Note Deed, dated as of October 22, 2008



			
		 	Exhibit 10.1

 Note Deed 
 Date 
 Parties 
  

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

  

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

 Recitals 
  

	 	A	The Note Issuer, QBE Holdings (AAP) Pty Limited (the Purchaser) and the Noteholder are parties to a Share Sale Agreement dated 14 August 2008, pursuant to which
the Purchaser has agreed to purchase all of the shares in PMI Mortgage Insurance Australia (Holdings) Pty Limited ABN 98 087 483 958 (the Share Sale Agreement). 

  

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

 It is agreed as follows. 
  

	1.	Definitions and Interpretation 

  

	1.1	Definitions 

 The following definitions apply unless
the context requires otherwise: 
 Business Day means any day other than Saturday, Sunday or any other day on which banks in the
city of New York, USA or Sydney, Australia are required to close. 
 Governmental Entity means any government or representative
of a government or any governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, agency, instrumentality, board or tribunal, whether federal, state, territorial or local and whether
Australian or foreign. It includes the Australian Securities and Investments Commission, the Australian Competition and Consumer Commission, the Australian Prudential Regulation Authority and the Australian Securities Exchange (and any other
securities exchange). 
 HK Note means the note deed issued pursuant to and in accordance with the HK Sale Agreement between the
Note Issuer and The PMI Group, Inc. 
 HK Sale Agreement means the share sale deed dated on or around 29 August 2008
between The PMI Group, Inc., QBE Holdings (AAP) Pty Limited and QBE Insurance Group Limited in relation to the sale of the shares in PMI Mortgage Insurance Asia Limited. 






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

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


  

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

  

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

  

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

  

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


  

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

 Interest Period means: 
  

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

  

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

 Interest Rate means 3.7875%, being 3 month US LIBOR plus 1% per annum as at 1 July 2008. 
 Issue Date means the date of this Deed. 
 Note means the debt obligation of the Note Issuer representing the right of the Noteholder to receive the Principal under the terms and conditions of, and as evidenced by, this Deed. 
 Principal means the amount specified in clause 2, as adjusted in accordance with clauses 5.1 and 7. 
 Repayment Date means: 
  

	 	(a)	the date elected by the Note Issuer for repayment of the Principal under clause 6.2; and 

  

	 	(b)	the date on which the Principal must be repaid under clause 12; and 

  

	 	(c)	the expiry of the Term. 

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

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

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 Note Deed 
  

	1.2	Interpretation 

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

	 	(a)	The singular includes the plural and conversely. 

  

	 	(b)	A gender includes all genders. 

  

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

  

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

  

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

  

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

  

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

  

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

  

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

  

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

  

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

  

	2.	Creation of Note 

 By this Deed, the Note Issuer
creates the Note on the date of this Deed in favour of the Noteholder with an initial principal amount outstanding on the date of this Deed of US$186,505,850. The principal outstanding and interest payable under the Note may be adjusted in
accordance with the terms and conditions of this Deed and the Share Sale Agreement. 
  

	3.	Term 

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

	4.	Purpose 

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

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 Note Deed 
  

	5.	Interest 

  

	5.1	Calculation of Interest 

  

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

  

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

  

	 	(c)	Interest, which is payable on the Repayment Date, will be calculated on the basis of each Interest Period, then, for the purpose of the calculation, added to, and so form part of
the Principal at the end of each Interest Period (on a compounding basis). 

  

	5.2	Overdue Payments 

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

	6.	Payment Obligations 

  

	6.1	Repayment at end of Term 

 Subject to clause 6.2 and
clause 12, the Note Issuer must repay the Principal (including Interest accrued) on the Repayment Date. 
  

	6.2	Voluntary prepayment 

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

	6.3	Method of payment 

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

	7.	Adjustments to Principal and Interest 

  

	 	(a)	The parties agree that: 

  

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

  

	 	(ii)	subject to completion of the transaction under the HK Sale Agreement in accordance with and subject to its terms (including without limitation the issuing of the HK Note), and to
the extent that there is an Australian Note Shortfall as defined in the Share Sale Agreement, then the Principal and Interest will be reduced to the extent and in accordance with the mechanism provided for in Schedule 11 of the Share Sale Agreement;
and 

  

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 Note Deed 
  

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

  

	 	(b)	The Noteholder acknowledges that in acting under clause 6(b) of the Share Sale Agreement, the Noteholder will bring the substance of this clause 7 to the attention of potential
investors. 

  

	8.	Taxation 

  

	8.1	Payments made free and clear 

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

	8.2	Additional payments 

 If the Note Issuer is obliged
to make a deduction in respect of Tax from any payment (including the capitalisation of interest under clause 5.1(c)): 
  

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

  

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

  

	9.	Representations and Warranties 

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

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

  

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

  

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

  

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 Note Deed 
  

	10.	Notices 

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

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

  

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

  

			
	 (i)     to Noteholder:
	  	 3003 Oak Road
 Walnut Creek, CA 94597
 United States
  
 Attention: General Counsel
  
 Fax No: +1-925-658-6175

		
	 (ii)    to the Note Issuer:
	  	 Level 2, 82 Pitt Street
 Sydney NSW 2000
 Australia
  
 Attention: Company Secretary
  
 Fax No: +61 2 9231 6104


  

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

  

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

  

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

  

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

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

	11.	Conditions 

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

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 Note Deed 
  

	12.	Events of Default 

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

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

  

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

  

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

  

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

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

	13.	Entire Agreement 

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

	14.	Amendment 

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

	15.	Assignment 

  

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

  

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


  

	16.	Set-off 

  

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

  

	 	(b)	If more than one of the circumstances contemplated by clause 7 of this Deed occurs, at the Note Issuer’s option, it may choose to apply the adjustment under clause 7 in full or
in part, first under either clause 7(a)(i) or 7(a)(ii) and secondly under clause 7(a)(iii). 

  

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 Note Deed 
  

	17.	Further actions 

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

	18.	Counterparts 

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

	19.	Confidentiality 

  

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

  

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

  

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

  

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

  

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

  

	20.	Governing Law 

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

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 Note Deed 
  
 Executed and delivered as a Deed in 
 NOTE ISSUER 

 

					
	Executed as a deed in accordance with section 127 of the Corporations Act 2001 by QBE Insurance Group Limited:	 		 	
			
	/s/ Frank M. O’Halloran	 		 	/s/ Duncan Ramsay
	Director Signature	 		 	Director/Secretary Signature
			
	Frank M. O’Halloran	 		 	Duncan Ramsay
	Print Name	 		 	Print Name

 NOTEHOLDER 
  

					
	Executed as a deed by PMI Mortgage Insurance Co.:	 		 	
			
	/s/ L. Stephen Smith	 		 	/s/ Donald P. Lofe, Jr.
	Director Signature	 		 	Director/Secretary Signature
			
	L. Stephen Smith	 		 	Donald P. Lofe, Jr.
	Print Name	 		 	Print Name

  

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