EX-10.2






EXHIBIT 10.2




PLEDGE AND SECURITY AGREEMENT




THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time to time, this
“Security Agreement”) is entered into as of May 29, 2009 by and between THE PMI GROUP,
INC., a Delaware corporation (the “Company”), and BANK OF AMERICA, N.A., as Administrative
Agent (in such capacity, together with any successor in such capacity, the “Administrative
Agent”) for the financial institutions (the “Lenders”) from time to time party to the
Credit Agreement referred to below (the Lenders, together with the Administrative Agent, are
collectively referred to herein as the “Secured Parties”).



PRELIMINARY STATEMENT




The Company has entered into a Revolving Credit Agreement, dated as of October 24, 2006 (as
amended, restated, supplemented, refinanced or replaced from time to time, including as amended and
restated as of the date of this Agreement, the “Credit Agreement”), with the Administrative
Agent and the Lenders, pursuant to which the Administrative Agent and the Lenders have agreed to
make loans and provide other extensions of credit to the Company from time to time, subject to the
terms and conditions set forth in the Credit Agreement; and



This Pledge and Security Agreement is being made by the Company in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, to secure the payment and performance of the
Secured Obligations (as defined in Article II of this Agreement).



In consideration of the premises set forth herein and in the Loan Documents, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby agrees with the Administrative
Agent for the ratable benefit of the Secured Parties as follows:



ARTICLE I

DEFINITIONS




Section 1.1. Terms Defined in Credit Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms in the Credit
Agreement.



Section 1.2. Terms Defined in UCC. Terms defined in the UCC that are not
otherwise defined in this Security Agreement or the Credit Agreement are used herein as defined in
the UCC.



Section 1.3. Definitions of Certain Terms Used Herein. As used in this
Security Agreement, in addition to the terms defined in the preamble and Preliminary Statement
above, the following terms shall have the following meanings:



 “Article” means a numbered article of this Security Agreement, unless another
document is specifically referenced.



“Australian Deed Polls” means of (x) that certain Deed Poll, dated as of May 29, 2009,
by QBE Lenders’ Mortgage Insurance Limited in favor of the Noteholder (as defined in the QBE Note)
from time to time and the Financiers (as defined therein) and (y) that certain Deed Poll, dated as
of May 29, 2009, by QBE Holdings (AAP) Pty Limited in favor of the Noteholder (as defined in the
QBE Note) from time to time and the Financiers (as defined therein).



“Collateral” shall have the meaning set forth in Article II.



“Control” shall have the meaning set forth in Article 8 of the UCC or, if applicable,
in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.



“Property” means, with respect to any Person, any right, title or interest in or to
property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, whether now in existence or owned or hereafter entered into or acquired.



“QBE Note” means the Note Deed entered into in December 2008 (as amended from time to
time) between QBE Insurance Group Limited and PMI Mortgage Insurance Co. (as transferred from PMI
Mortgage Insurance Co. to the Company).



“QBE Note Purchase Agreement” means the Note Purchase Agreement, entered into as of
May 29, 2009, by and between PMI Mortgage Insurance Co. and the Company, as may be amended,
restated or supplemented from time to time.



“Requirement of Law” means, as to any Person, any law, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its assets or to which such Person or any of its assets is
subject.



“Section” means a numbered section of this Security Agreement, unless another document
is specifically referenced.



“UCC” means the Uniform Commercial Code as in effect from time to time in the State of
New York.



The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.



ARTICLE II

GRANT OF SECURITY INTEREST




Section 2.1 Grant of Security Interest. As collateral security for the
prompt and complete payment, performance and observance of all present and future Obligations,
whether at stated maturity, by acceleration or otherwise (including, without limitation, all
interest thereon, whether accruing prior or subsequent to the commencement of a bankruptcy or
similar proceeding involving the Company as a debtor and whether or not such interest is an allowed
claim in any such proceeding) (all of the foregoing being herein referred to as the “Secured
Obligations”), the Company hereby assigns, transfers, pledges and grants to the Administrative
Agent, for the ratable benefit of the Secured Parties, all of its right, title and interest in, to
and under the property described below in this Article II (all of which is collectively referred to
as the “Collateral”) for the purposes of creating a first priority security interest in
such Collateral:




(i) the QBE Note;




(ii) the QBE Note Purchase Agreement;




(iii) all present and future payments, proceeds, distributions, instruments,
compensation, interests and rights with respect to the Collateral, and all monies due or to
become due and payable to the Company with respect to the Collateral or otherwise paid,
issued or distributed from time to time in respect of or in exchange therefor, and any
instrument or other document evidencing or representing the same (including, without
limitation, all proceeds of dissolution or liquidation); and




(iv) all proceeds of every kind and nature, including proceeds of proceeds, of any and
all of the foregoing.



Section 2.2 Limitations on Rights Upon Initial Transfer. Both the Company and the
Administrative Agent agree that any transfer of the Collateral to the Administrative Agent prior to
the occurrence and continuation of an Event of Default has been made solely to facilitate the
Administrative Agent’s exercise of its rights and remedies in respect of the Collateral in the
capacity of a secured party under Article 9 of the UCC. Such transfer shall not entitle the
Administrative Agent to take any actions in respect of the Collateral in any other capacity, and
in no event shall the Administrative Agent be permitted to treat the Collateral as its own property
(or as property of the Secured Parties) or exercise rights in respect thereof except as provided
in this Agreement or as available to it on default as a secured party under the UCC.



ARTICLE III

DELIVERY OF INSTRUMENTS, SECURITIES, CHATTEL PAPER AND DOCUMENTS




Section 3.1. Delivery of Instruments, Securities, Chattel Paper and
Documents. The Company will (a) deliver to the Administrative Agent immediately upon execution
of this Security Agreement an original of the QBE Note, (b) hold in trust for the Administrative
Agent upon receipt and promptly thereafter deliver to the Administrative Agent any Chattel Paper,
Securities and Instruments constituting Collateral received after the date of this Security
Agreement, (c) upon the Administrative Agent’s request, deliver to the Administrative Agent, and
thereafter hold in trust for the Administrative Agent upon receipt and promptly deliver to the
Administrative Agent any Document evidencing or constituting Collateral and (d) upon the
Administrative Agent’s reasonable request, deliver to the Administrative Agent a duly executed
amendment to this Security Agreement (each, an “Amendment”), pursuant to which the Company
will pledge any additional Collateral. The Company hereby authorizes the Administrative Agent to
attach each Amendment to this Security Agreement and agrees that all additional collateral set
forth in such Amendments shall be considered to be part of the Collateral.



ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS




The Company hereby represents, warrants and covenants that:



Section 4.1. Pledged Collateral. Immediately prior to giving effect to this
Agreement, the Company is the sole holder of record and the sole beneficial owner of the Collateral
free and clear of any Lien thereon or affecting the title thereto, except the Lien created
hereunder.



Section 4.2. Place of Perfection; Records; Etc. The organizational number
issued to the Company by the State of Delaware is 2366199. The federal employer identification
number of the Company is 94-3199675. The Company agrees to furnish to the Administrative Agent
prompt written notice of any change in: (i) the Company’s name; (ii) the location of the Company’s
chief executive office or its principal place of business; (iii) the Company’s organizational legal
entity designation or jurisdiction of incorporation or formation; (iv) the Company’s federal
taxpayer identification number or organizational identification number assigned to it by its
jurisdiction of incorporation or formation; or (v) the acquisition by the Company of any property
that constitutes Collateral and for which additional filings or recordings are necessary to perfect
and maintain the Administrative Agent’s security interest therein. The Company agrees not to effect
or permit any change referred to in the preceding sentence unless the Company has made or requested
to be made all filings under the UCC or other applicable law that are required in order for the
Administrative Agent to continue at all times following such change to have a valid, legal and
perfected, first priority security interest in the Collateral, all of which filings shall be in
form and substance satisfactory to the Administrative Agent.



Section 4.3. Sale or Other Disposition of Pledged Collateral. The Company
will not assign (by operation of law or otherwise), sell, lease, transfer, encumber, pledge or
grant a Lien on the Collateral in favor of any Person other than the Administrative Agent or
otherwise dispose of or abandon, nor will it suffer or permit any of the same to occur with respect
to, any Collateral, and the inclusion of “proceeds” of the Collateral under the security interest
granted herein shall not be deemed a consent by the Administrative Agent or any other Secured Party
to any sale or other disposition of any Collateral.



Section 4.4. Authority; Binding Obligation. The Company has the right and
requisite corporate authority to pledge, assign, deliver and set over the Collateral to the
Administrative Agent as provided herein. This Security Agreement has been duly authorized, executed
and delivered by the Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.



Section 4.5. Required Consents. Except as may be required in connection
with any disposition of any portion of the Collateral by laws affecting the offering and sale of
securities generally and the filing of a UCC financing statement in the form annexed hereto as
Exhibit A in the office of the Secretary of State of the State of Delaware, (i) no consent
of any Person (including, without limitation, any shareholders, partners or creditors of the
Company) and no license, permit, approval or authorization of, exemption by, notice or report to,
or registration, filing or declaration with any Governmental Authority that has not been made or
obtained on or prior to the date hereof is required to be made or obtained by the Company in
connection with (a) the execution or delivery by the Company, validity or enforceability against
the Company, or the performance by the Company of, this Security Agreement, (b) the creation or
maintenance by the Company of the security interest created hereby or the perfection thereof
(including the first priority nature of such security interest) except as provided under applicable
law with respect to the filing of continuation statements or amendments to financing statements and
(ii) no consent of any Person (including, without limitation, any shareholders, partners or
creditors of the Company) and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with any Governmental Authority is
required to be made or obtained by the Company in connection with the exercise by the
Administrative Agent of the rights provided for in this Security Agreement or the remedies in
respect of the Collateral pursuant to this Security Agreement.



Section 4.6. Nature of Security Interest, etc. No financing statement or
security agreement describing all or any portion of the Collateral naming the Company as debtor has
been filed or is of record in any jurisdiction except for financing statements or security
agreements naming the Administrative Agent as the secured party. The Company will not authorize the
filing of any financing statement naming it as debtor covering all or any portion of the
Collateral. The Company acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement naming it as debtor
covering all or any portion of the Collateral without the prior written consent of the
Administrative Agent, subject to the Company’s rights under Section 9-509(d)(2) of the UCC. Upon
the filing of a UCC financing statement in the form annexed hereto as Exhibit A in the
office of the Secretary of State of the State of Delaware, the pledge of the Collateral pursuant to
this Security Agreement creates a valid and perfected first priority security interest in favor of
the Administrative Agent for the ratable benefit of the Secured Parties in the Collateral, securing
the prompt and complete payment, performance and observance of the Secured Obligations, subject to
no other Lien.



Section 4.7. Modification of Agreements. It will not, without the prior
written consent of the Administrative Agent, execute any document or instrument or take any other
action of any kind which may, in the reasonable judgment of the Administrative Agent, reasonably be
expected to have an adverse effect on the value of the Collateral or any rights or remedies in
respect of the Collateral of the Secured Parties set forth in or arising under this Security
Agreement, including but not limited to agreeing to any modification, amendment, waiver, or consent
under or with respect to the QBE Note, the QBE Note Purchase Agreement, the Australian Deed Polls,
or the provisions of the QBE Share Sale Agreements relating to or affecting the QBE Note, in each
case having such effect.



Section 4.8. Further Assurances. It will, at its sole cost and expense,
perform all acts and promptly execute, acknowledge and deliver all such documents and instruments
and take all such actions, in each case, reasonably requested by the Administrative Agent from time
to time to evidence, perfect, maintain or enforce the Administrative Agent’s first priority
security interest granted herein or otherwise in furtherance of the provisions of this Security
Agreement. In addition and without limiting the foregoing, the Company will (w) promptly from time
to time following the request of the Administrative Agent, request that the issuer of the QBE Note
furnish any and all notices, reports and other information relating to the QBE Note that the
Company is then entitled to receive (whether pursuant to the terms of the QBE Note or otherwise)
and upon receipt thereof will deliver copies of same to the Administrative Agent (x) promptly
forward to the Administrative Agent true and complete copies of any notices received or given by
the Company or PMI Insurance relating to the QBE Note or the amount actually or potentially owed
thereon, including but not limited to any notice or other communication regarding a breach of
“Warranties” or relating to the “Actual Insurance Loss Percentage”, as applicable, under either of
the QBE Share Sale Agreements, together with copies of any responses thereto, (y) keep the
Administrative Agent fully informed of any reduction to the QBE Note Interest (other than by virtue
of the capitalization of any such portion thereof in accordance with the terms of the QBE Note as
in effect on the Restatement Effective Date) or to the QBE Note Principal, in each case that has
occurred pursuant to Section 7 of the QBE Note or otherwise and (z) take any and all actions
necessary, or in the reasonable opinion of the Administrative Agent desirable, to (i) defend title
to the Collateral against all Persons and (ii) defend the security interest of the Administrative
Agent in the Collateral and the priority thereof.



Section 4.9. Authority; Binding Obligation of QBE Note and Australian Deed
Polls.



(a) To the best of its knowledge, the QBE Note has been duly authorized,
authenticated or issued and delivered by the Issuer thereof, and is the legal, valid and binding
obligation of such issuer enforceable in accordance with its terms, and as of the date of this
Agreement, the Issuer is not in default thereunder.



(b) To the best of its knowledge, each of the Australian Deed Polls is the legal,
valid and binding obligation of each party thereto.



Section 4.10. Adjustments to the QBE Note Amount. Except with the prior
written consent of the Administrative Agent, the Company will not and will not suffer or permit any
of its Subsidiaries to agree to any reduction of the QBE Note Principal or QBE Note Interest
(including, but not limited to, consenting to any “Claim” respecting a breach of “Warranties” or
agreeing to resolution of the amount of the “Actual Insurance Loss Percentage” (as each such term
is defined in the applicable QBE Share Sale Agreement) that would result in such an adjustment) (i)
if at the time of such proposed adjustment or immediately after giving effect thereto (irrespective
of whether a Default or Event of Default has occurred or is then continuing) the QBE Note Amount is
or would be less than an amount equal to 125% of the Aggregate Commitments then outstanding or (ii)
at any time during the continuance of an Event of Default.



Section 4.11. Notices under Australian Deed Polls. The Company acknowledges
and agrees that the Administrative Agent shall at all times have the right to obtain information
and notices, and exercise such other rights, as are provided to the Administrative Agent under, and
pursuant and subject to the terms and conditions set forth in, the Australian Deed Polls.



ARTICLE V

APPLICATION OF CASH COLLATERAL; EXPENSES




Section 5.1. Application of Cash Collateral. Any monies received and retained by
the Administrative Agent as additional collateral hereunder pursuant to the foregoing provisions
may, at any time and from time to time, be applied by the Administrative Agent in the manner set
forth in Section 8.03 of the Credit Agreement.Section 5.2. Expenses. Company
will upon demand pay the Administrative Agent or any other Secured Party for any and all reasonable
out-of-pocket costs, sums, and expenses which such Persons may pay or incur pursuant to the
provisions of this Security Agreement or in enforcing the Secured Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all filing or recording
fees, court costs, collection charges, travel expenses, telephone fees, duplicating fees and
reasonable attorneys’ fees and expenses. Such expenses shall include, without limitation, any such
costs paid or incurred by the Administrative Agent or any other Secured Party in connection with
any waivers, amendments, modifications, extensions, renewals or renegotiations. All of the
foregoing shall be part of the Secured Obligations and be payable on demand.



ARTICLE VI

REMEDIES




Section 6.1. Remedies Upon an Event of Default.



(a) Upon the occurrence and for so long as an Event of Default is continuing, the
Administrative Agent may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and remedies of a secured
party on default under the UCC at that time (whether or not applicable to the affected Collateral)
and may also, without obligation to resort to other security, at any time and from time to time
sell, resell, assign and deliver, in its sole discretion, all or any of the Collateral, in one or
more parcels at the same or different times, and all right, title and interest, claim and demand
therein and right of redemption thereof, on any securities exchange on which any Collateral or any
of them may be listed, or at public or private sale, for cash, upon credit or for future delivery,
and in connection therewith the Administrative Agent may grant options, the Company hereby waiving
and releasing any and all equity and right of redemption. Without limiting the generality of the
foregoing, upon the occurrence and for so long as an Event of Default is continuing, the
Administrative Agent may exercise any or all of the following (i) any and all rights and remedies
to, without notice to the Company, compromise and settle, and to reach accord and satisfaction
regarding, the amount due on the QBE Note, (ii) any and all rights and remedies to enforce the QBE
Note against the parties thereto and (iii) any and all rights and remedies provided to the
Administrative Agent under any of the Australian Deed Polls.



(b) If any of the Collateral is sold by the Administrative Agent upon credit or for
future delivery, the Administrative Agent shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure, the Administrative Agent may
resell such Collateral. In no event shall the Company be credited with any part of the proceeds of
sale of any Collateral until cash payment thereof has actually been received by the Administrative
Agent.



(c) The Administrative Agent or any other Secured Party may purchase any Collateral
at any public sale and, if any Collateral is of a type customarily sold in a recognized market or
is of the type which is the subject of widely distributed standard price quotations, the
Administrative Agent or any other Secured Party may purchase such Collateral at private sale, free
from any right of redemption, which is hereby waived and released to the extent permitted by
applicable law, and in each case may make payment therefor by any means, including, without
limitation, by release or discharge of Secured Obligations in lieu of cash payment.



(d) The Administrative Agent shall apply the cash proceeds actually received from
any sale or other disposition of the Collateral to the payment of the Secured Obligations as
provided in Section 8.03 of the Credit Agreement. The Company shall remain liable for any
deficiency with respect to the Secured Obligations, which shall bear interest and be payable at the
interest rate applicable to such Secured Obligations at such time. The rights of the Company to
receive any surplus, if any, shall be subject to any duty of the Administrative Agent imposed by
law to the holder of any subordinate security interest in the Collateral known to the
Administrative Agent. Nothing contained herein shall be construed as requiring the Administrative
Agent to take any such action at any time.



(e) Except for any notices or advertisements required by applicable law which are
not permitted to be waived, no demand, advertisement or notice, all of which are hereby expressly
waived, shall be required in connection with any sale or other disposition of any part of the
Collateral which threatens to decline speedily in value or which is of a type customarily sold on a
recognized market; otherwise the Administrative Agent shall give the Company at least ten days’
prior notice of the time and place of any public sale and of the time after which any private sale
or other disposition is to be made, which notice the Company agrees is reasonable, all other
demands, advertisements and notices being hereby waived except as set forth above.



(f) The Administrative Agent shall not be obligated to make any sale of Collateral
if it shall determine not to do so, regardless of the fact that notice of sale may have been given.
The Administrative Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place to which the same
was so adjourned.



(g) The Company agrees to the maximum extent permitted by applicable law that
following the occurrence and during the continuance of an Event of Default it will not at any time
plead, claim or take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the enforcement of this
Security Agreement, or the absolute sale of the whole or any part of the Collateral or the
possession thereof by any purchaser at any sale hereunder, and the Company waives the benefit of
all such laws to the extent it lawfully may do so. The Company agrees that it will not interfere
with any right, power and remedy of the Administrative Agent provided for in this Security
Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Administrative Agent of any one or more of such
rights, powers or remedies. No failure or delay on the part of the Administrative Agent to
exercise any such right, power or remedy and no notice or demand which may be given to or made upon
the Company by the Administrative Agent with respect to any such remedies shall operate as a waiver
thereof, or limit or impair the Administrative Agent’s right to take any action or to exercise any
power or remedy hereunder, without notice or demand, or prejudice its rights as against the Company
in any respect.



(h) The Company acknowledges and agrees that the exercise by the Administrative
Agent of its rights and remedies under this Security Agreement, or the QBE Note, or any of the
Australian Deed Polls shall not be deemed to be an election or proposal to retain the Collateral in
satisfaction, in whole or in part, of the Secured Obligations.



Section 6.2. Specific Performance. The Company acknowledges and agrees that
its failure to perform the obligations provided by Sections 4.07, 4.08, 4.10, and 4.11 of this
Security Agreement will result in irreparable injury to the Secured Parties for which there is no
adequate remedy at law, and that it will not be possible to measure damages for such injuries
precisely. In addition, and without limiting the generality of the foregoing, the Company
acknowledges that (i) because of its financial circumstances an award against it of monetary
damages in addition to the amounts that it already owes in respect of the Obligations is of
uncertain collectibility, (ii) the provisions of Sections 4.07, 4.08, 4.10, and 4.11 are required
and intended to assure to the Administrative Agent for the benefit of the Secured Parties certain
critical and specific rights in respect of the QBE Note provided to them as Collateral for the
repayment of the Obligations, for which rights an award of damages would be an inadequate and
insufficient substitute, and (iii) the provisions of Sections 4.07, 4.08, 4.10, and 4.11 and their
specific performance are required and intended to provide to the Administrative Agent and the
Secured Parties certain critical rights with respect to the QBE Note as Collateral which the
issuer of the QBE Note and the purchasers under the QBE Share Sale Agreements have acknowledged the
Company enjoys against such issuer and purchasers directly and specific performance of such
provisions by the Company is essential to provide such rights to the Administrative Agent and
Secured Parties, and (iv) in exchange for and in reliance on obtaining such rights, including
specifically the right to enforce Sections 4.07, 4.08, 4.10 and 4.11 by specific performance, the
Secured Parties have released certain other Collateral previously provided to them and provided
certain waivers and amendments to the Credit Agreement that have enabled the Company to avoid an
immediate Event of Default. Accordingly, the Administrative Agent shall, in addition to any other
claims or actions for damages or other remedies, be entitled to entry of a decree of specific
performance, including a temporary restraining order, preliminary and/or permanent injunction and
other equitable remedies in connection with any breach or violation by the Company of any of
Sections 4.07, 4.08, 4.10, or 4.11 of this Security Agreement. The Company (a) specifically waives
the right to notice of the presentation of a motion for the entry of a temporary restraining order
specifically to perform such provisions, (b) agrees that one Business Day’s notice shall be
adequate notice of the presentation of a motion for entry of a preliminary injunction specifically
to perform such provisions, (c) agrees that five Business Days’ notice shall be adequate notice of
the presentation of a motion for entry of a permanent injunction specifically to perform such
provisions, and (d) agrees that a temporary restraining order, and a preliminary or permanent
injunction, enforcing any and all such provisions and ordering their specific performance by the
Company may each be entered at any time and from time to time without the posting of any bond by or
in favor of the Administrative Agent or Secured Parties, and unconditionally and irrevocably waives
all rights to seek or require the posting of such a bond.



Section 6.3. All Remedies Cumulative. The remedies provided herein in favor
of the Administrative Agent shall not be deemed exclusive, but shall be cumulative, and shall be in
addition to all other remedies in favor of the Administrative Agent existing at law or in equity.

        .


ARTICLE VII

ATTORNEY IN FACT; PROXY




Section 7.1. Administrative Agent Appointed Attorney-in-Fact. (a) To effectuate
the terms and provisions hereof, the Company hereby appoints the Administrative Agent as its
attorney-in-fact for the purpose, from and after the occurrence and for so long as an Event of
Default is continuing, of carrying out the provisions of this Security Agreement and taking any
action and executing any instrument which the Administrative Agent may deem necessary or advisable
to accomplish the purposes hereof. Without limiting the generality of the foregoing, the
Administrative Agent shall, from and after the occurrence and for so long as an Event of Default is
continuing, have the right and power to:




	 	(i)	 	receive, endorse and collect all checks and other orders for the payment of
money made payable to the Company representing any interest or dividend or other
distribution or amount payable in respect of the Collateral or any part thereof and to
give full discharge for the same, and






	 	(ii)	 	to execute endorsements, assignments or other instruments of conveyance or
transfer with respect to all or any of the Collateral and to exercise all rights and
privileges of (or on behalf of) the owner of the Collateral.





(b) All acts done under the foregoing authorization are hereby ratified and approved
by the Company and neither the Administrative Agent, any Affiliate of the Administrative Agent, any
agent, any other Secured Party nor any designee or agent thereof shall be liable for any acts of
commission or omission, for any error of judgment or for any mistake of fact or law except for acts
of gross negligence or willful misconduct.



(c) This power of attorney, being coupled with an interest, is irrevocable until the
Termination Date (as defined below) has occurred.



Section 7.2. Administrative Agent’s Duties; Reasonable Care. (a) The
Administrative Agent shall have the duty to exercise reasonable care in the custody and
preservation of any Collateral in its possession, which duty shall be fully satisfied if the
Administrative Agent maintains safe custody of such Collateral and, with respect to any calls,
conversions, exchanges, redemptions, offers, tenders or similar matters relating to any such
Collateral (herein called “Events”),




(i) the Administrative Agent exercises reasonable care to ascertain the occurrence and
to give reasonable notice to the Company of any Events applicable to any Collateral which is
registered and held in the name of the Administrative Agent or its nominee,




(ii) the Administrative Agent gives the Company reasonable notice of the occurrence of
any Events, of which the Administrative Agent has received actual knowledge, as to any
securities which are in bearer form or are not registered and held in the name of the
Administrative Agent or its nominee (the Company agreeing to give the Administrative Agent
reasonable notice of the occurrence of any Events applicable to any securities in the
possession of the Administrative Agent of which the Company has received knowledge), and




(iii) in the exercise of its sole discretion (x) the Administrative Agent endeavors to
take such action with respect to any of the Events as the Company may reasonably and
specifically request in writing in sufficient time for such action to be evaluated and taken
or (y) if the Administrative Agent determines that the action requested might adversely
affect the value of the Collateral as collateral, the collection of the Secured Obligations,
or otherwise prejudice the interests of the Administrative Agent or any Secured Party, the
Administrative Agent gives reasonable notice to the Company that any such requested action
will not be taken and if the Administrative Agent makes such determination or if the Company
fails to make such timely request, the Administrative Agent takes such other action as it
deems advisable in the circumstances.



(b) Except as hereinabove specifically set forth, the Administrative Agent shall
have no further obligation to ascertain the occurrence of, or to notify the Company with respect
to, any Events and shall not be deemed to assume any such further obligation as a result of the
establishment by the Administrative Agent of any internal procedures with respect to any securities
in its possession, nor shall the Administrative Agent be deemed to assume any other responsibility
for, or obligation or duty with respect to, any Collateral, or its use, of any nature or kind, or
any matter or proceedings arising out of or relating thereto, including, without limitation, any
obligation or duty to take any action to collect, preserve or protect its or the Company’s rights
in the Collateral or against any prior parties thereto, but the same shall be at the Company’s sole
risk and responsibility at all times.



(c) The Company hereby releases the Administrative Agent and the Secured Parties
from any claims, causes of action and demands at any time arising out of or with respect to this
Security Agreement, the Collateral and/or any actions taken or omitted to be taken by the
Administrative Agent or the Secured Parties with respect thereto (except such claims, causes of
action and demands arising from the gross negligence or willful misconduct of the Administrative
Agent or the Secured Parties) and the Company hereby agrees to hold the Administrative Agent and
the Secured Parties harmless from and with respect to any and all such claims, causes of action and
demands (except such claims, causes of action and demands arising from the gross negligence or
willful misconduct of the Administrative Agent or the Secured Parties).



Section 7.3. Rights and Remedies Not Waived. The Administrative Agent’s
prior recourse to any Collateral shall not constitute a condition of any demand, suit or proceeding
for payment or collection of the Secured Obligations. No act, omission or delay by the
Administrative Agent or any other Secured Party shall constitute a waiver of its rights and
remedies hereunder or otherwise. No single or partial waiver by the Administrative Agent of any
default hereunder or right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future occasion.



Section 7.4. Administrative Agent May Perform. If the Company fails to
perform any agreement contained herein, the Administrative Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Company pursuant to the terms of Section 5.05 hereof.



ARTICLE VIII

EXPENSES; GENERAL PROVISIONS




Section 8.1. SETOFF; WAIVER OF JURY TRIAL AND SETOFF; CONSENT TO JURISDICTION,
ETC. (a) IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS SECURITY AGREEMENT OR ANY OTHER SECURITY DOCUMENT, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS SECURITY AGREEMENT OR ANY OTHER SECURITY DOCUMENT, OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE COMPANY ON THE ONE HAND AND THE ADMINISTRATIVE AGENT, OR ANY ONE OR
MORE OF THE SECURED PARTIES ON THE OTHER HAND, THE COMPANY HEREBY, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, (i) WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, RECOUPMENT, COUNTERCLAIM OR
CROSS-CLAIM IN CONNECTION WITH ANY SUCH LEGAL ACTION OR PROCEEDING, IRRESPECTIVE OF THE NATURE OF
SUCH SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM, UNLESS SUCH SETOFF, RECOUPMENT, COUNTERCLAIM
OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION AND (ii) WAIVES ANY RIGHT IT MAY HAVE TO CLAIM
OR RECOVER IN ANY SUCH LEGAL ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES (AND AGREES THAT
IT MAY RECOVER ONLY ACTUAL DAMAGES, AND ONLY IF AND TO THE EXTENT DETERMINED IN A FINAL ORDER OF A
COURT OF COMPETENT JURISDICTION, WHICH IS NO LONGER SUBJECT TO APPEAL TO HAVE RESULTED FROM SUCH
OTHER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT).



(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, THE COMPANY CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE
COMPANY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING
OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT OR ANY
DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE ADMINISTRATIVE AGENT SHALL HAVE
THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR ITS PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION THE ADMINISTRATIVE AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON ANY SECURITY FOR THE SECURED OBLIGATIONS AND (2) THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM
THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.



(c) THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO THE COMPANY AT ITS ADDRESS PROVIDED FOR IN SECTION 8.03 AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE
U.S. MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT TO SERVE
LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.



(d) NO PROVISION OF THIS SECURITY AGREEMENT OR ANY OTHER SECURITY DOCUMENT SHALL
LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT, OR OTHER SECURED PARTY TO EXERCISE SELF-HELP REMEDIES
SUCH AS SETOFF OR OBTAINING PROVISIONAL OR ANCILLARY REMEDIES FROM A COURT OF COMPETENT
JURISDICTION BEFORE, AFTER, OR DURING THE PENDENCY OF ANY ARBITRATION OR OTHER PROCEEDING. THE
EXERCISE OF A REMEDY DOES NOT WAIVE THE RIGHT THAT ANY PARTY MAY HAVE TO RESORT TO ARBITRATION OR
REFERENCE.



(e) THE COMPANY HEREBY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
COMPANY HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE COMPANY HEREBY FURTHER AGREES THAT ITS RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
SECURITY AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT.



(f) THE COMPANY AGREES THAT THIS SECTION 8.01 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS SECURITY AGREEMENT AND ACKNOWLEDGES THAT THE SECURED PARTIES WOULD NOT EXTEND TO THE
COMPANY ANY FINANCIAL ACCOMMODATIONS IF THIS SECTION 8.01 WERE NOT PART OF THIS SECURITY
AGREEMENT.



Section 8.2. Admissibility of Security Agreement. The Company agrees that
any copy of this Security Agreement signed by the Company and transmitted by telecopier for
delivery to the Administrative Agent shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in existence.



Section 8.3. Address for Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing (unless otherwise expressly provided
herein) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to the Company, at
the address specified below its signature below; and if to the Administrative Agent, at its address
specified below its signature below or, at such other address as shall be designated by any party
in a written notice to the other parties hereto. All notices and communications given by a
telecommunications device shall be capable of creating a written record of confirmation receipt.
All such notices and communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier or personal delivery, and shall be effective when received.



Section 8.4. Amendments and Modification. No provision hereof shall be
amended, supplemented or otherwise modified, altered, waived or limited except by written
instrument expressly referring to this Security Agreement and to such provision, and executed by
all parties to this Security Agreement.



Section 8.5. Continuing Security Interest; Assignments. This Security
Agreement shall create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the date (the “Termination Date”) that is the earliest to occur
of (i) the date on which Liens created hereunder are released by the Administrative Agent upon the
written consent of all the Lenders pursuant to Section 10.01 of the Credit Agreement and (ii) the
date on which the Credit Agreement has been irrevocably and permanently terminated and all
of the Secured Obligations have been paid in full in immediately available funds, (b) be binding
upon and inure to the benefit of, and be enforceable by, the Company and its successors and
assigns, and (c) be binding upon and inure to the benefit of, and be enforceable by, the
Administrative Agent and its successors, transferees and assigns.



Section 8.6. Payments As Secured Obligations. All amounts payable from time
to time by the Company hereunder shall constitute part of the Secured Obligations.



Section 8.7. Counterparts. This Security Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts, each of which shall
be an original and all of which shall together constitute one and the same agreement.



Section 8.8. Captions; Separability. The captions of the various sections
and paragraphs of this Security Agreement have been inserted only for the purposes of convenience;
such captions are not a part of this Security Agreement and shall not be deemed in any manner to
modify, explain, enlarge or restrict any of the provisions of this Security Agreement.



Section 8.9. Security Interest Absolute. All rights of the Administrative
Agent and security interests hereunder, and all of the obligations of the Company hereunder, shall
be absolute and unconditional, irrespective of:




(i) the lack of validity or enforceability of any Loan Document, any other Security
Document, any particular Secured Obligation or any other agreement or instrument relating
thereto;




(ii) any change in the time, manner or place of payment of, or in any other term of,
all or any of the Secured Obligations, or any other amendment or waiver of or any consent to
any departure from any Loan Document, any other Security Document or any other agreement or
instrument relating thereto;




(iii) any exchange, release or non-perfection of any other collateral, or any release
or amendment or waiver of or consent to departure from any guaranty, for all or any of the
Secured Obligations; or




(iv) any other circumstance which might otherwise constitute a defense available to, or
a discharge of, the Company or a third party grantor of a security interest or Lien.



Section 8.10. Termination. On the Termination Date, this Security Agreement
shall terminate and the Administrative Agent, at the written request and expense of the Company,
will promptly execute and deliver to the Company a proper instrument or instruments (including UCC
termination statements on form UCC-3) acknowledging the satisfaction and termination of this
Security Agreement, and will duly assign, transfer and deliver to the Company (without recourse and
without any representation or warranty) such of the Collateral as may be in the possession of the
Administrative Agent or which may have been transferred or assigned to the Administrative Agent in
connection with the grant of the security interests hereunder and as has not theretofore been sold
or otherwise applied or released pursuant to this Security Agreement.



Section 8.11. Governing Law. This Security Agreement will be governed by,
and construed in accordance with, the laws of the State of New York.



Section 8.12. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Security Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any provisions of this Security Agreement.



Section 8.13. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law, such invalidity
shall not impair the operation of or effect those portions of this Security Agreement which are
valid.



Section 8.14. Schedules. The Administrative Agent is authorized to annex
hereto any schedules referred to herein.



Section 8.15. Acknowledgment of Receipt. The Company acknowledges receipt
of a copy of this Security Agreement.



 [Signature Page Follows]





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IN WITNESS WHEREOF, the Company and the Administrative Agent have executed this Security
Agreement as of the date first above written.



	 	 	 
	THE PMI GROUP, INC.
	 
	By:
	 	/s/ Donald P. Lofe, Jr.

	 	 	 

	Name:
	 	Donald P. Lofe, Jr.

	Title:
	 	Executive Vice President, Chief Financial Officer and Chief

Administrative Officer








	 	 	Address:






3003 Oak Road


Walnut Creek, CA 94597-2098


Attention: Chief Financial Officer


Telephone: 925-658-6530


Telecopier: 925-658-6519




with copies to:




Corporate Treasurer


Telephone: 925-658-6204


Telecopier: 925-658-6519


and


General Counsel


Telephone: 925-658-6212


Telecopier: 925-658-6175



	 	 	 
	BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT

	 

	By:

	 	/s/ Tyler D. Levings
	
 
	 	 
	Name:

	 	Tyler D. Levings
	Title:

	 	Senior Vice President






 



Address:




Bank of America, N.A.


Agency Management


1455 Market Street, 5th Floor


Mail Code: CA5-701-05-19


San Francisco, CA 94103


Attention: Aamir Saleem


Telephone: 415 436 2769


Telecopier: 415 503 5089


Electronic Mail: aamir.saleem@bankofamerica.com




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