Exhibit 10.3

THE PMI GROUP, INC.

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE

6.625% Senior Note Due 2036

CUSIP: 69344M AJ 0

 

No.1

  $150,000,000

The PMI Group, Inc., a corporation duly organized and existing under the laws of
Delaware (herein called the “Company”, which term includes any successor Person
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of $
150,000,000 (ONE HUNDRED FIFTY MILLION U.S. DOLLARS) on September 15, 2036, and
to pay interest thereon from September 18, 2006 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 15 and September 15 in each year, commencing March 15, 2007, at the
rate of 6.625% per annum, until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.

 

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Payment of the principal of (and premium, if any) and interest on this Security
will be made at the office or agency of the Company maintained for that purpose
in the City of Los Angeles, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.

Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

 

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Dated: September 18, 2006

 

THE PMI GROUP, INC. By:        Name:   Victor J. Bacigalupi   Title:   Executive
Vice President, Chief
Administrative Officer, General Counsel and Secretary

Attest:

By:        Name:   Andrew D. Cameron   Title:   Vice President and Assistant
Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.

Dated: September 18, 2006

 

THE BANK OF NEW YORK TRUST COMPANY, N.A. as Trustee By:        Authorized
Signatory

 

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THE PMI GROUP, INC.

This Security is one of a duly authorized issue of securities of the Company
(herein called the “Securities”), issued and to be issued in one or more series
under an Indenture, dated as of November 3, 2003 (herein called the “Indenture”,
which term shall have the meaning assigned to it in such instrument), between
the Company and The Bank of New York Trust Company, N.A., as successor to The
Bank of New York, as Trustee (herein called the “Trustee”, which term includes
any successor trustee under the Indenture), and reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $150,000,000.

The Securities of this series are subject to redemption upon no less than
30 days’ but no more than 60 days’ notice by mail, at any time, as a whole or in
part, at the election of the Company, at a Redemption Price equal to the greater
of:

 

  (1) 100% of the principal amount of the Securities to be redeemed; or

 

  (2) the sum of the present values of the remaining scheduled payments of
principal and interest on the Securities from the Redemption Date to the Stated
Maturity discounted, in each case, to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 35 basis points;

plus in the case of either clause (1) or (2), any interest accrued but not paid
to but excluding the Redemption Date. For the avoidance of doubt, any
calculation of the remaining scheduled payments of principal and interest
pursuant to clause (2) of the preceding sentence shall not include interest
accrued as of the applicable Redemption Date.

“Treasury Rate”, which is to be determined on the third Business Day preceding
the applicable Redemption Date for the Securities, as applicable, means (i) the
yield, under the heading which represents the average for the week immediately
preceding the determination date, appearing in the most recently published
statistical release designated “H. 15(519)” or any successor publication that is
published weekly by the Board of Governors of the Federal Reserve System and
that establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption “Treasury Constant Maturities,”
for the maturity (rounded to the nearest month) corresponding to the Comparable
Treasury Issue (if no maturity is within three months before or after the Stated
Maturity Date yields for the two published maturities most closely corresponding
to the Comparable Treasury Issue will be determined and the Treasury Rate will
be interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is

 

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not published during the week preceding the determination date or does not
contain such yields, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date. The
Treasury Rate will be calculated by the Independent Investment Banker and
reported to the Trustee on the third Business Day preceding the Redemption Date.

“Comparable Treasury Issue” means, with respect to the Securities being
redeemed, the United States Treasury security selected by the Independent
Investment Banker as having a maturity comparable to the remaining term of the
Securities to be redeemed that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of such
securities.

“Comparable Treasury Price” means with respect to any Redemption Date for the
Securities, (i) the average of four Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Independent Investment Banker obtains
fewer than four such Reference Treasury Dealer Quotations, the average of all
such quotations.

“Independent Investment Banker” means one of the reference treasury dealers that
the Company has appointed.

“Reference Treasury Dealer” means Banc of America Securities LLC and its
successors and any other primary dealers actively trading United States Treasury
securities that the Company selects and their respective successors (each, a
“primary treasury dealer”); provided, however, that if any of the foregoing
shall cease to be a primary dealer actively trading United States Treasury
securities, the Company shall substitute in its place another primary treasury
dealer.

“Reference Treasury Dealer Quotations” means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Independent Investment Banker by such reference
treasury dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.

Notice of any redemption will be mailed by first-class mail at least 30 days but
no more than 60 days before the Redemption Date to each holder of Securities to
be redeemed. If fewer than all of the Securities are being redeemed, the Trustee
will select the particular Securities to be redeemed pro rata, by lot or by
another method the Trustee deems fair and appropriate.

Unless the Company defaults in payment of the Redemption Price, on and after the
Redemption Date, interest will cease to accrue on the Securities or portions of
such Securities called for redemption.

 

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In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

In case of any redemption at the election of the Company of the Securities, the
Company shall, as soon as practicable after the determination thereof but at
least one Business Day prior to the Redemption Date, notify the Trustee of the
Redemption Price. For purposes of Section 1104 of the Indenture, the notice of
redemption given by the Trustee to each Holder of Securities of this series to
be redeemed need not set forth the Redemption Price but need only set forth the
manner of calculation thereof.The Indenture contains provisions for certain
restrictive covenants and Events of Default with respect to this Security, in
each case, upon compliance with certain conditions set forth in the Indenture.

If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of more than 50% in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of

 

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principal hereof or any premium or interest hereon on or after the respective
due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.

As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.

 

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ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:

                                                                               
                                        
                                        
                                        
                                                            

                                                                               
                                        
                                        
                                        
                                                            

(Insert assignee’s social security or taxpayer identification number)

                                                                               
                                        
                                        
                                        
                                                            

                                                                               
                                        
                                        
                                        
                                                            

                                                                               
                                        
                                        
                                        
                                                            

(Insert address and zip code of assignee)

and irrevocably appoints

                                                                               
                                        
                                        
                                        
                                                            

                                                                               
                                        
                                        
                                        
                                                            

                                                                               
                                        
                                        
                                        
                                                            

agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him or her.

Date:                     

 

Signature:     Signature Guarantee:    

(Sign exactly as your name appears on the other side of this Security)

 

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SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or such
other “signature guarantee program” as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

By:       

Name

 

Title:

 

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SCHEDULE OF INCREASES OR DECREASES IN THIS SECURITY

The following increases or decreases in a part of this Security have been made:

 

Date

 

Amount of decrease in
principal amount of this
Security

 

Amount of increase in
principal amount of this
Security

   Principal amount of this
Security following such
decrease (or increase)    Signature of authorized
officer of Trustee