================================================================================
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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
INVITATION TO ANNUAL MEETING
OF STOCKHOLDERS
[LOGO OF PMI(R)]
THE PMI GROUP, INC.
April 16, 1999
Dear Stockholder,
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of The PMI Group, Inc. to be held on Thursday, May 20, 1999, 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, ratification of the appointment of Deloitte & Touche LLP as
independent auditors for 1999, approval of the amendment and restatement of
The PMI Group, Inc. Equity Incentive Plan ("Equity Incentive Plan"), approval
of The PMI Group, Inc. Employee Stock Purchase Plan ("ESPP"), and approval of
The PMI Group, Inc. Bonus Incentive Plan ("Bonus Incentive Plan"). 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 Deloitte & Touche LLP, FOR approval of the amendment and
restatement of the Equity Incentive Plan, FOR approval of the ESPP, and FOR
approval of the Bonus Incentive Plan. At the Meeting, we will report on our
business, and there will be an opportunity for you to ask questions.
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.
/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 20, 1999, at 9:00 a.m., Pacific Time, at 601 Montgomery
Street, 17th Floor, San Francisco, California, for the following purposes:
1. To elect ten Directors;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for 1999;
3. To approve the amendment and restatement of TPG's Equity Incentive Plan;
4. To approve TPG's Employee Stock Purchase Plan;
5. To approve TPG's Bonus Incentive Plan; and
6. 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 March 31, 1999, 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
Senior Vice President
General Counsel and Secretary
April 16, 1999
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY COMPLETE,
SIGN, DATE AND RETURN YOUR PROXY CARD.
TABLE OF CONTENTS
Voting..................................................................... 1
Proposal-election of directors............................................. 2
Committees and meetings of the board of directors.......................... 4
Principal stockholders and stockholdings of management..................... 7
Executive compensation..................................................... 9
Compensation committee report on executive compensation.................... 14
Performance graph.......................................................... 17
Section 16(a) beneficial ownership reporting compliance.................... 18
Certain relationships and related transactions............................. 18
Proposal-ratification of independent auditors.............................. 19
Proposal-approval of amendment and restatement of the equity incentive
plan...................................................................... 20
Proposal-adoption of the employee stock purchase plan...................... 24
Proposal-adoption of the bonus incentive plan.............................. 26
Other matters.............................................................. 28
iii
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed on or about
April 16, 1999, 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 20, 1999, 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 March 31,
1999, (the "Record Date"). As of that date, approximately 30,010,056 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. Attending the meeting
alone will not revoke the proxy.
VOTING AND SOLICITATION. For each matter that may come before the Meeting,
every stockholder will be entitled to one vote for each share of common stock
registered in the stockholder's name on the Record Date. 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 ten individuals nominated by the Board
of Directors;
FOR -- ratification of the appointment of Deloitte & Touche LLP as
independent auditors for 1999;
FOR -- approval of the amendment and restatement of the Equity Incentive
Plan;
FOR -- approval of the Employee Stock Purchase Plan;
FOR -- approval of the Bonus Incentive Plan; and
Any other business that may properly come before the meeting will be voted
in the discretion of the proxy holders.
The ten nominees who receive the most votes will be elected to the ten open
directorships even if they receive less than a majority of the votes. For
approval of the appointment of Deloitte & Touche LLP as auditors (Item 2), the
amendment and restatement of the Equity Incentive Plan (Item 3), the approval
of the Employee Stock Purchase Plan (Item 4), and approval of the Bonus
Incentive Plan (Item 5), a majority of those shares present and entitled to
vote must be voted "for" each 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, the Company 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 Item 2, 3, 4 or 5. Broker non-votes (that is, if
the broker holding shares of a stockholder in street name does not vote with
respect to an
1
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, 3, 4 or 5.
The cost of this solicitation will be borne by TPG. TPG has retained
MacKenzie Partners, Inc. to assist in the solicitation of proxies at an
estimated fee of $6,000 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,
1998, has been mailed with this document to stockholders. 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 ten Directors is to be elected at the
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the ten nominees named below. All of the nominees, except
for Raymond L. Ocampo Jr., 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.
DR. JAMES C. CASTLE
DONALD C. CLARK
W. ROGER HAUGHTON
WAYNE E. HEDIEN
RAYMOND L. OCAMPO JR.
JOHN D. ROACH
KENNETH T. ROSEN
RICHARD L. THOMAS
MARY LEE WIDENER
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.
Each nominee has consented to being named in this Proxy Statement and has
indicated a willingness to serve if elected. However, if at the Annual 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.
2
Nominees for Director
Set forth below for each nominee is certain information, including age as of
April 1, 1999, 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.
Dr. James C. Castle, 62, has been a Director since May 1997. He is currently
Chairman and Chief Executive Officer of USCS International, Inc., a leading
provider of customer management software and statement presentment services to
the global communications and utilities industries, positions he has held
since joining the company in August 1992. On December 21, 1998, USCS
International became a wholly owned subsidiary of DST Systems, Inc. Prior to
joining USCS International 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 directors of DST Systems, Inc., PAR Technology
Corp., ADC Telecommunications, Inc. and Leasing Solutions, Inc. He is Vice
Chair of the Audit Committee.
Donald C. Clark, 67, has been a Director since May 1996. Mr. Clark joined
Household International, Inc., a major consumer financial services company, in
1955 and held a number of managerial and executive positions with that
company. He was elected to the board of directors of Household International,
Inc., in 1974, President in 1977, Chief Executive Officer in 1982 and Chairman
of the Board in 1984. In 1994, he relinquished the title of Chief Executive
Officer and in 1996 he relinquished the title of Chairman and retired. He is
also on the boards of directors of Armstrong World Industries, Inc., Warner-
Lambert Company, Ameritech and Scotsman Industries, Inc., and is Chairman of
the Board of Trustees of Clarkson University and Life Trustee of Northwestern
University. He is Chair of the Compensation Committee and a member of the
Governance and Nominating Committee.
W. Roger Haughton, 51, has been Chairman of the Board of TPG since May 1998
and has been Chief Executive Officer since January 1995. Mr. Haughton was
President of TPG from January 1995 until September 1998. Mr. Haughton has been
Chairman of PMI Mortgage Insurance Co., ("PMI") since May 1995 and has been
Chief Executive Officer and President of PMI since January 1993. PMI is the
third largest private mortgage insurer in the United States and is a leader in
risk management technology, and provides various products and services for the
home mortgage finance industry. Mr. Haughton joined PMI in 1985 as Vice
President of Underwriting, after 16 years with Allstate Insurance Company. In
1987, he was promoted to Vice President/General Manager for PMI's Central
Zone, responsible for all sales and field office operations in that region. In
1989, he became Group Vice President of Insurance Operations, which included
Administration, Systems, Underwriting, Claims and Actuarial Services
departments. In March 1999, Mr. Haughton concluded his two-year term as
President of the Mortgage Insurance Companies of America ("MICA"), the
industry trade association, a position he has held since March 1997. He also
has a long history of active volunteerism with various affordable housing
organizations, including Habitat for Humanity, and serves as Chairman of the
Board of Social Compact. Mr. Haughton has been a Director since January 1995.
He is an Ex Officio member of the Governance and Nominating Committee.
Wayne E. Hedien, 65, 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 Insurance
Company ("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 Dean Witter Funds. He is Chair of the
Governance and Nominating Committee and a member of the Audit Committee.
Raymond L. Ocampo Jr., 46, has been nominated to serve as a Director of TPG.
He has served on the board of directors of Vantive Corporation since January
1997. Mr. Ocampo is currently Executive Director of the Berkeley Center for
Law & Technology. He also serves as an independent mediator and arbitrator of
disputes among high technology companies and as an expert witness in
technology-related litigation. Mr. Ocampo served in several capacities with
Oracle Corporation from July 1986 to November 1996, primarily and most
recently, as
3
its Senior Vice President, General Counsel and Secretary. He is a member of
the board of directors of KQED, a public radio and television broadcasting
organization based in the San Francisco Bay Area, and of several other private
companies and nonprofit organizations.
John D. Roach, 55, has been a Director since May 1997. Mr. Roach is the
Chairman, President and Chief Executive Officer of Stonegate Resources, LLC,
positions he has held since October 1997. Stonegate Resources is an entity
formed to acquire and operate companies in the building products industry.
Prior to joining Stonegate Resources, Mr. Roach was the Chairman, President
and Chief Executive Officer of Fibreboard Corporation, between July 1991 and
July 1997. Prior to joining Fibreboard Corporation, Mr. Roach was Executive
Vice President of Manville Corporation between 1988 until he left the company
in July 1991. Manville Corporation is a manufacturer of building products,
paperboard packaging, fiberglass and industrial minerals. Mr. Roach first
joined Manville Corporation in April 1987, and served as Senior Vice President
and Chief Financial Officer between 1987 until 1988. Prior to joining
Manville, Mr. Roach was a strategy consultant and Vice Chairman of Braxton
Associates; Vice President and Managing Director of the Strategic Management
Practice for Booz, Allen, Hamilton; and Vice President and Director of the
Boston Consulting Group. Mr. Roach is also on the board of directors of
Morrison Knudsen Corporation. He has previously served on the boards of
directors for Magma Power, Thompson PBE and the American Stock Exchange. He is
Vice Chair of the Compensation Committee.
Kenneth T. Rosen, 50, 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
President of the Rosen Consulting Group, a real estate and mortgage market
consulting firm. Dr. Rosen serves as the Chief Executive Officer of Lend Lease
Rosen Real Estate Securities, LLC. Dr. Rosen is also on the boards of
directors of Golden West Financial Corporation and Avatar Company. He is a
member of the Compensation Committee.
Richard L. Thomas, 68, has been a Director since July 1996. Mr. Thomas is
the retired Chairman of First Chicago NBD Corporation. 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 IMC Global, Inc., The
Sabre Group Holdings, Inc., Sara Lee Corporation, Scotsman Industries, Inc.,
and Unicom Corp. He is Chair of the Audit Committee and a member of the
Governance and Nominating Committee.
Mary Lee Widener, 60, 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, and also holds the title of President. Ms. Widener is also
Chairperson of the board of directors of the Federal Home Loan Bank of San
Francisco. She is a member of the Audit Committee.
Ronald H. Zech, 55, has been a Director since May 1998. He is currently
Chairman, Chief Executive Officer and President of GATX Corporation, whose
subsidiaries engage in the leasing and management of railroad cars, provide
equipment and capital asset financing and related services, own and operate
tank storage terminals and pipelines, engage in Great Lakes shipping, and
provide distribution and logistics support services. 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 boards of directors of McGrath RentCorp and two of GATX
Corporation's subsidiaries, General American Transportation and GATX Capital
Corporation. He is a member 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 1998. Each Director attended at least 75%
of the Board meetings and meetings of committees
4
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 Mr. Thomas, Chair, Dr. Castle, Vice Chair,
Mr. Hedien and Ms. Widener. The committee held five meetings in 1998. The
committee selects a firm of independent certified public accountants to audit
the books and accounts of TPG and its subsidiaries for the fiscal year for
which they are appointed. In addition, the committee reviews and approves the
scope and costs of all services (including nonaudit services) provided by the
firm selected to conduct the audit. The committee also monitors the
effectiveness of the external and internal audit effort and financial
reporting, and inquires into the adequacy of financial and operating controls.
The committee also oversees TPG's Year 2000 remediation activities. The
committee coordinates with TPG's Compliance Officer with respect to statutory
and other business ethics matters, and receives periodic reports regarding
such matters from the Compliance Officer.
The Compensation Committee consists of Mr. Clark, Chair, Mr. Roach, Vice
Chair, and Dr. Rosen and Mr. Zech. The committee held six meetings in 1998.
The committee makes recommendations to the Board with respect to the
administration of the salaries, bonuses and other compensation to be paid to
the officers and other employees of PMI and TPG and acts as administrator for
the Equity Incentive Plan and The PMI Group, Inc., Directors' Deferred
Compensation Plan. The committee also evaluates the performance of management
and considers management succession and related matter.
The Governance and Nominating Committee consists of Mr. Hedien, Chair, Mr.
Clark, Mr. Thomas, and Mr. Haughton, Ex Officio. The committee held two
meetings in 1998. 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. The committee also reviews recommendations
regarding Director compensation.
Directors' Compensation and Benefits. Directors who are employees of TPG or
its subsidiaries do not receive additional compensation for their services as
Directors. Each Director who is not an employee of TPG or any of its
subsidiaries ("Non-Employee Director") receives fees for his or her service as
a Director. Each such Non-Employee Director receives an annual retainer of
$22,000. Each Non-Employee Director who serves as a Committee Chair receives
an additional annual retainer of $6,000. Directors are reimbursed for
reasonable expenses to attend meetings.
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's common stock. On any date, the value of each share of phantom stock will
equal the fair market value of a share of TPG 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's common stock will be paid in cash.
Under TPG's Stock Plan for Non-Employee Directors (the "Directors Plan"),
each Non-Employee Director is awarded annually up to 300 shares of common
stock. 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. Thereafter,
shares 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 common stock during any calendar year.
The number of shares 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. The Directors Plan also provides for an annual cash
payment to each Non-Employee Director
5
in an amount equal to the estimated tax liability, including taxes payable on
the amount of the tax gross-up from the award of the shares.
Under the Directors Plan, each Non-Employee Director is also annually
granted an option to purchase up to 1,500 shares of common stock (up to 3,000
shares for the initial year as a Director). In the initial year as a Director,
the annual option grant is prorated (based on months of service between June 1
and May 31) and is granted as soon as administratively practicable after the
Director joins the Board. Thereafter, 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. Options granted in the initial year as a Director become
exercisable in three equal installments, commencing on the first anniversary
of the grant date (assuming the Non- Employee Director remains on the Board on
such anniversary date, otherwise any unexercisable portion of the option will
be forfeited). Options granted after the initial year as a Director become
exercisable on the first anniversary of the grant date. All options granted to
Non-Employee Directors have a term of no greater than 10 years from the date
of grant. If a Director terminates service on the Board prior to an option's
normal expiration date, the period of exercisability of the option varies,
depending upon the reason for the termination.
During 1998, an outside executive compensation consulting firm, Hewitt
Associates, LLC, reviewed the compensation paid to TPG's Non-Employee
Directors. No changes in Non-Employee Director compensation were recommended
as a result of the review by Hewitt Associates, LLC and none were made.
Directors' Stock Ownership Guidelines. The Board of Directors established
stock ownership 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 elected as a director. Non-Employee Directors are expected to own TPG
common stock which has a market value equal to a minimum of approximately
$110,000, or five times such director's annual retainer fee. Stock owned or
deemed owned for purposes of the guidelines include: (a) shares purchased in
the open market, including shares held in a retirement plan, (b) stock awarded
under the Directors Plan, (c) TPG common stock equivalents held in the
Director's Deferred Compensation Plan, and (d) stock equal to the value of the
amount by which the market price of TPG common stock exceeds the exercise
price of any vested options. Ronald H. Zech, who joined the Board in 1998, has
met approximately 64% of the five-year ownership level during his first year
on the Board of Directors. All other directors have achieved compliance with
the stock ownership guidelines.
6
Security Ownership of Certain
Beneficial Owners and Management
The following table sets forth, as of March 31, 1999, 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's common stock,
each nominee and current Director of TPG, and each Named Executive Officer
listed in the 1998 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
March 31, 1999, through the exercise of any option, warrant, right, or
convertible security.
Common Stock Beneficially Owned
Percentage
Number of
Beneficial Owner of Shares Class/1/
---------------- --------- ----------
AXA Assurances I.A.R.D. Mutuelle/2/................. 4,340,422 14.41%
c/o The Equitable Companies Incorp.
787 Seventh Avenue
New York, NY 10019
FMR Corporation/3/................................... 4,295,140 14.27%
82 Devonshire Street
Boston, MA 02109
Sound Shore Management, Inc./4/ ..................... 1,871,900 6.22%
8 Sound Shore Drive
Greenwich, CT 06836
Capital Guardian Trust Company/5/.................... 1,754,000 5.83%
111000 Santa Monica Boulevard
Los Angeles, CA 90025-3384
Wellington Management Company LLP/6/................. 1,570,900 5.22%
75 State Street
Boston, MA 02109
Directors and Nominees
----------------------
Dr. James C. Castle/7/.............................. 3,100 *
Donald C. Clark/8/.................................. 5,400 *
W. Roger Haughton/9/................................ 105,163 *
Wayne E. Hedien/10/................................. 6,683 *
Raymond J. Ocampo, Jr............................... 0 *
John D. Roach/11/................................... 5,600 *
Kenneth T. Rosen/12/................................ 5,483 *
Richard L. Thomas/13/............................... 21,134 *
Mary Lee Widener/14/................................ 6,483 *
Ronald H. Zech/15/.................................. 1,300 *
Other Executive Officers
------------------------
L. Stephen Smith/16/................................ 52,828 *
John M. Lorenzen, Jr./17/........................... 43,159 *
Claude J. Seaman/18/................................ 37,850 *
Thomas C. Brown/19/................................. 6,254 *
All Directors, Nominees and Executive Officers as a
group (18 persons)/20/............................. 324,819 1.07%
7
- -------
* Less than 1%
/1/ As of March 31, 1999, there were outstanding 30,101,056 shares of common
stock, the only class of voting stock of TPG.
/2/ Based on an Amendment No. 5 to a Schedule 13G filed with the Securities and
Exchange Commission (the "SEC") on February 16, 1999, AXA Assurances
I.A.R.D. Mutuelle ("AXA") held sole voting power as to 1,301,900 of such
shares, held shared voting power as to 2,676,347 of such shares and held
sole dispositive power as to 4,340,422 of such shares. According to the
filing, AXA has no shared dispositive power over such shares. As of March
31, 1999, management of TPG believes AXA was the beneficial owner of
approximately 4,000,000 shares of common stock for purposes of voting at
TPG's May 20, 1999 Annual Meeting of Stockholders.
/3/ Based on an Amendment No. 4 to a Schedule 13G filed with the SEC on
February 12, 1999, FMR Corporation ("FMR"), held sole voting power as to
240,000 of such shares and held sole dispositive power as to 3,724,940
shares. According to the filing, FMR has no shared voting or shared
dispositive power over such shares. The filing indicates that Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of
FMR and an investment adviser, is the beneficial owner of 3,376,940 shares
of the common stock, which are held of record by clients of Fidelity. Such
clients have the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of the common stock, however,
no one client is known to have such right or power with respect to more
than five percent of the common stock. As of March 31, 1999, management of
TPG believes FMR Corporation was the beneficial owner of approximately
3,500,000 shares of common stock for purposes of voting at TPG's May 20,
1999 Annual Meeting of Stockholders.
/4/ Based on a Schedule 13G filed with the SEC on January 26, 1999, Sound Shore
Management, Inc. ("Sound Shore") held sole voting power as to 1,670,900 of
such shares, held share voting power as to 40,000 of such shares, and held
sole dispositive power as to 1,871,900 of such shares. According to the
filing, Sound Shore has no shared dispositive power over such shares. As of
March 31, 1999, management of TPG believes Sound Shore did not own any
shares of common stock for purposes of voting at TPG's May 20, 1999 Annual
Meeting of Stockholders.
/5/ Based on a Schedule 13G filed with the SEC on February 12, 1999 Capital
Guardian Trust Company ("Capital Guardian") held sole voting power as to
1,439,900 of such shares and held sole dispositive power as to 1,754,000
shares. According to the filing, Capital Guardian has no shared voting
power or shared dispositive power over such shares. The filing indicates
that Capital Guardian, in its capacity as investment manager, is deemed to
beneficially own the 266,100 shares held by Capital international Limited,
the 175,800 shares held by Capital International, Inc., and the 129,700
shares held by Capital International S.A., all affiliated entities of
Capital Guardian, no one client or affiliate is know to have such right or
power with respect to more than five percent of the common stock. As of
March 31, 1999, management of TPG believes Capital Guardian was the
beneficial owner of approximately 2,700,000 shares of common stock for
purposes of voting at TPG's May 20, 1999 Annual Meeting of Stockholders.
/6/ Based on a Schedule 13G filed with the SEC on February 10, 1999, Wellington
Management Company LLP ("Wellington") held shared voting power as to 300 of
such shares and held shared dispositive power as to 1,570,900 shares.
According to the filing, Wellington has no sole voting power or sole
dispositive power over such shares. The filing indicates that Wellington,
in its capacity as investment adviser, may be deemed to beneficially own
1,570,900 shares of common stock, which are held of record by clients of
Wellington. Such clients have the right to receive, or the power to direct
the receipt of, dividends from, or the proceeds from the sale of the common
stock, however, no one client is know to have such right or power with
respect to more than five percent of the common stock. As of March 31,
1999, management of TPG believes Wellington did not own any shares of
common stock for purposes of voting at TPG's May 20, 1999 Annual Meeting of
Stockholders.
/7/ Includes options to purchase 1,000 shares of common stock exercisable
within 60 days of March 31, 1999. Does not include 686 shares of common
stock equivalents arising from Director's election to defer payment of
Director's fees pursuant to The PMI Group, Inc. Directors' Deferred
Compensation Plan ("Directors' Deferred Compensation Plan").
/8/ Includes options to purchase 3,500 shares of common stock exercisable
within 60 days of March 31, 1999. Does not include 1,279 shares of common
stock equivalents arising from Director's election to defer payment of
Director's fees pursuant to the Directors' Deferred Compensation Plan.
/9/ Includes options to purchase 94,344 shares of common stock exercisable
within 60 days of March 31, 1999 and 1,444 shares of common stock deemed
owned under The PMI Group, Inc., Savings and Profit-Sharing Plan (the
"401(k) Plan"). Does not include 6,550 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").
/10/ Includes options to purchase 3,500 shares of common stock exercisable
within 60 days of March 31, 1999.
/11/ Includes options to purchase 1,000 shares of common stock exercisable
within 60 days of March 31, 1999. Does not include 685 shares of common
stock equivalents arising from Director's election to defer payment of
Directors' fees pursuant to the Directors' Deferred Compensation Plan.
/12/ Includes options to purchase 3,500 shares of common stock exercisable
within 60 days of March 31, 1999. Does not include 891 shares of common
stock equivalents arising from Director's election to defer payment of
Director's fees pursuant to the Directors' Deferred Compensation Plan.
/13/ Includes option to purchase 3,334 shares of common stock exercisable
within 60 days of March 31, 1999. Does not include 514 shares of common
stock equivalents arising from Director's election to defer payment of
Director's fees pursuant to the Directors' Deferred Compensation Plan. Does
not include 1,000 shares of common stock held by the Thomas Family Limited
Partnership, in which Mr. Thomas has a 2.5% ownership interest.
/14/ Includes options to purchase 2,500 shares of common stock exercisable
within 60 days of March 31, 1999.
/15/ Does not include 289 shares of common stock equivalents arising from
Director's election to defer payment of Director's fees pursuant to the
Directors' Deferred Compensation Plan.
/16/ Includes options to purchase 44,231 shares of common stock exercisable
within 60 days of March 31, 1999 and 7,438 shares of common stock deemed
owned under the 401(k) Plan.
/17/ Includes options to purchase 42,177 shares of common stock exercisable
within 60 days of March 31, 1999 and 275 shares of common stock deemed
owned under the 401(k) Plan. Does not include 1,830 shares of common stock
equivalents arising from the officer's election to defer payment of
compensation pursuant to the Officer Deferred Compensation Plan.
/18/ Includes options to purchase 37,167 shares of common stock exercisable
within 60 days of March 31, 1999 and 275 shares of common stock deemed
owned under the 401(k) Plan. Does not include 6,936 shares of common stock
equivalents arising from the officer's election to defer payment of
compensation pursuant to the Officer Deferred Compensation Plan.
/19/ Includes options to purchase 4,059 shares of common stock exercisable
within 60 days of March 31, 1999 and 581 shares of common stock deemed
owned under the 401(k) Plan.
/20/ Includes options to purchase 263,990 shares of common stock exercisable
within 60 days of March 31, 1999 and 10,405 shares of common stock deemed
owned under the 401(k) Plan. Does not include 25,140 shares of common stock
equivalents arising from the officer's or director's election to defer
payment of compensation pursuant to the Officers Deferred Compensation Plan
or the Directors' Deferred Compensation Plan.
8
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
- -------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------- --------------------------------
Awards
---------------------
Restricted Securities
Stock Underlying LTIP All Other
Name and Position Year Salary Bonus/1/ Awards Options Payouts/2/ Compensation/3/
- ---------------------------------------------------------------------------------------------------
W. Roger Haughton....... 1998 $500,000 $509,500 $ 0 48,397 $116,315 $7,500
Chairman of the Board 1997 $451,002 $203,267 $ 0 22,500 $ 0 $6,660
and 1996 $400,000 $199,001 $ 0 20,300 $ 0 $5,580
Chief Executive Officer
L. Stephen Smith........ 1998 $285,000/4/ $245,672 $ 0 21,922 $ 49,837 $7,500
President and 1997 $211,656 $ 89,910 $ 0 9,200 $ 0 $6,660
Chief Operating Officer 1996 $210,100 $ 94,072 $ 0 8,900 $ 0 $5,580
John M. Lorenzen, Jr.... 1998 $240,000 $202,320 $ 0 14,425 $ 47,085 $7,500
Executive Vice 1997 $211,101 $ 85,629 $ 0 8,600 $ 0 $6,660
President, 1996 $200,096 $ 89,593 $ 0 8,500 $ 0 $5,580
Chief Financial Officer
Thomas C. Brown......... 1998 $235,000/5/ $171,705 $ 0 13,174 $ 0 $7,500
Executive Vice 1997 $204,000 $ 42,000 $141,900 7,000 $ 0 $ 0
President 1996 N/A N/A N/A N/A N/A N/A
of Field Operations
Claude J. Seaman........ 1998 $231,666 $206,535 $ 0 16,726 $ 33,239 $7,500
Group Executive Vice 1997 $188,510 $ 67,969 $ 0 6,300 $ 0 $6,660
President Strategic 1996 $170,998 $ 68,057 $ 0 5,800 $ 0 $5,580
Investments
- -------------------------------------------------------------------------------
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 1998 were earned during 1998 and paid in 1999.
/2/ Represents payout of performance shares awarded in 1996 under The Equity
Incentive Plan, which vested upon the achievement of certain corporate
goals for the three-year performance cycle 1996-1998. Messrs. Haughton,
Smith, Lorenzen and Seaman received 2,705; 1,159; 1,095; and 773 shares,
respectively, of TPG common stock valued at $43.00 per share on February
18, 1999, the date of vesting.
/3/ Represents employer-matching contributions to the Named Executive Officer's
account under The PMI Group, Inc. Savings and Profit-Sharing Plan, a
"401(k)" Plan.
/4/ Effective September 1, 1998, Mr. Smith was promoted to President and Chief
Operating Officer and his annual base salary was increased to $325,000.
/5/ Mr. Brown commenced employment with TPG during June 1997. On June 9, 1997,
Mr. Brown was granted 2,500 shares of restricted stock which was 100%
vested on July 9, 1998. Effective September 1, 1998, Mr. Brown was promoted
to Executive Vice President of Field Operations and his annual base salary
was increased to $255,000.
- -------------------------------------------------------------------------------
9
Option Grants. The following table is a summary of all TPG stock options
granted to the Named Executive Officers during 1998. Individual grants are
listed separately for each Named Executive Officer. TPG has not granted any
SARs.
Option Grants in 1998
- -------------------------------------------------------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Shares Options of Stock Price Appreciation
Underlying Granted to All Exercise for Option Term/3/
Options Employees in Price Expiration ----------------------------
Name Granted/1/ Fiscal Year/2/ ($/Share) Date 5% 10%
- ----------------------------------------------------------------------------------------------------
W. Roger Haughton....... 48,397 13.2% $70.84 02/12/08 $ 2,156,241 $ 5,464,342
L. Stephen Smith........ 21,922 6.0 70.84 02/12/08 976,695 2,475,138
John M. Lorenzen, Jr.... 17,425 4.8 70.84 02/12/08 776,340 1,967,398
Claude J. Seaman........ 16,726 4.7 70.84 02/12/08 745,197 1,888,477
Thomas C. Brown......... 13,174 3.6 70.84 02/12/08 586,944 1,487,432
- ----------------------------------------------------------------------------------------------------
/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. Messrs. Haughton, Smith,
Lorenzen, Brown and Seaman received a stock option grant covering shares of
TPG common stock which vests in three equal installments as follows:
18,397; 7,922; 7,175; 5,174 and 6,726 shares, respectively. In addition,
Messrs. Haughton, Smith, Lorenzen, Brown and Seaman received a stock option
grant covering shares of TPG common stock which vests on the fifth
anniversary of the grant as follows: 30,000; 14,000; 10,250; 8,000; and
10,000 shares, respectively. 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 1998.
/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 underlying unexercised
options and the value of options outstanding as of December 31, 1998 for each
of the Named Executive Officers. TPG has not granted any SARs. No stock
options were exercised by the Named Executive Officers during 1998.
Options Outstanding
- -------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options
End at Fiscal Year End/1/
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------
W. Roger Haughton........... 73,945 70,163 $860,777 $17,500
L. Stephen Smith............ 35,557 31,021 403,012 7,693
John M. Lorenzen, Jr........ 34,085 25,991 387,081 7,348
Claude J. Seaman............ 30,892 22,888 373,223 5,014
Thomas C. Brown............. 2,334 17,840 0 0
- --------------------------------------------------------------------------------
/1/ Value is based on the closing price of TPG common stock on the New York
Stock Exchange on December 31, 1998 of $48.47 per share, less the exercise
price of the option.
- -------------------------------------------------------------------------------
10
Long-Term Incentive Plan Awards. The following table is a summary of the
performance share awards that were made to the Named Executive Officers during
1998. The performance shares will vest only if TPG's 1998, 1999 and 2000 goals
for stock price to earnings ratio relative to other mortgage insurance
companies and the average annual increase in return on average equity are
achieved. There can be no assurance that any such targets actually will be
achieved, and therefore, there can be no assurance that any performance shares
actually will vest and become payable. The Compensation Committee has the
discretion to waive performance measures and alter award amounts, but did not
exercise such discretion in 1998. No estimate or assumption in this table is a
forecast of TPG's future performance. For each performance share that vests,
the Named Executive Officer will receive, at the discretion of the
Compensation Committee, either one share of common stock (subject to any
adjustments for any changes in the common stock) or a cash payment in an
amount equal to the fair market value thereof. If a Named Executive Officer
terminates employment before the end of the performance period, the number of
performance shares otherwise payable to him or her may be reduced or forfeited
entirely, depending upon the reason for the termination.
Long-Term Incentive Plan Awards in Last Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Stock Priced-Based Plans
(Number of Shares)/3/
-----------------------------------
Number of Shares, Performance or Other Period Threshold Target Maximum
Name Units, or Other Rights/1/ Until Maturation or Payout/2/ (#) (#) (#)
- ---------------------------------------------------------------------------------------------------------------------
W. Roger Haughton....... 3,387 1998-2000 1,693 3,387 6,774
L. Stephen Smith........ 1,459 1998-2000 729 1,459 2,918
John M. Lorenzen, Jr.... 1,321 1998-2000 660 1,321 2,642
Claude J. Seaman........ 1,238 1998-2000 619 1,238 2,476
Thomas C. Brown......... 953 1998-2000 476 953 1,906
- ---------------------------------------------------------------------------------------------------------------------
/1/ Represents the target number of performance shares granted to each Named
Executive Officer during 1998 under the Equity Incentive Plan, that all
matching contributions vest as a change of control as defined above.
/2/ The performance period runs from January 1, 1998 through December 31, 2000.
/3/ The threshold number of shares is awarded for obtaining the minimum goals,
target shares are awarded for obtaining 100% of the goals and the maximum
number of shares is awarded for exceeding the target goals by a preset
amount.
- -------------------------------------------------------------------------------
Change of Control Arrangements. The TPG Equity Incentive Plan provides that
upon a Change of Control, all outstanding stock options, restricted stock and
performance shares shall become 100% vested and immediately exercisable. Under
the Equity Incentive Plan, "Change of Control" generally means the earlier 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 the TPG (excluding
acquisition directly from TPG, or by any employee benefit plan sponsored or
maintained by TPG); or (b) for any reason if the current Board members do not
constitute at least a majority of the Board (excluding individuals whose
election to the Board was approved by the current Board); or (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, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 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 the TPG Officer
Deferred Compensation Plan provides.
TPG has also entered into Change of Control Employment Agreements
("Employment Agreement") with certain senior officers of TPG, including
Messrs. Haughton, Smith, Lorenzen, Seaman and Brown (the
11
"Executives") each agreement 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 Agreement if, a change of control
occurs and the Executive's employment is terminated by the Executive for "Good
Reason," or by TPG other than for "Cause," "Death" or "Disability," as defined
in the Employment Agreement during the three year period following a "Change
of Control". Under the Employment Agreement, "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 the TPG (excluding acquisition
directly from TPG, or by any employee benefit plan sponsored or maintained by
TPG); or (b) for any reason the current Board members do not constitute at
least a majority of the Board; or (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, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 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 include: a lump-sum cash payment
equal to up to three times' (depending on the senior officer involved) base
salary and target incentive bonus; plus an amount equal to 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 senior officer 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; continuation of welfare benefit
plan coverage for up to three years (depending on the senior officer
involved); and outplacement services. 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; (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) stock equal to the value of the amount by
which the market price of TPG common stock exceeds the exercise price of any
vested options. As of March 31, 1999, Messrs. Haughton, Smith, Lorenzen,
Seaman and Brown have met approximately 93%, 72%, 91%, 126%, and 19%,
respectively, of the stock ownership guidelines based on the closing price of
TPG common stock on March 31, 1999 of $46.375 per share. Mr. Brown joined the
Company in June 1997 and has until June 2002 to achieve compliance with the
stock ownership guidelines.
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
12
intended to qualify under Section 401(a) of the Code; and 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. 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
participate 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 the amount deferred has remained in the TPG
Common Stock equivalent fund for three-years, or upon change of control. In
addition, the Named Executives Officers are eligible to participate in The PMI
Group, Inc. Savings and Profit-Sharing Plan ("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 is based on the
executive's average of his or her five highest consecutive years'
compensation. Credited service under the Retirement Plan includes only service
after the completion of TPG's initial public offering in April 1995 (up to a
maximum of 35 years). Credited service for the SERP includes all service with
TPG; Sears, Roebuck and Co.; and Allstate. Benefits are computed on a
straight-line annuity basis and are not subject to deduction for Social
Security or other offset amounts.
Compensation under the Retirement Plan and SERP is based upon the total
annual cash compensation paid to the participant (not to exceed $160,000 for
1998, as limited by the Code) for services rendered to PMI and its affiliates,
including pre-tax deferrals, but excluding items such as certain incentive and
long-term executive compensation plan awards, the value of stock awards and
employer contributions to profit sharing plans. Covered compensation under the
Retirement Plan in 1998 (without Code limitations) was $703,271, $374,906,
$325,629, $299,636 and $277,000 for Messrs. Haughton, Smith, Lorenzen, Seaman,
and Brown, respectively. As of December 31, 1998, Messrs. Haughton, Smith,
Lorenzen, Seaman and Brown had approximately 29, 22, 14, 23 and 1 years of
credited service, respectively, under the SERP. Messrs. Haughton, Smith,
Lorenzen, and Seaman each had 3.667 years of credited service under the
Retirement Plan. Mr. Brown had 1 year of credited service under the Retirement
Plan.
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
REMUNERATION YEARS OF SERVICE
------------ --------------------------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
$200,000 $ 63,000 $ 85,000 $106,000 $127,000 $148,000
250,000 80,000 107,000 133,000 160,000 187,000
300,000 96,000 129,000 161,000 193,000 225,000
350,000 113,000 151,000 188,000 226,000 264,000
400,000 129,000 173,000 216,000 259,000 302,000
450,000 146,000 194,000 243,000 292,000 340,000
500,000 162,000 216,000 271,000 325,000 379,000
550,000 179,000 238,000 298,000 358,000 417,000
600,000 195,000 260,000 326,000 391,000 456,000
650,000 212,000 282,000 353,000 424,000 494,000
700,000 228,000 304,000 381,000 457,000 533,000
750,000 244,000 325,000 407,000 488,000 570,000
800,000 261,000 347,000 434,000 521,000 608,000
- --------
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 would be lower.
13
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee on Executive Compensation
and related disclosure, including the following Performance Graph, 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 TPG specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
This report is provided by the Compensation 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 Compensation Committee ("Committee") of the Board of
Directors, it is our responsibility to review and set compensation levels of
the Chief Executive Officer and other senior officers of TPG, evaluate the
performance of management and consider management succession and related
matters.
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 six times in 1998 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 Committee's 1998 compensation actions and policies were based on
recommendations about TPG executive compensation practices from William M.
Mercer, Incorporated, an outside consulting firm that specializes in executive
compensation, internally generated information, comparative pay practice data,
and its own comprehensive review of the executive compensation program that
was adopted by TPG in 1996.
Compensation Philosophy. TPG's compensation philosophy is to tie total
compensation for executives closely to the creation of stockholder value. This
philosophy is supported through competitive base salaries that are targeted at
the 50th percentile among the group of peer companies in which TPG competes
for executive talent, through an annual incentive plan that focuses management
employees on key financial measures that promote stockholder value through
prudent growth and profitability, and through long-term incentives under TPG's
Equity Incentive Plan that tie rewards directly to increasing stockholder
value and to better align the executive's interest with those of the
stockholders. 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. TPG's focus on stockholder value creation is further
supported by TPG's policy for suggested stock ownership levels for senior
executives.
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) which is
designed to ensure the compensation program continue to meet all the current
tests required for compensation to be deductible for federal income tax
purposes. The Committee has the discretion to
14
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 1998, the Committee increased salaries of Mr. Haughton and
other executive officers to reflect its philosophy of pay for performance. In
1998, Mr. Haughton's salary was increased from $451,000 to $500,000. This
increase was intended to make Mr. Haughton's salary competitive with those
companies with whom TPG compares itself. The increase recognized the record
operating results in 1997. The base salaries of the CEO, the President,
Executive Vice Presidents, and Senior Vice Presidents are set annually by the
Committee. TPG seeks to pay its executives at competitive levels, based on the
scope of responsibilities applicable to each position. Competitive base salary
levels are defined as the median (50th percentile) level among a broader group
of companies than would be included in an industry index established to
compare stockholder returns.
Annual Incentives. The 1998 annual incentive award paid cash amounts tied to
(a) specific financial measures supporting continued growth, profitability and
increased stockholder value and/or (b) individual performance objectives.
These measures and objectives are identified by management and approved by the
Committee. The annual incentive award was designed to provide market median
levels of compensation for performance that met individual and/or annual
financial benchmarks set at the beginning of the year and approved by the
Committee. The incentive award provided approximately 75th percentile rewards
for superior performance against these annual objectives and measures.
The 1998 annual incentive award was based upon satisfactory performance of
four TPG performance measures, which include net operating earnings per share
growth, new insurance written growth, market share and the relative price-to-
earnings ratio relative to other publicly traded mortgage insurance companies.
No payouts are made as an annual incentive award unless TPG earns a threshold
return on average equity level that is at least four percentage points above
the 10-year U.S. Treasury bond yield for the year. The 1998 annual incentive
awards for the executive officers were based solely on meeting the four TPG
performance measures.
The Committee approves the targets for TPG performance measures shortly
after the beginning of each fiscal year. Similarly, 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. TPG's
independent auditors perform certain agreed-upon incentive compensation
recomputation procedures and issue a report to TPG of their result. The
Committee retains discretion to alter the award otherwise payable to any
executive and/or to pay a bonus for the achievement of other objectives.
For 1998, Mr. Haughton's annual incentive award was based on the four TPG
performance measures. Mr. Haughton's annual incentive award ranges from 0
percent to 120 percent of his base salary, depending upon actual achievement
of performance measures established by TPG. For 1998, Mr. Haughton received an
annual incentive award of $509,400 representing approximately 102 percent of
his base salary.
Long-Term Incentives. The purpose of TPG's long-term incentive program is to
reward top management for increasing stockholder value and to develop stock
ownership among key executives. Long-term incentives are designed to position
TPG's executives competitively between the 50th and 75th percentile of TPG's
peer group. Executives have the opportunity to earn market median incentive
awards for target business performance and up to 75th percentile awards for
superior performance. The Committee's long-term incentive philosophy provides
for annual awards under the Equity Incentive Plan of stock options and
performance shares to the CEO, the President, Executive Vice Presidents and
Senior Vice Presidents, and for the award of stock options alone to Vice
Presidents and Assistant Vice Presidents. In addition, TPG awards stock
options every other year to key employees of TPG below the level of Assistant
Vice President.
During 1998, 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; and a special one-time grant that vests on the
fifth anniversary of the grant date. All stock options granted during 1998
have a per share exercise price
15
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. Performance shares,
which are granted only to Senior Vice Presidents and above, are earned, based
on TPG's performance against certain financial measures, over a three-year
period. Performance shares are payable in shares of stock or cash, as
determined by the Committee. Performance shares for the performance period
1998 through 2000 will be earned based upon average annual increase in return
on average equity and the relative price to earnings ratio relative to other
publicly traded mortgage insurance companies over that three-year period. Any
awards earned during the cycle will be paid in early 2001 and only if TPG's
three-year average return on equity is at least four percentage points above
the 10-year U.S. Treasury Bond yield over the same period. The Committee has
discretion to waive performance measures or goals and alter award amounts. For
the three-year performance cycle, which ended in 1998 (1996-1998 cycle), Mr.
Haughton, received a performance share payout of 2,705 shares of common stock,
representing approximately 64 percent of his Target Award established in 1996.
The other named Executive Officers received a similar percentage payout. Such
payouts were based solely on the attainment of the performance goals
established in 1996.
In accordance with the Equity Incentive Plan and in connection with the
compensation levels approved by the Committee for key executives, in 1998, Mr.
Haughton was granted stock options covering 48,397 shares and a target award
of 3,387 performance shares both in consideration of his role and importance
to TPG and to strongly align him with stockholder objectives. The stock
options granted to Mr. Haughton give him the right to buy 18,397 shares of TPG
common stock, vesting in three equal installments on the first, second and
third anniversaries of the grant. Mr. Haughton also received a special one-
time stock option grant giving him the right to buy 30,000 shares of TPG
common stock which vests on the fifth anniversary of the grant. The stock
options have an exercise price of $70.84 per share (100 percent of the fair
market value on the date of grant), with a maximum term of 10 years. The
performance shares will vest only if TPG's 1998, 1999, and 2000 goals for
average annual increase in return on average equity and relative price to
earnings ratio relative to other selected companies over that three-year
period are achieved.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
DONALD C. CLARK, CHAIR
JOHN D. ROACH, VICE CHAIR
DR. KENNETH T. ROSEN
RONALD T. ZECH
16
Performance Graph
The graph shown below compares the cumulative total stockholder return for
TPG's common stock since its initial public offering on April 10, 1995 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
[PMI GROUP TOTAL RETURN INDEX GRAPH APPEARS HERE]
Total Return* and Total Rate of Return
- --------------------------------------------------------------------------------
S&P 500 The PMI Group, Inc. Russell 1000 Financial Services Index
-------------------------------- --------------------------- -------------------------------- ---------------------------
3/95 6/95 9/95 12/95 3/95 6/95 9/95 12/95 3/95 6/95 9/95 12/95 3/95 6/95 9/95 12/95
---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
100.00 106.41 114.87 121.79 n/a 116.58 127.47 121.88 100.00 108.43 124.45 131.19 n/a n/a n/a 100
3/96 6/96 9/96 12/96 3/96 6/96 9/96 12/96 3/96 6/96 9/96 12/96 3/96 6/96 9/96 12/96
---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
128.33 134.09 138.24 149.76 117.65 114.75 143.57 149.79 141.18 143.66 155.75 175.90 104.29 107.01 121.73 137.46
3/97 6/97 9/97 12/97 3/97 6/97 9/97 12/97 3/97 6/97 9/97 12/97 3/97 6/97 9/97 12/97
---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
153.77 180.57 194.1 199.73 135.72 169/02 155.44 196.27 181.98 216.48 244.32 264.11 125.84 171.04 202.89 230.45
3/98 6/98 9/98 12/98 3/98 6/98 9/98 12/98 3/98 6/98 9/98 12/98 3/98 6/98 9/98 12/98
---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
227.59 235.11 211.72 256.81 219.30 199.67 127.47 134.47 294.37 302.27 241.03 290.54 236.59 208.65 137.95 148.73
Total Rate of Return 156.81% Total Rate of Return 34.47% Total Rate of Return 190.54% Total Rate of Return 48.73%
- --------------------------------------------------------------------------------
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 (which includes Amerin Corporation, CMAC Investment
Corporation, MGIC Investment Corporation and Triad Guaranty Inc.) indices using
the starting date of 3/31/95 with a value of 100. The MI index measurement
period starts on December 1995, which is the earliest date from which such
index is available. For TPG, the starting date (value of 100) was 4/10/95, when
the IPO was priced.
*Total Return = Capital Appreciation + Dividend Income
- --------------------------------------------------------------------------------
17
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 Mr. Clark, Chair,
Mr. Roach, Vice Chair, Dr. Rosen and Mr. Zech. 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 1998, all Section
16(a) filing requirements were satisfied on a timely basis.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
None.
18
ITEM 2: RATIFICATION OF
APPOINTMENT OF INDEPENDENT
AUDITORS
Subject to stockholder ratification, the Board of Directors has appointed
Deloitte & Touche LLP as independent public auditors to audit the financial
statements of TPG for 1999. Deloitte & Touche LLP has audited the financial
statements of TPG annually since 1994. One or more representatives of Deloitte
& Touche LLP are expected to be present at the Annual Meeting of Stockholders
and 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 those 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 Deloitte & Touche LLP, the Board of Directors of TPG will consider the
appointment of other auditors. Deloitte & Touche LLP also performed internal
audit and tax related services in 1998 and is performing such services in
1999.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP.
19
ITEM 3: APPROVAL OF
AMENDMENT AND RESTATMENT
OF THE EQUITY INCENTIVE PLAN
The Board of Directors has approved the adoption of an amended and restated
Equity Incentive Plan (the "Equity Incentive Plan"). Adoption of the amended
and restated Plan is subject to the approval of a majority of the shares of
TPG's common stock, which are present in person or by proxy and entitled to
vote at the Annual Meeting. For approval, a majority of those 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 approved, the amended Plan
will replace the version of the Equity Incentive Plan that previously was
approved by TPG's stockholders.
The primary changes to the Equity Incentive Plan are to (1) increase the
number of shares available for issuance under the Plan by 1,500,000, (2)
permit awards to non-employee consultants, and (3) place an annual limit on
the number of Award shares that any individual may receive during any fiscal
year (the Equity Incentive Plan previously contained limits that applied for
the duration of the Plan).
Purpose of the Equity Incentive Plan
The Equity Incentive Plan is intended to increase incentive and to encourage
share ownership on the part of employees and consultants of TPG and its
affiliates.
Description of the Equity Incentive Plan
The following paragraphs provide a summary of the principal features of the
Equity Incentive Plan (as amended) and its operation. The following summary is
qualified in its entirety by reference to the Equity Incentive Plan.
General
The Equity Incentive Plan provides for the granting of stock options,
restricted stock awards, and performance unit and performance share awards
(collectively, "Awards") to eligible Plan participants. The maximum number of
shares of TPG's common stock available for Awards under the Equity Incentive
Plan will be 2,900,000. As of March 31, 1999, approximately 1,415,000 shares
are subject to Awards granted under the Equity Incentive Plan, and
approximately 1,485,000 shares remained available for any Awards to be granted
in the future.
Administration of the Equity Incentive Plan
The Equity Incentive Plan is administered by the Compensation Committee of
TPG's Board of Directors (the "Committee"). The members of the Committee must
qualify as "non-employee directors" under Rule 16b-3 under the Securities
Exchange Act of 1934, and as "outside directors" under Section 162(m) (for
purposes of qualifying the Equity Incentive Plan as performance-based
compensation under Section 162(m)).
Subject to the terms of the Equity Incentive Plan, the Committee has the
sole discretion to determine the employees and consultants who shall be
granted Awards, the size and types of such Awards, and the terms and
conditions of such Awards. The Committee may delegate its authority to grant
and administer Awards to a separate committee appointed by the Committee, but
only the Committee can make Awards to participants who are executive officers
of TPG.
Eligibility to Receive Awards
Employees and consultants of TPG and its affiliates are eligible to be
selected to receive one or more Awards. The actual number of employees who
will receive Awards under the Equity Incentive Plan cannot be determined
because eligibility for participation in the Equity Incentive Plan is in the
discretion of the Committee.
20
Options
The Committee may grant non-qualified stock options, incentive stock options
(which are entitled to favorable tax treatment), or a combination thereof. The
number of shares covered by each option will be determined by the Committee,
but during any fiscal year of TPG, no participant may be granted options for
more than 200,000 shares.
The price of the shares of TPG's common stock subject to each stock option
is set by the Committee, subject to the following restrictions. The exercise
price of an option cannot be less than 100% of the fair market value (on the
date of grant) of the shares covered by the option. Options granted under the
Equity Incentive Plan cannot be repriced. In addition, the exercise price of
an incentive stock option must be at least 110% of fair market value if (on
the grant date) the participant owns stock possessing more than 10% of the
total combined voting power of all classes of stock of TPG or any of its
subsidiaries. Also, the aggregate fair market value of the shares (determined
on the grant date) covered by incentive stock options which first become
exercisable by any participant during any calendar year may not exceed
$100,000.
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 of
each option, or by any other means which the Committee determines to be
consistent with the Equity Incentive Plan's purpose.
Options become exercisable at the times and on the terms established by the
Committee. However, if a participant retires, dies, or becomes disabled, or if
a participant incurs a termination of service following a Change of Control,
the participant's options would immediately vest. Options expire at the times
established by the Committee but not later than 10 years after the date of
grant (except in certain cases of death, in which case an employee's option
would remain exercisable for three years). The Committee may provide that
options granted may permit the exercise of all or part of such option by the
payment of the exercise price with already-owned shares, and allow the
participant to be granted an additional option for a number of shares of stock
equal to the number of shares tendered to exercise the previously granted
stock option.
Restricted Stock Awards
Restricted stock Awards are shares of TPG's common stock that vest in
accordance with terms and conditions established by the Committee. The number
of shares of restricted stock granted to a participant (if any) will be
determined by the Committee. No participant shall be granted more than 90,000
shares of restricted stock.
In determining whether an Award of restricted stock should be made, and/or
the vesting schedule for an Award, the Committee may impose whatever
conditions to vesting as it determines to be appropriate. For example, the
Committee may determine to grant restricted stock only if performance goals
established by the Committee are satisfied.
Performance Units and Performance Shares
Performance Units and Performance Shares are TPG Awards which will result in
a payment to a participant only if performance goals established by the
Committee are satisfied. The applicable performance goals (see "Performance
Goals" below) will be determined by the Committee, and may be applied on a
Company-wide or an individual business unit basis, as deemed appropriate in
light of the participant's specific responsibilities.
In addition to the performance requirements discussed above, performance
units and performance shares are subject to additional limits set forth in the
Equity Incentive Plan. No participant shall receive more than 90,000
performance units or performance shares.
Performance Goals
The Committee in its discretion may set performance goals applicable to a
participant with respect to an Award. At the Committee's discretion, one or
more of the following performance goals may apply: cash
21
operating earnings per share, earnings per share, expense ratio, loss ratio,
market share, net income, net operating income earnings per share, net
operating income per share, new insurance written, operating cash flow, pre-
tax net income, pre-tax return on average equity, price to earnings ratio,
price to earnings ratio relative to other public mortgage insurance companies,
return on average assets, return on average equity, return on sales, revenue,
risk in force, and total stockholder return. The Performance Goals may differ
from participant to participant and from award to award. Any criteria used may
be measured in absolute terms or as compared to another company or companies.
Any criteria used may be measured against the performance of TPG as a whole or
a segment of TPG.
Awards Granted to Certain Individuals and Groups
As described above, the Committee has discretion to determine the number of
Awards (if any) to be granted to any individual under the Equity Incentive
Plan. Non-Employee Directors are not eligible to participate in the Equity
Incentive Plan. Accordingly, the actual number of Awards to be granted to any
individual is not determinable. To date, only options, performance shares, and
restricted stock have been granted under the Equity Incentive Plan. The
following table sets forth (a) the aggregate number of shares of TPG's Common
Stock subject to options granted under the Equity Incentive Plan to date
during fiscal 1999, (b) the average per share exercise price of such options,
(c) the aggregate number of shares of TPG's Common Stock subject to restricted
stock granted under the Equity Incentive Plan during fiscal year 1999, and (d)
the dollar value of such shares of restricted stock based on $46.375 per
share, the last reported trade price for shares of TPG's common stock on March
31, 1999.
- --------------------------------------------------------------------------------
Average Number of Dollar Value of
Number of Per Share Shares of Shares of
Name of Individual or Options Exercise Restricted Stock Restricted Stock
Group Granted Price Granted Granted
- --------------------------------------------------------------------------------
W. Roger Haughton........ 53,500 $43.00 N/A $0
Chairman of the Board
and Chief Executive
Officer
L. Stephen Smith......... 27,300 $43.00 N/A $0
President and
Chief Operating Officer
John M. Lorenzen, Jr..... 17,000 $43.00 N/A $0
Executive Vice
President,
Chief Financial Officer
Claude J. Seaman......... 17,600 $43.00 N/A $0
Group Executive Vice
President
Strategic Investments
Thomas C. Brown.......... 16,800 $43.00 N/A $0
Executive Vice President
of Field Operations
All executive officers, $46,375
as a group.............. 195,400 $43.00 1,000
All employees who are not
current executive
officers, as a group.... 164,600 $43.00 N/A $0
- --------------------------------------------------------------------------------
Transferability of Awards
Awards granted under the Equity Incentive Plan generally may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the applicable laws of descent and distribution. However,
options (other than incentive stock options) may be transferred by bona fide
gift (1) to a member of the participant's immediate family, (2) to a trust or
other entity for the sole benefit of the member(s) of the participant's and/or
his or her immediate family, (3) to a partnership, limited liability company
or other entity whose members are the participant and/or his or her immediate
family, or (4) to a tax-qualified charity.
22
Tax Aspects
A recipient of a stock option will not have taxable income upon the grant of
the option. For options other than incentive stock options, the participant
will recognize ordinary income upon exercise in an amount equal to the excess
of the fair market value of the shares over the exercise price (the
"appreciation value") on the date of exercise. Any gain or loss recognized
upon any later disposition of the shares generally will be capital gain or
loss.
Purchase of shares upon exercise of an incentive stock option will not
result in any taxable income to the participant, except for purposes of the
alternative minimum tax. Gain or loss recognized by the participant on a later
sale or other disposition will either be long-term capital gain or loss or
ordinary income depending upon whether the participant holds the shares
transferred upon the exercise for a specified period. Any ordinary income
recognized will be in the amount, if any, by which the lesser of the fair
market value of such shares on the date of exercise or the amount realized
from the sale exceeds the option price.
Unless the participant elects to be taxed at the time of receipt of
restricted stock, the participant will not have taxable income upon the
receipt of the Award, but upon vesting will recognize ordinary income equal to
the fair market value of the shares or cash at the time of vesting.
At the discretion of the Committee, the Equity Incentive Plan allows a
participant to satisfy tax withholding requirements under federal and state
tax laws in connection with the exercise or receipt of an Award by electing to
have shares of common stock withheld, or by delivering to TPG already-owned
shares, having a value equal to the amount required to be withheld.
TPG will be entitled to a tax deduction in connection with an Award under
the Equity Incentive Plan only in an amount equal to the ordinary income
realized by the participant and at the time the participant recognizes such
income. In addition, Section 162(m) contains special rules regarding the
federal income tax deductibility of compensation paid to TPG's Chief Executive
Officer and to each of the other four most highly compensated executive
officers. The general rule is that annual compensation paid to any of these
specified executives will be deductible only to the extent that it does not
exceed $1,000,000. However, TPG can preserve the deductibility of certain
compensation in excess of $1,000,000 if it complies with conditions imposed by
Section 162(m), including the establishment of a maximum number of shares with
respect to which Awards may be granted to any one employee during one year,
and if for Awards other than options, the Equity Incentive Plan sets forth
performance goals which must be achieved prior to payment of the Awards. The
Equity Incentive Plan has been designed to permit the Committee to grant
Awards which satisfy the requirements of Section 162(m), thereby permitting
TPG to continue to receive a federal income tax deduction in connection with
such Awards.
Amendment and Termination of the Equity Incentive Plan
The Board, in its sole discretion, may generally may amend or terminate the
Equity Incentive Plan, or any part thereof at any time and for any reason. The
amendment, suspension or termination of the Equity Incentive Plan, shall not,
without the consent of the participant, alter or impair any rights or
obligations under any Award granted to such participant. The Equity Incentive
Plan shall remain in effect, subject to the Board rights to terminate the
plan. Absent further stockholder approval, no incentive stock option may be
granted under the Equity Incentive Plan after ten (10) years from the plan's
effective date.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE EQUITY INCENTIVE
PLAN.
23
ITEM 4: ADOPTION OF
THE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted an Employee Stock Purchase Plan (the
"Plan"), subject to the approval of a majority of the shares of TPG's Common
Stock that are present in person or by proxy and entitled to vote at the
Annual Meeting. For approval, a majority of those 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.
Purpose
The purpose of the Plan is to provide eligible employees of TPG and its
participating subsidiaries with the opportunity to purchase shares of Common
Stock of TPG through payroll deductions. The Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended.
Eligibility to Participate
Most employees of TPG and its participating subsidiaries are eligible to
participate in the Plan. However, an employee is not eligible if he or she has
the right to acquire five percent or more of the voting stock of TPG or of any
subsidiary of TPG. Also, an employee is not eligible if he or she normally is
scheduled to work less than or equal to five months per calendar year or is
below the legal age limit to open a stock brokerage account under applicable
state law. Approximately 200 employees currently are participating in the
Plan.
Administration, Amendment and Termination
The Compensation Committee (the "Committee") of the Board of Directors of
TPG administers the Plan. The members of the Committee serve at the pleasure
of the Board.
Subject to the terms of the Plan, the Committee has all discretion and
authority necessary or appropriate to control and manage the operation and
administration of the Plan. The Committee also may establish a waiting period
(not to exceed two years) before new employees may become eligible for the
Plan. The Committee may make whatever rules, interpretations, and
computations, and take any other actions to administer the Plan that it
considers appropriate to promote TPG's best interests, and to ensure that the
Plan remains qualified under Section 423 of the Internal Revenue Code. The
Committee may delegate one or more of ministerial duties in the administration
of the Plan.
TPG's Board of Directors, in its sole discretion, may amend or terminate the
Plan at any time and for any reason.
Number of Shares of Common Stock Available under the Plan
A maximum of 200,000 shares of Common Stock are available for issuance
pursuant to the Plan. Shares sold under the Plan may be newly issued shares or
treasury shares. In the event of any stock split or other change in the
capital structure of TPG, appropriate adjustments will be made in the number,
kind and purchase price of the shares available for purchase under the Plan.
Enrollment and Contributions
Eligible employees voluntarily elect whether or not to enroll in the Plan.
Employees join for an enrollment period of six months. Employees who have
joined the Plan automatically are re-enrolled for additional rolling six-month
periods; provided, however, that an employee may cancel his or her enrollment
at any time (subject to Plan rules).
24
Employees contribute to the Plan through payroll deductions. Participating
employees generally may contribute up to 10% of their eligible compensation
through after-tax payroll deductions. From time to time, the Committee may
establish a different maximum permitted contribution percentage, change the
definition of eligible compensation, or change the length of the enrollment
periods (but in no event may any enrollment period exceed 27 months). After an
enrollment period has begun, an employee may increase or decrease his or her
contribution percentage (subject to Plan rules).
Purchase of Shares
On the last business day of each six-month enrollment period, TPG uses each
participating employee's payroll deductions to purchase shares of Common Stock
for the employee. The price of the shares purchased will be 85% of the lower
of (1) the stock's market value on the first day of the six-month enrollment
period, or (2) the stock's market value on the last day of the enrollment
period. Market value under the Plan means the average of the high and low
prices of the Common Stock on the New York Stock Exchange for the day in
question. However, during any single year, no employee may purchase more than
the lower of (1) 500 shares of stock in a single year, or (2) $10,000 of
Common Stock in a single year (based on market value on the applicable
enrollment date(s)).
Termination of Participation
Participation in the Plan terminates when a participating employee's
employment with TPG ceases for any reason, the employee withdraws from the
Plan, or TPG terminates or amends the Plan such that the employee no longer is
eligible to participate.
Tax Aspects
Based on management's understanding of current federal income tax laws, the
tax consequences of the purchase of shares of common stock under the Plan are
as follows.
An employee will not have taxable income when the shares of common stock are
purchased for him or her, but the employee generally will have taxable income
when the employee sells or otherwise disposes of stock purchased through the
Plan.
For shares which the employee does not dispose of until more than 24 months
after the enrollment date under which the shares were purchased (the "24-month
holding period"), gain up to the amount of the discount (if any) from the
market price of the stock on the enrollment date (or re-enrollment date) is
taxed as ordinary income. Any additional gain above that amount is taxed at
long-term capital gain rates. If, after the 24-month holding period, the
employee sells the stock for less than the purchase price, the difference is a
long-term capital loss. Shares sold within the 24-month holding period are
taxed at ordinary income rates on the amount of discount received from the
stock's market price on the purchase date. Any additional gain (or loss) is
taxed to the stockholder as long-term or short-term capital gain (or loss).
The purchase date begins the holding period for determining whether the gain
(or loss) is short-term or long-term.
TPG may deduct for federal income tax purposes an amount equal to the
ordinary income an employee must recognize when he or she disposes of stock
purchased under the Plan within the 24-month holding period. TPG may not
deduct any amount for shares disposed of after the 24-month holding period.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO ADOPT THE EMPLOYEE STOCK PURCHASE PLAN (ESPP).
25
ITEM 5: ADOPTION OF
THE BONUS INCENTIVE PLAN
The Board of Directors has adopted a Bonus Incentive Plan (the "Bonus
Incentive Plan"), subject to the approval of a majority of the shares of TPG's
Common Stock which are present in person or by proxy and entitled to vote at
the Annual Meeting. For approval, a majority of those 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.
Purpose
The Bonus Incentive Plan is intended to motivate TPG's key employees to
perform to the best of their abilities, and to achieve TPG's objectives by
providing such executives with incentive awards based on the achievement of
goals relating to TPG and its business units.
Under section 162(m) of the Internal Revenue Code ("Section 162(m)"), the
federal income tax deductibility of compensation paid to TPG's Chief Executive
Officer and to each of its next four most highly compensated executive
officers may be limited to the extent that it exceeds $1 million in any one
year. TPG can deduct compensation in excess of that amount if it qualifies as
"performance-based compensation" under Section 162(m). The Bonus Incentive
Plan is intended to permit TPG to pay incentive compensation which qualifies
as performance-based compensation, thereby permitting TPG to receive a federal
income tax deduction for the payment of such incentive compensation.
Description of the Bonus Incentive Plan
The following paragraphs provide a summary of the principal features of the
Bonus Incentive Plan and its operation. The following summary is qualified in
its entirety by reference to Bonus Incentive Plan.
Eligibility to Receive Bonus Payments
Eligibility for the Bonus Incentive Plan is determined in the discretion of
the Committee. In selecting participants for the Bonus Incentive Plan, the
Committee will choose key employees of TPG and its affiliates who are likely
to have a significant impact on Company performance.
Administration, Amendment and Termination
The Compensation Committee (the "Committee") of TPG's Board of Directors
administers the Bonus Incentive Plan. The members of the Committee must
qualify as "outside directors" under Section 162(m) (for purposes of
qualifying the Bonus Incentive Plan as performance-based compensation under
such section). Subject to the terms of the Bonus Incentive Plan, the Committee
has the sole discretion to determine the key employees who shall be granted
awards, and the amounts, terms and conditions of each award.
The Board of Directors may amend or terminate the Bonus Incentive Plan at
any time and for any reason.
Awards and Performance Goals
Under the Bonus Incentive Plan, the Committee will establish (1) the
performance goals which must be achieved in order for the participant to
actually be paid an award, and (2) a formula or table for calculating a
participant's award, depending upon how actual performance compares to the
preestablished performance goals. A participant's award will increase or
decrease as actual performance increases or decreases. The Committee also will
determine the period for measuring actual performance (the "performance
period"), except that no performance period may be shorter than one year. The
Committee's current intention is to establish each calendar year as a separate
performance period.
26
The Committee may set performance periods and performance goals which differ
from participant to participant. For example, the Committee may choose
performance goals based on either Company-wide or business unit results, as
deemed appropriate in light of the participant's specific responsibilities.
For purposes of qualifying awards as performance based compensation under
Section 162(m), the Committee will specify performance goals from the
following list: cash operating earnings per share, earnings per share, expense
ratio, loss ratio, market share, net income, net operating income earnings per
share, net operating income per share, new insurance written, operating cash
flow, pre-tax net income, pre-tax return on average equity, price to earnings
ratio, price to earnings ratio relative to other public mortgage insurance
companies, return on average assets, return on average equity, return on
sales, revenue, risk in force, and total stockholder return. The Performance
Goals may differ from Participant to Participant and from award to award. Any
criteria used may be measured in absolute terms or as compared to another
company or companies. Any criteria used may be measured against the
performance of TPG as a whole or a segment of TPG.
Determination of Actual Awards
After the end of each performance period, the Committee will determine the
extent to which the performance goals applicable to each participant were
achieved or exceeded. The Committee will determine the actual award (if any)
for each participant by applying the formula to the level of actual
performance which was achieved. However, the Committee retains discretion to
(1) eliminate or reduce the actual award payable to any participant below that
which otherwise would be payable under the applicable formula, and (2)
determine what actual award (if any) would be payable in the event of a
participant's termination of service before the end of a performance period.
The Committee does not have discretion to increase awards pursuant to the
applicable formula. Awards under the Bonus Incentive Plan generally will be
payable in cash or TPG common stock within 90 days after the performance
period during which the award was earned. In no event during any performance
period, may a participant receive an award of more than $2,000,000.
27
Pro Forma Benefits for TPG's Management Under The Bonus Incentive Plan
Given that payments under the Bonus Incentive Plan are determined by
comparing actual performance to the performance goals established by the
Committee, it is not possible to conclusively state the amount of benefits
which will be paid under the Bonus Incentive Plan. Non-Employee Directors are
not eligible to participate in the Bonus Incentive Plan. The following table
sets forth the target awards that would be payable to each of the following
persons and groups if the performance goals established by the Committee for
fiscal year 1999 are achieved at Target level of performance. There can be no
assurance that the preestablished performance goals actually will be achieved,
and therefore there can be no assurance that the awards shown below actually
will be paid.
- -------------------------------------------------------------------------------
1999 Target Cash 1999 Target Stock
Name and Position Payments/1/ Awards/2/
- -------------------------------------------------------------------------------
W. Roger Haughton........................... $ 440,000 9,500
Chairman of the Board
and Chief Executive Officer
L. Stephen Smith............................ $ 237,300 5,100
President and
Chief Operating Officer
John M. Lorenzen, Jr........................ $ 162,500 3,500
Executive Vice President
and Chief Financial Officer
Claude J. Seaman............................ $ 172,250 3,700
Group Executive Vice President
Strategic Investments
Thomas C. Brown............................. $ 172,250 3,700
Executive Vice President
of Field Operations
All executive officers, as a group.......... $1,692,800 36,500
All employees who are not current executive
officers, as a group........................ $2,800,000 60,400
- -------------------------------------------------------------------------------
/1/ Cash payments under the Bonus Incentive Plan will be made only if the
performance measures, as approved by the Compensation Committee, are
satisfied. For fiscal year 1999 payments indicated above are at Target and,
if paid, are to be paid in cash. For fiscal year 1999, the actual payment,
if any, may range from 0 to 120 percent of the executive's base salary.
/2/ Stock Awards under the Bonus Incentive Plan will be made only if the
performance measures, as approved by the Compensation Committee, are
satisfied. For fiscal year 1999, the actual shares awarded, if any, may be
calculated using a range from 0 to 120 percent of the executive's base
salary. The amounts shown above and have been converted into shares of
stock using the closing price of TPG common stock on March 31, 1999 of
$46.375.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE BONUS INCENTIVE PLAN.
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.
28
Shareholder Proposals
for 2000 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. Any
proposals intended to be presented at the 2000 Annual Meeting of Stockholders
must be received by the Secretary of TPG on or before December 17, 1999 in
order to be considered for inclusion in TPG's proxy statement and form of
proxy relating to such meeting. Any proposals intended to be presented at the
2000 Annual Meeting of Stockholders, which are not to be included in the proxy
statement and form of proxy relating to such meeting, must be received by the
Secretary of TPG not before January 20, 2000, nor later than February 20, 2000
to be timely for consideration at such meeting.
/s/ Victor J. Bacigalupi
Victor J. Bacigalupi
Senior Vice President,
General Counsel and Secretary
April 16, 1999
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.
29
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE PMI GROUP, INC.
The undersigned hereby appoints W. Roger Haughton, Victor J. Bacigalupi and L.
Stephen Smith 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 20, 1999 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 SHAREHOLDERS
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE ANNUAL MEETING OF THE PMI
GROUP, INC.: THURSDAY, MAY 20, 1999
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 SHAREHOLDER 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.
The Board of Directors recommends a vote FOR Please mark [X]
all nominees and for director and FOR, Items your vote as
2, 3, 4, and 5. Unless contrary Instructions indicated in
are given below, below, this proxy will be this example.
voted in accordance with the recommendations
of the Board of Directors.
FOR all nominees listed below WITHHOLD AUTHORITY for all nominees listed below
[_] [_]
ITEM 1-ELECTION OF DIRECTORS
Nominees:
01 Dr. James C Castle 06 John D. Roach
02 Donald C. Clark 07 Kenneth T. Rosen
03 W. Roger Haughton 08 Richard L. Thomas
04 Wayne E. Hedien 09 Mary Lee Widener
05 Raymond L. Ocampo, Jr. 10 Ronald H. Zech
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
================================================================================
FOR AGAINST ABSTAIN
Item 2 - Ratification of appointment of independent auditors [_] [_] [_]
Item 3 - Approval of the amendment and restatement of the Equity [_] [_] [_]
Incentive Plan
Item 4 - Approval of the Employee Stock Purchase Plan [_] [_] [_]
Item 5 - Approval of the Bonus Incentive Plan [_] [_] [_]
I PLAN TO ATTEND THE MEETING YES NO
[_] [_]
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*
VOTE BY TELEPHONE
QUICK * * * EASY * * * IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
* You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS.
PRESS 1
-------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0.
YOU WILL HEAR THESE INSTRUCTIONS.
---------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions.
Proposals 2-5: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1. \
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE
-----------------------------------------------------------
CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
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 20, 1999 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 SHAREHOLDERS
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE ANNUAL MEETING OF THE PMI
GROUP, INC.: THURSDAY, MAY 20, 1999
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 SHAREHOLDER 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.
The Board of Directors recommends a vote FOR Please mark your [X]
all Nominees for director and FOR Items 2, vote as indicated
3, 4, and 5. in this example
FOR all nominees WITHHOLD AUTHORITY
listed below for all nominees listed below
[_] [_]
ITEM 1-ELECTION OF DIRECTORS
Nominees:
01 Dr. James C Castle 06 John D. Roach
02 Donald C. Clark 07 Kenneth T. Rosen
03 W. Roger Haughton 08 Richard L. Thomas
04 Wayne E. Hedien 09 Mary Lee Widener
05 Raymond L. Ocampo, Jr. 10 Ronald H. Zech
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
================================================================================
ITEMS 2 - 5 FOR AGAINST ABSTAIN
Item 2 - Ratification of appointment of independent auditors [_] [_] [_]
Item 3 - Approval of the amendment and restatement of the Equity [_] [_] [_]
Incentive Plan
Item 4 - Approval of the Employee Stock Purchase Plan [_] [_] [_]
Item 5 - Approval of the Bonus Incentive Plan [_] [_] [_]
I PLAN TO ATTEND THE MEETING YES NO
[_] [_]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED HEREON, BUT IF
NO SPECIFICATION IS MADE, THE TRUSTEE WILL VOTE ALL OF THE SHARES FOR WHICH YOU
ARE ENTITLED TO PROVIDE INSTRUCTION IN THE SAME PROPORTION AS SHARES FOR WHICH
INSTRUCTIONS ARE RECEIVED. THE TRUSTEE MAY VOTE ACCORDING TO ITS DISCRETION ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
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*
VOTE BY TELEPHONE
QUICK * * * EASY * * * IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
* You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS.
PRESS 1
-------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0.
YOU WILL HEAR THESE INSTRUCTIONS.
---------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions.
Proposals 2-5: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1. \
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE
-----------------------------------------------------------
CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.