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                                                                     EXHIBIT 4.1
                              THE PMI GROUP, INC.

                  AMENDED AND RESTATED EQUITY INCENTIVE PLAN

     THE PMI GROUP, INC., having amended and restated The PMI Group, Inc. Equity
Incentive Plan (the "Plan") in its entirety most recently effective as of August
16, 1999, and having amended the restated Plan on two subsequent occasions,
hereby again amends and restates the Plan in its entirety, effective as of June
1, 2000 (except as otherwise described below), as follows:

                                   SECTION 1
                            BACKGROUND AND PURPOSE

     1.1     Background.  The Plan permits the grant of Options, Restricted
             ----------
Stock, Performance Units and Performance Shares. The terms of the Plan, as in
effect prior to June 1, 2000, shall govern any outstanding Awards granted prior
to June 1, 2000.

     1.2     Purpose of the Plan.  The Plan is intended to increase incentives
             -------------------
and to encourage Share ownership on the part of eligible employees of the
Company and its Affiliates, consultants who provide significant services to the
Company and its Affiliates, and directors of the Company who are employees of
neither the Company nor any Affiliate. The Plan also is intended to further the
growth and profitability of the Company. The Plan is intended to permit the
grant of Awards that qualify as performance-based compensation under Section
162(m) of the Code.

                                   SECTION 2
                                  DEFINITIONS

     The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

     2.1     "1934 Act" means the Securities Exchange Act of 1934, as amended.
              --------
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.

     2.2     "Affiliate" means any corporation or any other entity (including,
              ---------
but not limited to, partnerships and joint ventures) controlling, controlled by,
or under common control with the Company.

     2.3     "Award" means, individually or collectively, a grant under the Plan
              -----
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Units, Performance Shares or cash.

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     2.4     "Award Agreement" means the written agreement setting forth the
              ---------------
terms and provisions applicable to each Award granted under the Plan.

     2.5     "Board" means the Board of Directors of the Company.
              -----

     2.6     "Change of Control" means:
              -----------------

             (a)    The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty percent (20%) or more of either (i) the then outstanding
Shares (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following shall not constitute a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, (iv) any beneficial
ownership maintained by (but not additional acquisitions by), The Allstate
Corporation and its subsidiaries, and their respective successors ("Allstate"),
pending such time that Allstate distributes or transfers its current ownership
interest in the Outstanding Company Common Stock and Outstanding Company Voting
Securities as contemplated by the Prospectus dated April 10, 1995, relating to
the initial public offering of the common stock of the Company, or (v) any
acquisition pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2.6. Notwithstanding the foregoing, in
its sole discretion, the Board may increase the twenty percent (20%) threshold
set forth above in this subsection (a) prior to any acquisition of twenty
percent (20%) or more beneficial ownership of the Outstanding Company Common
Stock or the Outstanding Company Voting Securities; provided, that (i) such
increased threshold shall apply only to the acquisition and maintenance of
beneficial ownership by any Person eligible to report such beneficial ownership
at the time of such acquisition on Schedule 13G under the 1934 Act, and (ii) in
the event that any Person initially eligible to so report on Schedule 13G
thereafter ceases to be eligible to so report on Schedule 13G, the occurrence of
the event causing such Person no longer to be eligible to so report shall be
deemed an acquisition by such Person of all of the Outstanding Company Common
Stock and Outstanding Company Voting Securities beneficially owned by such
Person immediately prior to such occurrence; or

             (b)    Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

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             (c)    Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than sixty
percent (60%) of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

             (d)    Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

     Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any Person acquires beneficial ownership of twenty percent
(20%) or more of the Outstanding Company Voting Securities or Outstanding
Company Common Stock as a result of the acquisition of such securities or stock
by the Company, which acquisition reduces the number of the Outstanding Company
Voting Securities or Outstanding Company Common Stock; provided, that if after
such acquisition by the Company such Person (while such Person remains the
beneficial owner of twenty percent (20%) or more of the Outstanding Company
Voting Securities or Outstanding Company Common Stock) becomes the beneficial
owner of additional shares of such Outstanding Company Voting Securities or
Outstanding Company Common Stock (as the case may be), a Change of Control shall
then occur. Capitalized terms used in this Section 2.6, not otherwise defined,
shall have the meaning set forth in the form of change of control employment
agreement approved at the February 12, 1998 meeting of the Board.

     2.7     "Code" means the Internal Revenue Code of 1986, as amended.
              ----
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated thereunder,
and any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

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     2.8     "Committee" means the committee appointed by the Board (pursuant to
              ---------
Section 3.1) to administer the Plan.  Unless otherwise determined by the Board,
the Compensation Committee of the Board shall constitute the Committee.

     2.9     "Company" means The PMI Group, Inc., a Delaware corporation, or any
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successor thereto.

     2.10    "Consultant" means any consultant, independent contractor, or other
              ----------
person who provides significant services to the Company or any of its
Affiliates, but who is neither an Employee nor a Director.

     2.11    "Deferred Option Compensation Account" means an account established
              ------------------------------------
in the name of the Participant on the books and records of the Company pursuant
to Section 5.10 or 8.5 (as applicable).

     2.12    "Director" means any individual who is a member of the Board.
              --------

     2.13    "Disability" means a permanent and total disability within the
              ----------
meaning of Section 22(e)(3) of the Code, provided that in the case of Awards
other than Incentive Stock Options, the Committee in its discretion may
determine whether a permanent and total disability exists in accordance with
uniform and non-discriminatory standards adopted by the Committee from time to
time.

     2.14    "Employee" means any employee of the Company or of any Affiliate.
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     2.15    "Exercise Price" means the price at which a Share may be purchased
              --------------
by a Participant pursuant to the exercise of an Option.

     2.16    "Fair Market Value" means the arithmetic mean between the highest
              -----------------
and lowest per share selling prices of Shares, as quoted in the New York Stock
Exchange Composite Transactions Index on the relevant date, or if there were no
sales on such date, the arithmetic mean of the highest and lowest quoted per
share selling prices of Shares on the nearest day before and the nearest day
after the relevant date, as determined by the Committee.

     2.17    "Fiscal Year" means the fiscal year of the Company.
              -----------

     2.18    "Grant Date" means, with respect to a particular Award, the date on
              ----------
which the Award was granted. In the case of Awards granted to Employees and
Consultants, the "Grant Date" shall be the date on which the Committee approves
the material terms of the Award or such later date as the Committee, in its
discretion, may determine.

     2.19    "Incentive Stock Option" means an option to purchase Shares that is
              ----------------------
designated as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.

     2.20    "Non-employee Director" means a Director who is not an Employee.
              ---------------------

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     2.21    "Nonqualified Stock Option" means an option to purchase Shares that
              -------------------------
is not intended to be an Incentive Stock Option.

     2.22    "Option" means an Incentive Stock Option or a Nonqualified Stock
              ------
Option.

     2.23    "Participant" means an Employee, Consultant or Non-employee
              -----------
Director who has an outstanding Award.

     2.24    "Performance Goals" means the goal(s) (or combined goal(s))
              -----------------
determined by the Committee (in its discretion) to be applicable to a
Participant with respect to an Award. As determined by the Committee, the
Performance Goals applicable to an Award may provide for a targeted level or
levels of achievement using one or more of the following measures: (a) Cash
Operating Earnings Per Share, (b) Earnings Per Share, (c) Expense Ratio, (d)
Loss Ratio, (e) Market Share, (f) Net Income, (g) Net Operating Income Earnings
Per Share, (h) Net Operating Income Per Share, (i) New Insurance Written, (j)
Price to Earnings Ratio, (k) Return on Average Equity, (l) Risk in Force, and
(m) Total Shareholder Return. The Performance Goals may differ from Participant
to Participant and from Award to Award. Any criteria used may be measured in
absolute terms or as compared to another company or companies. Any criteria used
may be measured against the performance of the Company as a whole or a segment
of the Company.

     2.25    "Performance Period" means any period of not less than twelve
              ------------------
consecutive calendar months, as determined by the Committee, in its sole
discretion.

     2.26    "Performance Share" means an Award granted to a Participant
              -----------------
pursuant to Section 7.

     2.27    "Performance Unit" means an Award granted to a Participant pursuant
              ----------------
to Section 7.

     2.28    "Period of Restriction" means the period during which Shares of
              ---------------------
Restricted Stock are subject to forfeiture and/or restrictions on
transferability.

     2.29    "Plan" means The PMI Group, Inc. Amended and Restated Equity
              ----
Incentive Plan, as set forth in this instrument and as heretofore or hereafter
amended from time to time.

     2.30    "Restricted Stock" means an Award granted to a Participant pursuant
              ----------------
to Section 6.

     2.31    "Retirement" means, in the case of an Employee: (a) a Termination
              ----------
of Service occurring on or after age sixty-five (65), (b) a Termination of
Service at or after age fifty-five (55) with at least ten (10) Years of Vesting
Service (as defined in The PMI Group, Inc. Retirement Plan, as amended), or (c)
a Termination of Service approved by the Company as an early retirement;
provided that in the case of a Section 16 Person, such early retirement must be
approved by the Committee. In the case of a Consultant, no Termination of
Service shall be deemed to be on account of "Retirement."

     2.32    "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and
              ----------
any future regulation amending, supplementing or superseding such regulation.

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     2.33    "Section 16 Person" means a person who, with respect to the Shares,
              -----------------
is subject to Section 16 of the 1934 Act.

     2.34    "Shares" means shares of the Company's common stock, $.01 par
              ------
value.

     2.35    "Stock Unit" means a bookkeeping entry initially representing an
              ----------
amount equivalent to the Fair Market Value of one Share covered by the exercise
of an Option in respect of which the Participant has made a deferral election
pursuant to Section 5.10 or 8.5 (as applicable). Stock Units represent an
unfunded and unsecured obligation of the Company.

     2.36    "Subsidiary" means any corporation in an unbroken chain of
              ----------
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

     2.37    "Termination of Service" means (a) in the case of an Employee, a
              ----------------------
cessation of the employee-employer relationship between the Employee and the
Company or an Affiliate for any reason, including, but not by way of limitation,
a termination by resignation, discharge, death, Disability, Retirement, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous reemployment by the Company or an Affiliate; (b) in the case
of a Consultant, a cessation of the service relationship between the Consultant
and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous re-engagement of the consultant by the Company or an
Affiliate, and (c) in the case of a Non-employee Director, a cessation of the
Director's service on the Board for any reason, including, but no by way of
limitation, a termination by resignation, death, Disability or retirement.

                                   SECTION 3
                                ADMINISTRATION

     3.1     The Committee.  The Plan shall be administered by the Committee.
             -------------
The Committee shall consist of two (2) or more Directors who shall be appointed
from time to time by, and shall serve at the pleasure of, the Board. Each member
of the Committee shall qualify as (a) a "non-employee director" under Rule 16b-
3, and (b) an "outside director" under Section 162(m) of the Code. If it is
later determined that one or more members of the Committee do not so qualify,
actions taken by the Committee prior to such determination shall be valid
despite such failure to qualify.

     3.2     Authority of the Committee.  It shall be the duty of the Committee
             --------------------------
to administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees and Consultants shall be granted Awards, (b)
prescribe the terms and conditions of the Awards, (c) interpret the Plan and the
Awards, (d) adopt such procedures and subplans as are necessary or appropriate
to permit participation in the Plan by Employees, Consultants and Non-employee
Directors who are foreign nationals or employed outside of the United States,
(e) adopt rules for the administration,

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interpretation and application of the Plan as are consistent therewith, and (f)
interpret, amend or revoke any such rules. Except as provided in Section 4.3,
after an Award has been granted, the Committee shall not reduce the Exercise
Price of the Award (or cancel the Award and grant a substitute Award having a
lower Exercise Price).

     3.3     Delegation by the Committee.  The Committee, in its sole discretion
             ---------------------------
and on such terms and conditions as it may provide, may delegate all or any part
of its authority and powers under the Plan to one or more Directors and/or
officers of the Company; provided, however, that the Committee may not delegate
its authority and powers (a) with respect to Section 16 Persons, or (b) with
respect to Awards which are intended to qualify as performance-based
compensation under Section 162(m) of the Code.

     3.4     Decisions Binding.  All determinations and decisions made by the
             -----------------
Committee, the Board, and any delegate thereof, pursuant to the provisions of
the Plan shall be final, conclusive, and binding on all persons, and shall be
given the maximum deference permitted by law.

                                   SECTION 4
                          SHARES SUBJECT TO THE PLAN

     4.1     Number of Shares.  Subject to adjustment as provided in Section
             ----------------
4.3, the total number of Shares available for grant under the Plan is 8,000,000.
Notwithstanding the preceding sentence, the aggregate number of Shares subject
to Awards of Restricted Stock granted under the Plan shall not exceed 135,000
and the aggregate number of Shares subject to Awards of Performance Units and
Performance Shares granted under the Plan shall not exceed 135,000. Shares
granted under the Plan may be either authorized but unissued Shares or treasury
Shares.

     4.2     Lapsed Awards.  If an Award (or an Award under the Company's Stock
             -------------
Plan for Non-Employee Directors (the "Director Plan")) is settled in cash, or
terminates, expires, or lapses for any reason, any Shares subject to such Award
again shall be available to be the subject of an Award. In addition, if any
Shares are tendered to the Company (whether by physical delivery or attestation)
as full or partial payment for the exercise of an Option or in satisfaction of a
tax withholding obligation pursuant to an Award, only the net Shares issued
shall be deemed delivered for purposes of determining the maximum number of
Shares that may be delivered under Section 4.1.

     4.3     Adjustments in Awards and Authorized Shares.  In the event of any
             -------------------------------------------
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other change in the
corporate structure of the Company affecting the Shares, the Committee shall
adjust the number and class of Shares which may be delivered under the Plan, the
number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Section 5.1, 6.1, 7.1, 8.1 and 9.1, in such manner as the
Committee (in its sole discretion) shall determine to be appropriate to prevent
the dilution or diminution of such Awards. Notwithstanding the preceding, the
number of Shares subject to any Award always shall be a whole number.

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                                   SECTION 5
                                 STOCK OPTIONS

     5.1     Grant of Options.  Subject to the terms and provisions of the Plan,
             ----------------
Options may be granted to Employees and Consultants at any time and from time to
time as determined by the Committee in its sole discretion. The Committee, in
its sole discretion, shall determine the number of Shares subject to each
Option, provided that during any Fiscal Year, no Participant shall be granted
Options covering more than 300,000 Shares. The Committee may grant Incentive
Stock Options, Nonqualified Stock Options, or a combination thereof.

     5.2     Award Agreement.  Each Option shall be evidenced by an Award
             ---------------
Agreement (satisfactory to the Committee) that shall specify the Exercise Price,
the expiration date of the Option, the number of Shares to which the Option
pertains, any conditions to exercise of the Option, and such other terms and
conditions as the Committee, in its discretion, shall determine. The Award
Agreement also shall specify whether the Option is intended to be an Incentive
Stock Option or a Nonqualified Stock Option.

     5.3     Exercise Price.  Subject to the provisions of this Section 5.3, the
             --------------
Exercise Price of each Option shall be determined by the Committee in its sole
discretion.

             5.3.1   Nonqualified Stock Options.  In the case of a Nonqualified
                     --------------------------
Stock Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date.

             5.3.2   Incentive Stock Options.  In the case of an Incentive Stock
                     -----------------------
Option, the Exercise Price shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share on the Grant Date; provided, however, that if
on the Grant Date, the Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code) owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the Exercise Price
shall be not less than one hundred and ten percent (110%) of the Fair Market
Value of a Share on the Grant Date.

             5.3.3   Substitute Options.  Notwithstanding the provisions of
                     ------------------
Sections 5.3.1 and 5.3.2, in the event that the Company or an Affiliate
consummates a transaction described in Section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons who
become Employees or Consultants on account of such transaction may be granted
Options in substitution for options granted by their former employer. If such
substitute Options are granted, the Committee, in its sole discretion and
consistent with Section 424(a) of the Code, shall determine the exercise price
of such substitute Options.

     5.4     Expiration of Options.
             ---------------------

             5.4.1   Expiration Dates.  Each Option shall terminate no later
                     ----------------
than the first to occur of the following events:

                     (a)    The expiration of ten (10) years from the Grant
Date; or

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                     (b)    The expiration of one (1) year from the date of the
Participant's Termination of Service for a reason other than the Participant's
death, Disability or Retirement; or

                     (c)    The expiration of three (3) years from the date of
the Participant's Termination of Service by reason of Disability; or

                     (d)    The expiration of three (3) years from the date of
the Participant's Retirement (subject to Section 5.8.4 regarding Incentive Stock
Options); or

                     (e)    The date for termination of the Option determined by
the Committee in its sole discretion and set forth in the written Award
Agreement.

             5.4.2   Death of Participant.  Notwithstanding the provisions of
                     --------------------
Section 5.4.1, if a Participant dies prior to the expiration of his or her
Options, the Committee, in its discretion, may provide that his or her Options
shall be exercisable for up to three (3) years after the date of death.

             5.4.3   Committee Discretion.  Subject to the limits of Sections
                     --------------------
5.4.1 and 5.4.2, the Committee, in its sole discretion, (a) shall provide in
each Award Agreement when each Option expires and becomes unexercisable, and (b)
may, after an Option is granted and before such Option expires, extend the
maximum term of the Option (subject to Section 5.8.4 regarding Incentive Stock
Options).

     5.5     Exercisability of Options.  Options shall be exercisable at such
             -------------------------
times and be subject to such restrictions and conditions as the Committee shall
determine in its sole discretion. After an Option is granted, the Committee, in
its sole discretion, may accelerate the exercisability of the Option.

             5.5.1   Special Rule for Retirement, Death and Disability.
                     -------------------------------------------------
Notwithstanding any contrary provision of the Plan, the right to exercise each
Option shall accrue as to one hundred percent (100%) of the Shares subject to
such Option upon the Participant's Termination of Service due to Retirement,
death or Disability.

             5.5.2   Special Rule for Change of Control.  Notwithstanding any
                     ----------------------------------
contrary provision of the Plan, immediately upon the occurrence of a Change of
Control that occurs prior to a Participant's Termination of Service, the right
to exercise each Option then outstanding shall accrue as to one hundred percent
(100%) of the Shares subject to such Option. Notwithstanding the preceding
sentence, if the Committee determines that the acceleration of the vesting of
Options following a Change of Control would cause a Change of Control
transaction to be ineligible for pooling of interests accounting under APB No.
16, which transaction (but for such accelerated vesting) otherwise would have
been eligible for such accounting treatment, the Committee, in its sole
discretion, may determine that no such accelerated vesting shall occur.

     5.6     Payment.  Options shall be exercised by the Participant's delivery
             -------
of a written notice of exercise (satisfactory to the Committee) to the Secretary
of the Company (or its designee), setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares to be purchased.

                                       9
<PAGE>

     Upon the exercise of any Option, the Exercise Price shall be payable to the
Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan.

     Subject to the provisions of Section 5.10, as soon as practicable after
receipt of a written notification of exercise and full payment for the Shares
purchased, the Company shall deliver to the Participant (or the Participant's
designated broker), Share certificates (which may be in book entry form)
representing such Shares.

     5.7     Restrictions on Share Transferability.  The Committee may impose
             -------------------------------------
such restrictions on any Shares acquired pursuant to the exercise of an Option
as it may deem advisable, including, but not limited to, restrictions related to
applicable Federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.

     5.8     Certain Additional Provisions for Incentive Stock Options.
             ---------------------------------------------------------

             5.8.1   Exercisability.  The aggregate Fair Market Value
                     --------------
(determined on the Grant Date(s)) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000.

             5.8.2   Termination of Service.  If any portion of an Incentive
                     ----------------------
Stock Option is exercised more than three (3) months after the Participant's
Termination of Service for any reason other than Disability or death (unless (a)
the Participant dies during such three-month period, and (b) the Award Agreement
or the Committee permits a later exercise), the portion so exercised shall be
deemed a Nonqualified Stock Option. No Incentive Stock Option may be exercised
more than one (1) year after the Participant's Termination of Service by reason
of Disability, unless (i) the Participant dies during such one-year period, and
(ii) the Award Agreement or the Committee permit later exercise).

             5.8.3   Company and Subsidiaries Only.  Incentive Stock Options may
                     -----------------------------
be granted only to persons who are Employees of the Company or a Subsidiary on
the Grant Date.

             5.8.4   Expiration.  No Incentive Stock Option may be exercised
                     ----------
after the expiration of ten (10) years from the Grant Date; provided, however,
that if the Option is granted to an Employee who, together with persons whose
stock ownership is attributed to the Employee pursuant to Section 424(d) of the
Code, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of the stock of the Company or any of its
Subsidiaries, the Option may not be exercised after the expiration of five (5)
years from the Grant Date.

     5.9     Grant of Reload Options.  The Committee may provide in an Award
             -----------------------
Agreement that a Participant who exercises all or part of an Option by payment
of the Exercise Price with already-owned Shares, shall be granted an additional
option (a "Reload Option") for a number of

                                       10
<PAGE>

shares of stock equal to the number of Shares tendered to exercise the
previously granted Option plus, if the Committee so determines, any Shares
withheld or delivered in satisfaction of any tax withholding requirements. As
determined by the Committee, each Reload Option shall (a) have a Grant Date
which is the date as of which the previously granted Option is exercised, and
(b) be exercisable on the same terms and conditions as the previously granted
Option, except that the Exercise Price shall be determined as of the Grant Date.

     5.10    Deferral of Option Proceeds.
             ---------------------------

             5.10.1  Election to Defer Option Proceeds. Notwithstanding any
                     ---------------------------------
contrary provision of the Plan, a Participant who is eligible to defer income
under the Company's Officer Deferred Compensation Plan may elect, at the
discretion of, and in accordance with rules which may be established by, the
Committee, to defer delivery of the proceeds of exercise of an Option which is
exercised by means of an exchange of Shares as described in Section 5.6(a),
provided that the Shares tendered or applied in exercise of such Option shall
have been held by the Participant for at least six (6) months prior to such
exercise. A Participant's election as provided in the preceding sentence shall
be irrevocable. Notwithstanding any other provision of this Section 5.10, a
deferral election made by a Participant pursuant to this Section 5.10.1 shall be
void and shall not be given effect unless (i) the Participant's deferral
election is made at least six (6) full calendar months prior to the calendar
month in which the Option otherwise would expire, (ii) the Participant's
deferral election is made at least six (6) full calendar months prior to the
calendar month in which the Option is exercised, and (iii) the Participant is
employed by or is rendering services to the Company or any of its Subsidiaries
on the date of exercise of the Option. For purposes of either or both of clauses
(i) or (ii) of the preceding sentence, rules established by the Committee may
require an election earlier than the six (6) calendar month period described
therein. Upon exercise of an Option to which a deferral election applies, the
Shares covered by such exercise shall not be issued or transferred to the
Participant, and instead, a number of Stock Units equal to the number of Shares
covered by such exercise and in respect of which the Participant has made a
deferral election, shall be credited to a Deferred Option Compensation Account
at the date of exercise. A separate Deferred Option Compensation Account shall
be maintained with respect to each Participant and to each effective deferral
election.

             5.10.2  Form and Timing of Payment.  Payment of Stock Units shall
                     --------------------------
be made by issuance of Shares on such date or dates or upon the occurrence of
such event or events as the Committee may authorize the Participant to designate
at the time a deferral election under Section 5.10.1 is made, provided, however,
that in no event shall payment occur more than sixty (60) days after a
Participant's Termination of Service for any reason. The number of Shares to be
so distributed may be increased by dividend equivalents, which may be valued as
if reinvested in Shares. Until payment of a Stock Unit is made, the number of
Shares represented by a Stock Unit shall be subject to adjustment pursuant to
Section 4.3.

             5.10.3  Provisions of the Officer Deferred Compensation Plan May
                     --------------------------------------------------------
Govern. To the extent determined by the Committee, any amount deferred under
------
this Section 5.10, and any Deferred Option Compensation Account, may be treated
and held as a portion of the Company's Officer Deferred Compensation Plan, in
which event the provisions of such plan shall govern the

                                       11
<PAGE>

operation and administration of amounts deferred under this Section 5.10 and
credited to Deferred Option Compensation Accounts.

                                   SECTION 6
                               RESTRICTED STOCK

     6.1     Grant of Restricted Stock.  Subject to the terms and provisions of
             -------------------------
the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees and Consultants in such amounts as the Committee,
in its sole discretion, shall determine. The Committee, in its sole discretion,
shall determine the number of Shares to be granted to each Participant, provided
that during any Fiscal Year, no Participant shall be granted more than 15,000
Shares of Restricted Stock.

     6.2     Restricted Stock Agreement.  Each Award of Restricted Stock shall
             --------------------------
be evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, any price to be paid for the Shares, and such
other terms and conditions as the Committee, in its sole discretion, shall
determine. Unless the Committee determines otherwise, Shares of Restricted Stock
shall be held by the Company as escrow agent until the restrictions on such
Shares have lapsed.

     6.3     Transferability.  Shares of Restricted Stock may not be sold,
             ---------------
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.

     6.4     Other Restrictions.  The Committee, in its sole discretion, may
             ------------------
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate, in accordance with this Section 6.4.

             6.4.1   General Restrictions.  The Committee may set restrictions
                     --------------------
based upon the achievement of specific performance objectives (Company-wide,
business unit or individual), applicable federal or state securities laws, or
any other basis determined by the Committee in its discretion.

             6.4.2   Section 162(m) Performance Restrictions.  For purposes of
                     ---------------------------------------
qualifying grants of Restricted Stock as "performance-based compensation" under
Section 162(m) of the Code, the Committee, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Committee on or before the latest date permissible to
enable the Restricted Stock to qualify as "performance-based compensation" under
Section 162(m) of the Code. In granting Restricted Stock which is intended to
qualify under Section 162(m) of the Code, the Committee shall follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).

             6.4.3   Legend on Certificates.  The Committee, in its discretion,
                     ----------------------
may legend the certificates representing Restricted Stock to give appropriate
notice of such restrictions. For example, the Committee may determine that some
or all certificates representing Shares of ed Stock shall bear the following
legend:

                                       12
<PAGE>

          "The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is subject
to certain restrictions on transfer as set forth in The PMI Group, Inc. Equity
Incentive Plan, and in a Restricted Stock Agreement.  A copy of the Plan and
such Restricted Stock Agreement may be obtained from the Secretary of The PMI
Group, Inc."

  6.5     Removal of Restrictions.  Shares of Restricted Stock covered by each
          -----------------------
Restricted Stock grant made under the Plan shall be released from escrow as soon
as practicable after the last day of the Period of Restriction. The Committee,
in its discretion, may accelerate the time at which any restrictions shall
lapse, and remove any restrictions. After the restrictions have lapsed, the
Participant shall be entitled to have any legend or legends under Section 6.4
removed from his or her Share certificate, and the Shares shall be freely
transferable by the Participant.

          6.5.1   Special Rule for Retirement, Death and Disability.
                  -------------------------------------------------
Notwithstanding any contrary provision of the Plan, one hundred percent (100%)
of any outstanding Shares of Restricted Stock shall be one hundred percent
(100%) vested in the Participant upon the Participant's Termination of Service
due to Retirement, death or Disability.

          6.5.2   Special Rule for Change of Control. Notwithstanding any
                  ----------------------------------
contrary provision of the Plan, immediately upon the occurrence of a Change of
Control that occurs prior to a Participant's Termination of Service, one hundred
percent (100%) of any outstanding Shares of Restricted Stock shall be one
hundred percent (100%) vested in the Participant. Notwithstanding the preceding
provisions of this Section 6.5.2, if the Committee determines that the
acceleration of vesting of Restricted Stock following a Change of Control would
cause a Change of Control transaction to be ineligible for pooling of interests
accounting under APB No. 16, which transaction (but for such accelerated
vesting) otherwise would have been eligible for such accounting treatment, the
Committee, in its sole discretion, may determine that no such accelerated
vesting shall occur.

  6.6     Voting Rights.  During the Period of Restriction, Participants holding
          -------------
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless otherwise provided in the Award Agreement.

  6.7     Dividends and Other Distributions.  During the Period of Restriction,
          ---------------------------------
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement.  If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

  6.8     Return of Restricted Stock to Company.  On the date set forth in the
          -------------------------------------
Award Agreement, the Restricted Stock for which restrictions have not lapsed
shall revert to the Company and again shall become available for grant under the
Plan.

                                       13
<PAGE>

                                   SECTION 7
                   PERFORMANCE UNITS AND PERFORMANCE SHARES

  7.1     Grant of Performance Units and Shares.  Performance Units and
          -------------------------------------
Performance Shares may be granted to Employees and Consultants at any time and
from time to time, as shall be determined by the Committee, in its sole
discretion.  The Committee shall have complete discretion in determining the
number of Performance Units and Performance Shares granted to any Participant,
provided that during any Fiscal Year no more than 15,000 Performance Units or
Performance Shares may be granted to any Participant.

  7.2     Initial Value.  Each Performance Unit shall have an initial value that
          -------------
is established by the Committee on or before the Grant Date, provided that such
value shall not exceed the Fair Market Value of a Share on the Grant Date.  Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the Grant Date.

  7.3     Performance Objectives and Other Terms.  The Committee shall set
          --------------------------------------
performance objectives in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Units or Shares
that will be paid out to the Participants.  The Committee may set performance
objectives based upon the achievement of Company-wide, business unit, or
individual goals, or any other basis determined by the Committee in its
discretion.  The time period during which the performance objectives must be met
shall be called the "Performance Period."  Each Award of Performance Units or
Shares shall be evidenced by an Award Agreement that shall specify the
Performance Period, and such other terms and conditions as the Committee, in its
sole discretion, shall determine.

          7.3.1     General Performance Objectives.  The Committee may set
                    ------------------------------
performance objectives based upon the achievement of Company-wide, business unit
or individual goals, or any other basis determined by the Committee in its
discretion.

          7.3.2     Section 162(m) Performance Objectives.  For purposes of
                    -------------------------------------
qualifying grants of Performance Units or Shares as "performance-based
compensation" under Section 162(m) of the Code, the Committee, in its
discretion, may determine that the performance objectives applicable to
Performance Units or Shares shall be based on the achievement of Performance
Goals.  The Performance Goals shall be set by the Committee on or before the
latest date permissible to enable the Performance Units or Shares to qualify as
"performance-based compensation" under Section 162(m) of the Code.  In granting
Performance Units or Shares which are intended to qualify under Section 162(m)
of the Code, the Committee shall follow any procedures determined by it from
time to time to be necessary or appropriate to ensure qualification of the
Performance Units or Shares under Section 162(m) of the Code (e.g., in
determining the Performance Goals).

  7.4     Earning of Performance Units and Performance Shares.  After the
          ---------------------------------------------------
applicable Performance Period has ended, the Participant shall be entitled to
receive a payout of the number of Performance Units or Shares earned during the
Performance Period, depending upon the extent to which the applicable
performance objectives have been achieved.  After the grant of a Performance
Unit or Share, the Committee, in its sole discretion, may reduce or waive any

                                       14
<PAGE>

performance objectives for Award, except with respect to Awards which are
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code.

         7.4.1     Special Rule for Retirement, Death and Disability.
                   -------------------------------------------------
Notwithstanding any contrary provision of the Plan, upon the Participant's
Termination of Service due to Retirement, death or Disability, one hundred
percent (100%) of any outstanding Performance Units or Shares shall be deemed to
be earned and shall be immediately payable to the Participant, or, in cases
where a Participant has received a target award of Performance Units or Shares,
one hundred percent (100%) of the target amount shall vest.

         7.4.2     Special Rule for Change of Control. Notwithstanding any
                   ----------------------------------
contrary provision of the Plan, immediately upon the occurrence of a Change of
Control that occurs prior to a Participant's Termination of Service, one hundred
percent (100%) of any outstanding Performance Units or Shares shall be deemed to
be earned and shall be immediately payable to the Participant, or, in cases
where a Participant has received a target award of Performance Units or Shares,
one hundred percent (100%) of the target amount shall vest. Notwithstanding the
preceding provisions of this Section 7.4.2, if the Committee determines that the
acceleration of vesting of Performance Units or Shares following a Change of
Control would cause a Change of Control transaction to be ineligible for pooling
of interests accounting under APB No. 16, which transaction (but for such
accelerated vesting) otherwise would have been eligible for such accounting
treatment, the Committee, in its sole discretion, may determine that no such
accelerated vesting shall occur.

  7.5    Form and Timing of Payment.  Except as described below, payment of
         --------------------------
earned Performance Units or Performance Shares shall be made as soon as
practicable after the expiration of the applicable Performance Period.  The
Committee, in its sole discretion, may pay such earned Awards in cash, Shares or
a combination thereof.  In addition, the Committee, in its sole discretion, may
permit a Participant to defer receipt of the payment of cash or the delivery of
Shares that would otherwise be delivered to a Participant under this Section
7.5.  Any such deferral elections shall be subject to such rules and procedures
as shall be determined by the Committee in its sole discretion.

  7.6    Cancellation.  On the date set forth in the Award Agreement, all
         ------------
unearned or unvested Performance Units or Performance Shares shall be forfeited
to the Company, and again shall be available for grant under the Plan.

                                   SECTION 8
                         NON-EMPLOYEE DIRECTOR OPTIONS

  The provisions of this Section 8 are applicable only to Nonqualified Stock
Options granted to Non-employee Directors.  The provisions of Section 5 are
applicable to Options granted to Employees and Consultants (and to the extent
provided in Section 8.3, to Non-employee Directors).

  8.1    Grant of Options.
         ----------------

         8.1.1    Initial Grants. Each individual who first becomes a Non-
                  --------------
employee Director on or after June 1, 2000, automatically shall receive, as of
the date that he or she first is

                                       15
<PAGE>

appointed or elected as a Non-employee Director (the "Initial Grant Date"), an
Option to purchase 6,000 Shares.

          8.1.2  Ongoing Grants. Each Non-employee Director who either (a)
                 --------------
has received an initial grant of an Option to purchase 6,000 Shares pursuant to
Section 8.1.1, or (b) was a participant in the Company's Stock Plan for Non-
Employee Directors (the "Director Plan") on May 31, 2000, automatically shall
receive, as of the first business day of each June thereafter (the "Subsequent
Grant Date"), an Option to purchase 3,750 Shares, provided that he or she both
(i) is a Non-employee Director on the Subsequent Grant Date, and (ii) has served
as a Non-employee Director for the entire period since the last Grant Date under
this Plan or the Director Plan (as applicable).

     8.2  Terms of Options.
          ----------------

          8.2.1  Award Agreement.  Each Option granted pursuant to this Section
                 ---------------
8 shall be evidenced by an Award Agreement (satisfactory to the Committee),
which shall be executed by the Participant and the Company.

          8.2.2  Exercise Price.  The Exercise Price for the Shares subject to
                 --------------
each Option granted pursuant to this Section 8 shall be one hundred percent
(100%) of the Fair Market Value of such Shares on the Grant Date.

          8.2.3  Exercisability.
                 --------------

                 (a) Each Option granted pursuant to Section 8.1.1 shall become
exercisable as to 2,000 Shares on the first anniversary of the Grant Date, as to
an additional 2,000 Shares on the second anniversary of the Grant Date, and as
to the remaining 2,000 Shares on the third anniversary of the Grant Date.

                 (b) Each Option granted pursuant to Section 8.1.2 shall become
exercisable as to one hundred percent (100%) of the Shares subject to such
Option on the first anniversary of the Grant Date.

Notwithstanding the foregoing, once a Participant ceases to be a Director, his
or her Options which are not then exercisable shall never become exercisable and
shall be immediately forfeited, except to the limited extent provided in
Sections 8.2.5 and 8.2.6.

          8.2.4  Expiration Dates. Each Option granted pursuant to this
                 ----------------
Section 8 shall terminate upon the first to occur of the following events:

                 (a) The expiration of ten (10) years from the Grant Date; or

                 (b) The expiration of three (3) months from the date of the
Participant's Termination of Service prior to age seventy (70) for any reason
other than the Participant's death or Disability, provided that the Committee,
in its discretion, may extend such three-month period to a maximum of ten (10)
years; or

                                       16
<PAGE>

               (c)  The expiration of two (2) years from the date of the
Participant's Termination of Service by reason of Disability; or

               (d)  The expiration of five (5) years from the date of the
Participant's Termination of Service at or after age seventy (70) for any reason
other than the Participant's death or Disability; or

               (e)  The date for termination of the Option determined by the
Committee in its sole discretion and set forth in the written Award Agreement.

       8.2.5   Death of Participant. Notwithstanding the provisions of Section
               --------------------
8.2.4, if a Participant dies prior to the expiration of his or her Options in
accordance with Section 8.2.4, then his or her Options that are then exercisable
shall terminate two (2) years after the date of death.

       8.2.6   Special Rule for Retirement, Death, Disability, Resignation and
               ---------------------------------------------------------------
Non-Reelection.  Notwithstanding any contrary Plan provision, the right to
--------------
exercise each Option granted pursuant to this Section 8 shall accrue as to one
hundred percent (100%) of the Shares subject to such Option upon the
Participant's death, Disability, Retirement, resignation or non-reelection to
the Board.

  8.3  Other Terms.  All provisions of the Plan not inconsistent with this
       -----------
Section 8 shall apply to Options granted to Non-employee Directors.

  8.4  Not Incentive Stock Options.  Options granted pursuant to this Section
       ---------------------------
8 shall not be designated as Incentive Stock Options.

  8.5  Deferral of Option Proceeds.
       ---------------------------

       8.5.1   Election to Defer Option Proceeds.  Notwithstanding any contrary
               ---------------------------------
provision of the Plan, a Participant who is eligible to defer income under the
Company's Directors' Deferred Compensation Plan may elect, at the discretion of,
and in accordance with rules which may be established by the Committee, to defer
delivery of the proceeds of exercise of an Option which is exercised by means of
an exchange of Shares as described in Section 5.6(a), provided that the Shares
tendered or applied in exercise of such Option shall have been held by the
Participant for at least six (6) months prior to such exercise.  A Participant's
election as provided in the preceding sentence shall be irrevocable.
Notwithstanding any other provision of this Section 8.5 to the contrary, a
deferral election made by a Participant pursuant to this Section 8.5 shall be
void and shall not be given effect unless (i) the Participant's deferral
election is made at least six (6) full calendar months prior to the calendar
month in which the Option otherwise would expire, (ii) the Participant's
deferral election is made at least six (6) full calendar months prior to the
calendar month in which the Option is exercised, and (iii) the Participant is
serving as a Non-employee Director on the date of exercise of the Option.  For
purposes of either or both of clauses (i) or (ii) of the preceding sentence,
rules established by the Committee may require an election earlier than the six
(6) calendar month period described therein.  Upon exercise of an Option to
which a deferral election applies, the Shares covered by such exercise shall not
be issued or transferred to the Participant, and instead, a number of Stock
Units equal to the number of Shares covered by such exercise and in respect of
which the

                                       17
<PAGE>

Participant has made a deferral election, shall be credited to a Deferred Option
Compensation Account at the date of exercise. A separate Deferred Option
Compensation Account shall be maintained with respect to each Participant and to
each effective deferral election.

          8.5.2   Form and Timing of Payment. Payment of Stock Units shall be
                  --------------------------
made by issuance of Shares on such date or dates or upon the occurrence of such
event or events as the Committee may authorize the Participant to designate at
the time a deferral election under Section 8.5.1 is made, provided, however,
that in no event shall payment occur more than sixty (60) days after a
Participant's Termination of Service for any reason. The number of Shares to be
so distributed may be increased by dividend equivalents, which may be valued as
if reinvested in Shares. Until payment of a Stock Unit is made, the number of
Shares represented by a Stock Unit shall be subject to adjustment pursuant to
Section 4.3.

          8.5.3   Provisions of the Directors' Deferred Compensation Plan May
                  -----------------------------------------------------------
Govern.  To the extent determined by the Committee, any amount deferred under
------
this Section 8.5, and any Deferred Option Compensation Account, may be treated
and held as a portion of the Company's Directors' Deferred Compensation Plan, in
which event the provisions of such plan shall govern the operation and
administration of amounts deferred under this Section 8.5 and credited to
Deferred Option Compensation Accounts.

                                   SECTION 9
                    NON-EMPLOYEE DIRECTOR RESTRICTED STOCK

     9.1  Grant of Restricted Stock.  Each Non-employee Director automatically
          -------------------------
shall receive (a) as of his or her Initial Grant Date (as defined in Section
8.1.1), an Award of 37.5 Shares of Restricted Stock for each full month of
service on the Board until the next Grant Date, and (b) as of each Subsequent
Grant Date (as defined in Section 8.1.2), an Award of 450 Shares of Restricted
Stock, provided that he or she is a Non-employee Director on each such Grant
Date.  Notwithstanding the foregoing, the number of Shares granted to any Non-
employee Director on any Grant Date shall be reduced if and as necessary so that
the Fair Market Value of the Shares does not exceed $30,000 on the Grant Date.
A Non-employee Director who joins the Board on or before the 15/th/ day of the
month will receive credit for service for the full month.

     9.2  Restricted Stock Escrow.  Except as provided in this Section 9, Shares
          -----------------------
of Restricted Stock shall not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated by the Participant until six (6) months
after the applicable Grant Date.  Unless the Committee determines otherwise,
Shares of Restricted Stock shall be either (a) held by the Company as escrow
agent until such six-month period expires, or (b) affixed with an appropriate
legend restricting the sale transfer pledge, assignment or other alienation or
hypothecation of such Shares by the Participant until the expiration of the six
month period.

     9.3  Voting and Other Rights.  After Shares of Restricted Stock have been
          -----------------------
granted, the Participant may exercise full voting rights with respect to such
Shares.  A Participant shall be entitled to receive all dividends and other
distributions paid in Shares.  If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability that are provided in Section 9.2.

                                       18
<PAGE>

     9.4  Cash Payment for Income Taxes.  As soon as practicable after each
          -----------------------------
Grant Date, the Company shall pay to each Non-employee Director, in cash or its
equivalent, an amount equal to the expected increase in his or her federal state
and local income tax liability due to the Shares granted to the Participant on
such Grant date.  The formula for determining each such cash payment shall be
adopted by the Committee (in it discretion) from time to time, but in each case
shall assume that the maximum prevailing income tax rates apply to the
Participant.

                                  SECTION 10
                                 MISCELLANEOUS

     10.1 Deferred Option Compensation Accounts.
          -------------------------------------

          10.1.1  Participants Remain Unsecured Creditors. Participants have the
                  ---------------------------------------
status of general unsecured creditors of the Company with respect to their
Deferred Option Compensation Accounts (if any), and such accounts constitute a
mere promise by the Company to make payments with respect thereto.

          10.1.2  Nontransferability of Deferred Option Compensation Accounts. A
                  -----------------------------------------------------------
Participant's right to benefit payments with respect to their Deferred Option
Compensation Accounts (if any) may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, attached or garnished by creditors
of the Participant or the Participant's beneficiary and any attempt to do so
shall be void and shall not be given effect.

     10.2 No Effect on Employment or Service.  Nothing in the Plan shall
          ----------------------------------
interfere with or limit in any way the right of the Company or any Affiliate to
terminate any Participant's employment or service at any time, with or without
cause.  For purposes of the Plan, the transfer of employment of a Participant
between the Company and any one of its Affiliates (or between Affiliates) shall
not be deemed a Termination of Service.  Employment or service with the Company
and its Affiliates is on an at-will basis only.

     10.3 Participation.  No Employee or Consultant shall have the right to be
          -------------
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive any future Award.

     10.4 Indemnification.  Each person who is or shall have been a member of
          ---------------
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf.  The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of

                                       19
<PAGE>

Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under
any power that the Company may have to indemnify them or hold them harmless.

  10.5    Successors.  All obligations of the Company under the Plan, with
          ----------
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.

  10.6    Beneficiary Designations.  If permitted by the Committee, a
          ------------------------
Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee.  In the absence of any such designation, any vested benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate and, subject to the terms of the Plan and of the applicable Award
Agreement, any unexercised vested Award may be exercised by the administrator or
executor of the Participant's estate.

  10.7    Limited Transferability of Awards.  No Award granted under the Plan
          ---------------------------------
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will, by the laws of descent and distribution, or to
the limited extent provided in Section 10.6.  All rights with respect to an
Award granted to a Participant shall be available during his or her lifetime
only to the Participant.  Notwithstanding the foregoing, the Participant may, in
a manner specified by the Committee, transfer a Nonqualified Stock Option by
bona fide gift and not for any consideration, to (a) a member of the
Participant's immediate family,  (b) a trust or other entity for the exclusive
benefit of the Participant and/or a member or members of the Participant's
immediate family, (c) a partnership, limited liability company or other entity
whose only partners or members are the Participant and/or a member or members of
the Participant's immediate family, or (d) a tax-qualified, not for profit
organization.

  10.8    No Rights as Stockholder.  Except to the limited extent provided in
          ------------------------
Sections 6.6, 6.7, and 9.3, no Participant (nor any beneficiary) shall have any
of the rights or privileges of a stockholder of the Company with respect to any
Shares issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).

  10.9    Withholding Requirements.  Prior to the delivery of any Shares or cash
          ------------------------
pursuant to an Award (or exercise thereof), the Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).  Notwithstanding any contrary
provision of the Plan, if a Participant fails to remit to the Company such
withholding amount within the time period specified by the Committee (in its
discretion), the Participant's Award may, in the Committee's discretion, be
forfeited and in such case the Participant shall not receive any of the Shares
subject to such Award.

                                       20
<PAGE>

  10.10   Withholding Arrangements.  The Committee, in its sole discretion and
          ------------------------
pursuant to such procedures as it may specify from time to time, may permit or
require a Participant to satisfy all or part of the tax withholding obligations
in connection with an Award by (a) having the Company withhold otherwise
deliverable Shares, or (b) delivering to the Company already-owned Shares having
a Fair Market Value equal to the amount required to be withheld.  The amount so
withheld shall not exceed the amount determined by using the minimum federal,
state, local or foreign jurisdiction statutory withholding rates applicable to
the Participant with respect to the Award on the date that the amount of tax to
be withheld is to be determined.  The Fair Market Value of the Shares to be
withheld or delivered shall be determined as of the date that the taxes are
required to be withheld.

                                  SECTION 11
                      AMENDMENT, TERMINATION AND DURATION

  11.1    Amendment, Suspension or Termination.  The Board, in its sole
          ------------------------------------
discretion, may amend or terminate the Plan, or any part thereof, at any time
and for any reason. The amendment, suspension or termination of the Plan shall
not, without the consent of the Participant, alter or impair any rights or
obligations under any Award theretofore granted to such Participant.  No Award
may be granted during any period of suspension or after termination of the Plan.

  11.2    Duration of the Plan.  The Plan shall become effective as of the date
          --------------------
specified herein, and subject to Section 11.1 (regarding the Board's right to
amend or terminate the Plan), shall remain in effect thereafter.  However,
without further stockholder approval, no Incentive Stock Option may be granted
under the Plan after May 31, 2010.

                                  SECTION 12
                              LEGAL CONSTRUCTION

  12.1    Gender and Number.  Except where otherwise indicated by the context,
          -----------------
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

  12.2    Severability.  In the event any provision of the Plan shall be held
          ------------
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

  12.3    Requirements of Law.  The granting of Awards and the issuance of
          -------------------
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

  12.4    Governing Law.  The Plan and all Award Agreements shall be construed
          -------------
in accordance with and governed by the laws of the State of California, but
without regard to its conflict of law provisions.

  12.5    Captions.  Captions are provided herein for convenience only, and
          --------
shall not serve as a basis for interpretation or construction of the Plan.

                                       21
<PAGE>

                                   EXECUTION


     IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
executed the Plan on the date indicated below.

                                   THE PMI GROUP, INC.

     Dated: June 11, 2001          By  /s/ Charles Broom
                                   Name: Charles Broom
                                   Title: HR VP

                                       22
<PAGE>

                              AMENDMENT NO. 1 TO
                              THE PMI GROUP, INC.
                             AMENDED AND RESTATED
                             EQUITY INCENTIVE PLAN


     THE PMI GROUP, INC., having adopted The PMI Group, Inc. Amended and

Restated Equity Incentive Plan effective as of June 1, 2000 (the "Plan"), hereby

amends the Plan effective as of May 17, 2001, as follows:

     1.       Section 8.2.4(b) and (c) are amended in their entirety to read as
              follows:

     "(b) The expiration of five (5) years from the date of the Participant's
     Termination of Service prior to age seventy (70) for any reason other than
     the Participant's death or Disability, provided that the Committee, in its
     discretion, may extend such five-year period to a maximum of ten (10)
     years; or

     (c)  The expiration of five (5) years from the date of the Participant's
     Termination of Service by reason of Disability; or"

     2.       Section 8.2.5 is amended in its entirety to read as follows:

     "8.2.5   Death of Participant.   Notwithstanding the provisions of Section
     8.2.4, if a Participant dies prior to the expiration of his or her Options
     in accordance with Section 8.2.4, then his or her Options that are then
     exercisable shall terminate five (5) years after the date of death."

     IN WITNESS WHEREOF, The PMI Group, Inc., by its duly authorized officer,

has executed this Amendment No. 1 to the Plan on the date indicated below.

                                    THE PMI GROUP, INC.


Dated: June 11, 2001                By  /s/ Charles Broom
                                    Title:  Vice President, Human Resources