**Exhibit 10.3**

 

Credit SuisseFirst Boston (USA), Inc.c/o Credit Suisse First Boston LLCOne Madison Avenue, 9th FloorNew York, New York 10010

 

August 12, 2005

 

VIA FAX 925-658-6175

The PMI Group, Inc.

PMI Plaza

3003 Oak Road

Walnut Creek, CA  94597

Attention:  General Counsel

 

VIA FAX 212-339-0849

FSA Portfolio ManagementInc.,

c/o Financial SecurityAssurance Holdings Ltd.

31 West 52nd Street

New York, New York  10019

Attention:  General Counsel

 

VIA FAX 203 655 - 6044

Greenrange Partners LLC

114 Goodwives River Rd.

Darien, CT 06820

Attention:  James H. Ozanne

 

VIA FAX (801) 293-3907

SPS Holding Corp.

P. O. Box 65250

Salt Lake City, UT 84165-0250

Attention:  General Counsel

 

**RE:  Exercise Notice**

 

Ladies and Gentlemen:

 

Reference is made to thatcertain Option Agreement, dated as of August 12, 2005, by and among CreditSuisse First Boston (USA), Inc. (the “Optionee”), SPS Holding Corp., ThePMI Group, Inc., FSA Portfolio Management Inc., and Greenrange PartnersLLC (the “Option Agreement”).  Certaincapitalized terms used herein shall have the meanings assigned to them inOption Agreement.

 

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Pursuant to Section 3.1(a) ofthe Option Agreement, and subject to Section 3.1(b) of the OptionAgreement, the Optionee hereby exercises the Option to purchase the OptionShares for the Exercise Price in accordance with the terms of the Option Agreement.  Please be advised that the Measurement Dateshall be September 30, 2005.

 

 
| Sincerely,                                   |               |
|----------------------------------------------|--------------------|
|                                         |               |
|                                         |               |
| Credit Suisse First  Boston (USA), Inc. |               |
|                                         |               |
|                                         |               |
| By:                                          | /s/ James P. Healy |   |   |
|                                         | James P. Healy     |   |
|                                         | Managing Director  |   |
|                                              |                    |  |  |  |

 

 

cc:

 

VIA FAX 713-437-5370

Bracewell &Giuliani LLP

711 Louisiana Street, Suite 2300

Houston, Texas  77002

Attention:  William S. Anderson

 

VIA FAX (202) 778-9100

Thomas F. Cooney, III

Kirkpatrick &Lockhart Nicholson Graham LLP

1800 MassachusettsAvenue, N.W.

Second Floor

Washington, D.C.  20036

 

2

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Acknowledgement ofReceipt of Acceptance

 

Receipt of the foregoingnotice of acceptance delivered by Credit Suisse First Boston (USA), Inc.on August 12, 2005 with respect to the exercise of the Option to purchasethe Option Shares is hereby acknowledged this 12th day of August,2005, and such notice is effective to exercise the right to purchase the OptionShares.  This Acknowledgement of Receiptof Acceptance may be executed in counterparts.

 

 
|   | The PMI  Group, Inc.                                                         |
|--------|-----------------------------------------------------------------------------------|
|   |                                                                              |
|   |                                                                              |
|   | /s/ Victor J.  Bacigalupi                                                         |   |
|   | Name: Victor J.  Bacigalupi                                                       |
|   | Title Executive Vice  President, Chief Administrative Officer and General Counsel |
|   |                                                                              |
|   |                                                                              |
|   | FSA Portfolio  Management Inc.                                                    |
|   |                                                                              |
|   |                                                                              |
|   | /s/ Bruce E. Stern                                                                |   |
|   | Name: Bruce E. Stern                                                              |
|   | Title General Counsel  and Managing Director                                      |
|   |                                                                              |
|   | Greenrange Partners LLC                                                           |
|   |                                                                              |
|   |                                                                              |
|   | /s/ James H. Ozanne                                                               |   |
|   | Name:                                                                             |
|   | Title                                                                             |
|   |                                                                              |
|   | SPS Holding Corp.                                                                 |
|   |                                                                              |
|   |                                                                              |
|   | /s/ Matt Hollingsworth                                                            |   |
|   | Name: Matt  Hollingsworth                                                         |
|   | Title CEO                                                                         |

 

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