Licensee
to the maximum extent permitted by law from and against any liability in
connection with any claim by a third party that the use of the Software
infringes its intellectual property rights. This indemnity does not apply to the
extent the liability relates to any modification of the Software by or on behalf
of the Licensee.

 

  (c) The indemnities in this clause 6.5 commence on the Commencement Date and
survives the execution and delivery of this Agreement and the completion of the
transactions contemplated by it.

 

7. Acknowledgements and Warranties

 

7.1 Licensee’s acknowledgements

 

  (a) The Licensee acknowledges and agrees that the Software, the Documentation
and the copyright, trade secrets and other intellectual property rights of
whatever nature in the Software and the Documentation are owned or licensed by
the Licensor.

 

 

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  (b) The Licensee acknowledges that the Licensor has no responsibility for the
selection, functioning and installation of the Licensee’s computer hardware.

 

7.2 Licensee’s warranties

 

  (a) The Licensee warrants to the Licensor that it has, prior to the
Commencement Date, satisfied itself as to the suitability of the Software for
the Licensee’s purposes.

 

  (b) The Licensee warrants that it will not engage in any conduct which is
contrary to the provisions of clause 2.2.

 

7.3 Licensor’s warranties

The Licensor warrants to the Licensee that:

 

  (a) the Software, the Documentation and the copyright, trade secrets and other
intellectual property rights of whatever nature in the Software and the
Documentation are owned or licensed by the Licensor;

 

  (b) the Documentation was prepared in good faith in the ordinary course of the
Licensor’s business and the Licensor has made all reasonable enquiries to locate
and compile the Documentation; and

 

  (c) it will exercise due care and skill when providing the Support Services to
the Licensee under this Agreement.

 

7.4 Licensor’s Acknowledgements

The Licensor acknowledges and agrees that:

 

  (a) to the extent that the Licensee modifies or otherwise develops the
Software or the Documentation, the copyright, trade secrets and other
intellectual property rights of whatever nature in such modifications of the
Software and Documentation (Modifications) are owned by the Licensee; and

 

  (b) the Licensor will not be entitled to receive any royalties or other
payment in relation to the development of the Modifications.

 

8. Intellectual Property Infringements

 

8.1 Notification of infringements

The Licensee must promptly notify the Licensor of any use by any third party of
any Software or the Documentation of which the Licensee becomes aware which
would amount to any infringement of any intellectual property, trade secret or
confidential information rights relating to the Software or the Documentation.

 

8.2 Proceedings to enforce intellectual property rights

 

  (a) The Licensor will have the conduct of all proceedings or court actions to
enforce any intellectual property, trade secret or confidential information
rights relating to the Software or the Documentation, and will be entitled to
all damages, compensation or other money awarded.

 

 

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  (b) The Licensor will bear the external costs (including of experts and
lawyers) of any such proceedings or actions, including under clause (c).

 

  (c) The Licensee will co-operate as reasonably requested by with the Licensor
in relation to those proceedings and will, if requested by the Licensor, join as
a party to any such proceedings.

 

  (d) In the defence or settlement of the proceedings or court actions, the
Licensor may obtain for the Licensee the right to continue using the Software,
including to replace or modify the Software so that it becomes non-infringing.

 

9. Confidential Information

 

9.1 Acknowledgement

 

  (a) The Licensee acknowledges that information relating to or embodied in the
Software and the Documentation is confidential to the Licensor and that any
disclosure thereof would cause damage to the Licensor.

 

  (b) The Licensor acknowledges that information relating to the Licensee’s or
the Affiliates’ business is confidential to them and any disclosure thereof
would cause damage to them.

 

9.2 Obligation of non-disclosure

 

  (a) Each party undertakes:

 

  (i) to keep the other party’s Confidential Information secret;

 

  (ii) to prevent third parties from gaining access to the other party’s
Confidential Information subject to clause 9.2(a)(iii); and

 

  (iii) to use and to disclose the other party’s Confidential Information only:

 

  (A) to those of its contractors, employees and agents who need to know the
other party’s Confidential Information for the purposes of its business and for
the performance of this Agreement, and to obtain from each such person to whom
the Confidential Information is disclosed undertakings no less onerous than
those contained in this clause 9; and

 

  (B) as required by law; and

 

  (iv) to take all reasonable steps required by the other party to enforce any
obligation of confidence imposed on it by this Agreement.

 

  (b) Confidential Information does not include any information which:

 

  (i) at the time of the first disclosure to or observation by the a party, was
already in the lawful possession of the other party in written form;

 

  (ii) is in or comes into the public domain otherwise than by disclosure in
breach of this Agreement, provided that any material part of the Confidential
Information which is in the public domain will not mean that the remainder of
the information loses its confidential character; or

 

 

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  (iii) becomes available to the a party from a third person legally entitled to
possess the information and provide it to the party, if the use or disclosure
accords with the right or permission granted to the party by that third person.

 

9.3 Security

A party will take all reasonable steps to ensure that all of the other party’s
Confidential Information in its possession is kept in a safe and secure place
and will be protected at all times from access, misuse, damage or destruction.

 

9.4 Survival and conflict

 

  (a) If there is any inconsistency between the terms of this clause and the
confidentiality provisions in the Share Sale Agreement, the confidentiality
clauses in the Share Sale Agreement shall prevail.

 

  (b) The operation of this clause 9 will survive the termination of this
Agreement.

 

10. Termination

 

10.1 Termination by the Licensor

The Licensor may terminate this Agreement and/or the Support Services at any
time with immediate effect by giving written notice to the Licensee on any of
the following grounds:

 

  (a) (Major breach) The Licensee fails to perform any of its obligations under
clauses 2, 6.5, 7 or 9 of this Agreement. The Licensee acknowledges that
termination and damages may not be an adequate remedy for actual or threatened
breaches of clauses 2, 6.5, 7 or 9 and that the Licensor may apply for an
injunction or other equitable remedy to restrain the Licensee from breaching
clauses 2, 6.5, 7 or 9 of this Agreement.

 

  (b) (Breach) The Licensee breaches any provision of this Agreement other than
clauses 2, 6.5, 7 or 9 and has not remedied that breach within 7 days after
service by the Licensor of written notice of the breach giving notice of the
Licensor’s intention to terminate.

 

  (c) (Insolvency etc) The Licensee being a company:

 

  (i) stops or suspends or threatens to stop or suspend payment of all or a
class of its debts;

 

  (ii) is insolvent within the meaning of section 95A of the Corporations Act;

 

  (iii) must be presumed by a court to be insolvent by reason of an event set
out in section 459C(2) of the Corporations Act;

 

  (iv) fails to comply with a statutory demand (within the meaning of
section 459F(1) of the Corporations Act);

 

  (v) has an administrator appointed or any step preliminary to the appointment
of an administrator is taken;

 

 

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  (vi) has a controller (within the meaning of section 9 of the Corporations
Act) or similar officer appointed to all or any of its property;

 

  (vii) has proceedings commenced, a resolution passed or proposed in a notice
of meeting, an application to, or order of, a court made or other steps taken
against or in respect of it for its winding up, deregistration or dissolution or
for it to enter an arrangement, compromise or composition with or assignment for
the benefit of its creditors, a class of them or any of them.

 

  (d) (Termination of third party arrangements) An agreement the Licensor has
with any third party, where the Licensor is granted a licence to sub-license or
distribute any or all of the Software, is terminated (for whatever reason), in
which case the Licensor will give to the Licensee the maximum notice of
termination practicable in the circumstances, and opportunity to enter into
replacement arrangements with such third party.

 

  (e) (Non-use) The Licensee provides the Licensor with written notice that it
is permanently discontinuing use of the Software.

 

  (f) (Sub-licensees) Any Sub-licensee does or fails to do an act that would be
in breach of this Agreement if done or failed to be done by the Licensee.

 

10.2 Additional termination actions

If the Licensor gives notice to terminate this Agreement under clause 10.1, the
Licensor may, in addition to giving notice to terminate:

 

  (a) repossess any copies of the Software provided under clause 4;

 

  (b) retain any moneys paid; and

 

  (c) be discharged from further obligations under this Agreement.

 

10.3 Termination by the Licensee

The Licensee may terminate this Agreement at any time with immediate effect by
giving written notice to the Licensor on any of the following grounds:

 

  (a) (Breach) The Licensor breaches any provision of this Agreement and has not
remedied that breach within 7 days after service by the Licensee of written
notice of the breach giving notice of the Licensee’s intention to terminate.

 

  (b) (Insolvency etc) The Licensor being a company:

 

  (i) stops or suspends or threatens to stop or suspend payment of all or a
class of its debts;

 

  (ii) is insolvent within the meaning of section 95A of the Corporations Act;

 

  (iii) must be presumed by a court to be insolvent by reason of an event set
out in section 459C(2) of the Corporations Act;

 

  (iv) fails to comply with a statutory demand (within the meaning of
section 459F(1) of the Corporations Act);

 

 

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  (v) has an administrator appointed or any step preliminary to the appointment
of an administrator is taken;

 

  (vi) has a controller (within the meaning of section 9 of the Corporations
Act) or similar officer appointed to all or any of its property;

 

  (vii) has proceedings commenced, a resolution passed or proposed in a notice
of meeting, an application to, or order of, a court made or other steps taken
against or in respect of it for its winding up, deregistration or dissolution or
for it to enter an arrangement, compromise or composition with or assignment for
the benefit of its creditors, a class of them or any of them.

 

  (c) (Foreign company insolvency etc) The Licensor, being a corporation
incorporated outside Australia, becomes insolvent or suffers any event or
similar event to those set out in paragraph (b) which would restrict its
business operations or cause those operations to be placed under the control of
a person other than its directors under the laws of its place of incorporation.

 

10.4 Copies of Software and Documentation

Within 7 days after termination of this Agreement, the Licensee will certify to
the Licensor that all copies of the Software and Documentation provided under
clause 4 in any form have been returned to the Licensor, or if the Licensor
directs, destroyed.

 

11. Subcontracting

 

  (a) The Licensor may subcontract for the performance of its obligations under
this Agreement.

 

  (b) In the event that the Licensor subcontracts the performance of any of its
obligations under this Agreement, the Licensor will remain responsible for the
performance of those obligations and will hold harmless and indemnify the
Licensee and its Affiliates from and against any liability in connection with
any breach by the subcontractor of this Agreement.

 

12. GST

 

12.1 GST to be added to amounts payable

If GST is payable on a Taxable Supply made under, by reference to or in
connection with this Agreement, the party providing the Consideration for that
Taxable Supply must also pay the GST Amount as additional Consideration. This
clause does not apply to the extent that the Consideration for the Taxable
Supply is expressly stated to be GST inclusive.

 

12.2 Liability net of GST

Any reference in the calculation of Consideration or of any indemnity,
reimbursement or similar amount to a cost, expense or other liability incurred
by a party, must exclude the amount of any Input Tax Credit entitlement of that
party in relation to the relevant cost, expense or other liability.

 

 

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12.3 GST obligations to survive termination

This clause will continue to apply after expiration or termination of this
Agreement.

 

12.4 Definitions

In this clause , the following definitions apply:

Consideration has the meaning given by the GST Law.

GST has the meaning given by the GST Law.

GST Amount means in relation to a Taxable Supply the amount of GST payable in
respect of that Taxable Supply.

GST Group has the meaning given by the GST Law.

GST Law has the meaning given by the A New Tax System (Goods and Services Tax)
Act 1999 (Cth), or, if that Act does not exist means any Act imposing or
relating to the imposition or administration of a goods and services tax in
Australia and any regulation made under that Act.

Input Tax Credit has the meaning given by the GST Law and a reference to an
Input Tax Credit entitlement of a party includes an Input Tax Credit for an
acquisition made by that party but to which another member of the same GST Group
is entitled under the GST Law.

Taxable Supply has the meaning given by the GST Law excluding the reference to
section 84-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

 

13. Specific Performance and Injunctive Relief

Each party acknowledges that damages will not be an adequate remedy for other
party for any breach of this Agreement and that the first party is entitled to
seek specific performance or injunctive relief as a remedy for any actual or
threatened breach, in addition to any other remedies available at law or in
equity under or independently of this Agreement.

 

14. Further Assurance

Each party will take all steps, execute all documents and do everything
reasonably required by the other party to give effect to any of the transactions
contemplated by this Agreement.

 

15. Governing Law

This Agreement is governed by the laws of New South Wales. The parties submit to
the non-exclusive jurisdiction of courts exercising jurisdiction there and New
York.

 

16. No Waiver

No failure to exercise and no delay in exercising any right, power or remedy
under this Agreement will operate as a waiver. Nor will any single or partial
exercise of any right, power or remedy preclude any other or further exercise of
that or any other right, power or remedy.

 

 

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17. Notices

Any notice given under this Agreement:

 

  (a) must be in writing addressed to the intended recipient at the address
shown below or the address last notified by the intended recipient to the
sender:

 

  (i)   to the Licensor:   

PMI Mortgage Insurance Co

3003 Oak Road

Walnut Creek, CA 94597

United States of America

Attention: General Counsel

Fax No: +1-925-658-6175

  (ii)   to the Licensee:   

PMI Mortgage Insurance Ltd

Level 2

82 Pitt Street

Sydney NSW 2000

Attention: Company Secretary

Fax No: 612 9231 6104

 

  (b) must be signed by a person duly authorised by the sender,

 

  (c) will be taken to have been given:

 

  (i) (in the case of delivery in person) when delivered, received or left at
the above address;

 

  (ii) (in the case of facsimile transmission) when recorded on the transmission
result report unless:

 

  (A) within 24 hours of that time the recipient informs the sender that the
transmission was received in an incomplete or garbled form; or

 

  (B) the transmission result report indicates a faulty or incomplete
transmission; and

 

  (iii) (in the case of post) on the seventh day after the date on which the
notice is accepted for posting by the relevant postal authority.

If delivery or receipt is on a day when commercial premises are not generally
open for business in the place of receipt or is later than 4pm (local time) on
any day, the notice will be taken to have been given on the next day when
commercial premises are generally open for business in the place of receipt.

 

 

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18. Stamp Duty and Costs

Each party will bear its own costs arising out of the preparation of this
Agreement but the Licensee will bear any stamp duty (including fines and
penalties) chargeable on this Agreement, on any instruments entered into under
this Agreement, and in respect of a transaction evidenced by this Agreement
other than stamp duty arising due to the default of the Licensor. The Licensee
will indemnify the Licensor on demand against any liability for that stamp duty
(including fines and penalties).

 

19. Assignment

The Licensee cannot assign, charge or deal with any of its rights and
obligations under this Agreement, or attempt or purport to do so, unless
(a) with the written consent of the Licensor, or (b) except to a Related Body
Corporate as part of a solvent corporate restructure provided the assignee
remains in the future a Related Body Corporate.

 

20. Severance

Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction will be ineffective in that jurisdiction to the extent of the
prohibition or unenforceability. That will not invalidate the remaining
provisions of this Agreement nor affect the validity or enforceability of that
provision in any other jurisdiction.

 

21. No Merger

The rights and obligations of the parties will not merge on completion of any
transaction under this Agreement. They will survive the execution and delivery
of any assignment or other document entered into for the purpose of implementing
any transaction.

 

22. Entire Agreement

This Agreement contains the entire agreement of the parties with respect to its
subject matter. It sets out the only conduct relied on by the parties and
supersedes all earlier conduct by the parties with respect to its subject
matter.

 

23. Amendment

This Agreement may be amended only by another agreement executed by all parties.

 

24. Counterparts

This Agreement may be executed in any number of counterparts. All counterparts
taken together will be taken to constitute one agreement.

 

 

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25. Dispute Resolution

 

  (a) If a dispute under clause 5.3 or clause 6.3(b) of this Agreement is not
resolved following referral to the chief executive officers or nominees with 10
business days of such referral, the dispute must be submitted to an independent
expert for determination as follows.

 

  (b) The independent expert will be KPMG or, if KPMG is unable or unwilling to
act, such other expert as the parties may agree, or if such other expert
otherwise agreed by the parties is unable or unwilling to act within 10 business
days of notice to them, the expert will be nominated by the President or senior
officer of the Institute of Chartered Accountants or his nominee.

 

  (c) The independent expert must have no direct or indirect personal interest
in the outcome of the decision or determination he is requested to make.

 

  (d) The parties must submit the dispute in writing to the independent expert
on or promptly after appointment of the independent expert. The submission shall
state the specific matter to be determined and all other reasonably relevant
matters.

 

  (e) Each party shall direct the independent expert to act expeditiously and to
give reasons for his determination, and shall supply the independent expert with
any information, assistance and cooperation which he may request in connection
with his determination.

 

  (f) Unless independent expert, in his absolute discretion, determines that the
conduct of any disputing party is such that it should bear all or a greater
proportion, the fees and expenses of the independent expert actuary shall be
borne by the parties in equal shares.

 

  (g) The independent expert is an independent expert, not an arbitrator. The
independent expert's decision will be conclusive and final and binding on the
parties except in the case of manifest error.

 

 

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Executed as an agreement

 

Executed by PMI Mortgage Insurance Co.:

   

 

   

 

Director Signature    

 

   

 

Print Name    

 

Executed in accordance with section 127 of the

Corporations Act 2001 (Cth) by PMI Mortgage

Insurance Ltd:

   

 

   

 

Director Signature     Director/Secretary Signature

 

   

 

Print Name     Print Name

 

 

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Schedule 6

Loss Development Cover and Adjustment to Value of the Note

 

  1. Loss development cover (LDC) will be arranged in accordance with the
limitations, terms and conditions as set out below in respect of losses in
excess of the Performance Metric.

 

  2. The LDC will comprise two components arranged in separate layers as
follows:

 

  (a) firstly, a reduction in the amount payable under the Note in the
circumstances identified in paragraph 10 below; and

 

  (b) secondly, the Reinsurance Cover.

 

  3. The determination of the Actual Insurance Loss Percentage for the purposes
of settlement under the LDC will be subject to agreement by the parties. In the
event a dispute arises concerning the reaching of agreement by the Vendor and
Purchaser as to the Actual Insurance Loss Percentage, the Vendor and the
Purchaser will work together, diligently in good faith and acting reasonably, to
investigate and resolve the dispute through senior representatives of the
respective parties within one calendar month. If the dispute cannot be resolved,
it will be referred to the following chief executive officers for good faith
resolution within a further calendar month after referral:

 

  •  

Purchaser – Frank O’Halloran;

 

  •  

Vendor – Steve Smith;

or in each case, their respective successor or senior executive nominee, as
applicable.

 

  4. A dispute between the parties as to the amount of the Actual Insurance Loss
Percentage which is not resolved following referral to the chief executive
officers or nominees, and any other dispute concerning the calculation and
determination of the Actual Insurance Loss Percentage which the parties agree
should be so submitted, must be submitted to an independent expert actuary for
determination as follows.

The independent expert actuary will be KPMG, or if they are unable or unwilling
to act within 14 days of notice to them, nominated by the President or senior
officer of the Institute of Actuaries of Australia or his nominee.

The independent expert actuary must have no direct or indirect personal interest
in the outcome of the decision or determination it is requested to make.

The parties must submit the dispute in writing to the independent expert actuary
on or promptly after appointment of the independent expert actuary. The
submission shall state the specific matter to be determined and all other
reasonably relevant matters.

Each party shall direct the independent expert actuary to act expeditiously and
to give reasons for his determination, and shall supply the independent expert
actuary with any information, assistance and co-operation which it may request
in connection with its determination.

 

 

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Unless the independent expert actuary, in its absolute discretion, determines
that the conduct of any disputing party is such that it should bear all or a
greater proportion, the fees and expenses of the independent expert actuary
shall be borne by the Vendor and Purchaser in equal shares.

The independent expert actuary is an independent expert, not an arbitrator. The
independent expert actuary’s decision will be conclusive and final and binding
on the parties except in the case of manifest error.

 

  5. Any agreement or determination of the Actual Insurance Loss Percentage is
to be reached or made, as applicable, on the basis that loss reserving
methodologies (including loss reserving at the best estimate) and claim
settlement practices are consistent with the US GAAP principles used to prepare
the Unaudited Financial Statements.

 

  6. The Vendor and Purchaser have agreed on an appropriate form of Reinsurance
Cover. The reinsurer will be the Purchaser’s captive, Equator Reinsurances
Limited (Equator Re).

 

  7. The gross reinsurance premium payable in respect of the Reinsurance Cover
will be an amount of US$100 million in aggregate payable in equal instalments on
Completion, 30 June 2010 and 30 June 2011. Subject to clause 7 of the Agreement,
50% of the gross reinsurance premium is payable by the Purchaser. The Vendor
will on Completion pay Equator Re US$46,486,471 being the net present value (at
a discount rate of 5%) of its 50% share of the gross reinsurance premium.

 

  8. The Vendor will receive a profit commission of US$25,000,000 under the
Reinsurance Cover being 50% of its share of the gross reinsurance premium if the
Actual Insurance Loss Percentage is less than 100% of US$475,199,150 being the
unearned premium reserve on Relevant Policies as at 30 June 2008. The Vendor
will also receive any tax benefit to the Purchaser or the Consolidated Companies
arising from its payment of the 50% share of the gross reinsurance premium under
paragraph 7 (being US$50,000,000) less any profit commission under paragraph 8
(being US$25,000,000), being a net amount of US$25,000,000 grossed-up.

 

  9. Equator Re will settle any profit commission and tax benefit under
paragraph 8 on the same day as payment under the Note.

 

  10. If the amount calculated by applying the Actual Insurance Loss Percentage
to the unearned premium reserve of US$475,199,150 at 30 June 2008 exceeds the
Performance Metric of US$237,599,575, the value of the Note (principal and
interest) will be reduced by an amount equal to the amount of such excess. If
such reduction in the value of the Note is insufficient to fully cover the
excess, then the Purchaser shall be entitled, but not required, to claim under
the Reinsurance Cover.

 

  11. The Purchaser will provide the Vendor with such information as the Vendor
may reasonably request in connection with the Vendor’s financial, regulatory and
tax reporting obligations on a confidential basis (subject to any disclosures
required to be made by applicable law) in relation to the LDC and acknowledges
that the Vendor may share such information with potential investors as
contemplated by clause 6(b) of the Agreement.

 

  12. In this Schedule 6:

 

 

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Actual Insurance Loss Percentage means the percentage which is agreed by the
Vendor and Purchaser or otherwise determined in accordance with paragraph 4 of
this Schedule 6 and (whether so agreed or determined), having regard to the
bases and principles set out in paragraph 5 of this Schedule 6, calculated from
the formula below using the following factors:

X – claims paid during the three year period commencing on 30 June 2008 and
ending on 30 June 2011 with respect to the Relevant Policies

Y – the difference (which may be positive or negative) between the loss reserve
balance with respect to the Relevant Policies as of 30 June 2011, minus the loss
reserve balance on such policies as of 30 June 2008

Z – the projected ultimate unpaid losses with respect to the Relevant Policies
at 30 June 2011 (including for the avoidance of doubt the loss reserve balance
with respect to the Relevant Policies as at 30 June 2011) if any, to the extent
exceeding the loss reserve balance as at 30 June 2011 with respect to the
Relevant Policies remaining in force at that date

A –US$475,199,150 being the unearned premium reserve as at 30 June 2008 with
respect to the Relevant Policies.

The formula is:

 

 

X+Y+Z

          A        

Performance Metric means a loss ratio of 50% of the unearned premium reserve
agreed by the Vendor and the Purchaser applicable to the Relevant Policies as at
30 June 2008 being US$237,599,575.

Reinsurance Cover means excess of loss reinsurance reasonably acceptable to the
Purchaser in an amount up to US$237,600,000.

Relevant Policies means policies issued by PMI Mortgage Insurance Ltd and
Permanent LMI Pty Limited and in force as at 30 June 2008.

 

  13. For the purposes of calculating X, Y, Z and the Performance Metric, the
A$/US$ exchange rate shall be taken to be A$1/US$0.95.

The Note Issuer and the Purchaser will procure that Equator Re perform its
obligations under this Schedule.

 

 

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Schedule 7

Note Issuer and Purchaser Warranties

In this Schedule, “Entity” means either the Note Issuer or the Purchaser

 

1. The Entity is duly incorporated and validly exists under the law of its place
of incorporation.

 

2. The Entity is not insolvent, no receiver has been appointed over any part of
its assets, no such appointment has been threatened and it is not subject to any
Insolvency Event.

 

3. Subject to clause 16.5(d), there are no facts, matters or circumstances which
give any person the right to apply to liquidate or wind up the Entity.

 

4. The Entity is not in liquidation and no proceedings have been brought or
threatened for the purpose of winding up the Entity.

 

5. The execution and delivery of this Agreement has been properly authorised by
all necessary corporate action of the Entity.

 

6. The Entity has full corporate power and lawful authority to execute and
deliver this Agreement and to consummate and perform or cause to be performed
its obligations under this Agreement and each transaction contemplated by this
Agreement to be performed by it.

 

7. This Agreement constitutes a legal, valid and binding obligation of the
Entity enforceable in accordance with its terms by appropriate legal remedy.

 

8. The execution, delivery and performance by the Entity of this Agreement and
each transaction contemplated by this Agreement does not or will not (with or
without the lapse of time, the giving of notice or both) contravene, conflict
with or result in a breach of or default under:

 

  (a) any provision of the constitution of the Entity;

 

  (b) any material term or provision of any security arrangement, undertaking,
agreement or deed; or

 

  (c) any writ, order or injunction, judgment, law, rule or regulation to which
it is a party or is subject or by which it is bound.

 

9. There are no Legal Proceedings pending or subject to clause 16.5(d)
threatened against the Entity which question the validity of this Agreement or
which would reasonably be expected to prevent, materially delay or materially
impair the ability of the Entity to consummate the transactions contemplated by
this Agreement.

 

10. The Purchaser has available to it and will have available to it at the
Completion Date all funds necessary for the payment to the Vendor of the Cash
Purchase Price.

 

13. The Entity has no Liability to pay any brokerage or finder's commission, fee
or similar compensation in connection with the transactions contemplated by this
Agreement.

 

14. The Entity has no knowledge in accordance with clause 16.5(d) of any matter
that is inconsistent with the Vendor’s Warranties.

 

 

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Schedule 8

Vendor Warranties

In this Schedule:

 

(a) a reference to “consistent with past practice” is to be interpreted having
regard to the changed circumstances arising from the transaction contemplated
under this Agreement and the fact that the Shares will be sold to the Purchaser
at Completion;

 

(b) Adverse NTA Effect means a diminution in the net tangible assets of the
Company or Company Subsidiary or Permanent exceeding A$500,000;

 

(c) each Warranty is given subject to the terms of this Agreement, including the
Disclosure Materials in accordance with clause 16.5; and

 

(d) a reference to “Company Subsidiary” includes Permanent where marked with a
double asterisk in parentheses (“(**)”) in accordance with clause 16.3(c) of
this Agreement.

Information

 

1. All information set out in the Schedules to this Agreement and the Disclosure
Materials was prepared in good faith, is true and accurate, and is not
misleading or deceptive in any material particular, whether by inclusion of
misleading information or omission of material information or both, including:

 

  (a) Schedule 1 – Shares;

 

  (b) Schedule 2 – Company Subsidiary;

 

  (c) Schedule 3 – Permanent;

 

  (d) Schedule 11 of the Disclosure Letter – Material Contracts;

 

  (e) Schedule 12 of the Disclosure Letter – Inter-company Agreements;

 

  (f) Schedule 13 of the Disclosure Letter – Real Property;

 

  (g) Schedule 14 of the Disclosure Letter – Intellectual Property; and

 

  (h) Schedule 15 of the Disclosure Letter – Bank Accounts.

 

2. All individual outstanding capital expenditure commitments in excess of
A$750,000 which are binding on the Company, the Company Subsidiary or Permanent
as at the date of this Agreement have been fairly disclosed to the Purchaser in
the Data Room Documentation.

Corporate Status

 

3. The Vendor is duly incorporated and validly exists under the law of its place
of incorporation.

 

 

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4. The Vendor is not insolvent, no receiver has been appointed over any part of
its assets, no such appointment has been threatened and it is not subject to any
Insolvency Event.

 

5. There are no facts, matters or circumstances which give any person the right
to apply to liquidate or wind up the Vendor.#

 

6. The Vendor is not in liquidation and no proceedings have been brought or
threatened for the purpose of winding up the Vendor.

 

7. The execution and delivery of this Agreement has been properly authorised by
all necessary corporate action of the Vendor.

 

8. The Vendor has full corporate power and lawful authority to execute and
deliver this Agreement and to consummate and perform or cause to be performed
its obligations under this Agreement and each transaction contemplated by this
Agreement to be performed by it.

 

9. This Agreement constitutes a legal, valid and binding obligation of the
Vendor enforceable in accordance with its terms by appropriate legal remedy.

 

10. The execution, delivery and performance by the Vendor of this Agreement and
each transaction contemplated by this Agreement does not or will not (with or
without the lapse of time, the giving of notice or both) contravene, conflict
with or result in a breach of or default under:

 

  (a) any provision of the constitution of the Vendor;

 

  (b) any material term or provision of any security arrangement, undertaking,
agreement or deed; or

 

  (c) any writ, order or injunction, judgment, law, rule or regulation to which
it is a party or is subject or by which it is bound.

 

11. There are no Legal Proceedings pending or subject to # threatened against
the Vendor which question the validity of this Agreement or which would
reasonably be expected to prevent, materially delay or materially impair the
ability of the Vendor to consummate the transactions contemplated by this
Agreement.

Company Group

 

12. Each of the Company and the Company Subsidiary is duly incorporated and
validly exists under the law of its place of incorporation. (**)

 

13. The shareholding in:

 

  (a) the Company is accurately described in Schedule 1;

 

  (b) the Company Subsidiary is accurately described in Schedule 2; and

 

  (c) Permanent is accurately described in Schedule 3.

 

14. Each of the Company and the Company Subsidiary:

 

  (a) has full corporate power to own its respective properties, assets and
business and to carry on its respective business as now conducted; (**)

 

 

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  (b) has done everything necessary to do business lawfully in all jurisdictions
in which its respective business is now carried on, except in relation to any
act or omission which would not, individually, be reasonably expected to have an
Adverse NTA Effect; (**) and

 

  (c) each asset of or represented as belonging to the Company and Company
Subsidiary as fairly disclosed in the Disclosure Material is legally and
beneficially owned by the Company or the Company Subsidiary (as relevant) free
of any Security Interest, except for:

 

  (i) any Permitted Security Interest; (**)

 

  (ii) any asset subject to hire purchase, lease or rental agreements which if
not fairly disclosed in the Disclosure Materials is on normal commercial terms;
or (**)

 

  (iii) any such asset which would not individually be expected to have an
Adverse NTA Effect. (**)

 

15. There are no facts, matters or circumstances which give any person the right
to apply to liquidate or wind up the Company or the Company Subsidiary. (**)

 

16. Neither the Company nor the Company Subsidiary has entered into an
arrangement, compromise or composition with or assignment for the benefit of its
creditors or a class of them which is in effect or is otherwise subject to an
Insolvency Event. (**)

Shares

 

17. The Vendor is the sole registered holder and beneficial owner of the Shares
as set out in Schedule 1.

 

18. The Vendor has full corporate power and lawful authority to own the Shares.

 

19. The Shares comprise the whole of the issued share capital of the Company,
were validly issued and are fully paid.

 

20. There are no Security Interests over or affecting the Shares.

 

21. There is no restriction on the sale or transfer of the Shares to the
Purchaser except for the consent of the directors of the Company to the
registration of the transfers of the Shares.

 

22. Neither the Vendor nor the Company is a party to any shareholder agreements,
voting trusts or other arrangements or understanding relating to the voting,
purchase, redemption or acquisition of the Shares.

Prudential regulation

 

23. Each of the Company and the Company Subsidiary is presently compliant with
applicable regulatory requirements, except where the failure to comply would
not, individually, be reasonably expected to have an Adverse NTA Effect. (**)

Financial Statements

 

24. The Audited USGAAP 2007 Financial Statements:

 

  (a) have been prepared in accordance with US GAAP applied on a consistent
basis during the periods involved;

 

 

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  (b) present fairly the consolidated financial position of the Company
Subsidiary as at the dates thereof and the consolidated results of operations,
changes in equity and cash flows of the Company Subsidiary for the periods then
ended in accordance with USGAAP; and

 

  (c) accurately reflect the books of account and other financial records of the
Company Subsidiary; and

 

  (d) contain proper and adequate provision for and full disclosure of all
liabilities of the Company Subsidiary of whatever description and however
arising, whether present, actual, unascertained, immediate, prospective, future
or contingent in accordance with USGAAP.

 

25. The Audited AGAAP 2007 Financial Statements:

 

  (a) have been prepared in accordance with AGAAP applied on a consistent basis
during the periods involved;

 

  (b) present fairly the consolidated financial position of the Consolidated
Companies as at the dates thereof and the consolidated results of operations,
changes in equity and cash flows of the Consolidated Companies for the periods
then ended in accordance with AGAAP; and

 

  (c) accurately reflect the books of account and other financial records of the
Consolidated Companies; and

 

  (d) contain proper and adequate provision for and full disclosure of all
liabilities of the Consolidated Companies of whatever description and however
arising, whether present, actual, unascertained, immediate, prospective, future
or contingent in accordance with AGAAP.

 

26. The Unaudited Financial Statements:

 

  (a) have been prepared in accordance with USGAAP applied on a consistent basis
during the periods involved;

 

  (b) present fairly the consolidated financial position of the Consolidated
Companies as at the dates thereof and the consolidated results of operations,
changes in equity and cash flows of the Consolidated Companies for the periods
then ended in accordance with USGAAP; and

 

  (c) accurately reflect the books of account and other financial records of the
Consolidated Companies; and

 

  (d) contain proper and adequate provision for and full disclosure of all
liabilities of the Consolidated Companies of whatever description and however
arising, whether present, actual, unascertained, immediate, prospective, future
or contingent in accordance with USGAAP.

 

27. The management accounts provided under clause 11.4 have been prepared on a
consistent basis with the Unaudited Financial Statements except for changes in
US GAAP since the date of such statements.

Absence of material changes

 

28. Since the Effective Date to the date of this Agreement, other than in
connection with the transactions contemplated by this Agreement and otherwise as
fairly disclosed to the Purchaser in the Disclosure Material:

 

  (a) the Company and the Company Subsidiary have conducted their respective
businesses only in the ordinary course of business consistent with past practice
and since the date of this Agreement in accordance with clause 12 of this
Agreement; (**)

 

 

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  (b) other than changes to the general economic environment in which the
Company and the Company Subsidiary operate, there has been no change,
development or effect or combination of changes, developments or effects that,
individually, which have had or would be reasonably expected to have an Adverse
NTA Effect. (**)

 

29. Since the Effective Date to the date of this Agreement, neither the Company
or the Company Subsidiary has (except in the ordinary course of business
consistent with past practice or as required by Law or as fairly disclosed in
the Disclosure Materials):

 

  (a) incurred any Liabilities;

 

  (b) acquired or disposed of or dealt with any assets, nor has it entered into
any form of agreement to acquire or dispose of any assets other than in relation
to the investment portfolio as contemplated by clause 3.1(d) of this Agreement;

 

  (c) borrowed money;

 

  (d) granted any Security Interest;

 

  (e) paid or agreed to pay any retiring allowance, superannuation or similar
benefit to any of its Officers other than as fairly disclosed in the Disclosure
Materials;

 

  (f) not entered into or altered any contract of service with any Officers or
increased or agreed to increase the compensation payable to any of its Officers
other than as fairly disclosed in the Disclosure Materials;

 

  (g) implemented any new accounting or actuarial principle; or

 

  (h) made any loans (other than amounts for reasonable expenses) or paid
bonuses to its Officers or agreed to do so except as provided for in clause 14
of this Agreement,

that, individually, have had or would be reasonably expected to have an Adverse
NTA Effect.# (**) Since the date of this Agreement, the Company and the Company
Subsidiary will have complied with clause 12 of this Agreement. (**)

 

30. Since the Effective Date to the date of this Agreement, other than as agreed
to by the Purchaser in writing, neither the Company nor the Company Subsidiary
has declared, set aside, paid or agreed to pay any dividends or distributions
on, or made any other distributions in respect of, any Company Securities (other
than, in each case, cash dividends or distributions by the Company Subsidiary to
the Company). (**)

 

31. Since the date of this Agreement, other than as agreed to by the Purchaser
in writing, no resolutions have been passed by the members or directors of the
Company Group except in the ordinary course of business consistent with past
practice or necessary to give effect to this Agreement.

Compliance with Laws

 

32. The business of each of the Company and the Company Subsidiary is in
compliance with all applicable Laws (including privacy, occupational health and
safety, annual leave, long service leave, equal opportunity,
anti-discrimination, superannuation, workers compensation and industrial laws),
except where the failure to comply would not, individually be reasonably
expected to have an Adverse NTA Effect. (**)

 

 

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33. The Company and the Company Subsidiary each possesses all Governmental
Entity permits, licences, certificates, variances, exemptions, exceptions,
orders and other authorizations, consents, clearances and approvals necessary to
conduct its business as presently conducted, except where the failure to hold
such permits would not individually be reasonably expected to have an Adverse
NTA Effect, and all such permits are in full force and effect. (**)

Taxation

 

34. All Taxes and Duties due and payable by the Company and the Company
Subsidiary in respect of periods ending on or before the date of this Agreement
have been paid by the due date or provided for in accordance with Warranty 50.

 

35. All Tax and Duty returns required by law (including, but not limited to, all
laws imposing or relating to income tax, fringe benefits tax, sales tax, payroll
tax, GST, group tax, land tax, water and municipal rates and stamp and customs
duty) to be lodged or filed in respect of periods ending before the Completion
Date have been, or will be, duly lodged or filed.

 

36. Each of the Company and the Company Subsidiary has deducted all Tax required
to be deducted from any payments made by it prior to the Completion Date and has
remitted that Tax to the relevant Taxation Authority in accordance with the
relevant law.

 

37. Each of the Company and the Company Subsidiary maintains and has retained
for the period required by law all records that it is required to maintain under
any law relating to Taxes or Duties.

 

38. No Tax or Duty return contains a statement that is false or misleading in
any material particular or omits to refer to any matter which is required to be
included or without which the statement is false or misleading.

 

39. There is no current dispute between the Company or any of the relevant
Subsidiaries and the Commissioner of Taxation of the Commonwealth of Australia
or any other Taxation Authority in respect of any Tax or Duty nor subject to #
are there are facts, matters or circumstances which are likely to give rise to a
dispute.

 

40. A member of the Company Group has not entered into to any transaction which
contravenes the anti-avoidance or transfer pricing provisions of any Law on Tax
or Duty.

 

41. A member of the Company Group has not made any objection or requested any
amended assessment in relation to its lodged, filed or submitted Tax and Duty
returns.

 

42. Any transaction that a member of the Company Group has entered into in
reliance on any ruling from a Taxation Authority has been implemented in the
manner disclosed in the application for the ruling.

 

43. A member of the Company Group has not acted or failed to act in any way
which has or is likely to alter, prejudice or infringe any ruling.

 

44. All documents required to be created by a member of the Company Group under
a law relating to Duty have been created and have had Duty paid in full in
accordance with all applicable laws.

 

 

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45. All documents which are liable to Duty, or necessary to establish the title
of a member of the Company Group to an asset, have had Duty paid in full in
accordance with all applicable laws.

 

46. No event has occurred (excluding the transfer of the Shares under this
Agreement) which has prevented or is likely to prevent a member of the Company
Group obtaining the benefit of any future income tax benefit provided for in the
Unaudited Financial Statements.

 

47. No debt owed by the Company or the Company Subsidiary has been forgiven for
the purposes of Division 245 of Schedule 2C to the Tax Act.

 

48. On the Completion Date, the share capital account of the Company or a
Company Subsidiary will not be tainted within the meaning of Division 197 of the
Tax Act.

 

49. The Company or the Company Subsidiary does not own at Completion any asset
in respect of which capital gains tax roll-over relief was obtained under the
Tax Act when the asset was acquired by it.

 

50. The Unaudited Financial Statements fully provide for all Tax or Duty which
the Company Group is liable to pay in respect of the period up to and including
the Effective Date, including any joint and several liability as part of a group
for either GST or income tax purposes.

 

51. After the Effective Date, the only Tax or Duty liabilities of the Company
Group that arise up to and including the Completion Date are or will be
liabilities in the ordinary course of business consistent with past practice.

 

52. All Tax Warranties apply to Permanent to the extent relevant subject to the
terms of this Agreement.

Agreements with Governmental Entities

 

53. No Company Group Member is subject to any cease-and-desist or other order or
enforcement action issued by any Governmental Entity that currently restricts
the conduct of the Business. No Company Group Member is subject to any written
agreement, consent agreement or memorandum of understanding with, any
Governmental Entity that currently restricts the conduct of the Business in a
way that would reasonably be expected to have an Adverse NTA Effect.(**)

Litigation

 

54. Other than insurance claims in the ordinary course of business, consistent
with past practice, there are no Legal Proceedings including by Employees or
pending or subject to # threatened in writing against the Company or a Company
Subsidiary that, individually, if determined adversely to a Company or the
Company Subsidiary, would be reasonably expected to have an Adverse NTA
Effect. (**)

Real Property

 

55. Schedule 13 of the Disclosure Letter lists all real property leases and
subleases to which the Company or Company Subsidiary is a party or is bound (the
Leases). Neither the Company nor the Company Subsidiary owns freehold property.
(**)

 

56. Each of the Leases is enforceable against the lessee and subject to # the
lessor which is party thereto in accordance with its terms, in each case except
as limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally. The lessee is not in default and has
not been given written notice that it is in default, and the lessor is not in
default and has not been given written notice that it is in default under any of
the Leases. (**)

 

 

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Intellectual Property

 

57. Schedule 14 of the Disclosure Letter lists all registered Intellectual
Property owned by any member of the Company Group.

 

58. Except as, individually, would not be reasonably expected to have an Adverse
NTA Effect:

 

  (a) each member of the Company Group owns or has the right to use all
Intellectual Property necessary to its business as currently conducted; (**) and

 

  (b) no member of the Company Group is infringing or otherwise violating the
Intellectual Property rights of any third party and subject to # no third party
is infringing or otherwise violating any Intellectual Property right owned by a
member of the Company Group. (**)

 

59. Each of the licences under which the Company or Company Subsidiary uses any
Intellectual Property rights is enforceable against the Company or Company
Subsidiary and subject to # the licensor, in each case except as limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally. The Company and Company Subsidiary are not in
default, and subject to # the licensor is not in default under each software
licence agreement. (**)

Material Contracts

 

60. Complete and correct copies of all terms of Material Contracts are contained
in the Disclosure Material. There are no change of control or non-competition
obligations which are binding on the Company or Company Subsidiary under the
Material Contracts other than as set out in those documents. Each Material
Contract is enforceable against the member of the Company Group that is a party
to it and subject to # the other party to the Material Contract, in each case
except as limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors’ rights generally. (**)

 

61. Neither the Company or the Company Subsidiary is in breach or violation of,
or default under, any Material Contract, such as would reasonably be expected to
have an Adverse NTA Effect, nor is the other party in breach or violation of, or
default under a Material Contract, such as would reasonably be expected to have
an Adverse NTA Effect. (**)

 

62. The Company Group has not received, prior to the date of this Agreement, a
written notice from any customer intending to terminate a Material Contract, nor
subject to # are there any facts, matters or circumstances which give such a
customer a valid right to do so.

 

63. Since the Effective Date, none of the Company Group has received notice that
a counterparty to a Material Contract intends to:

 

  (a) significantly reduce the amount of LMI business which it provides to the
Company Group under a Material Contract; or

 

  (b) require the Company Group to participate in any tender process in order to
obtain LMI business from the counterparty.

 

 

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Environmental matters

 

64. Except as, individually or in the aggregate, would not be reasonably
expected to have an Adverse NTA Effect, each of the Company and the Company
Subsidiary is in compliance with all Laws concerning the Environment as
applicable to the operation of their business.

Brokerage

 

65. None of the Vendor, the Company or the Company Subsidiary has any Liability
to pay any brokerage or finder’s commission, fee or similar compensation in
connection with the transactions contemplated by this Agreement. (**)

Employees

 

66. All changes in the remuneration or emoluments or benefits of Officers from
the Effective Date to the date of this Agreement have been fairly disclosed in
the Disclosure Materials,

 

67. No Company Group Member acts as trustee, administrator, investment manager
or life insurer of a defined benefits fund or an accumulation fund in respect of
its employees.

 

68. The Company Subsidiary acts as the employer in the Company Group.

 

69. All material terms of the arrangements (including bonus arrangements) for
each Employee are set out in the Disclosure Material.

 

70. No Claim has been made and not settled, nor subject to # is the Vendor aware
of any potential ongoing or outstanding Claim, by or on behalf of any Employee
or contractor against the Company Group, including for discrimination, sexual
harassment or wrongful termination.

 

71. There is no outstanding matter (including under any award, enterprise
agreement or other instrument made or approved under Law) which is likely to
lead to industrial action by Employees or any industrial organisation of
employees and which may disrupt the Business. #

 

72. There are no contracts, arrangements or understandings with contractors of
the Company who are engaged to provide key strategic or operational services,
other than as fairly disclosed in the Disclosure Materials.

Privacy

 

73. No grounds exist for an individual to claim compensation, from the Company
Group for a breach of privacy law applicable in Australia or New Zealand which
is currently outstanding. #

 

74. No outstanding notice has been received by a Company Group member from a
Governmental Entity alleging a breach of privacy law applicable in Australia or
New Zealand. #

Computer Systems

 

75. All the material computers and material computer systems used by the Company
Group Members:

 

  (a) are, having regard to fair wear and tear and their age, in operating order
and are fulfilling the purposes for which they were acquired in an efficient
manner without material downtime or errors; (**)

 

 

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  (b) are owned or leased, under the control of the members of the Company
Group, are located in premises and are not shared with or accessible by any
other person as fairly disclosed in the Disclosure Materials; and (**)

 

  (c) comprise all of the software, hardware and services reasonably necessary
to operate the business of the Company Group from the Completion Date to the
extent that these are not provided by The PMI Group Inc. and its other Related
Bodies Corporate as fairly disclosed in the Disclosure Materials. (**)

Insurance

 

76. All material details of the insurance policies providing cover to the
Company Group in respect of the operational risks of the Business (which for the
avoidance of doubt excludes any insurance policies issued or arranged by the
Company Group for or on behalf of any other parties) have been included in the
Disclosure Material. (**)

 

77. There are no outstanding claims under the policies referred to in
Warranty 76 nor subject to # are there any facts, matters or circumstances which
give rise to a claim under those policies.

 

78. All premiums which have become due and payable in respect of the insurances
referred to in Warranty 76 will have been paid before the Completion Date.

 

79. Nothing has been done or omitted to be done which would make any current
insurance contract void or voidable or which would permit an insurer to or
refuse or reduce a claim. #

Records

 

80. The Records contain all documents reasonably necessary to operate the
business of the Company and Company Subsidiary from the Completion Date
consistent with past practice, including statutory corporate records and
fundamental accounting and management records and operational manuals (Key
Documents). (**)

 

81. The Key Documents created by the Company and Company Subsidiary since
1 January 2006 do not contain inaccuracies which would reasonably be expected to
have an Adverse NTA Effect, and to the extent necessary, have been prepared in
accordance with the requirements of the Corporations Act. # (**)

Guarantees and Indemnities

 

82. There are no guarantees securing debt obligations (whether secured or
unsecured) given by the Company Group under which obligations or liabilities are
still outstanding, other than as established in the ordinary course of business
consistent with past practice, insurance contracts involving credit enhancements
under a residential mortgage backed securities program issued by a member of the
Company Group and guarantees of obligations in respect of any member of the
Company Group. (**)

Loans by and debts due to the Company Group

 

83.

Each receivable (including those due from trade debtors) shown as an asset of
the Company or Company Subsidiary in the Unaudited Financial Statements is a
valid and subsisting debt and will realise the nominal amount of the debt (and
all interest and other charges payable) in accordance

 

 

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with its terms fairly disclosed in the Disclosure Materials (less, in respect of
the total of those receivables, the total of any bad or doubtful debts included
in the Unaudited Financial Statements in respect of debts other than receivables
owing from trade debtors). (**)

 

84. No receivable in excess of $5,000 shown as an asset of the Company or
Company Subsidiary owed to the Company or Company Subsidiary has been written
down or written off since the Effective Date. (**)

General

 

85. The Company Group has:

 

  (a) no members other than as set out in Schedules 1, 2 and 3 of this
Agreement; (**) and

 

  (b) no interest in the share capital of any other corporation except
investments in the ordinary course of business consistent with past practice.
(**)

 

86. The Company Group:

 

  (a) does not engage in coinsurance, except in relation to arrangements for top
up loans; (**)

 

  (b) does not carry on business in partnership with any other person; (**)

 

  (c) is not a member of any unincorporated body, undertaking or association
(other than a trade or industry association); (**)

 

  (d) does not hold any share or security (other than a share or security in a
trade or industry association) which is not fully paid up. (**)

 

87. No entity which is a member of the Company Group trades under any name other
than its corporate name or PMI Australia. (**)

 

88. All foreign currency transactions to which a member of the Company Group is
party to are fairly disclosed in the Disclosure Materials. (**)

 

89. No agreement is under negotiation which, if finalised, would qualify as an
agreement that is material to the Business and which has not been fairly
disclosed in the Disclosure Materials. (**)

 

90. There are no unsatisfied judgements or awards against the Company Group.
(**)

 

91. No Intellectual Property rights material to the operation of the Business
may be terminated or subjected to terms less favourable to the Company Group by
reason of the change in ownership or control of the Company Group or any of
them. (**)

 

92. There is no fact, matter or circumstance which is likely to prejudice the
continuance or renewal, or result in the revocation or variation in any respect,
of any statutory licence which would reasonably be expected to have an Adverse
NTA Effect. # (**)

 

93. Neither the Vendor nor the Company Group has received any written notice
that any statutory licence will be revoked, suspended, modified or will not be
renewed other than in respect of modifications which have been implemented. (**)

 

94. Subject to transitional arrangements in clause 10, the Company Group is not
dependent on any asset owned, licensed or leased by any member of the Vendor
Group in order to carry on the Business other than owned, licensed or leased by
the Company Group. (**)

 

 

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95. Subject to transitional arrangements agreed in accordance with clause 10,
the Company Group will on Completion have no outstanding contract, arrangement
or understanding with any member of the Vendor Group which would reasonably be
expected to have an Adverse NTA Effect. (**)

 

96. All returns or other documents which the Company Group is required to lodge
with APRA and ASIC have been lodged and are accurate except where the failure to
lodge or the inaccuracy would not reasonably be expected to have an Adverse NTA
Effect. (**)

Company Subsidiary Shares

 

97. The Company is the sole registered holder and beneficial owner of the shares
in the Company Subsidiary as set out in Schedule 2 (the Company Subsidiary
Shares).

 

98. The Company has full corporate power and lawful authority to own the Company
Subsidiary Shares.

 

99. The Company Subsidiary Shares comprise the whole of the issued share capital
of the Company Subsidiary, were validly issued and are fully paid.

 

100. There are no Security Interests over or affecting the Company Subsidiary
Shares.

 

101. Neither the Vendor nor the Company Subsidiary is a party to any shareholder
agreements, voting trusts or other arrangements or understanding relating to the
voting, purchase, redemption or acquisition of the Company Subsidiary Shares.

Permanent Shares

 

102. The Company Subsidiary is the sole registered holder and beneficial owner
of the shares in Permanent which are identified in Schedule 3 as being owned by
it (the Permanent Shares).

 

103. The Company Subsidiary has full corporate power and lawful authority to own
the Permanent Shares.

 

104. The Permanent Shares comprise the proportion of the issued share capital of
Permanent which is identified in Schedule 3 as being held by the Company
Subsidiary, were validly issued and are fully paid.

 

105. There are no Security Interests over or affecting the Permanent Shares.

Neither the Vendor nor Permanent is a party to any shareholder agreements,
voting trusts or other arrangements or understanding relating to the voting,
purchase, redemption or acquisition of the Permanent Shares, other than as
fairly disclosed in the Disclosure Materials.

 

 

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Schedule 9

Disclosure Material

 

1. The Disclosure Letter.

 

2. The Data Room Documentation.

 

3. All other information and data provided or communicated in writing to the
Purchaser or its Related Bodies Corporate, or any of their respective
Representatives by the Company, the Vendor, their Related Bodies Corporate or
Representatives, before the date of this Agreement regarding the transaction
contemplated by this Agreement, including without limitation:

 

  (a) all board meeting minutes of the Company and the Company Subsidiary for
2007 and 2008;

 

  (b) all Board Audit Risk Committee (BARC) meeting minutes of the Company for
2007 and 2008 and the Company Subsidiary for 2003 to 2008;

 

  (c) all board resolutions in respect of the Company and the Company Subsidiary
for 2007 and 2008; and

 

  (d) all board and BARC papers in respect of the Company and the Company
Subsidiary for 2008.

 

 

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Schedule 10

Transitional Services Principles

 

 

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Executed as an agreement

 

Executed by PMI Mortgage Insurance Co:    

/s/ L. Stephen Smith

   

/s/ Donald P. Lofe, Jr.

Director Signature     Director Signature

 

   

 

Print Name     Print Name Executed in accordance with section 127 of the
Corporations Act 2001 by QBE Holdings (AAP) Pty Limited:    

/s/ Frank M. O’Halloran

   

/s/ Duncan Ramsay

Director Signature     Director/Secretary Signature

 

   

 

Print Name     Print Name Executed in accordance with section 127 of the
Corporations Act 2001 by QBE Insurance Group Limited:    

/s/ Frank M. O’Halloran

   

/s/ Duncan Ramsay

Director Signature     Director/Secretary Signature

 

   

 

Print Name     Print Name

 

 

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