EX-10.1






EXHIBIT 10.1 




THE PMI GROUP, INC.




AMENDED AND RESTATED EQUITY INCENTIVE PLAN




(Amended   May 21, 2009)


 
 


TABLE OF CONTENTS


 


	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 
	 	 	 	 	 	 	 	 
	SECTION 1 BACKGROUND AND PURPOSE	 	 	1	 
	 	 	 	 	 	 	 	 	 
	1.1	 	Background	 	 	1	 
	1.2	 	Purpose of the Plan	 	 	1	 
	 	 	 	 	 
	SECTION 2 DEFINITIONS	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	1934 Act
	 	 	1	 
	 	2.2	 	 	Affiliate
	 	 	1	 
	 	2.3	 	 	Award
	 	 	1	 
	 	2.4	 	 	Award Agreement
	 	 	2	 
	 	2.5	 	 	Board
	 	 	2	 
	 	2.6	 	 	Change of Control
	 	 	2	 
	 	2.7	 	 	Code
	 	 	3	 
	 	2.8	 	 	Committee
	 	 	3	 
	 	2.9	 	 	Company
	 	 	3	 
	 	2.10	 	 	Consultant
	 	 	4	 
	 	2.11	 	 	Deferred Unit Compensation Account
	 	 	4	 
	 	2.12	 	 	Director
	 	 	4	 
	 	2.13	 	 	Disability
	 	 	4	 
	 	2.14	 	 	Employee
	 	 	4	 
	 	2.15	 	 	Exercise Price
	 	 	4	 
	 	2.16	 	 	Fair Market Value
	 	 	4	 
	 	2.17	 	 	Fiscal Year
	 	 	4	 
	 	2.18	 	 	Grant Date
	 	 	4	 
	 	2.19	 	 	Incentive Stock Option
	 	 	4	 
	 	2.20	 	 	Non-employee Director
	 	 	4	 
	 	2.21	 	 	Nonqualified Stock Option
	 	 	4	 
	 	2.22	 	 	Option
	 	 	4	 
	 	2.23	 	 	Participant
	 	 	5	 
	 	2.24	 	 	Performance Goals
	 	 	5	 
	 	2.25	 	 	Performance Period
	 	 	5	 
	 	2.26	 	 	Performance Share
	 	 	5	 
	 	2.27	 	 	Performance Unit
	 	 	5	 
	 	2.28	 	 	Period of Restriction
	 	 	5	 
	 	2.29	 	 	Plan
	 	 	5	 
	 	2.30	 	 	Restricted Stock
	 	 	5	 
	 	2.31	 	 	Retirement
	 	 	5	 
	 	2.32	 	 	Rule 16b-3
	 	 	6	 
	 	2.33	 	 	Section 16 Person
	 	 	6	 
	 	2.34	 	 	Stock Appreciation Right or SAR
	 	 	6	 






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	 	2.35	 	 	 	 	 	 	Shares	 	 	 	 	 	 	6	 
	 	2.36	 	 	 	 	 	 	Stock Unit	 	 	 	 	 	 	6	 
	 	2.37	 	 	 	 	 	 	Subsidiary	 	 	6	 
	 	2.38	 	 	 	 	 	 	Termination of Service	 	 	6	 
	 	2.39	 	 	 	 	 	 	Three Year Period	 	 	6	 
	SECTION 3 ADMINISTRATION	 	 	 	 	 	 	 	 	 	 	7	 
	 	3.1	 	 	The Committee	 	 	 	 	 	 	 	 	 	 	7	 
	 	3.2	 	 	Authority of the Committee	 	 	 	 	 	 	 	 	 	 	7	 
	 	3.3	 	 	Delegation by the Committee	 	 	 	 	 	 	 	 	 	 	7	 
	 	3.4	 	 	Decisions Binding	 	 	 	 	 	 	 	 	 	 	7	 
	SECTION 4 SHARES SUBJECT TO THE PLAN	 	 	 	 	 	 	 	 	 	 	7	 
	 	4.1	 	 	 	 	 	 	 	 	 	 	Number of Shares
	 	 	 	 	 	 	 	 	 	 	7	 
	 	4.2	 	 	 	 	 	 	 	 	 	 	Lapsed Awards	 	7
	 	4.3	 	 	 	 	 	 	 	 	 	 	Adjustments in Awards and Authorized Shares
	 	 	 	 	 	 	 	 	 	 	8	 
	SECTION 5 STOCK OPTIONS	 	 	 	 	 	 	 	 	 	 	8	 
	 	5.1	 	 	 	 	 	 	 	 	 	 	Grant of Options
	 	 	 	 	 	 	 	 	 	 	8	 
	 	5.2	 	 	 	 	 	 	 	 	 	 	Award Agreement
	 	 	 	 	 	 	 	 	 	 	8	 
	 	5.3	 	 	 	 	 	 	 	 	 	 	Exercise Price
	 	 	 	 	 	 	 	 	 	 	8	 
	 	5.4	 	 	 	 	 	 	 	 	 	 	Expiration of Options
	 	 	 	 	 	 	 	 	 	 	9	 
	 	5.5	 	 	 	 	 	 	 	 	 	 	Exercisability of Options
	 	 	 	 	 	 	 	 	 	 	9	 
	 	5.6	 	 	 	 	 	 	 	 	 	 	Payment
	 	 	 	 	 	 	 	 	 	 	10	 
	 	5.7	 	 	 	 	 	 	 	 	 	 	Restrictions on Share Transferability
	 	 	 	 	 	 	 	 	 	 	10	 
	 	5.8	 	 	 	 	 	 	 	 	 	 	Certain Additional Provisions for Incentive Stock Options.
	 	 	 	 	 	 	 	 	 	 	10	 
	 	5.9	 	 	 	 	 	 	 	 	 	 	Grant of Reload Options
	 	 	 	 	 	 	 	 	 	 	11	 
	 	5.10	 	 	 	 	 	 	 	 	 	 	Exchange for Stock Appreciation Rights
	 	 	 	 	 	 	 	 	 	 	11	 
	SECTION 6 RESTRICTED STOCK	 	 	 	 	 	 	 	 	 	 	11	 
	 	6.1	 	 	 	 	 	 	 	 	 	 	Grant of Restricted Stock
	 	 	 	 	 	 	 	 	 	 	11	 
	 	6.2	 	 	 	 	 	 	 	 	 	 	Restricted Stock Agreement
	 	 	 	 	 	 	 	 	 	 	11	 
	 	6.3	 	 	 	 	 	 	 	 	 	 	Transferability
	 	 	 	 	 	 	 	 	 	 	11	 
	 	6.4	 	 	 	 	 	 	 	 	 	 	Other Restrictions
	 	 	 	 	 	 	 	 	 	 	12	 
	 	6.5	 	 	 	 	 	 	 	 	 	 	Removal of Restrictions
	 	 	 	 	 	 	 	 	 	 	12	 
	 	6.6	 	 	 	 	 	 	 	 	 	 	Voting Rights
	 	 	 	 	 	 	 	 	 	 	13	 
	 	6.7	 	 	 	 	 	 	 	 	 	 	Dividends and Other Distributions
	 	 	 	 	 	 	 	 	 	 	13	 
	 	6.8	 	 	 	 	 	 	 	 	 	 	Return of Restricted Stock to Company
	 	 	 	 	 	 	 	 	 	 	13	 






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	SECTION 7 PERFORMANCE UNITS, PERFORMANCE SHARES AND STOCK UNITS	 	 	13	 
	 	7.1	 	 	Grant of Performance Units, Performance Shares and Stock Units	 	 	13	 
	 	7.2	 	 	Initial Value	 	 	13	 
	 	7.3	 	 	Performance Objectives and Other Terms	 	 	13	 
	 	7.4	 	 	Earning of Performance Units, Performance Shares and Stock Units	 	 	14	 
	 	7.5	 	 	Form and Timing of Payment	 	 	14	 
	 	7.6	 	 	Cancellation	 	 	15	 
	SECTION 8 NON-EMPLOYEE DIRECTOR AWARDS	 	 	15	 
	 	8.1	 	 	Grant of Stock Units	 	 	15	 
	 	8.2	 	 	Terms of Stock Units	 	 	15	 
	 	8.3	 	 	Dividends and Other Distributions	 	 	15	 
	 	8.4	 	 	Payment After Vesting	 	 	15	 
	 	8.5	 	 	Deferral of Proceeds	 	 	15	 
	 	 	 
	SECTION 9 STOCK APPRECIATION RIGHTS	 	 	16	 
	 	9.1	 	 	 	 	 	 	Grant of SARs
	 	 	16	 
	 	9.2	 	 	 	 	 	 	SAR Agreement
	 	 	16	 
	 	9.3	 	 	 	 	 	 	Expiration of SARs
	 	 	16	 
	 	9.4	 	 	 	 	 	 	Exercisability of SARs
	 	 	17	 
	 	9.5	 	 	 	 	 	 	Payment of SAR Amount
	 	 	17	 
	SECTION 10 MISCELLANEOUS	 	 	17	 
	 	10.1	 	 	 	 	 	 	Deferred Unit Compensation Accounts
	 	 	17	 
	 	10.2	 	 	 	 	 	 	No Effect on Employment or Service.
	 	 	17	 
	 	10.3	 	 	 	 	 	 	Participation
	 	 	17	 
	 	10.4	 	 	 	 	 	 	Indemnification
	 	 	17	 
	 	10.5	 	 	 	 	 	 	Successors
	 	 	18	 
	 	10.6	 	 	 	 	 	 	Beneficiary Designations
	 	 	18	 
	 	10.7	 	 	 	 	 	 	Limited Transferability of Awards
	 	 	18	 
	 	10.8	 	 	 	 	 	 	No Rights as Stockholder
	 	 	18	 
	 	10.9	 	 	 	 	 	 	Withholding Requirements
	 	 	19	 
	 	10.10	 	 	 	 	 	 	Withholding Arrangements
	 	 	19	 
	SECTION 11 AMENDMENT, TERMINATION AND DURATION	 	 	19	 
	 	11.1	 	 	Amendment, Suspension or Termination	 	 	19	 
	 	11.2	 	 	Duration of the Plan	 	 	19	 






3




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 
	 	 	 	 
	SECTION 12 LEGAL CONSTRUCTION	 	 	19	 
	 	12.1	 	 	Gender and Number
	 	 	19	 
	 	12.2	 	 	Severability
	 	 	20	 
	 	12.3	 	 	Requirements of Law
	 	 	20	 
	 	12.4	 	 	Governing Law
	 	 	20	 
	 	12.5	 	 	Captions
	 	 	20	 






THE PMI GROUP, INC.




AMENDED AND RESTATED EQUITY INCENTIVE PLAN




(Amended  May 21,  2009)




SECTION 1

BACKGROUND AND PURPOSE




1.1 Background. The Plan permits the grant of Options, Restricted Stock, Performance
Units, Performance Shares, Stock Units and Stock Appreciation Rights. The terms of the Plan, as in
effect prior to May 21, 2009, shall govern any outstanding Awards granted prior to   May 21, 2009.



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 each corporation, trade or business which is, together with the
Company, a member of a controlled group of corporations or an affiliated service group or under
common control (within the meaning of section 414(b), (c) or (m) of the Code), but only for the
period during which such other entity is so affiliated with the Company. Notwithstanding the
foregoing, in applying sections 1563(a)(1), (2) and (3) of the Code for purposes of determining a
controlled group of corporations under section 414(b) of the Code and in applying Treasury
regulation section 1.414(c)-2 for purposes of determining trades or businesses that are under
common control for purposes of section 414(c) of the Code, the phrase “at least 50 percent” will be
used instead of “at least 80 percent” at each place it appears in such sections.



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, Stock Units, Stock Appreciation Rights or cash.



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, as constituted from time to
time, except that any action that could be taken by the Board of Directors may also be taken by a
duly authorized Committee of the Board of Directors.




	 	2.6	 	“Change of Control” means:





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



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



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



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.



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 successor
thereto and any Affiliate to the extent required.



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 Unit Compensation Account” means an account established in the name of
the Participant on the books and records of the Company pursuant to Section 8.5.



2.12 “Director” means any individual who is a member of the Board.



2.13 “Disability” means the Participant is (a) unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months and is evidenced by a certificate of a physician satisfactory to the Committee
stating that such Disability exists and is likely to result in death or last for at least twelve
(12) months, or (b) by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months, receiving income replacement benefits for a period of not less than three
(3) months under an accident and health plan covering employees of the Company. The Committee shall
determine whether or not a Participant is Disabled based on such evidence as the Committee deems
necessary or advisable. Notwithstanding the foregoing, a Participant shall be deemed to be Disabled
if the Participant is determined to be totally disabled by the Social Security Administration.



2.14 “Employee” means any employee of the Company or of any Affiliate.



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 closing market price per Share, 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 closing market price per Share on 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.



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 (each as
defined in the Company’s Bonus Incentive Plan): (a) Adjusted Book Value, (b) Book Value, (c) Brand
Management, (d) Business Quality, (e) Capital, (f) Cash Flow, (g) Cash Operating Earnings,
(h) Combined Ratio, (i) Customer Satisfaction, (j) Earnings, (k) Equity in the Earnings of
Unconsolidated Subsidiaries, (l) Expense Ratio, (m) Incurred Losses, (n) Loss Ratio, (o) Market
Share, (p) Net Income, (q) Operating Income, (r) New Insurance Written, (s) Operating Cash Flow,
(t) Paid Claims, (u) Premiums, (v) Price to Book Value Ratio, (w) Price to Earnings Ratio,
(x) Ratings, (y) Return on Average Assets, (z) Return on Average Equity, (aa) Return on Revenue,
(bb) Revenue, (cc) Risk in Force, (dd) Total Shareholder Return, and (ee) Value Added. The
Performance Goals may differ from Participant to Participant and from Award to Award. Any criteria
used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but
not limited to, passage of time and/or against another company or companies), (iii) on a per-share
basis, (iv) against the performance of the Company as a whole or a segment of the Company and/or
(v) on a pre-tax or after-tax basis.



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. Notwithstanding any contrary
provision of the Plan, each Period of Restriction that expires solely as a result of continued
service shall expire as to no more than 1/3 of the Shares covered by the applicable Award each year
except as specifically provided in the Plan in the event of a Participant’s death, Disability,
Retirement or a Change of Control.



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.



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 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with another Award that is described in Section 9.



2.35 “Shares” means shares of the Company’s common stock, $.01 par value.



2.36 “Stock Unit” means a bookkeeping entry initially representing an amount
equivalent to the Fair Market Value of one Share, granted pursuant to Section 7 or Section 8 (as
applicable). Stock Units represent an unfunded and unsecured obligation of the Company.



2.37 “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.



2.38 “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,
(as determined in accordance with section 409A(a)(2)(A)(i) of the Code and Treasury regulation
section 1.409A-1(h)), 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, (as determined in accordance with section 409A(a)(2)(A)(i)
of the Code and Treasury regulation section 1.409A-1(h)), 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, (as determined in accordance with section
409A(a)(2)(A)(i) of the Code and Treasury regulation section 1.409A-1(h)), including, but not by
way of limitation, a termination by resignation, death, Disability or retirement. For this purpose,
the employment relationship shall be treated as continuing intact while the Participant is on
military leave, sick leave or other bona fide leave of absence, except that if the period of such
leave exceeds six (6) months and the Participant does not retain a right to reemployment under an
applicable statute or by contract, then the employment relationship shall be deemed to have
terminated on the first day immediately following such six-month period. A leave of absence
constitutes a bona fide leave of absence only if there is a reasonable expectation that the
Participant will return to perform services for the Company or an Affiliate.



2.39 “Three Year Period” means any period of three consecutive Fiscal Years. The first
Three Year Period shall commence on January 1, 2004. Three Year Periods shall commence thereafter
at the start of every Fiscal Year.



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,
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 permit the surrender or cancellation
of the Award in exchange for (i) a substitute Award settled in Shares only having a lower Exercise
Price, (ii) a different type of Award settled in Shares only, or (iii) any combination of (i) and
(ii).



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 18,000,000. Notwithstanding the preceding
sentence, the aggregate number of Shares subject to Awards of Restricted Stock, Stock Units,
Performance Units and Performance Shares granted under the Plan shall not exceed 6,000,000. 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 pursuant to its terms, 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. Notwithstanding the foregoing, the following Shares may
not again be made available for issuance as Awards under the Plan: (i) Shares not issued or
delivered as a result of the net settlement of an outstanding Option; (ii) Shares used to pay the
exercise price or withholding taxes related to an outstanding Award; or (iii) Shares repurchased on
the open market with the proceeds of the exercise price of an Option. The following Shares shall
not again be made available for issuance as Awards under the Plan: (i) Shares not issued or
delivered as a result of the net settlement of an outstanding stock option, (ii) Shares used to pay
the exercise price or withholding taxes related to an outstanding Award, or (iii) Shares
repurchased on the open market with the proceeds of the option exercise price.



4.3 Adjustments in Awards and Authorized Shares. In the event of any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property),
merger, reorganization, consolidation, recapitalization, separation, liquidation, stock split,
reverse stock split, split-up, spin-off, Share combination, repurchase, or exchange of Shares or
other securities of the Company, or other change in the corporate structure of the Company
affecting the Shares, the Committee shall adjust the number and/or class of Shares which may be
delivered under the Plan, the number, class, and/or price of Shares subject to outstanding Awards,
and the numerical limits of Sections 5.1, 6.1 and 7.1 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.



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 Three Year Period, no Participant shall
be granted Options covering more than 900,000 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



(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 and subject to Section 5.4.1(a) providing that the maximum term of an Option may not extend
beyond ten (10) years.



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.



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.



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.



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
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 Exchange for Stock Appreciation Rights. The Committee may institute a program
whereby outstanding Options are surrendered or cancelled in exchange for a grant of SARs having a
value less than or equal to the value of the surrendered or cancelled Options as determined by the
Committee; provided that the exercise price of SARs granted hereunder shall not be less than the
exercise price of the related surrendered Options Participation in such a program may, in the
discretion of the Committee, be mandatory with respect to any particular Participant or any
particular outstanding Option. Notwithstanding any contrary provision of the Plan, any SARS granted
in exchange for the surrender or cancellation of Options shall (a) be payable solely in Shares,
(b) vest at a rate no faster then the vesting schedule of the surrendered or cancelled Option and
(c) expire no later than the date on which the surrendered or cancelled Option would have expired
had the Option remained outstanding.



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 Three Year Period, no Participant shall be granted more than
400,000 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
Restricted Stock shall bear the following legend:




“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.



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.



SECTION 7

PERFORMANCE UNITS, PERFORMANCE SHARES AND STOCK UNITS




7.1 Grant of Performance Units, Performance Shares and Stock Units. Performance
Units, Performance Shares and Stock Units 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,
Performance Shares and Stock Units granted to any Participant, provided that during any Three Year
Period, no more than 400,000 Performance Units, Performance Shares or Stock Units 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 and Stock Unit 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, Performance Shares or Stock Units that will be paid out
to the Participants. The time period during which the performance objectives must be met shall be
called the “Performance Period.” Each Award of Performance Units, Performance Shares or Stock Units
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. Notwithstanding any
contrary provision of the Plan, Awards granted under this Section 7 that vest solely as a result of
continued employment shall vest as to no more than 1/3 of the covered Shares each year except as
specifically provided in the Plan in the event of a Participant’s death, Disability, Retirement or
a Change of Control.



7.3.1 General Performance Objectives. The Committee may set performance objectives
based upon the achievement of Company-wide, business unit or individual goals (including, but not
limited to, continued employment), 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, Performance Shares, or Stock Units as “performance-based compensation” under
Section 162(m) of the Code, the Committee, in its discretion, may determine that the performance
objectives applicable to the Performance Units, Performance Shares, or Stock Units 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 Award to qualify as “performance-based
compensation” under Section 162(m) of the Code. In granting Performance Units, Performance Shares,
or Stock Units that 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 Award under Section 162(m) of the Code (e.g., in determining the Performance
Goals).



7.4 Earning of Performance Units, Performance Shares and Stock Units. After the
applicable Performance Period has ended, the Participant shall be entitled to receive a payout of
the number of Performance Units, Performance Shares or Stock Units 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, Performance Share or Stock Unit, the Committee, in
its sole discretion, may reduce or waive any performance objectives for Award, except with respect
to Awards that 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, Performance Shares or
Stock Units 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, Performance Shares or Stock Units 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 foregoing, if Participant has elected to defer payment pursuant to Section 7.5
and such applicable Award Agreement, then such payment will not be payable immediately, but will be
delayed until the Deferred Payment Date, as such term is defined in the applicable Award Agreement.



7.5 Form and Timing of Payment. Except as described below, payment of earned
Performance Units, Performance Shares or Stock Units 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, which rules and procedures shall at all times comply with the
requirements of Section 409A of the Code.



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



SECTION 8

NON-EMPLOYEE DIRECTOR AWARDS




The provisions of this Section 8 are applicable only to Stock Units granted to Non-employee
Directors. The provisions of Section 7 are applicable to Stock Units granted to Employees and
Consultants.



8.1 Grant of Stock Units. On the first business day on or after
April 15, July 15, October 15 and January 15 of each year, each individual then serving as a
Non-employee Director automatically shall be granted Stock Units with an initial value of $4,000,
each Stock Unit valued at the Fair Market Value per Share, but in no event shall any Non-employee
Director receive more than 2,500 Stock Units in any calendar quarter.



8.2 Terms of Stock Units.



8.2.1 Award Agreement. Each Award 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 Vesting. Each Award granted pursuant to this Section 8 shall vest upon the
first to occur of the following events:




(a) The expiration of five (5) years from the Grant Date; or



(b) Cessation of a Participant’s service as a Non-employee Director for any reason, including,
but not limited to, death, Disability, retirement, resignation or non-reelection to the Board.



8.3 Dividends and Other Distributions. Any dividends or other distributions paid on
the Shares underlying an Award granted under this Section 8 automatically shall be deemed
reinvested in Stock Units (the “Dividend Stock Units”). Dividend Stock Units shall be subject to
the same terms and conditions as the underlying Award, including any deferral election made
pursuant to Section 8.5



8.4 Payment After Vesting. Except as described in Section 8.5, Stock Units that vest
shall be paid in full in Shares (with the balance, if any, in cash) as soon as practicable after
the date of vesting.



8.5 Deferral of Proceeds.



8.5.1 Election to Defer Proceeds. A Participant who is eligible to defer income under
the Company’s 2005 Directors’ Deferred Compensation Plan may elect, at the discretion of the
Committee, to defer receipt of the proceeds of an Award of Stock Units that would otherwise be
delivered to the Participant under this Section 8. Any such deferral elections shall be subject to
such rules and procedures as shall be determined by the Committee in its sole discretion, which
rules and procedures shall at all times comply with the requirements of Section 409A of the Code.



Upon payment of the portion of an Award to which a deferral election applies, the Committee
shall not have discretion as to the form of payment. Instead, the Award shall remain in the form of
Stock Units, and the number of Stock Units in respect of which the Participant has made a deferral
election shall be credited to a Deferred Unit Compensation Account on the date of deferral. A
separate Deferred Unit 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 deferred 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. 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 2005 Directors’ Deferred Compensation Plan May Govern. To the
extent determined by the Committee, any amount deferred under this Section 8.5, and any Deferred
Unit Compensation Account, may be treated and held as a portion of the Company’s 2005 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 Unit
Compensation Accounts.



SECTION 9

STOCK APPRECIATION RIGHTS




9.1 Grant of SARs. Subject to the terms and conditions of the Plan, a SAR 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.



9.1.1 Number of Shares. The Committee shall have complete discretion to determine the
number of SARs granted to any Participant, provided that during any Three Year Period, no
Participant shall be granted SARs covering more than 900,000 Shares.



9.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions of the
Plan, shall have complete discretion to determine the terms and conditions of SARs granted under
the Plan. Notwithstanding the foregoing, the exercise price of an SAR may not be less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.



9.2 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall
specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Committee, in its sole discretion, shall determine.



9.3 Expiration of SARs. An SAR granted under the Plan shall expire upon the date
determined by the Committee, in its sole discretion, and set forth in the Award Agreement.
Notwithstanding the foregoing, the rules of Section 5.4 also shall apply to SARs, providing that
the maximum term of an SAR may not extend beyond ten (10) years.



9.4 Exercisability of SARs. An SAR 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 SAR is granted, the Committee, in its sole discretion, may accelerate the exercisability of the
SAR. Additionally, the rules of Section 5.5.1 and 5.5.2 (providing accelerated vesting upon certain
events) also shall apply to SARs.



9.5 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled
to receive payment from the Company in an amount determined by multiplying:



(a) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times



(b) The number of Shares with respect to which the SAR is exercised. At the discretion of the
Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some
combination thereof.



SECTION 10

MISCELLANEOUS




10.1 Deferred Unit 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 Unit 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 Unit Compensation Accounts. A Participant’s
right to benefit payments with respect to their Deferred Unit 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 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, (a) the Participant may transfer a
Nonqualified Stock Option by bona fide gift and not for any consideration, to (i) a member of the
Participant’s immediate family, (ii) a trust or other entity for the exclusive benefit of the
Participant and/or a member or members of the Participant’s immediate family, (iii) 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 (iv) a tax-qualified, not for profit
organization, and (b) the Participant may, if the Committee (in its discretion) so permits,
transfer an Award to an individual or entity other than the Company. Any such transfer shall be
made in accordance with such procedures as the Committee may specify from time to time.



10.8 No Rights as Stockholder. Except to the limited extent provided in Sections 6.6,
6.7 and 8.3, 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.



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; provided,
however, that the Company will obtain stockholder approval of any amendment to the extent necessary
to comply with applicable law, regulation or rule (including the rules of the New York Stock
Exchange). Additionally, and notwithstanding the foregoing, any material (as determined in the sole
discretion of the Committee) amendment to the Plan will be submitted to the Company’s stockholders
for approval. 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 February 24, 2019.



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. To the extent applicable, the Plan and Award Agreements are
intended to comply with the provisions of Section 409A of the Code. Notwithstanding any contrary
provision of the Plan or any Award Agreements, the Plan and Award Agreements shall be construed,
administered and enforced in a manner that is consistent with such intent. The Plan and all Award
Agreements also 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.



EXECUTION




IN WITNESS WHEREOF, The PMI Group, Inc., by its duly authorized officer, has executed this
Plan on the date indicated below.

 


	 	 	 	 	 	 	 	 	 
	 	 	 	 	THE PMI GROUP, INC.
	 	 	 	 	 	 	 
	Dated: May 26, 2009	 	 	 	By:	 	 /s/ Charles Broom
 
	 
	 	 
	 	 
	 	 
	 	Charles Broom

	 	 	 	 	 	 	 	 	Senior Vice President, Human

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