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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The PMI Group, Inc.
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Notes:
INVITATION TO ANNUAL MEETING
OF STOCKHOLDERS
[LOGO] PMI GROUP, INC.
THE PMI GROUP, INC.
April 15, 2002
Dear Stockholder,
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of The PMI Group, Inc. to be held on Thursday, May 16, 2002, at 9:00 a.m.,
Pacific Time. The Meeting will be held on the 17th floor at our headquarters
located at 601 Montgomery Street, San Francisco, California.
We look forward to greeting as many of our stockholders as are able to be
with us. As explained in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement, the purposes of the Meeting are the election
of Directors, the ratification of the appointment of Ernst & Young LLP as
independent auditors for 2002, and the approval of the proposal to amend the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of common stock. Your Board of Directors unanimously
recommends that you vote FOR the nominees for Director identified in the Proxy
Statement, FOR ratification of the appointment of Ernst & Young LLP, and FOR
the approval of the proposal to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock. At
the Meeting, we will report on our business and there will be an opportunity
for you to ask questions.
I am pleased to announce that the Board of Directors elected L. Stephen
Smith as a Director at its February 2002 Board meeting. Mr. Smith joined the
Company in 1979. He has been the Company's President and Chief Operating
Officer since 1998, and directs our U.S. mortgage insurance operations. Donald
C. Clark has decided not to stand for election to the Board after nearly six
years of service as a member of the Company's Board of Directors. Among his
many accomplishments as a Director was Don's exemplary leadership and guidance
during the Company's transition to public company status. Don's experience and
wisdom will be missed. We thank him for his many contributions to PMI.
WHETHER OR NOT YOU EXPECT TO ATTEND, TO ENSURE YOUR REPRESENTATION AT THE
MEETING AND THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE
ENCLOSED PROXY PROMPTLY. STOCKHOLDERS OF RECORD MAY ALSO GIVE THEIR PROXY BY
TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING THE PROXY CARD. ANY
PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME AND STOCKHOLDERS
WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON.
/s/ W. Roger Haughton
W. Roger Haughton
Chairman of the Board of Directors and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders
("Meeting") of The PMI Group, Inc. ("TPG"), a Delaware corporation, will be
held on Thursday, May 16, 2002, at 9:00 a.m., Pacific Time, at 601 Montgomery
Street, 17th Floor, San Francisco, California, for the following purposes:
1. To elect twelve Directors, each to serve for a term as described in the
accompanying Proxy Statement;
2. To ratify the appointment of Ernst & Young LLP as independent auditors for
2002;
3. To approve a proposal to amend TPG's Restated Certificate of Incorporation
to increase the number of authorized shares of common stock; and
4. To transact such other business as may properly come before the Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 1, 2002, are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ Victor J. Bacigalupi
Victor J. Bacigalupi
Executive Vice President
General Counsel and Secretary
April 15, 2002
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY COMPLETE,
SIGN, DATE AND RETURN YOUR PROXY CARD.
TABLE OF CONTENTS
Proxy Statement......................................................................................... 1
Item 1: Election of Directors........................................................................... 2
Security Ownership of Certain Beneficial Owners and Management.......................................... 8
Executive Compensation.................................................................................. 11
Compensation Committee Report on Executive Compensation................................................. 16
Performance Graph....................................................................................... 19
Audit Committee Report.................................................................................. 20
Compensation Committee Interlocks and Insider Participation............................................. 21
Section 16(a) Beneficial Ownership Reporting Compliance................................................. 21
Certain Relationships and Related Transactions.......................................................... 21
Item 2: Ratification of Appointment of Independent Auditors............................................. 21
Item 3: Approval of Proposal to Amend TPG's Restated Certificate of Incorporation to Increase the Number
of Authorized Shares of Common Stock.................................................................. 22
Other Matters........................................................................................... 23
Stockholder Proposals for 2003 Annual Meeting........................................................... 24
Appendix A: Audit Committee Charter..................................................................... 25
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed on or about
April 15, 2002, in connection with the solicitation of proxies on behalf of the
Board of Directors of The PMI Group, Inc. ("TPG"), a Delaware corporation, for
use at the Annual Meeting of Stockholders to be held at 9:00 a.m., Pacific
Time, May 16, 2002, at 601 Montgomery Street, 17th Floor, San Francisco,
California and at any adjournment or postponement thereof (the "Meeting").
TPG's principal executive office is located at 601 Montgomery Street, San
Francisco, California 94111. The telephone number at that address is (415)
788-7878.
RECORD DATE AND SHARES OUTSTANDING. The record date for determining
stockholders entitled to notice of, and to vote at, the Meeting is April 1,
2002 (the "Record Date"). As of that date, approximately 44,906,219 shares of
common stock were outstanding.
REVOCABILITY OF PROXIES. Proxies are revocable by written notice to the
Secretary of TPG at any time prior to their exercise stating that the proxy is
revoked and may also be revoked by signing and delivering a proxy with a later
date or by attending the Meeting and voting in person.
VOTING AND SOLICITATION. For each matter that may come before the Meeting,
each stockholder will be entitled to one vote for each share of common stock
registered in the stockholder's name on the Record Date. The Chairman of the
Board will announce the closing of the polls during the Meeting. Proxies must
be received prior to the closing of the polls in order to be counted. Instead
of submitting a signed proxy card, stockholders may submit their proxies by
telephone using the control number and instructions accompanying the proxy
card. Telephonic voting may not be available to stockholders who hold their
shares through a broker, nominee, fiduciary or other custodian. The enclosed
proxy is solicited by the Board of Directors of TPG. If the proxy is properly
executed and returned, and choices are specified, the shares represented
thereby will be voted at the Meeting in accordance with those instructions. If
no choices are specified, a properly executed proxy will be voted as follows:
FOR--election to the Board of the twelve individuals nominated by the Board
of Directors;
FOR--ratification of the appointment of Ernst & Young LLP as independent
auditors for 2002; and
FOR--approval of the proposal to amend TPG's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock.
Any other business that may properly come before the meeting will be voted
in the discretion of the proxy holder.
The twelve nominees who receive the most votes will be elected to the twelve
open directorships even if they get less than a majority of the votes cast. For
approval of the appointment of Ernst & Young LLP as auditors (Item 2), more
shares must be voted "for" than "against" such proposal. For approval of the
proposal to amend TPG's Restated Certificate of Incorporation (Item 3), a
majority of the outstanding shares must be voted "for" such proposal.
Votes cast by proxy or in person at the Meeting will be counted by the
persons appointed by TPG to act as election inspectors for the Meeting. The
election inspectors will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, TPG believes that abstentions should be
counted for purposes of determining both (i) the presence or absence of the
quorum for the transaction of business and (ii) the total number of votes cast
with respect to an Item. Accordingly, abstentions will have the same effect as
a vote against Items 2 and 3. Broker non-votes (that
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is, if the broker holding shares of a stockholder in street name does not vote
with respect to an item) will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not
be counted for purposes of determining the number of votes cast with respect to
Items 2 and 3.
The cost of this solicitation will be borne by TPG. MacKenzie Partners, Inc.
has been retained by TPG to assist in the solicitation of proxies at an
estimated fee of $4,500 plus reimbursement of reasonable expenses. In addition,
TPG may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies also may be solicited by certain of TPG's Directors,
officers and employees, personally or by telephone or telegram, without
additional compensation.
TPG's Annual Report to Stockholders for the fiscal year ended December 31,
2001 has been mailed with this document. Stockholders should refer to that
Annual Report for financial and other information about the activities of TPG.
However, the Annual Report to Stockholders is not incorporated by reference
into this Proxy Statement and is not to be deemed a part of this Proxy
Statement.
ITEM 1: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION. A board of twelve Directors is to be elected at the
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the twelve nominees named below. All of the nominees are
presently Directors of TPG. Each person elected shall serve a one-year term as
a Director until the next Annual Meeting or until a successor is duly elected
and qualified or until his or her earlier death, resignation or removal.
Mariann Byerwalter John D. Roach
Dr. James C. Castle Dr. Kenneth T. Rosen
W. Roger Haughton L. Stephen Smith
Wayne E. Hedien Richard L. Thomas
Louis G. Lower II Mary Lee Widener
Raymond L. Ocampo Jr. Ronald H. Zech
STOCKHOLDER VOTE REQUIRED. Directors shall be elected by a plurality of the
votes cast at the Meeting. Only votes cast for a nominee will be counted. Votes
cast include votes under proxies that are signed, but that do not have contrary
voting instructions. Broker non-votes, abstentions and instructions on the
accompanying proxy card to withhold authority to vote for one or more of the
nominees will be disregarded in the calculation of a plurality of the votes
cast. TPG's bylaws and proxy rules promulgated by the Securities and Exchange
Commission provide that stockholders may submit nominations for Directors at an
Annual Meeting if they comply with certain requirements. Any stockholder
submitted nomination for director must have been delivered to or mailed and
received by TPG's Secretary at TPG's principal executive offices not later than
the close of business on the 90th day, nor earlier than the close of business
on the 120th day, prior to the first anniversary of the preceding year's annual
meeting to be considered timely. Any nomination not timely received will not be
considered.
Each nominee has consented to being named in this Proxy Statement and has
indicated a willingness to serve if elected. However, if at the Meeting any of
the nominees named above is not available to serve as a Director (an event that
the Board of Directors does not anticipate), the proxies will be voted for the
election as Directors for such other person or persons as the proxy holders may
designate, unless the Board of Directors, in its discretion, reduces the number
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEES NAMED ABOVE, AND UNLESS A STOCKHOLDER GIVES INSTRUCTIONS ON THE PROXY
CARD TO THE CONTRARY, THE PROXY WILL BE VOTED FOR THE NOMINEES.
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NOMINEES FOR DIRECTOR: Set forth below for each nominee is certain
information, including age as of April 1, 2002, principal occupation, business
experience for at least the past five years, the first year elected a Director,
and the Committees of the Board of Directors on which each Director serves,
which is based on data furnished by them.
MARIANN BYERWALTER, 41, has been a Director of TPG since May 2001. Ms.
Byerwalter is currently Chairman of JDN Corporate Advisory LLC, a privately
held advisory services firm. Ms. Byerwalter served as Chief Financial Officer
and Vice President for Business Affairs of Stanford University from February
1996 through February 2001. Prior to joining Stanford University, she was a
partner and co-founder of America First Financial Corporation from 1987 through
January 1996. Ms. Byerwalter was also the Chief Operating Officer, Chief
Financial Officer and Director of America First Eureka Holdings, the holding
company for EurekaBank, a publicly traded institution. She was the Chief
Financial Officer of EurekaBank from 1993 to 1996 and was a member of its Board
of Directors from 1988 until the company was sold in 1998. Ms. Byerwalter is
currently on the boards of SchwabFunds, LookSmart, Inc., SRI International,
Redwood Trust, Inc., and America First Companies. She serves as a Director and
as Chair of the Audit Committees of both the Stanford Hospital & Clinics and
the Lucile Packard Children's Hospital. She also serves on the board of
trustees of Stanford University. She is Vice Chair of the Audit Committee.
DR. JAMES C. CASTLE, 65, has been a Director since May 1997. Dr. Castle is
currently President and Chief Executive Officer of Castle Information
Technologies, LLC, a provider of information technology and board of director
consulting services, and is also Chairman and Chief Executive Officer of DST
Systems of California, Inc. (formerly knows as USCS International, Inc.),
positions he has held since 1992. On April 30, 2002, Dr. Castle will retire as
Chairman and Chief Executive Officer of DST Systems of California, Inc. Dr.
Castle served as Chief Executive Officer and Director of Teradata Corporation
from August 1991 through April 1992. Dr. Castle is also on the boards of DST
Systems, Inc., ADC Telecommunications, Inc. and Southwest Water Co. He is Chair
of the Audit Committee.
W. ROGER HAUGHTON, 54, is Chairman of the Board and Chief Executive Officer
of TPG and its subsidiary, PMI Mortgage Insurance Co. He brings more than 32
years of experience to his position. Mr. Haughton came to PMI in 1985 from
Allstate Insurance Company ("Allstate"). He was appointed President and Chief
Executive Officer of the subsidiary in January 1993. He became President, Chief
Executive Officer and a Director of TPG when the Company went public in April
1995, and was elected Chairman of the Board in May 1998. A graduate of the
University of California at Santa Barbara, Mr. Haughton holds a B.A. in
economics. He is a member of the Executive Committee and past President of
Mortgage Insurance Companies of America (MICA), the industry trade association.
Mr. Haughton has a long history of active volunteerism with various affordable
housing organizations, including Habitat for Humanity, and is on the board and
former Chairman of Social Compact, a Washington D.C. organization dedicated to
promoting revitalization of America's inner cities. He is also on the board of
San Francisco's Bay Area Council. Mr. Haughton is a Trustee for the University
of California at Santa Barbara, and he also serves on the policy advisory
boards for both the Fisher Center for Real Estate & Urban Economics at UC
Berkeley and the School of Real Estate at the University of San Diego. He is an
Ex Officio member of the Governance and Nominating Committee.
WAYNE E. HEDIEN, 68, has been a Director since January 1995 and was a
Director of PMI between February 1983 and May 1990 and between April 1992 and
January 1995. Mr. Hedien was the Chairman of the Board of Allstate from July
1989 through December 1994 and was elected to the same position with The
Allstate Corporation in March 1993 in preparation for The Allstate
Corporation's initial public offering. He held a variety of senior executive
positions with Allstate and its affiliates prior to his retirement from
Allstate in December 1994. He is also on the board of directors of the Morgan
Stanley Funds. He is a member of the Governance and Nominating Committee and
the Compensation Committee.
LOUIS G. LOWER II, 56, has been a Director of TPG since May 2001. Mr. Lower
has been President and Chief Executive Officer of Horace Mann Educators Corp.
since February 2000. Before joining Horace Mann,
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Mr. Lower served as Chairman and Chief Executive Officer of Allstate Life
Insurance Company and was a director of Allstate Insurance Company and Allstate
Federal Savings Bank. Prior to being elected Chairman of Allstate Life
Insurance Company in 1999, Mr. Lower served as that company's President and
Chief Executive Officer since 1990 and as Senior Vice President, Treasurer and
Chief Investment Officer of both Allstate Life Insurance Company and Allstate
Insurance Company from 1986 to 1989. Mr. Lower joined Allstate in 1976 and held
a number of positions prior to becoming Executive Vice President of Allstate
Life Insurance Company in 1989. Mr. Lower serves on the Boards of Directors of
Horace Mann and the NEA Foundation for the Improvement of Education. He is past
Chairman of LOMA and has served on the Boards of the American Council of Life
Insurers, LIMRA, LUTC, NAVA, and the American College. He is a member of the
Audit Committee.
RAYMOND L. OCAMPO JR., 49, has been a Director since May 1999. He has been a
member of the board of directors of the Berkeley Center for Law & Technology
since January 2000 and was Executive Director of the Center from August 1997 to
December 1999. Mr. Ocampo was Senior Vice President, General Counsel &
Secretary at Oracle Corporation from September 1990 until his retirement in
November 1996. Mr. Ocampo joined Oracle in July 1986 and held various senior
and executive positions with Oracle until retirement. Mr. Ocampo is a member of
the board of directors of Teamscape Corporation and previously served on the
boards of directors of Vantive Corporation (from January 1997 until its
acquisition by PeopleSoft Inc. in December 1999), Spruce Technologies, Inc.,
Syncronex, Inc., Blackboard Entertainment Inc. and HolaMujer Corporation. He is
Vice Chair of the Compensation Committee.
JOHN D. ROACH, 58, has been a Director since May 1997. Mr. Roach is the
Chairman and Chief Executive Officer of Stonegate International, a private
investment and advisory services firm. He was previously the Chairman,
President and Chief Executive Officer of Builders FirstSource, positions he had
held since October 1997. Prior to joining Builders FirstSource, he was the
Chairman, President and Chief Executive Officer of Fibreboard Corporation. From
1988 until July 1991, Mr. Roach was Executive Vice President of Manville
Corporation. Prior to joining Manville, Mr. Roach was a strategy consultant and
senior officer of Braxton Associates; Booz, Allen, Hamilton; and The Boston
Consulting Group. Mr. Roach has previously served on the boards of directors
for Fibreboard, Magma Power, Thompson PBE, the American Stock Exchange, NCI
Building Systems, and Washington Group International. He is a member of the
Compensation Committee and the Governance and Nominating Committee.
DR. KENNETH T. ROSEN, 53, has been a Director since January 1995 and was a
Director of PMI between October 1993 and January 1995. Dr. Rosen has been a
Professor of Business Administration at the Haas School of Business since July
1978, and Chairman of the Fisher Center for Real Estate and Urban Economics
since 1979, each at the University of California at Berkeley. He is also
Chairman of the Rosen Consulting Group, a real estate and mortgage market
consulting firm. Dr. Rosen serves as the Chairman of Lend Lease Rosen Real
Estate Securities. Dr. Rosen is also on the boards of directors of Golden West
Financial Corporation and Avatar Holdings, Inc. He is a member of the
Compensation Committee.
L. STEPHEN SMITH, 52, has been a Director since February 2002. Mr. Smith has
been President and Chief Operating Officer of TPG and its subsidiary, PMI
Mortgage Insurance Co., since September 1998. Prior thereto he was Executive
Vice President of Marketing and Field Operations of PMI Mortgage Insurance Co.
since May 1994 and was elected to the same positions with TPG in January 1995.
Prior thereto, he held various executive positions with PMI Mortgage Insurance
Co. since 1991. Mr. Smith joined PMI in 1979. Mr. Smith is Vice Chair of the
Board of Directors of CMG Mortgage Insurance Company, a partially owned
subsidiary of PMI Mortgage Insurance Co.
RICHARD L. THOMAS, 71, has been a Director since July 1996. Mr. Thomas is
the retired Chairman of First Chicago NBD Corporation and its principal
subsidiary, The First National Bank of Chicago. From January 1, 1992 until
December 1, 1995, he was Chairman and CEO of First Chicago Corporation, after
which he served as Chairman of First Chicago NBD Corporation until May 1996.
Mr. Thomas is also on the boards of directors of
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IMC Global, Inc., Sabre Holdings Corporation, Sara Lee Corporation and Exelon
Corporation. He is Chair of the Governance and Nominating Committee and a
member of the Audit Committee.
MARY LEE WIDENER, 63, has been a Director since January 1995 and was a
Director of PMI between October 1993 and January 1995. Ms. Widener has been
Chief Executive Officer of Neighborhood Housing Services of America, Inc. since
May 1974. Ms. Widener has been the chairperson of the board of directors of the
Federal Home Loan Bank of San Francisco since 1994, serves as vice chairperson
of the board of directors of Social Compact and is a member of the board of
directors of the S.H. Cowell Foundation. She is a member of the Audit Committee.
RONALD H. ZECH, 58, has been a Director since May 1998. He is currently
Chairman, Chief Executive Officer and President of GATX Corporation, a leading
provider of specialized finance and leasing solutions to businesses and
partners worldwide. GATX focuses on primarily rail, aircraft, technology and
marine assets. Mr. Zech was elected Chairman of GATX Corporation in April 1996,
Chief Executive Officer in January 1996, and President in July 1994. Mr. Zech
previously served as President and Chief Executive Officer of GATX Capital
Corporation from 1984 to 1994. Mr. Zech is also on the board of directors of
McGrath RentCorp. He is Chair of the Compensation Committee.
There are no family relationships among any of the aforementioned persons.
FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS. The Board of
Directors held seven meetings during 2002. Each Director attended at least 75%
of the Board meetings and meetings of committees of which he or she is a
member. The Board of Directors has established an Audit Committee, a
Compensation Committee, and a Governance and Nominating Committee. The members
and chair of each committee are determined from time to time by the Board.
The Audit Committee consists of James C. Castle, Chair, Mariann Byerwalter,
Vice Chair, Donald C. Clark, Louis G. Lower II, Richard L. Thomas, and Mary Lee
Widener. The committee held four meetings in 2001. Information regarding the
functions performed by the Audit Committee is set forth in the Audit Committee
Report and the Audit Committee Charter included in this Proxy.
The Compensation Committee consists of Ronald H. Zech, Chair, Raymond L.
Ocampo Jr., Vice Chair, Wayne E. Hedien, John D. Roach, and Dr. Kenneth T.
Rosen. The committee held five meetings in 2001. The committee makes decisions
with respect to the administration of the salaries, bonuses and other
compensation to be paid to executive officers and officers who receive base
salaries of $240,000 or more, and acts as administrator for The PMI Group, Inc.
Equity Incentive Plan.
The Governance and Nominating Committee consists of Richard L. Thomas,
Chair, Wayne E. Hedien, Donald C. Clark, John D. Roach, and W. Roger Haughton,
Ex Officio. The committee held five meetings in 2001. The committee develops
and monitors TPG's corporate governance practices and procedures and monitors
the responsibilities of board members, in consultation with the Chairman of the
Board. The committee makes periodic reports to the Board of Directors regarding
TPG's governance practices. The committee assists the Board of Directors in its
assessment of the Chief Executive Officer, and assists the Chairman in the
annual self-assessment process for the Board of Directors. The committee
advises the Board with respect to the size and composition of the Board and
recommends prospective Directors to assist in creating a balance of knowledge,
experience and capability on the Board. Any shareholder wishing to propose a
nominee should submit a recommendation in writing to TPG's Secretary,
indicating the nominee's qualifications and other relevant biographical
information and providing confirmation of the nominee's consent to serve as a
director. The committee reviews recommendations regarding Director compensation.
DIRECTORS' STOCK OWNERSHIP GUIDELINES. In order to more closely align the
interest of Non-Employee Directors with those of TPG's stockholders, the Board
of Directors established stock ownership
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guidelines for all Non-Employee Directors. The desired level of stock ownership
is to be achieved over a period of five years from the date of first election
as a director. Non-Employee Directors are expected to own TPG common stock that
has a market value equal to a minimum of approximately $110,000, which is five
times a director's annual retainer fee. Stock owned for purposes of the
guidelines include: (a) shares purchased in the open market or upon the
exercise of options, including shares held in a retirement plan, (b) stock
awarded under The PMI Group, Inc. Stock Plan For Non-Employee Directors, (c)
stock awarded under The PMI Group, Inc. Equity Incentive Plan, (d) TPG common
stock equivalents held in The PMI Group, Inc. Directors' Deferred Compensation
Plan ("Directors' Deferred Compensation Plan"), and (e) the market value of
vested stock options which have an exercise price below the current market
price for TPG common stock. As of April 1, 2002, Non-Employee Directors
Byerwalter, Dr. Castle, Clark, Hedien, Lower, Ocampo, Roach, Dr. Rosen, Thomas,
Widener and Zech have met approximately 30%, 1050%, 1058%, 966%, 52%, 549%,
1216%, 962%, 5253%, 686%, and 674%, respectively, of the stock ownership
guidelines based on the closing price of TPG common stock on April 1, 2002 of
$76.43 per share.
DIRECTORS' COMPENSATION AND BENEFITS. Directors who are employees of TPG or
its subsidiaries do not receive additional compensation for their services as
Directors. Each Non-Employee Director receives fees for his or her service as a
Director. Each Non-Employee Director receives an annual retainer of $22,000.
The Non-Employee Directors who serve as Committee Chairs receive an additional
annual retainer of $6,000. Directors are reimbursed for reasonable expenses to
attend meetings. Non-Employee Directors also receive initial and annual grants
of stock options and restricted shares of TPG common stock. The following table
sets forth the fees and other compensation benefits paid to all Non-Employee
Directors. In the event that the stockholders at the Annual Meeting approve the
proposal to amend TPG's Restated Certificate of Incorporation to increase the
number of authorized shares of common stock, the Governance and Nominating
Committee of the Board of Directors may review the non-cash compensation
benefits paid to all Non-Employee Directors.
Non-Employee Directors' Compensation and Benefits
Annual
Grant of
Annual Initial Grant Annual Grant TPG
Retainer of TPG Stock of TPG Stock Common
Fees(1) Options(2) Options(3) Stock(4)
-------- ------------- ------------ ----------
Board Members................................ $22,000 6,000 shares 3,750 shares 450 shares
Chairs of Audit, Compensation, and Governance
and Nominating Committees.................. $ 6,000 N/A N/A N/A
- --------
(1) Under the Directors' Deferred Compensation Plan, each Non-Employee Director
may defer receipt of his or her retainer fees. The minimum permitted
deferral is $5,000. All amounts deferred are deemed to be invested in
phantom shares of TPG common stock. On any date, the value of each share of
phantom stock will equal the fair market value of a share of common stock,
including reinvestment of any dividends. At the time when a Director makes
a deferral election, he or she also must elect the time and method for
payment of the deferred amounts. Phantom shares of TPG common stock will be
paid in cash.
(2) Granted in the initial year as a Director, the shares are prorated (based
on months of service between June 1 and May 31) and are awarded as soon as
administratively practicable after the Director joins the Board. The stock
option generally vests in three equal installments on the first, second and
third anniversaries of the date of grant, assuming continued service on the
Bard. The exercise price is equal to 100 percent of the fair market value
on the date of grant.
(3) Stock options are granted as of the first business day in June of each year
(assuming that he or she remains an eligible Non-Employee Director). The
exercise price of each such option is equal to 100 percent of the fair
market value on the date of grant of the shares covered by the option. The
options granted become exercisable on the first anniversary of the date of
grant. All options granted to Non-Employee Directors have a term of not
greater than 10 years from the date of grant. If a Director terminates
service on the Board
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prior to an option's normal expiration date, the period of exercisability of
the option may be shorter, depending upon the reason for the termination.
(4) Granted for each full year of service, prorated for service of less than
one year. Shares of restricted stock are awarded as of the first business
day in June of each year (assuming that he or she remains an eligible
Non-Employee Director). Each Non-Employee Director may receive only one
award of TPG common stock during any calendar year. The number of shares of
restricted stock awarded to any Non-Employee Director will be reduced as
necessary so that the fair market value of the shares on the date of award
does not exceed $30,000. Any shares of restricted stock will vest six
months after the applicable grant date. Each Non-Employee Director also
receives an annual cash payment equal to the estimated tax liability on the
award of restricted stock, including taxes payable on the amount of the tax
cash payment.
7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 2002, unless otherwise noted,
certain stock ownership information regarding all stockholders known by TPG to
be the beneficial owners of five percent or more of TPG common stock, each
nominee and current Director of TPG, and each Named Executive Officer listed in
the Summary Compensation Table herein, and all Directors, nominees and
Executive Officers as a group. For purposes of this table, a beneficial owner
is generally any person or entity that directly, indirectly, or through a
family relationship has or shares the power to vote or direct the vote of the
shares, has the power to trade or dispose of the shares, or has the right to
acquire the ownership of any shares at any time within 60 days of April 1,
2002, through the exercise of any option, warrant, right, or convertible
security.
Common Stock Beneficially Owned
Number Percentage
of Shares of Class(1)
--------- -----------
Beneficial Owner
AXA FINANCIAL, INC.(2)................................... 4,606,994 10.3%
1290 Avenue of the Americas
New York, NY 10104
CAPITAL GROUP INTERNATIONAL, INC.(3)..................... 4,356,900 9.8%
111000 Santa Monica Boulevard
Los Angeles, CA 90025
INVESCO INSTITUTIONAL NA, INC.(4)........................ 2,920,735 6.6%
1315 Peachtree Street, NE
Atlanta, GA 30309
FMR CORP.(5)............................................. 2,368,710 5.3%
82 Devonshire Street
Boston, MA 02109
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.(6).......... 2,365,155 5.3%
4500 Main Street
Kansas City, MO 64141
Directors and Nominees
Mariann Byerwalter(7).................................... 434 *
Dr. James C. Castle(8)................................... 20,734 *
Donald C. Clark(9)....................................... 20,684 *
W. Roger Haughton(10).................................... 328,057 *
Wayne E. Hedien(11)...................................... 22,609 *
Louis G. Lower II(12).................................... 434 *
Raymond L. Ocampo Jr.(13)................................ 11,084 *
John D. Roach(14)........................................ 22,984 *
Dr. Kenneth T. Rosen(15)................................. 20,809 *
L. Stephen Smith(16)..................................... 130,415 *
Richard L. Thomas(17).................................... 81,959 *
Mary Lee Widener(18)..................................... 18,025 *
Ronald H. Zech(19)....................................... 15,284 *
Other Executive Officers
Claude J. Seaman(20)..................................... 25,565 *
John M. Lorenzen, Jr.(21)................................ 93,123 *
Victor J. Bacigalupi(22)................................. 47,611 *
All Directors, Nominees and Executive Officers as a group
(16 persons including those named above)(23)............. 869,885 1.9%
- --------
* Less than 1%
8
(1) As of April 1, 2002, 44,906,219 shares of common stock were outstanding,
the only class of voting stock of TPG.
(2) Based on Amendment No. 8 to Schedule 13G filed jointly by AXA Financial,
Inc., AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA
Conseil Vie Assurance Mutuelle, AXA Courtage Assurance Mutuelle, AXA and
their subsidiaries (collectively "AXA") with the Securities and Exchange
Commission (the "SEC") on February 12, 2002, AXA held sole voting power as
to 1,028,384 of such shares, held shared voting power as to 3,447,070 of
such shares, and held sole dispositive power as to 4,606,994 of such
shares.
(3) Based on Amendment No. 3 to Schedule 13G filed with the SEC on February
11, 2002, Capital Group International, Inc. ("Capital Group") held sole
voting power as to 3,811,450 of such shares and held sole dispositive
power as to 4,356,900 of such shares. According to the filing, Capital
Group had no shared voting or shared dispositive power over such shares.
(4) Based on Schedule 13G filed with the SEC on January 31, 2002, Invesco
Institutional NA, Inc. ("Invesco") had no sole voting power or sole
dispositive power over such shares. According to the filing, Invesco had
shared voting or shared dispositive power over 2,920,735 of such shares.
(5) Based on Schedule 13G filed with the SEC on February 14, 2002, FMR Corp.
("FMR") held sole voting power as to 16,100 of such shares and held sole
dispositive power as to 2,368,710 of such shares. According to the filing,
FMR had no shared voting or shared dispositive power over such shares.
(6) Based on Schedule 13G filed with the SEC on February 8, 2002, American
Century Investment Management, Inc. ("American Century") held sole voting
power as to 2,365,155 of such shares and held sole dispositive power as to
2,365,155 of such shares. According to the filing, American Century had no
shared voting or shared dispositive power over such shares.
(7) Includes 434 shares.
(8) Includes 6,484 shares and options to purchase 14,250 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 2,478
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to The PMI Group, Inc. Directors'
Deferred Compensation Plan. ("Directors' Deferred Compensation Plan").
(9) Includes 4,184 shares and options to purchase 16,500 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 3,250
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to the Directors' Deferred
Compensation Plan.
(10) Includes 10,848 shares, options to purchase 312,199 shares of common stock
exercisable within 60 days of April 1, 2002, 4,568 shares of common stock
deemed owned under The PMI Group, Inc. Savings and Profit-Sharing Plan
(the "401(k) Plan"), and 442 shares of common stock deemed owned under The
PMI Group, Inc. Employee Stock Purchase Plan (the "ESPP"). Does not
include 28,902 shares of common stock equivalents arising from the
officer's election to defer payment of compensation pursuant to The PMI
Group, Inc. Officer Deferred Compensation Plan ("Officer Deferred
Compensation Plan").
(11) Includes 6,109 shares and options to purchase 16,500 shares of common
stock exercisable within 60 days of April 1, 2002.
(12) Includes 434 shares. Does not include 320 shares of common stock
equivalents arising from the election to defer payment of Director's fees
pursuant to the Directors' Deferred Compensation Plan.
(13) Includes 3,334 shares and options to purchase 7,750 shares of common stock
exercisable within 60 days of April 1, 2002. Does not include 1,313 shares
of common stock equivalents arising from the election to defer payment of
Director's fees pursuant to the Directors' Deferred Compensation Plan.
(14) Includes 8,734 shares and options to purchase 14,250 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 2,622
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to the Directors' Deferred
Compensation Plan.
(15) Includes 4,309 shares and options to purchase 16,500 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 1,743
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to the Directors' Deferred
Compensation Plan.
(16) Includes 13,156 shares, options to purchase 105,156 shares of common stock
exercisable within 60 days of April 1, 2002, 11,312 shares of common stock
deemed owned under the 401(k) Plan, and 791 shares of common stock owned
under ESPP. Does not include 9,261 shares of common stock equivalents
arising from
9
the officer's election to defer payment of compensation pursuant to the
Officer Deferred Compensation Plan.
(17) Includes 65,834 shares and options to purchase 16,125 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 2,267
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to the Directors' Deferred
Compensation Plan; 10,000 shares of common stock held by the Thomas Family
Limited Partnership, in which Mr. Thomas has a 2.5% ownership interest;
and 2,000 shares of common stock held in a charitable remainder unitrust
of which Mr. Thomas is a trust beneficiary.
(18) Includes 2,985 shares and options to purchase 15,040 shares of common
stock exercisable within 60 days of April 1, 2002.
(19) Includes 3,284 shares and options to purchase 12,000 shares of common
stock exercisable within 60 days of April 1, 2002. Does not include 1,838
shares of common stock equivalents arising from the election to defer
payment of Director's fees pursuant to the Directors' Deferred
Compensation Plan.
(20) Includes 11,803 shares, options to purchase 12,936 shares of common stock
exercisable within 60 days of April 1, 2002, and 826 shares of common
stock deemed owned under the 401(k) Plan. Does not include 10,404 shares
of common stock equivalents arising from the officer's election to defer
payment of compensation pursuant to the Officer Deferred Compensation Plan.
(21) Includes 13,180 shares, options to purchase 78,171 shares of common stock
exercisable within 60 days of April 1, 2002, 826 shares of common stock
deemed owned under 401(k) Plan, and 946 shares of common stock owned under
the ESPP. Does not include 7,028 shares of common stock equivalents
arising from the officer's election to defer payment of compensation
pursuant to the Officer Deferred Compensation Plan.
(22) Includes 5,322 shares, options to purchase 41,694 shares of common stock
exercisable within 60 days of April 1, 2002, and 595 shares of common
stock deemed owned under the 401(k) Plan. Does not include 4,477 shares of
common stock equivalents arising from the election to defer payment of
compensation pursuant to the Officer Deferred Compensation Plan.
(23) Includes 170,508 shares, options to purchase 679,071 shares of common
stock exercisable within 60 days of April 1, 2002, 18,127 shares of common
stock deemed owned under the 401(k) Plan, and 2,179 shares of common stock
owned under the ESPP. Does not include 75,903 shares of common stock
equivalents arising from the officer's or director's election to defer
payment of compensation pursuant to the Officer Deferred Compensation Plan
and the Directors' Deferred Compensation Plan.
10
EXECUTIVE COMPENSATION. Except as otherwise indicated, the following
Summary Compensation Table sets forth information on compensation for the last
three years for the Chief Executive Officer and for each of the four most
highly compensated executive officers (collectively the "Named Executive
Officers") of TPG.
Summary Compensation Table
Long-term Compensation
------------------------------------
Annual
Compensation Restricted Securities
---------------------- Stock Underlying LTIP All Other
Name and Principal Position Year Salary Bonus(1) Awards Options (#) Payouts(2)($) Compensation(3)
- --------------------------- ---- -------- -------- ---------- ----------- ------------- ---------------
W. Roger Haughton.......... 2001 $625,000 $944,821 0 77,848 $ 0 $130,818
Chairman of the Board and 2000 575,000 852,171 0 80,000 453,395 10,200
Chief Executive Officer 1999 550,000 577,766 0 80,250 430,124 102,083
L. Stephen Smith........... 2001 370,000 505,000 0 38,000 0 92,823
Director, President and 2000 353,600 465,821 0 51,750 195,332 10,200
Chief Operating Officer 1999 339,000 311,600 0 40,951 176,142 9,100
Claude J. Seaman........... 2001 300,000 365,000 0 26,684 0 10,200
President International 2000 276,400 295,848 0 32,986 165,707 10,200
and Strategic Investments 1999 265,000 226,182 0 26,400 119,819 109,111
John M. Lorenzen, Jr....... 2001 275,000 285,000 0 21,528 0 35,999
Executive Vice President, 2000 261,000 279,364 0 25,500 176,861 42,237
Chief Financial Officer 1999 250,008 213,380 0 25,501 167,761 34,725
Victor J. Bacigalupi....... 2001 270,000 290,000 0 21,000 0 10,200
Executive Vice President, 2000 250,000 267,590 0 26,631 127,633 27,915
Secretary and General 1999 241,250 178,911 0 22,800 89,921 38,776
Counsel
- --------
Note: Executives also receive financial planning assistance, automobile
allowance and reimbursed parking, but such amounts did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus of each executive.
(1) Bonus amounts shown for 2001 were earned during 2001 and paid in 2002.
(2) Represents payouts of performance shares awarded under the Equity Incentive
Plan paid in 2000 and 2001 for performance in 1999 and 2000.
(3) All Other Compensation for 2001 represents employer-matching contributions
to each of the Named Executive Officer's account under The PMI Group, Inc.
Savings and Profit-Sharing Plan, a "401(k)" Plan; and a matching
contribution under The PMI Group, Inc. Officer Deferred Compensation Plan
to the accounts of Mr. Haughton, Mr. Smith, and Mr. Lorenzen of 1,800,
1,233, and 385 shares of TPG common stock equivalents valued at $67.01 per
share, the closing price of TPG common stock on December 31, 2001.
11
OPTION GRANTS. The following table is a summary of all TPG stock options
granted to the Named Executive Officers during 2001. Individual grants are
listed separately for each Named Executive Officer. TPG has not granted any
SARs. All option information has been adjusted to reflect the Company's 3-for-2
stock split on August 16, 1999.
Option Grants in 2001
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Shares Options Stock Appreciation for
Underlying Granted to All Exercise Option Term(3)
Options Employees in Price Expiration -----------------------------
Name Granted(1) Fiscal Year(2) ($/Share) Date 5% ($) 10% ($)
- ---- ---------- -------------- --------- ---------- ---------- ----------
W. Roger Haughton.... 75,000 9.8% $57.57 2/06/2011 $2,715,409 $6,881,382
2,848 .4 63.18 3/04/2006 40,978 88,712
L. Stephen Smith..... 38,000 5.0 57.57 2/06/2011 1,375,808 3,486,567
Claude J. Seaman..... 26,000 3.4 57.57 2/06/2011 941,342 2,385,546
684 .1 70.88 2/18/2009 21,875 51,886
John M. Lorenzen, Jr. 17,600 2.3 57.57 2/06/2011 637,216 1,614,831
2,941 .4 68.84 2/18/2009 92,969 221,117
987 .1 68.84 3/04/2006 17,861 39,247
Victor J. Bacigalupi. 21,000 2.7 57.57 2/06/2011 760,315 1,926,787
- --------
(1) The options have a per share exercise price equal to the fair market value
of a share of common stock on the grant date and vest in three equal
installments on the first, second and third anniversaries of the grant. The
required exercise price and tax withholding may be paid in cash and/or
shares of common stock that would otherwise have been received on exercise.
(2) Represents percentage of total options to purchase common stock granted
under The PMI Group, Inc. Equity Incentive Plan ("Equity Incentive Plan")
to employees of TPG and its subsidiaries during 2001.
(3) Realizable values are reported net of the option exercise price. The dollar
amounts under these columns are the result of calculations at the 5% and
10% rates (determined from the price at the date of grant, not the stock's
current market value) set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if
any, of TPG's stock price. Actual gains, if any, on stock option exercises
are dependent on the future performance of the common stock as well as the
optionholder's continued employment through the vesting period. The
potential realizable value calculation assumes that the optionholder waits
until the end of the option term to exercise the option.
The following table shows the number of shares acquired on the exercise of
stock options, value realized on the exercise of options, underlying
unexercised options and the value of options outstanding as of December 31,
2001 for each of the Named Executive Officers. TPG has not granted any SARs.
Options Outstanding
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End (#) at Fiscal Year End ($)(1)
- - on Value ------------------------------ -------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- ------------ ----------- ------------- ----------- -------------
W. Roger Haughton.... 6,000 $ 195,550 245,332 202,931 $8,906,983 $4,195,265
L. Stephen Smith..... 0 0 116,161 107,150 4,159,833 2,231,687
Claude J. Seaman..... 1,693 71,459 45,405 72,474 1,362,442 1,491,837
John M. Lorenzen, Jr. 24,240 1,054,558 76,001 62,404 2,666,689 1,293,650
Victor J. Bacigalupi. 0 0 38,738 57,604 1,212,634 1,231,665
- --------
(1) Value is based on the closing price of TPG common stock on the New York
Stock Exchange on December 31, 2001 of $67.01 per share, less the exercise
price of the option.
12
LONG-TERM INCENTIVE PLAN AWARDS. No performance share awards or any other
long-term incentive plan awards, except for stock option grants, were made to
the Named Executive Officers during 2001.
CHANGE OF CONTROL ARRANGEMENTS. The Equity Incentive Plan and the Officer's
Deferred Compensation Plan both provide that upon a Change of Control, all
outstanding stock options, restricted stock, performance shares and other
common stock equivalents shall become 100% vested and immediately exercisable.
Under the Equity Incentive Plan, "Change of Control" generally means the
earliest to occur of: (a) the acquisition by any individual, entity or group of
20% or more of the then outstanding shares of common stock of TPG (excluding
acquisition directly from TPG, or by any employee benefit plan sponsored or
maintained by TPG); (b) the failure of the current Board members, for any
reason, to constitute at least a majority of the Board (excluding individuals
whose election to the Board was approved by the current Board); (c)
consummation by TPG of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of TPG or the
acquisition of assets of another entity unless, following such business
combination, all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding shares of common stock
and outstanding company voting securities of TPG immediately prior to such
business combination beneficially own, directly or indirectly, more than 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; or (d) approval by the stockholders
of TPG of a complete liquidation or dissolution of TPG.
TPG has also entered into Change of Control Employment Agreements
("Employment Agreements") with certain senior officers of TPG, including
Messrs. Haughton, Smith, Seaman, Lorenzen, and Bacigalupi (the "Executives"),
each Employment Agreement originally dated as of February 12, 1998. TPG
believes it is imperative to be able to maintain a stable and competent
management base, and that the continued success of TPG depends, to a
significant degree, on the skills and competence of its senior officers. The
Employment Agreements are intended to assure that TPG will have the continued
dedication of its senior officers by diminishing the inevitable distraction of
such officers by virtue of the personal uncertainties and risks arising from
the possibility, threat or occurrence of a change of control of TPG. Generally,
severance benefits will be triggered under the Employment Agreements if a
change of control occurs and the Executive's employment is terminated (a) by
the Executive for "Good Reason" or (b) by TPG other than for "Cause," "Death"
or "Disability," as defined in the Employment Agreements, during the three year
period following a "Change of Control". Under the Employment Agreements,
"Change of Control," generally means (a) the acquisition by any individual,
entity or group of 20% or more of the then outstanding shares of common stock
of TPG (excluding acquisition directly from TPG, or by any employee benefit
plan sponsored or maintained by TPG); (b) the failure of the current Board
members, for any reason, to constitute at least a majority of the Board; (c)
consummation by TPG of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of TPG or the
acquisition of assets of another entity unless, following such business
combination, all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding shares of common stock
and outstanding voting securities of TPG immediately prior to such business
combination beneficially own, directly or indirectly, more than 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; or (d) approval by the stockholders
of TPG of a complete liquidation or dissolution of TPG.
Payments and benefits payable under the Employment Agreement under these
circumstances include a lump-sum cash payment of the aggregate of the following
amounts: (i) the sum of the Executive's annual base salary through the date of
termination; a pro rata portion of the greater of either the executive's
highest bonus earned under the TPG's annual incentive plans for the last three
full fiscal years preceding the change of control or the executive's annual
bonus earned during the last fiscal year prior to termination; any compensation
previously deferred by the Executive; and any accrued vacation pay; (ii) up to
three times (depending on the Executive involved) the sum of the Executive's
annual base salary and the greater of either the Executive's highest bonus
earned under the TPG's annual incentive plans for the last three full fiscal
years preceding the
13
change of control or the Executive's annual bonus earned during the last fiscal
year prior to termination; and (iii) the difference between the aggregate
benefit under the Retirement Plan and the Supplemental Employee Retirement Plan
benefit which the Executive would have accrued (whether or not vested) had the
Executive's employment continued for up to three years (depending on the
Executive involved) after the date of termination, and the actual vested
benefit under such plans as of the date of the Executive's termination of
employment, except that Executives aged 50 or over shall be deemed fully
eligible for retiree health benefits; continuation of welfare benefit plan
coverage for up to three years (depending on the Executive involved); and
outplacement services not to exceed 15% of base salary. Under certain
circumstances, a portion of the present value of the benefits payable under the
Employment Agreement or upon the acceleration of the vesting of all outstanding
stock options, restricted stock and performance shares could be subject to a
20% excise tax under the Internal Revenue Code and be nondeductible by TPG. TPG
has agreed, subject to limited exceptions, to reimburse the Executives for any
such excise taxes, together with any additional excise or income taxes
resulting from such reimbursement.
EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES. The Compensation Committee of
the Board of Directors established stock ownership guidelines for TPG's senior
executive officers. The desired level of stock ownership is to be achieved over
a period of five years from the date of becoming an executive officer.
Executive officers are expected to own TPG common stock which has a market
value equal to a minimum range from one to three times such executive's annual
base salary. Stock owned for purposes of the guidelines include: (a) shares
purchased in the open market, or upon the exercise of options; (b) shares held
in a retirement plan, including TPG common stock fund units held under The PMI
Group, Inc., Savings and Profit-Sharing Plan ("401(k) Plan"); (c) restricted
stock awarded under the Equity Incentive Plan; (d) TPG common stock equivalents
held in the Officer Deferred Compensation Plan, and (e) the market value of
vested stock options which have an exercise price below the current market
price for TPG common stock. As of April 1, 2002, Messrs. Haughton, Smith,
Seaman, Lorenzen, and Bacigalupi have met approximately 1037%, 686%, 274%,
962%, and 474% respectively, of the stock ownership guidelines based on the
closing price of TPG common stock on April 1, 2002 of $76.43 per share.
GENERAL COMPENSATION AND BENEFIT PLANS. The Named Executive Officers
participate in certain stock option, retirement and profit-sharing plans
sponsored by TPG, some of which are intended to qualify for tax-favored
treatment under the Internal Revenue Code, as amended ("Code"). These plans
include the Equity Incentive Plan; The PMI Group, Inc. Retirement Plan
("Retirement Plan"), a defined benefit pension plan intended to qualify under
Section 401(a) of the Code; The PMI Group, Inc. Supplemental Employee
Retirement Plan ("SERP"), a nonqualified plan designed to provide benefits in
excess of those permitted to be provided under the Retirement Plan because of
the Code limitations described below; and The PMI Group, Inc. Employee Stock
Purchase Plan. The Named Executive Officers are eligible to participate in the
Officer Deferred Compensation Plan, which permits each participant to elect to
defer receipt of part or all of his or her eligible compensation on a pre-tax
basis. Under the Officer Deferred Compensation Plan, TPG makes a matching
contribution for each participant equal to 25% of the amount a participant has
deferred into the TPG common stock equivalent fund. The matching contribution
is made in TPG common stock equivalents and vests after three-years, except in
the event of a change of control, in which case the vesting is automatic. In
addition, the Named Executive Officers are eligible to participate in the
401(k) Plan, a defined contribution plan intended to qualify under Section
401(a) of the Code. TPG also makes matching and discretionary matching
contributions to the 401(k) Plan.
The pension benefit under the Retirement Plan and SERP generally is based on
the executive's years of credited service and the average of his or her five
highest consecutive years' compensation in the last 10 years of service.
Credited service under the Retirement Plan includes only service after the
completion of TPG's initial public offering in April 1995. Credited service for
the SERP includes all service with TPG, Sears, Roebuck and Co. and Allstate
Insurance Company. Benefits are computed on a straight-line annuity basis and
are not subject to deduction for Social Security or other offset amounts.
14
The following table indicates the annual benefits the Named Executive
Officers would receive at their normal retirement date if they continue as TPG
employees at the specified levels of compensation and for the years of credited
service under the combined formulas of the Retirement Plan and the SERP.
Pension Plan Table
Years Of Service
-----------------------------------------
Remuneration 15 20 25 30 35
------------ ------- ------- ------- ------- ---------
300,000.... 95,000 127,000 159,000 191,000 223,000
400,000.... 128,000 171,000 214,000 257,000 300,000
500,000.... 161,000 215,000 269,000 323,000 377,000
600,000.... 194,000 259,000 324,000 389,000 454,000
700,000.... 227,000 303,000 379,000 455,000 531,000
800,000.... 260,000 347,000 434,000 521,000 608,000
900,000.... 293,000 391,000 489,000 587,000 685,000
1,000,000.. 326,000 435,000 544,000 653,000 762,000
1,100,000.. 359,000 479,000 599,000 719,000 839,000
1,200,000.. 392,000 523,000 654,000 785,000 916,000
1,300,000.. 425,000 567,000 709,000 851,000 993,000
1,400,000.. 458,000 611,000 764,000 917,000 1,070,000
1,500,000.. 491,000 655,000 819,000 983,000 1,147,000
- --------
Note: Assumes age 65 normal retirement. Amounts represent total annual benefit
payable under both the Retirement Plan and the SERP. The amount shown is for a
single life annuity. If another form of benefit is elected, such as a joint and
survivor annuity, the benefit amount will be lower.
Compensation under the Retirement Plan and SERP is based upon the total
annual cash compensation paid to the participant (not to exceed $200,000 for
2002 under the Retirement Plan only) for services rendered to PMI and its
affiliates, including pre-tax deferrals, but excluding certain items such as
equity-based compensation and the value of employer contributions to employee
benefit plans. The benefits listed in the Pension Plan Table are not subject to
any deduction for Social Security or other offset amounts. Covered compensation
under the Retirement Plan in 2001 (without Code limitations) was $1,489,336,
$843,302, $598,506, $554,867, and $538,071 for Messrs. Haughton, Smith, Seaman,
Lorenzen, and Bacigalupi, respectively. As of December 31, 2001, Messrs.
Haughton, Smith, Seaman, Lorenzen, and Bacigalupi had approximately 32, 25, 26,
17, and 5 years of credited service, respectively, under the SERP. Messrs.
Haughton, Smith, Seaman, and Lorenzen each had 6.667 years of credited service
under the Retirement Plan. Mr. Bacigalupi had 5.167 years of credited service
under the Retirement Plan.
15
The Compensation Committee Report on Executive Compensation, related
disclosure including the Performance Graph, and those portions of the Audit
Committee Report that are not deemed filed for purposes of the Securities
Exchange Act of 1934, shall not be deemed incorporated by reference by any
general statement incorporating this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report is provided by the Compensation Committee (the "Committee") of
the Board of Directors to assist stockholders in understanding the Committee's
objectives and procedures in establishing the compensation of TPG's Chief
Executive Officer and other senior officers of TPG.
As members of the Committee, it is our responsibility to review and set
compensation levels of the Chief Executive Officer and other senior officers of
TPG, to evaluate the performance of management in relation to such
compensation, and to take any and all other actions regarding such matters. The
Committee sets base salary levels, annual incentive awards and long-term
incentives for those executive officers who have company-wide authority with
salaries exceeding levels set by the Committee or who are subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended.
The Committee is composed of independent, non-employee members of the Board
of Directors who are not eligible to participate in any of the executive
compensation programs of TPG. The Committee met five times in 2001. The
Committee sets the overall compensation principles of TPG and reviews the
entire program at least annually for its effectiveness. Every two years, the
Committee conducts a comprehensive review of TPG's compensation philosophy,
policies and programs for its executive officers. The purpose of this review is
to ascertain whether TPG's total compensation program remains competitive to
attract, retain and motivate skilled executives who are capable of developing
and implementing a business strategy designed to build stockholder value. The
most recent comprehensive review was completed in 2001.
The Committee's 2001 compensation actions and policies were based on
recommendations on TPG executive compensation practices from Hewitt Associates
LLC, an outside consulting firm that specializes in executive compensation,
internally generated information, comparative pay practice data, and its own
review of the status of the executive compensation program. As a result of its
comprehensive review, the Committee increased the annual and long-term
incentive target opportunities for TPG's Chief Executive Officer and the Named
Executive Officers. In addition, based on the results of the study, the
Committee implemented base salary increases that averaged 6.5% for the Named
Executive Officers (excluding the Chief Executive Officer).
COMPENSATION PHILOSOPHY. TPG's compensation philosophy is to tie total
compensation for executives closely to the creation of stockholder value. TPG
seeks to pay its executives at competitive levels based on the scope of
responsibility applicable to each position. This philosophy is supported
through competitive base salaries, annual and long-term incentives. TPG's
competitors for executive talent are not necessarily the same companies that
would be included in an industry index established to compare stockholder
returns because TPG requires skills and perspectives from a broader range of
backgrounds. Thus, the comparable companies for purposes of executive
compensation are not necessarily limited to those contained in the industry
group index used in the performance comparison graph included in this Proxy
Statement.
Base salary levels are defined as the median (50th percentile) level among
companies for which TPG competes for executive talent.
Annual incentive awards are designed to focus management employees on key
financial measures that promote stockholder value through prudent growth and
profitability and are designed to provide market median
16
levels of compensation for performance at target, with enhanced compensation
opportunities for superior performance relative to our financial objectives.
For example, the 2001 annual incentive award was tied to specific financial
measures supporting continued growth, profitability and increased stockholder
value. The Committee approves the targets and TPG performance measures shortly
after the beginning of each fiscal year. The Committee certifies annually that
awards payable as annual incentives correspond to performance goals and the
target level established at the beginning of the year. Each year TPG's
independent auditors perform certain agreed-upon annual incentive compensation
computation procedures and issue a report to the Committee of their results.
Long-term incentives, generally stock options, reward management for
increasing stockholder value and are designed to develop stock ownership among
key executives. Long-term incentives seek to better align the executive's
interest with those of the stockholders and are targeted to position TPG's
executives competitively between the 50th and 75th percentile of TPG's peer
group. TPG's focus on stockholder value creation is further supported by TPG's
policy for stock ownership levels for senior executives. Stock options are
awarded on an annual basis to executives and non-executive officers and key
employees of the Company and its affiliates. Stock options and other long-term
incentive awards are made under TPG's Equity Incentive Plan.
The Committee also considers whether compensation paid to TPG's senior
executives will be fully tax deductible to TPG. Section 162(m) of the Internal
Revenue Code, as amended (the "Code"), contains special rules regarding the
federal income tax deductibility of compensation paid to the CEO and to each of
the other four most highly compensated Named Executive Officers. The general
rule is that annual compensation paid to any of these executives will be
deductible only to the extent that it does not exceed $1,000,000 or qualifies
as "performance-based" compensation under Section 162(m). The Committee has
adopted a policy with respect to Section 162(m) that is designed to ensure that
the compensation program continues to meet all the current tests required for
compensation to be deductible for federal income tax purposes. The Committee
has the discretion to make nondeductible awards, to the extent consistent with
TPG's best interest, to reward employees for excellent service or recruit new
executives while taking into consideration the financial effects such action
may have on TPG.
BASE SALARIES. In 2001, the Committee recommended increased salaries of Mr.
Haughton and other executive officers to reflect its philosophy of pay for
performance. In 2001, Mr. Haughton's salary was increased from $575,000 to
$625,000. This increase was intended to make Mr. Haughton's salary competitive
with those companies with whom TPG compares itself and recognized the record
operating results in 2000.
ANNUAL INCENTIVES. The 2001 annual incentive award was based upon TPG's
results vis-a-vis the three performance measures for the year. Those measures
were net operating earnings per share, U.S. mortgage market share, and pre-tax
income from the Company's strategic investments. These three factors were
weighted 50%, 25% and 25%, respectively. No payouts are made as an annual
incentive award unless TPG earns a threshold return on average equity that is
at least four percentage points above the 10-year U.S. Treasury bond yield for
the year. The annual incentive awards for 2001 for the executive officers were
based solely on achieving the three TPG performance measures. Mr. Haughton
received an annual incentive award of $944,821. Mr. Haughton elected to defer a
portion of his annual incentive award.
LONG-TERM INCENTIVES. During 2001, executive officers received an annual
award of stock options that vest in three equal installments on the first,
second and third anniversaries of the grant. The stock options granted have a
per share exercise price equal to 100 percent of the fair market value of a
share of common stock on the grant date, with a maximum term of up to 10 years.
In prior years, performance shares were granted to Senior Vice Presidents and
above. Performance shares are payable in shares of stock or cash, as determined
by the Committee, and measure performance over a three year period. In 2001,
Mr. Haughton received a performance share payout of 7,876 shares of common
stock, representing approximately 155% of his target award established in 1998.
The other executives received the same percentage payout of performance shares.
The performance share payout was determined by performance goals, established
for the three-year cycle
17
ending December 31, 2000, based upon return on average equity and the Company's
price to earnings ratio relative to other publicly-traded mortgage insurance
companies.
In accordance with the Equity Incentive Plan and in connection with the
compensation levels approved by the Committee for key executives, Mr. Haughton
was granted a stock option in 2001 covering 75,000 shares in consideration of
his role and importance to TPG and to strongly align him with stockholder
objectives. The stock option granted to Mr. Haughton generally vests in three
equal installments on the first, second and third anniversaries of the date of
grant. The stock option has an exercise price of $57.57 per share (100% of the
fair market value on the date of grant), with a maximum term of 10 years.
Compensation Committee of the Board of Directors
Ronald T. Zech, Chair
Raymond L. Ocampo Jr., Vice Chair
Wayne E. Hedien
John D. Roach
Dr. Kenneth T. Rosen
18
PERFORMANCE GRAPH
The graph shown below compares the cumulative total stockholder return for
TPG's common stock for the last five fiscal years with that of the Standard &
Poor's 500 Index, the Russell 1000 Financial Services Index, and the Mortgage
Insurance Company Index. The graph plots the changes in value of an initial
$100 investment over the indicated time periods, assuming all dividends are
reinvested quarterly. The total stockholders' returns are not necessarily
indicative of future returns.
Comparison of The PMI Group, Inc. and Benchmarks
Total Return Index
[CHART]
S&P 500 PMI Russell 1000 FIN SVS MI Index
1996 100 100 100 100
1997 133.32 131.03 147.75 162.4
1998 171.34 89.77 160.99 103.35
1999 207.36 133.61 166.24 149.75
2000 188.47 185.81 209.72 185.42
2001 166.17 184.4 180.45 183.6
Total Return* and Total Rate of Return**
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
S&P 500......................... 100 133.32 171.34 207.36 188.47 166.17
Total Rate of Return--66.17%
The PMI Group, Inc.............. 100 131.03 89.77 133.61 185.81 184.40
Total Rate of Return--84.40%
Russell 1000 Financial Services. 100 147.75 160.99 166.24 209.72 180.45
Total Rate of Return--80.45%
MI Index........................ 100 162.40 103.35 149.75 185.42 183.60
Total Rate of Return--83.60%
- --------
Note: These numbers represent an index of total return performance of TPG's
common stock vs. the S&P 500, Russell 1000 Financial Services and the Mortgage
Insurance Company indices (the latter including Radian Group, Inc., MGIC
Investment Corporation and Triad Guaranty, Inc.) using the starting date of
December 31, 1996 with a value of 100.
* Total Return = Capital Appreciation + Dividend Income for the period 12/31/96-12/31/01
** Total Rate of Return = Total Return - 100
------------------
100
19
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgment, has determined that all members of the Committee are
"independent" as required by, and meet the experience requirements of,
applicable listing standards of The New York Stock Exchange. The Committee
operates pursuant to a Charter that was last amended and restated by the Board
on March 5, 2002. As set forth in the Charter, management of the Company is
responsible for the preparation, presentation and integrity of the Company's
financial statements, the Company's accounting and financial reporting
principles and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors are responsible for auditing the Company's financial statements and
expressing an opinion as to their conformity with generally accepted accounting
principles.
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as currently in effect.
Finally, the Committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, as currently in effect,
and written confirmations from management with respect to internal audit
services provided by the auditors, has considered whether the provision of
internal audit services by the independent auditors to the Company is
compatible with maintaining the auditor's independence and has discussed with
the auditors the auditors' independence.
The Audit Committee performs duties set forth in its Charter. The Charter
provides that the Audit Committee shall review, evaluate, and make
recommendations with respect to financial statement preparation and related
matters. The Charter gives the Audit Committee the ability to properly monitor
the integrity of the financial statements, the compliance of the Company and
the independence and performance of the company's auditors in accordance with
the Charter.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members
of the Committee rely without independent verification on the information
provided to them and on the representations made by management and the
independent accountants. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the Company's financial statements are complete and accurate, that the audit of
the Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Company's auditors are in fact "independent."
Based upon the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Committee referred
to above and in the Charter, the Committee recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001 to be filed with the Securities and
Exchange Commission.
Submitted by the Audit Committee of the Company's Board of Directors
James C. Castle, Chair
Mariann Byerwalter, Vice Chair
Donald C. Clark
Louis G. Lower II
Richard L. Thomas
Mary Lee Widener
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised solely of outside Directors. The
Compensation Committee of the Board of Directors consists of Messrs. Zech,
Chair, Ocampo, Vice Chair, Hedien, Roach and Dr. Rosen. No executive officer of
TPG served on the compensation committee of another entity or on any other
committee of the board of directors of another entity performing similar
functions during the last fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires TPG's
Directors and executive officers, and persons who own more than 10 percent of
TPG's common stock to file with the SEC initial reports of ownership and
reports of changes in ownership of the common stock. Directors, officers and
more than 10 percent stockholders are required by SEC regulations to furnish
TPG with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of these Form 3, 4 and 5 reports
received by TPG, and certain written representations received from TPG's
directors and executive officers, TPG believes that, during 2001, all reports
required to be filed under Section 16(a) were filed on a timely basis except as
follows: The inadvertent failure to file two Form 4's relating to two
dispositions of TPG common stock in 1999 by Ms. Widener, a member of the Board
of Directors; and the late filing of a Form 4 due to a clerical error in form
processing relating to a purchase of TPG common stock in April 2001 by Mr.
Thomas, a member of the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent public
auditors to audit the financial statements of TPG for 2002. During 2001, Ernst
& Young LLP audited the financial statements of TPG and performed certain
internal audit and tax related services. One or more representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting of Stockholders and
will be available to respond to appropriate questions. This proposal is
presented to the stockholders in order to permit them to participate in the
selection of TPG's auditors. For approval, a majority of shares present and
entitled to vote must be voted "for" this Item. Abstentions will be counted as
shares present at the meeting and will have the effect of a vote against this
Item. Broker non-votes will not be counted as shares voted and will have no
effect on the outcome of the vote. If the stockholders do not ratify the
appointment of Ernst & Young LLP, the Board of Directors of TPG will consider
the appointment of other auditors. Ernst & Young LLP will cease providing
internal audit services to TPG in 2002 as soon as a replacement is chosen by
the Audit Committee of the Board of Directors.
Commencing in 2002, the Audit Committee has decided that the internal audit
functions will not be provided by the independent auditors. In addition, as to
the provision of non-audit work by the independent auditors, the Audit
Committee has established procedures set forth in its Charter (attached hereto
as Appendix A) for prior and subsequent review of such services.
Audit Fees. The aggregate fees billed, or expected to be billed, by Ernst &
Young LLP for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2001 and for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for that fiscal year are $320,000.
21
Financial Information Systems Design and Implementation Fees. No fees were
billed by Ernst & Young LLP for professional services rendered for information
technology services relating to financial information systems design and
implementation during the fiscal year ended December 31, 2001.
All Other Fees. The aggregate fees billed, or expected to be billed, by
Ernst & Young LLP for services rendered to the Company, other than services
described above under "Audit Fees" and "Financial Information Systems Design
and Implementation Fees," during the fiscal year ended December 31, 2001 are
$1,481,000. Of this amount, $1,082,000 represented fees for audit related
services, including the audit of statutory-basis financial statements and
benefit plans, consents related to regulatory filings and internal audit
services. The balance of the All Other Fees related primarily to tax, due
diligence and actuarial services.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP.
ITEM 3: APPROVAL OF PROPOSAL TO AMEND TPG'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed that stockholders approve an amendment
to TPG's Restated Certificate of Incorporation to increase the number of shares
of authorized Common Stock of TPG to 250,000,000 shares from the currently
authorized number of 125,000,000 shares. The Board of Directors has declared
the proposed amendment to be advisable and has submitted it to a vote by the
stockholders at the Annual Meeting.
On February 20, 2002, the Board of Directors indicated its intent to declare
a 2-for-1 stock split in the form of a stock dividend if, and only if, the
proposed amendment to TPG's Restated Certificate of Incorporation is approved
by the stockholders at the Annual Meeting, and the number of shares of
authorized Common Stock is thereby increased to 250,000,000. In this event, it
is the Board of Directors' intention that the additional stock representing the
dividend will be distributed on June 17, 2002, to record holders of Common
Stock as of the close of business on May 31, 2002.
If the proposed amendment is approved by the stockholders, TPG plans to file
a Certificate of Amendment to the Restated Certificate of Incorporation as soon
as practicable following the Annual Meeting to increase the number of shares of
authorized Common Stock to 250,000,000.
On April 1, 2002, of the 125,000,000 authorized shares of Common Stock, a
total of 44,906,219 shares were outstanding, approximately 8.0 million shares
were held in treasury and approximately 12.1 million shares were reserved for
potential issuance in connection with TPG's obligations to issue stock in
connection with outstanding convertible securities and employee compensation
plans, including TPG's stock option plans, employee stock purchase plans and
401(k) plans. If the proposed amendment is approved by the stockholders, the
reserved shares will be adjusted in accordance with the 2-for-1 stock split.
In addition to enabling the proposed 2-for-1 stock split in the form of a
stock dividend, the additional shares will enhance TPG's flexibility in
connection with possible future actions, such as acquisitions of property and
securities of other companies, financings, stock splits, stock dividends, and
other corporate purposes. The Board of Directors will determine whether, when
and on what terms the issuance of shares of Common Stock may be warranted in
connection with any of the foregoing purposes. The Board of Directors believes
that it is beneficial to TPG to have the additional shares available for such
purposes without delay or the necessity of a special meeting of stockholders.
Other than the proposed 2-for-1 stock split and the obligations referred to
above for which shares of common stock have already been reserved, TPG has no
immediate plans, arrangements, commitments or understandings with respect to
the issuance of any of the additional shares of Common Stock which would be
authorized by the proposed amendment.
22
If the proposed amendment is approved by the stockholders, the additional
shares will be available for issuance from time to time without further action
by the stockholders (unless required by applicable law, regulatory agencies or
by the rules of any stock exchange on which TPG's securities may then be
listed) and without first offering those shares to the stockholders.
Stockholders do not have preemptive rights with respect to the Common Stock.
The issuance of Common Stock, or securities convertible into Common Stock, on
other than a pro-rata basis would result in the dilution of a present
stockholder's interest in TPG.
TPG has not proposed the increase in the authorized number of shares with
the intention of using the additional shares for anti-takeover purposes,
although TPG could theoretically use the additional shares to make it more
difficult or to discourage an attempt to acquire control of TPG. As of this
date, TPG is unaware of any pending or threatened efforts to acquire control of
TPG.
For approval, a majority of the outstanding shares of common stock must be
voted "for" this Item. Abstentions will be counted as shares present at the
meeting and will have the effect of a vote against this Item. Broker non-votes
will have the effect of a vote against this Item.
At the Annual Meeting, the following resolution will be introduced:
RESOLVED, that the Restated Certificate of Incorporation of this
Corporation, be amended by deleting the first sentence of Article Four in its
entirety and inserting, in lieu thereof, the following new first sentence of
Article Four, providing in its entirety as follows:
"The total number of shares of common stock that the corporation shall have
the authority to issue is 250,000,000, par value $.01 per share (the "Common
Stock")."
The Proxyholders intend to vote the shares represented by proxy in favor of
the proposed amendment, except to the extent a stockholder votes against or
abstains from voting on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
OTHER MATTERS
The Board of Directors does not know of any matters to be acted upon at the
Annual Meeting of Stockholders except as specified in the Notice of Annual
Meeting of Stockholders. However, as to any other business that may properly
come before the Annual Meeting of Stockholders, it is intended that proxies, in
the form enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such proxies in consultation with the Board of
Directors.
23
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
stockholders' meeting if they comply with the requirements of TPG's Bylaws and
the proxy rules promulgated by the Securities and Exchange Commission.
Proposals of stockholders intended for presentation at the 2003 Annual Meeting
must be received by TPG for inclusion in its Proxy Statement and form of Proxy
relating to that meeting by December 16, 2002. Such proposals should be sent in
writing by certified mail to the Secretary of TPG at 3003 Oak Road, Walnut
Creek, California 94596. If proposals are sent prior to September 1, 2002, they
should be sent in writing by certified mail to the Secretary of TPG at 601
Montgomery Street, San Francisco, California 94111. Faxed proposals will not be
accepted.
Stockholders whose proposals are not included in the Proxy Statement and
form of Proxy, but who still intend to submit a proposal at an Annual Meeting,
and stockholders who intend to submit nominations for Directors at an Annual
Meeting are required to notify TPG of their proposals or nominations and to
provide certain other information, in accordance with TPG's Bylaws, not before
January 16, 2003, nor later than February 15, 2003, to be timely for
consideration at the 2003 Annual Meeting. Such proposals and nominations should
be sent in writing by certified mail to TPG's Secretary at 3003 Oak Road,
Walnut Creek, California 94596. Faxed proposals or nominations will not be
accepted.
/s/ Victor J. Bacigalupi
Victor J. Bacigalupi
Executive Vice President,
General Counsel and Secretary
April 15, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.
24
APPENDIX A:
THE PMI GROUP, INC.
Audit Committee Charter
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2)
the compliance by the Company with management's policies and procedures
regarding legal and regulatory requirements and (3) the independence of the
external auditors and the performance of the Company's internal and external
auditors.
The Audit Committee and its members shall meet the independence, experience
and other requirements of the New York Stock Exchange. In particular, the
Chairman of the Audit Committee shall have accounting or related financial
management expertise. The members of the Audit Committee shall be appointed by
the Board on the recommendation of the Governance and Nominating Committee.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee
may request any officer or employee of the Company or the Company's outside
counsel or independent auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee. The Audit Committee may
also meet with the Company's investment bankers or financial analysts who
follow the Company.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually, recommend any
proposed changes to the Board for approval and publish it in accordance
with SEC regulations.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices, including off-balance sheet structures, as well as the
adequacy of internal controls that could significantly affect the
Company's financial statements.
3. Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, including an
analysis of the effect of estimates and judgments by management that
would result in lower revenues and /or profits and in higher asset
write-offs and /or greater liabilities on the Company's financial
statements and a description of any transactions as to which management
obtained Statement on Auditing Standards No. 50 letters.
4. Review with management and the independent auditor the effect of
regulatory and accounting initiatives.
5. Review with management and the independent auditor the Company's
quarterly financial statements (including the results of the independent
auditors' reviews of the quarterly financial statements) prior to the
release of quarterly earnings, provided that the Audit Committee can be
represented by its Chair.
6. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
7. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management.
8. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
9. Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the
independent auditor.
25
10. Review the aggregate annual fees billed by the independent auditor for
the most recently completed fiscal year for audit services, financial
information systems design and implementation services, and all other
services performed by the independent auditor for the Company including
audit related services, and approve the fees to be paid to the
independent auditor for audit services.
11. Approve in advance the retention of the independent auditor for any
non-audit service and related fee if such fee is $50,000 or more, or if
the non-audit service does not relate to due diligence, taxes, or
litigation support; and approve all other non-audit services and the
fees for such services within a reasonable time after they are incurred
but no later than the next scheduled Audit Committee meeting.
12. Receive periodic reports from the independent auditor regarding the
auditor's independence in accordance with applicable standards, discuss
such reports with the auditor, consider whether the provision of
non-audit services is compatible with maintaining the auditor's
independence and, if so determined by the Audit Committee, recommend
that the Board take appropriate action to satisfy itself of the
independence of the auditor.
13. Evaluate together with the Board the performance of the independent
auditor and whether it is appropriate to adopt a policy of rotating
independent auditors on a regular basis (e.g., independent auditor
rotation commensurate with SEC guidelines relating to rotation of
engagement partners). If so determined by the Audit Committee, recommend
that the Board replace the independent auditor.
14. Recommend to the Board guidelines for the Company's hiring of employees
of the independent auditor who were engaged on the Company's accountant.
15. Discuss with the independent auditor issues upon which it consulted with
its national office.
16. Review the appointment and replacement of the senior internal auditing
executive.
17. Review the significant reports to management prepared by the internal
auditors and management's responses.
18. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
19. Obtain from the independent auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
20. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company's
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Company's Business Ethics Handbook, including
disclosures of insider and affiliated party transactions.
21. Discuss with the independent auditor the matters required to be
discussed by all relevant Statements on Auditing Standards, including
but not limited to Statement on Auditing Standard No. 61, relating to
the conduct of the audit.
22. Review with management and the independent auditor any correspondence
with regulators or governmental agencies and any employee complaints or
published reports which raise material issues regarding the Company's
financial statements or accounting policies.
23. Review with the independent and internal auditors any problems or
difficulties such auditors may have encountered and any management or
other letter provided by the auditors and the Company's response to that
letter. Such review should include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information, and any disagreement with management.
b. Any changes required in the planned scope of the audits.
c. The internal auditor's responsibilities, budget and staffing.
26
24. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
25. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Business Ethics Handbook.
26. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
27. Meet at least quarterly with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
28. Meet at least four times annually with agendas for such meetings
prepared or approved in advance by the Audit Committee Chair.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor, or to
assure compliance with laws and regulations and the Company's Business Ethics
Handbook, or to assure auditor independence.
27
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE PMI GROUP, INC.
The undersigned hereby appoints W. Roger Haughton, L. Stephen Smith and Victor
J. Bacigalupi proxies, with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote all the shares of
Common Stock of The PMI Group, Inc. standing in the name of the undersigned with
all powers which the undersigned would possess if present at the Annual Meeting
of Stockholders of The PMI Group, Inc. to be held May 16, 2002 or any
adjournments or postponements thereof as designated on the other side, and upon
any and all such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING OF STOCKHOLDERS
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE ANNUAL MEETING OF THE PMI GROUP, INC.:
THURSDAY, MAY 16, 2002
9:00 A.M.
THE PMI GROUP, INC.
CONFERENCE CENTER, 17TH FLOOR
601 MONTGOMERY STREET
SAN FRANCISCO, CA 94111
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE OTHER SIDE OF THIS CARD. OR, IF
YOU ARE A STOCKHOLDER OF RECORD, USE THE TOLL-FREE TELEPHONE NUMBER SET FORTH ON
THE REVERSE SIDE OF THIS PROXY CARD TO AUTHORIZE A PROXY TO VOTE YOUR SHARES.
YOU WILL REDUCE PMI'S EXPENSE IN SOLICITING PROXIES IF YOU AUTHORIZE A PROXY TO
VOTE BY TELEPHONE.
Please mark [X]
your vote
PROXY BY MAIL like this.
The Board of Directors recommends a vote FOR Items 1, 2 and 3. Unless contrary
instructions are given below, this proxy will be voted in accordance with the
recommendations of the Board of Directors:
ITEM 1-ELECTION OF DIRECTORS
Nominees:
01 Mariann Byerwalter 07 John D. Roach WITHHELD
02 Dr. James C. Castle 08 Dr. Kenneth T. Rosen FOR FOR ALL
03 W. Roger Haughton 09 L. Stephen Smith [_] [_]
04 Wayne E. Hedien 10 Richard L. Thomas
05 Louis G. Lower II 11 Mary Lee Widener
06 Raymond L. Ocampo Jr. 12 Ronald H. Zech
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below
Withhold Authority For: __________________________________________________
__________________________________________________________________________
FOR AGAINST ABSTAIN
Item 2-Ratification of appointment of [_] [_] [_]
independent auditors
Item 3-Approval of the proposal to [_] [_] [_]
amend TPG's Restated Certificate of
Incorporation to increase the number of
authorized shares of common stock.
YES NO
I PLAN TO ATTEND THE MEETING [_] [_]
-------------------------------
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
-------------------------------
Signature______________________ Signature______________________ Date ___________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY TELEPHONE
QUICK***EASY***IMMEDIATE
THE PMI GROUP, INC.
. You can now vote shares electronically through the telephone.
. This eliminates the need to return the proxy card.
. Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
- ---------------------------
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
--------------------------------------------
ELECTRONICALLY
--------------
PROXY
VOTING INSTRUCTIONS
TO THE TRUSTEE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE PMI GROUP, INC.
The undersigned hereby authorizes and instructs the Trustee of The PMI
Group, Inc. Savings and Profit-Sharing Plan to represent and vote, as designated
on the reverse side, all shares of Common Stock of The PMI Group, Inc. which the
undersigned would be entitled to vote at the Annual Meeting of Stockholders of
said corporation to be held on May 16, 2002 and any adjournments thereof, with
all powers that the undersigned would possess if personally present, with
respect to the following:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING OF STOCKHOLDERS
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE ANNUAL MEETING OF THE PMI GROUP, INC.:
THURSDAY, MAY 16, 2002
9:00 A.M.
THE PMI GROUP, INC.
CONFERENCE CENTER, 17TH FLOOR
601 MONTGOMERY STREET
SAN FRANCISCO, CA 94111
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE OTHER SIDE OF THIS
CARD, OR, IF YOU ARE A STOCKHOLDER OF RECORD, USE THE TOLL-FREE
TELEPHONE NUMBER SET FORTH ON THE REVERSE SIDE OF THIS PROXY CARD
TO AUTHORIZE A PROXY TO VOTE YOUR SHARES. YOU WILL REDUCE PMI'S
EXPENSE IN SOLICITING PROXIES IF YOU AUTHORIZE A PROXY TO VOTE BY
TELEPHONE.
Please mark [X]
your votes
PROXY BY MAIL like this
The Board of Directors recommends a vote FOR Items 1,2 and 3.
ITEM 1-ELECTION OF DIRECTORS
Nominees: WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
01 Mariann Byerwalter 07 John D. Roach [_] [_] Item 2-Ratification of appointment of [_] [_] [_]
02 Dr. James C. Castle 08 Dr. Kenneth T. Rosen independent auditors
03 W. Roger Haughton 09 L. Stephen Smith
04 Wayne E. Hedien 10 Richard L. Thomas Item 3-Approval of the proposal to [_] [_] [_]
05 Louis G. Lower II 11 Mary Lee Widener amend TPG's Restated Certificate of
06 Raymond L. Ocampo Jr. 12 Ronald H. Zech Incorporation to increase the number of
authorized shares of common stock
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write the nominee's name in the space provided below
YES NO
Withhold Authority For:_______________________________________ I PLAN TO ATTEND THE [_] [_]
MEETING
______________________________________________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --------------------------------------------
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --------------------------------------------
Signature ______________________________________ Signature ______________________________________ Date ________________
Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY TELEPHONE
QUICK***EASY***IMMEDIATE
THE PMI GROUP, INC.
. You can now vote your shares electronically through the telephone.
. This eliminates the need to return the proxy card.
. Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
- ---------------------------
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
--------------------------------------------
ELECTRONICALLY
--------------