Exhibit 10.41
EXHIBIT A
TRIAD GUARANTY INC.
EXECUTIVE/KEY EMPLOYEE PHANTOM STOCK AWARD AGREEMENT
     This Phantom Stock Agreement (the “Agreement”), dated December 26, 2006 is
entered into between Triad Guaranty Inc., a Delaware corporation (the
“Company”), and Mark K. Tonnesen (the “Participant”).
     WHEREAS, the Company, pursuant to its 2006 Long-Term Stock Incentive Plan
(the “Plan”), desires to grant Phantom Stock rights (as defined in the Plan) to
the Participant, and the Participant desires to accept such Phantom Stock
rights, on the terms and conditions set forth herein.
     NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
     1. Grant of Phantom Stock Rights. The Company hereby grants to the
Participant, on the terms and conditions set forth herein, Phantom Stock rights
with respect to 36,075 shares of Common Stock of the Company (the “Phantom Stock
Rights”).
     2. Vesting. The Phantom Stock Rights granted hereunder will vest according
to the following schedule:

              Date     Vested Percentage     September 13, 2007     50%    
September 13, 2008     100%    

Notwithstanding the vesting schedule set forth above, in the event that
Participant’s employment with the Company should be terminated prior to
September 13, 2007, without cause by the Company or by Participant for Good
Reason or on account of a Change in Control, all as defined in the Employment
Agreement between Participant and Company dated as of September 9, 2005,
Participant will, on the effective date of such termination, vest in one-third
of the Phantom Stock Rights granted hereunder. Except as provided in the
preceding sentence, upon termination of Participant’s employment with the
Company for any reason, any Phantom Stock Rights granted hereunder that are not
vested at the time of termination shall be forfeited.

 

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3. Payment.
     (a) Upon vesting under Section 2 hereof of any Phantom Stock Rights, the
Company shall pay Participant (or Participant’s beneficiary, if applicable) the
number of shares of Common Stock corresponding to the number of vested Phantom
Stock Rights subject to the following:
     (i) if the vesting of any Phantom Stock Rights granted hereunder shall be
on account of the Participant’s separation from service with the Company and the
Participant is a “specified employee” within the meaning of section 409A of the
Internal Revenue Code of 1986 (the “Code”), then the payment shall be delayed
until the expiration of six months following the separation from service (or, if
earlier, the date of the Participant’s death); and
     (ii) if the Company reasonably anticipates that the Company’s federal
income tax deduction with respect to a payment for such Phantom Stock Rights
would be limited or eliminated by application of section 162(m) of the Code,
then the payment shall be delayed until the earlier of:
     the next January 15 or December 30 (or, if not a business day, the next
preceding business day) of a calendar year during which the Company reasonably
anticipates that the Company’s federal income tax deduction with respect to such
payment will not be limited or eliminated by application of section 162(m) of
the Code taking into account the estimated amount deductible by the Company for
that calendar year for other compensation paid to Participant; or
     the date of the Participant’s termination of employment with the Company if
the Company reasonably anticipates that the deduction of such payment will not
be limited or eliminated by application of section 162(m) of the Code for the
calendar year during which such termination occurs.
     (b) Any payment by the Company hereunder for Phantom Stock Rights shall be
in Shares. Following such payment with respect to any Phantom Stock Rights, such
Phantom Stock Rights shall cease to exist and shall provide no further benefits
to Participant.
     4. Dividend Equivalents. In the event of a cash dividend paid on Common
Stock after the date of this Agreement, the Participant shall be entitled to
receive a cash payment equal to the dividend per share multiplied by the number
of shares of Common Stock corresponding to the Phantom Stock Rights granted
hereunder. The payment of any dividend equivalents hereunder with respect to any
Phantom Stock Rights shall be paid at the same time as the payment under
Section 3 hereof with respect to the underlying Phantom Stock Rights. If any
Phantom Stock Rights are forfeited, then the dividend equivalents on such
Phantom Stock Rights shall also be forfeited.
     5. Other Terms of Phantom Stock Rights.
     (a) No Stockholder Rights; Unfunded Award. Participant shall have no rights
of a stockholder of the Company with respect to Phantom Stock Rights. Any
provision for

 

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distribution in settlement of Phantom Stock Rights hereunder shall be by means
of bookkeeping entries on the books of the Company and shall not create in
Participant or any beneficiary any right to, or claim against, any specific
assets of the Company, nor result in the creation of any trust or escrow account
for Participant. With respect to any entitlement of Participant or any
beneficiary to any distribution hereunder, Participant or such beneficiary shall
be a general creditor of the Company.
     (b) Company Policies Related to Stock Ownership. To the extent the Company
adopts any policy or requirement applicable to Participant which requires
Participant to achieve and hold a targeted level of the stock of the Company,
sixty-five percent (65%) of the Phantom Stock Rights hereunder shall count
toward any such required stock ownership.
     (c) Consideration for Grant of Phantom Stock Rights. Participant shall not
be required to pay any cash or other consideration for the grant of the Phantom
Stock Rights.
     6. Income Taxes and Withholding. Participant is solely responsible and
liable for the satisfaction of all taxes and penalties that may arise in
connection with the Phantom Stock Rights awarded pursuant to this Agreement
(including any taxes arising under section 409A of the Code). The Committee
shall have the discretion to unilaterally modify Participant’s award pursuant to
this Agreement in a manner that conforms with the requirements of section 409A
of the Code. The Company shall have the right to deduct from any distribution
with respect to any Phantom Stock Rights an amount equal to the federal, state
and local income taxes and other amounts as be required by law to be withheld
with respect to the Phantom Stock Right and any distributions thereunder.
     7. Determinations. All determinations, interpretations, or other actions
made or taken by the Committee (as defined in the Plan) pursuant to the
provisions of the Plan shall be final, binding, and conclusive for all purposes
and upon all persons.
     8. Controlling Documents. The Phantom Stock Rights granted hereby are
subject to:
     (a) All terms and conditions of the Plan (which is hereby incorporated by
reference with the same effect as if fully recited herein) as now or hereafter
in effect; and
     (b) All the terms and conditions of this Agreement as now in effect or as
hereafter modified at the discretion of the Committee to conform with the Plan
as amended from time to time.
     The Participant acknowledges receipt of a copy of the Plan, represents and
warrants that he has read the Plan and agrees that this Agreement shall be
subject to all of the terms and conditions of the Plan. Any capitalized terms
used herein that are not otherwise defined herein shall have the meanings set
forth in the Plan unless the context shall clearly require to the contrary.
     9. No Guarantee of Employment. This Agreement shall not interfere with or
limit in any way the right of the Company to terminate the Participant’s
employment at any time, or confer upon the Participant any right to continue in
the employment of the Company.

 

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     10. Assignment. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Company. The Phantom Stock Rights granted under
this Agreement shall not be transferable other than to the Participant’s
executors, administrators, legatees and heirs to the extent permitted by the
Plan.
     11. Governing Law. This Agreement shall be governed by the law of the State
of Delaware and construed in accordance therewith.
     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.

     
PARTICIPANT:
  COMPANY:
 
   
/s/ Mark K. Tonnesen
  TRIAD GUARANTY INC.
Mark K. Tonnesen
   
 
   
 
  BY: /s/ William T. Ratliff, III
Name: William T. Ratliff, III
Title: Chairman of the Board