Triad Guaranty Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Soliciting Material Pursuant to §240.14a-12 |
Triad Guaranty Inc.
(Name
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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TRIAD GUARANTY
INC.
101 South Stratford Road
Winston-Salem, North Carolina 27104
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 11, 2008
To the Stockholders of TRIAD GUARANTY INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Triad Guaranty Inc. (the Company) will be held at
the offices of the Company, 101 South Stratford Road,
Winston-Salem, North Carolina, on Thursday, September 11,
2008, at 9:00 a.m. Eastern Daylight Time, for the
purpose of considering and acting upon the following matters:
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1.
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To elect five (5) directors to serve until the next annual
meeting of stockholders and until their successors are duly
elected and qualified;
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2.
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To consider and act upon a board proposal to ratify the
appointment of Ernst & Young LLP as the Companys
independent registered public accounting firm for the year
ending December 31, 2008; and
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3.
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To consider and act upon such other business as may properly
come before the meeting or any adjournments thereof.
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Stockholders of record as of the close of business on
July 28, 2008 shall be entitled to notice of and to vote at
the meeting. The transfer books will not be closed. For ten
(10) days prior to the meeting, a list of stockholders
entitled to vote at the meeting will be open to the examination
of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, at the offices of the Company,
101 South Stratford Road, Winston-Salem, North Carolina 27104.
Stockholders who do not expect to attend the meeting in person
are urged to execute and return the accompanying proxy in the
envelope enclosed. You may also vote your shares on the Internet
or by using a toll-free telephone number (see the proxy card for
complete instructions).
By order of the Board of Directors
Earl F. Wall
Secretary
Winston-Salem, North Carolina
August 8, 2008
TABLE OF CONTENTS
PROXY
STATEMENT
TRIAD GUARANTY INC.
ANNUAL MEETING OF
STOCKHOLDERS
September 11,
2008
GENERAL
INFORMATION
This proxy statement is being furnished to the stockholders of
Triad Guaranty Inc., a Delaware corporation (the
Company, we, us or
our), 101 South Stratford Road, Winston-Salem, North
Carolina 27104, in connection with the solicitation of proxies
by its Board of Directors for use at the annual meeting of
stockholders to be held on Thursday, September 11, 2008 and
at any adjournments thereof. The approximate date on which this
proxy statement and the accompanying proxy are first being sent
to stockholders is August 8, 2008.
The accompanying proxy is for use at the meeting if a
stockholder either will be unable to attend in person or will
attend but wishes to vote by proxy. Registered
holders who have shares registered in the owners
name through the Companys transfer agent may vote by
(i) returning a completed proxy card in the enclosed
postage-paid envelope, (ii) accessing the Internet website
identified on the proxy card and following the steps outlined on
the secured website, or (iii) calling the toll free
telephone number identified on the proxy card within the United
States, Canada and Puerto Rico. For shares held in street
name, that is, shares held in the name of a brokerage
firm, bank or other nominee, a voting instruction form should be
received from that institution by mail in lieu of a proxy card.
Street name holders of our shares may vote by
(i) returning a completed voting instruction form in the
enclosed postage-paid envelope, (ii) accessing the Internet
website if one is identified on the voting instruction form, or
(iii) calling the telephone number if one is identified on
the voting instruction form. The availability of telephone and
Internet voting for street name holders will depend
on the voting processes of the respective broker, bank or other
nominee holder of record. Therefore, we recommend that you
follow the voting instructions in the materials that you
personally receive.
Proxies submitted by the Internet or telephone must be received
by 12:00 a.m., Eastern Daylight Time, on September 11,
2008. The Internet and telephone voting procedures are designed
to authenticate the stockholders identity and to allow
stockholders to vote their shares and confirm that their
instructions have been properly recorded.
The proxy is revocable at any time before it is voted by a
subsequently dated proxy, which may be provided by
(i) written notification to the persons named therein as
proxies that is mailed or delivered to the Company at the above
address, (ii) if available, subsequently voting on the
Internet or telephone, or (iii) physically attending the
meeting and voting in person. All shares represented by
effective proxies will be voted at the meeting and at any
adjournments thereof.
Proxies properly submitted by mail, the Internet or the
telephone will be voted by the individuals named on the proxy
card in the manner you indicate. If no specification is made,
the proxy will be voted by the persons named therein as proxies
FOR the election as directors of the nominees named below (or
substitutes therefor, if any nominees are unable or refuse to
serve), FOR ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm
for 2008, and in their discretion upon such matters not
presently known or determined which may properly come before the
meeting. With respect to the election of directors, a plurality
of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election are
required for the election of a director. Ratification of the
appointment of Ernst & Young LLP requires a majority
of FOR votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the ratification.
We have one class of stock outstanding, common stock, par value
$0.01 per share. On July 28, 2008, 15,116,259 shares
of common stock were outstanding and entitled to one vote each
on all matters to be considered at the meeting. Stockholders of
record as of the close of business on July 28, 2008, are
entitled to notice of and to vote at the meeting. There are no
cumulative voting rights with respect to the election of
directors.
The holders of a majority of our common stock issued and
outstanding on the record date, July 28, 2008, present in
person or represented by proxy at the annual meeting, will
constitute a quorum for the meeting. Inspector(s) of election
will be appointed to tabulate the number of shares of common
stock represented at the meeting in person or by proxy to
determine whether or not a quorum is present and to count all
votes cast at the meeting. Brokers that are members of the New
York Stock Exchange, Inc. (the NYSE) and who hold
shares of the Companys common stock in street name for
beneficial owners have authority to vote on certain items when
they have not received instructions from beneficial owners.
Under the rules of the NYSE, the proposals to elect directors
and ratify the appointment of the independent registered public
accounting firm are considered discretionary items.
This means that brokers may vote in their discretion on these
matters on behalf of beneficial owners who have not furnished
voting instructions. In contrast, certain items are considered
non-discretionary, and a broker non-vote
occurs when brokers do not receive voting instructions from
beneficial owners with respect to such items. None of the
proposals presented in this proxy statement are
non-discretionary items. Therefore, brokers that
have not received voting instructions from beneficial owners
with respect to the proposals contained in this proxy statement
may vote in their discretion on these matters on behalf of such
beneficial owners.
The inspector(s) of election will treat abstentions and broker
non-votes, if any, as shares that are present and entitled to
vote for purposes of determining whether there is a quorum for
the meeting. With respect to the tabulation of votes cast on any
of the proposals presented to the stockholders at the meeting,
abstentions will be considered as present and entitled to vote
with respect to that specific proposal, and, therefore, will
have the effect of a vote against the proposal. Broker non-votes
are considered present and entitled to vote and, if applicable,
would have the effect of a vote against the proposal in
question. Shares for which authority to vote for a particular
nominee for election as a director is withheld will not be
counted as votes for the election of that nominee.
PRINCIPAL
HOLDERS OF COMMON STOCK
The following table shows, with respect to each person who is
known to be the beneficial owner of more than 5% of our common
stock: (i) the total number of shares of common stock
beneficially owned as of July 28, 2008; and (ii) the
percentage of the common stock so owned as of that date:
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Name and Address of
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Amount and Nature of
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Percent of
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Beneficial Owner
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Beneficial Ownership(1)
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Common Stock
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Collateral Holdings, Ltd.(2)(3)(4)
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2,572,550
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17.0
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%
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Dimensional Fund Advisors LP(5)
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820,557
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5.4
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%
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FMR LLC(6)
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1,460,051
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9.7
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%
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Third Avenue Management LLC(7)
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1,064,023
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7.0
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%
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The following table shows with respect to each of our directors
and the executive officers named in the Summary Compensation
Table and all directors and executive officers as a group,
sixteen (16) in number: (i) the total number of shares
of common stock beneficially owned as of July 28, 2008; and
(ii) the percentage of the common stock so owned as of that
date. Unless otherwise indicated, the address for each of our
directors and executive officers is
c/o Triad
Guaranty Inc., 101 South Stratford Road, Winston-Salem, North
Carolina 27104:
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Amount and Nature of
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Percent of
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Name of Beneficial Owner
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Beneficial Ownership(1)
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Common Stock
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Glenn T. Austin, Jr.
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4,336
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*
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Robert T. David(9)
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27,356
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*
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H. Lee Durham, Jr.
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2,419
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*
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Kenneth C. Foster(9)
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44,272
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*
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Kenneth W. Jones(9)
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28,018
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*
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Ronnie D. Kessinger
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29,058
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*
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Gregory J. McKenzie(9)
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54,300
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William T. Ratliff, III(8)(9)
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3,294,622
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21.8
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%
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Michael A. F. Roberts(9)
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3,922
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Richard S. Swanson
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4,476
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Mark K. Tonnesen(9)(10)
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208,579
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1.4
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%
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David W. Whitehurst(9)
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40,177
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Henry G. Williamson, Jr.
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1,474
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All directors and executive officers as a group (16 persons)
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3,870,513
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25.6
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%
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Less than one percent (1%). |
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(1) |
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Calculated pursuant to
Rule 13d-3(d)
under the Securities Exchange Act of 1934. Unless otherwise
stated below, each such person has sole voting and investment
power with respect to all such shares. In accordance with Rule
13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within
sixty (60) days of July 28, 2008 are deemed
outstanding for the purpose of calculating the number and
percentage owned by such person, but are not deemed outstanding
for the purpose of calculating the percentage owned by each
other person listed. |
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Collat, Inc. is the general partner of Collateral Holdings, Ltd.
and as such may be deemed to be the beneficial owner of the
shares of common stock owned by Collateral Holdings, Ltd.
Mr. William T. Ratliff, Jr. is vice president and a
director of Collat, Inc. Mr. Ratliff, Jr. beneficially owns
29.6% of the outstanding limited partnership interests in
Collateral Holdings, Ltd. Accordingly, Mr. Ratliff, Jr. may
be deemed to be the beneficial owner of the shares of common
stock owned by Collateral Holdings, Ltd. The business address of
Mr. Ratliff, Jr., Collateral Holdings, Ltd. and Collat,
Inc. is 1900 Crestwood Boulevard, Birmingham, Alabama
35210-2034.
Mr. Ratliff, Jr. is the father of Mr. William T.
Ratliff, III. For additional information on ownership by
Mr. Ratliff, III of Collateral Holdings, Ltd. and
Collat, Inc., see footnote 8, below. |
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2,012,500 shares of common stock owned by Collateral
Holdings, Ltd. are pledged to secure loans with three banks. |
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Number of shares reported on Schedule 13G jointly filed by
Collateral Holdings, Ltd., Collat, Inc., Mr. Ratliff, Jr.
and Mr. Ratliff, III with the Securities and Exchange
Commission on February 13, 2008. Collateral Holdings, Ltd.
has shared voting and dispositive power with respect to all
2,572,550 shares. |
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Number of shares reported on Schedule 13G filed by
Dimensional Fund Advisors LP (Dimensional) with the
Securities and Exchange Commission on February 6, 2008.
According to its Schedule 13G, Dimensional is an investment
advisor registered under Section 203 of the Investment
Advisors Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act
of 1940, and serves as investment manager to certain other
commingled group trusts and separate accounts (these investment
companies, trusts and accounts are collectively referred to as
the Dimensional Funds). In its role as investment
advisor or manager, Dimensional possesses investment and/or
voting power over the securities of the Company that are owned
by the Dimensional Funds, and may be deemed to be the beneficial
owner of the shares of common stock held by the Dimensional
Funds. However, all of the common stock reported in
Dimensionals Schedule 13G is owned by the Dimensional
Funds. Dimensional disclaims beneficial ownership of such
securities. The business address of Dimensional is 1299 Ocean
Avenue, Santa Monica, California 90401. |
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Number of shares reported on Schedule 13G filed by FMR LLC
with the Securities and Exchange Commission on February 14,
2008. According to the Schedule 13G filed by FMR LLC,
Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR LLC and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is the
beneficial owner of the common stock as a result of acting as
investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940 (the
Fidelity Funds). One of the Fidelity Funds, Fidelity
Low Priced Stock Fund, owns 1,438,451 of the
1,460,051 shares reported by FMR LLC on its
Schedule 13G. Each of FMR LLC and Edward C.
Johnson, III, Chairman of FMR LLC, through control of the
Fidelity Funds, has sole power to dispose of the reported common
stock. However, neither FMR LLC nor Mr. Johnson has the
sole power to vote or direct the voting of the common stock
owned directly by the Fidelity Funds. Such voting rights reside
with the board of trustees of each Fidelity Fund. The business
address of FMR LLC, Mr. Johnson, Fidelity
Management & Research Company and the funds is 82
Devonshire Street, Boston, Massachusetts 02109. |
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Number of shares reported on Schedule 13G filed by Third
Avenue Management LLC with the Securities and Exchange
Commission on February 14, 2008. According to its
Schedule 13G, Third Avenue Real Estate Value Fund, an
investment company registered under the Investment Company Act
of 1940, has the right to receive dividends from and the
proceeds from the sale of the common stock reported by Third
Avenue Management LLC. The business address of Third Avenue
Management LLC is 622 Third Avenue, 32nd Floor, New York, NY
10017. |
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(8) |
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Includes 2,617 shares owned by
Mr. Ratliff, IIIs wife; 12,390 shares held
of record in trusts for his minor children; 74,555 shares
held through RaS I, Ltd., a family limited partnership;
246,518 shares held by Mr. Ratliff, III as one
(1) of five (5) trustees for the Grandchildrens
Trust U/A, December 4, 1990. Also includes
2,572,550 shares held by |
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Collateral Holdings, Ltd. for which voting and dispositive power
is shared with Collateral Holdings, Ltd., Collat, Inc. and
Mr. Ratliff, Jr. Mr. Ratliff, III beneficially
owns 7.7% of the outstanding limited partnership interests in
Collateral Holdings, Ltd. Mr. Ratliff, III is also
president and a director of Collat, Inc., the general partner of
Collateral Holdings, Ltd., and beneficially owns 50.2% of the
outstanding voting capital stock of Collat, Inc. Accordingly,
Mr. Ratliff, III may be deemed to be the beneficial
owner of the shares of common stock owned by Collateral
Holdings, Ltd. The business address of
Mr. Ratliff, III is 1900 Crestwood Boulevard,
Birmingham, Alabama
35210-2034.
Mr. Ratliff, III is the son of Mr. Ratliff, Jr.
No other director or executive officer of the Company
beneficially owns any partnership interests in Collateral
Holdings, Ltd. For additional information on Collateral
Holdings, Ltd. and Collat, Inc., see footnotes 2 and 3, above. |
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(9) |
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Includes shares of common stock which could be acquired through
the exercise of stock options as follows: Mr. David,
6,880 shares; Mr. Foster, 27,780 shares;
Mr. Jones, 900 shares; Mr. McKenzie,
16,000 shares; Mr. Ratliff, III,
61,285 shares; Mr. Roberts, 920 shares;
Mr. Tonnesen, 119,891 shares; Mr. Whitehurst,
20,360 shares; all directors and executive officers as a
group, 284,016 shares. |
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(10) |
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Excludes 36,075 shares of common stock issuable pursuant to
Mr. Tonnesens Phantom Stock Award Agreement, as to
which share delivery is unconditionally deferred until
February 15, 2009. See Executive
Compensation Employment Agreements Mark
K. Tonnesen. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys executive officers, directors and
persons who own more than 10% of the Companys common stock
to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. These persons are required
to provide the Company with copies of all Section 16(a)
forms that they file. Based solely on the Companys review
of these forms and written representations from the executive
officers and directors, the Company believes that all
Section 16(a) filing requirements were met during calendar
year 2007, except that the Form 4 of Kenneth S. Dwyer, Vice
President and Chief Accounting Officer, which reported the grant
of 555 shares of common stock on February 20, 2007,
was filed one day late on February 23, 2007.
ELECTION
OF DIRECTORS
Nominees
and Directors
At the meeting, five (5) directors are to be elected to
hold office until the next annual meeting of stockholders and
until their successors are duly elected and qualified. All of
the nominees are presently directors of the Company.
Mr. Henry G. Williamson, Jr. and Mr. Glenn T.
Austin, Jr. are not standing for re-election. The Company and
its Board would like to thank Messrs. Williamson and Austin
for their service to the Company and are grateful for their
wisdom and guidance during their tenure on the Board.
The affirmative vote of the holders of a plurality of the shares
of common stock represented in person or by proxy at the annual
meeting of stockholders is required to elect directors. It is
intended that, in the absence of contrary specifications, votes
will be cast pursuant to the enclosed proxies for the election
of such nominees. Should any of the nominees become unable or
unwilling to serve, if elected, it is intended, in the absence
of contrary specifications, that the proxies will be voted for
the balance of those named and for a substitute nominee or
nominees. However, we now know of no reason to anticipate such
an occurrence. All of the nominees have consented to be named as
nominees and to serve as directors if elected.
The following persons are nominees for election as directors of
the Company:
Robert T.
David Age
70 Director since 1993
Since 2000, Mr. David has served as President and Chief
Executive Officer of Integrated Photonics, Inc., a manufacturer
of fiber optic components and materials.
H. Lee
Durham, Jr. Age
60 Director since 2006
Mr. Durham was with PricewaterhouseCoopers in a number of
senior management positions from 1990 to 2002. From 1980 to 1990
he was with Durham, Martin, Jenkins & Co., a firm he
founded and grew until it was merged
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into Coopers & Lybrand. Since 2003, Mr. Durham
has served on the board of First Citizens BancShares, Inc. and
currently serves as Chair of its Audit Committee.
William T.
Ratliff, III Age
55 Director since 1993
Mr. Ratliff, III has been the Chairman of the Board of
the Company since 1993 and has served as President and Chief
Executive Officer of the Company since July 18, 2008.
Mr. Ratliff, III was Chairman of the Board of Triad
from 1989 to 2005 and President of Collateral Investment Corp.
(CIC), an insurance holding company, from 1990 to
2005. Mr. Ratliff, III has also been President of
Collat, Inc. since 1995 and a director since 1987. Collat, Inc.
is the general partner of Collateral Holdings, Ltd., an
investment partnership. Mr. Ratliff, III has been
Chairman of the Board of Directors of New South Federal Savings
Bank (New South) since 1986 and President and a
director of New South Bancshares, Inc., New Souths parent
company, since 1994.
Richard S.
Swanson Age
58 Director since 2003
Mr. Swanson is currently President and CEO of the Federal
Home Loan Bank of Des Moines. From April 2004 to May 2006,
Mr. Swanson was a principal of Hillis Clark
Martin & Peterson, a law firm located in Seattle,
Washington. From 1988 to 2003, Mr. Swanson was an executive
of HomeStreet Bank, a regional savings bank and mortgage company
headquartered in Seattle, serving as President and CEO from 1990
through 2001 and retiring as Chairman in 2003. Mr. Swanson
has served as a director and Vice Chair of the Federal Home Loan
Bank of Seattle, as Chair of the Washington State Tobacco
Settlement Authority and as Chair of the Washington Business
Roundtable.
David W.
Whitehurst Age
58 Director since 1993
Mr. Whitehurst is the owner of DW Investments, LLC, a real
estate and investment holding company, and DW Cleaners LLC d/b/a
Champion Cleaners, a dry cleaning business in Birmingham,
Alabama. He was Executive Vice President and Chief Operating
Officer of CIC from 1995 to 2002. He was a director of New South
from 1989 to 2001. Mr. Whitehurst is a certified public
accountant (retired).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES LISTED ABOVE.
CORPORATE
GOVERNANCE
The Board
of Directors
The business and affairs of the Company are managed under the
direction of the Board of Directors. The Board of Directors has
determined that each of Messrs. David, Durham, Swanson and
Whitehurst is an independent director, as that term
is defined under the listing standards of The NASDAQ Stock
Market LLC (Nasdaq). Mr. Michael A.F. Roberts,
who resigned from the Board in December 2007, and
Messrs. Williamson and Austin, who are not standing for
re-election, also were previously determined to be independent
directors under the Nasdaq listing standards. During 2007, the
Board of Directors met sixteen (16) times. No director
attended fewer than 75% of the aggregate number of meetings of
the Board of Directors and the committees on which he served.
Mr. Roberts was the Boards Lead Independent Director
until November 15, 2007, when Mr. Austin was elected
to succeed Mr. Roberts. The Lead Independent Director is
responsible for leading the executive sessions of independent
directors, advising on Board meeting schedules and agendas and
for performing such other duties as are requested by the Board.
The general authority and responsibilities of the Lead
Independent Director are established by the Board. The Lead
Independent Director serves a one-year term in such capacity, or
until his or her resignation as Lead Independent Director or the
election by the independent directors of a successor Lead
Independent Director.
Board
Committees
The Board of Directors has five (5) active standing
committees: the Audit Committee; the Finance and Investment
Committee; the Corporate Governance and Nominating Committee;
the Compensation Committee; and the Credit Risk Committee.
5
Audit
Committee
The Audit Committee, which is a separately-designated standing
Audit Committee established in accordance with
section 3(a)(58) of the Securities Exchange Act of 1934,
appoints the Companys independent registered public
accounting firm. The Audit Committee also reviews the scope of
the annual audit, the annual and quarterly financial statements
of the Company and the auditors report thereon and the
auditors comments relative to the adequacy of the
Companys system of internal controls and accounting
systems. In addition, the Audit Committee oversees the
Companys internal audit function. The Audit Committee acts
pursuant to the Audit Committee Charter, a copy of which is
available on the Companys website at:
http://www.triadguaranty.com.
The Audit Committee reviews and reassesses the adequacy of the
Audit Committee Charter on an annual basis. The Audit Committee,
which is composed of Messrs. Durham (Chairman), Austin,
Williamson and Whitehurst, met sixteen (16) times in 2007.
The Board of Directors has determined that each of
Mr. Durham and Mr. Whitehurst is an audit
committee financial expert as defined in the
Sarbanes-Oxley Act of 2002 and the applicable rules and
regulations of the Securities and Exchange Commission. The Board
has also determined that all of the members of the Audit
Committee (i) are independent under
Rule 10A-3(b)(1)
under the Securities Exchange Act of 1934, (ii) have not
participated in the preparation of the financial statements of
the Company or any current subsidiary during the past three
(3) years, and (iii) are able to read and understand
fundamental financial statements, including a balance sheet,
income statement and cash flow statement. In addition, the Board
has determined that Messrs. Austin, Durham, Whitehurst and
Williamson are independent under the applicable Nasdaq listing
standards.
Finance
and Investment Committee
The Finance and Investment Committee reviews the capital
structure needs of the Company as well as the Companys
investment policies. The Finance and Investment Committee acts
pursuant to the Finance and Investment Committee Charter, a copy
of which is available on the Companys website at:
http://www.triadguaranty.com.
The Finance and Investment Committee, which is composed of
Messrs. David (Chairman), Ratliff, III and Whitehurst,
met seven (7) times in 2007.
Corporate
Governance and Nominating Committee
The Corporate Governance and Nominating Committee (hereinafter
the Nominating Committee) makes recommendations to
the Board regarding corporate governance matters and oversees
director nominations. Among other corporate governance
responsibilities, the Nominating Committee leads the annual
self-evaluation of the Board. In carrying out its director
nomination responsibilities, the Nominating Committees
role is to identify and recommend the slate of director nominees
for election to the Companys Board of Directors, identify
and recommend candidates to fill vacancies occurring between
annual meetings of stockholders, and identify and recommend
Board members for service on committees of the Board. The
Nominating Committee acts pursuant to the Nominating Committee
Charter, a copy of which is available on the Companys
website at:
http://www.triadguaranty.com.
The Nominating Committee reviews and reassesses the adequacy of
the Nominating Committee Charter on an annual basis. The
Nominating Committee is composed of Messrs. Austin
(Chairman), Durham and Swanson. Each member of the Nominating
Committee is independent under the Nasdaq listing standards. The
Nominating Committee met nine (9) times in 2007.
One of the principal functions of the Nominating Committee is
the oversight of the process for nominating candidates to stand
for election to the Board, as described below:
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Operation of the Nominating
Committee. Nominations for director submitted to
the Nominating Committee by stockholders, other directors or
management are evaluated according to the nominees
knowledge, experience and background. While the Nominating
Committee does not have any specific minimum qualifications for
director candidates, the Nominating Committee may take into
consideration such factors and criteria as it deems appropriate
in evaluating a candidate, including his or her judgment, skill,
integrity, diversity and business or other experience.
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The process for identifying and evaluating candidates.
The Nominating Committee is responsible for identifying and
evaluating candidates for Board membership and selecting or
recommending to the Board nominees to stand for election.
Candidates may come to the attention of the Nominating Committee
through current Board members,
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professional search firms, stockholders or other persons. The
Nominating Committee Charter provides that the Nominating
Committee will consider candidates recommended by stockholders
or members of the Board or by management. The Nominating
Committee evaluates all candidates selected for consideration,
including incumbent directors, based on the same criteria as
described above. All candidates who, after evaluation, are then
recommended by the Nominating Committee and approved by the
Board, are included in the Companys recommended slate of
director nominees in its proxy statement.
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General Nomination Right of all
Stockholders. The Companys Certificate of
Incorporation establishes procedures, including advance notice
procedures, with regard to the nomination, other than by or at
the direction of the Board of Directors, of candidates for
election as directors. Director nominations by stockholders must
be in writing addressed to the Secretary of the Company at the
Companys principal executive offices. Such notice must be
delivered or mailed and received by the Secretary at least
60 days and not more than 90 days prior to the date of
the meeting, except that if public disclosure of the date of the
meeting is given less than 70 days prior to the meeting,
notice by the stockholder will be considered timely if received
by the Secretary by the close of business on the 10th day
after public disclosure of the date of the meeting. Such notice
must set forth all information with respect to each such nominee
as required by the federal proxy rules. Such notice must be
accompanied by a signed statement of such nominee consenting to
be a nominee and a director, if elected.
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Compensation
Committee
The Compensation Committee evaluates and approves
managements recommendations and establishes salaries and
other compensation for the Companys executive officers,
including bonuses, equity grants and other incentive programs.
The Compensation Committee also administers the Companys
2006 Long Term Stock Incentive Plan and the Companys 2007
Key Executive Incentive Compensation Plan. The Compensation
Committee, which is composed of Messrs. Swanson (Chairman),
Austin and David, met fifteen (15) times in 2007. Each
member of the Compensation Committee is independent under the
Nasdaq listing standards.
The authority and responsibilities of the Compensation Committee
are set forth in its charter available at the Companys
website at:
http://www.triadguaranty.com.
The Compensation Committee reviews and reassesses the adequacy
of the Compensation Committee Charter on an annual basis. Among
other items, the Compensation Committee is charged with:
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Reviewing the Companys overall compensation philosophy and
program;
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Reviewing goals and objectives relevant to the compensation of
the President and Chief Executive Officer and the other
executive officers of the Company and setting their compensation;
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Evaluating the aggregate compensation of all executive officers
in light of the Companys performance;
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Making recommendations to the Board with respect to the
approval, adoption and amendment of cash and equity-based
incentive compensation plans and administering those plans;
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Approving all grants of equity-based awards;
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Reviewing and approving employment agreements with executive
officers; and
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Making recommendations to the Board with respect to the
compensation of directors.
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The Compensation Committee has the authority to retain
independent legal counsel or other advisors. The Vice President
of Human Resources serves as a resource for the Compensation
Committee and assists the President and Chief Executive Officer
in making recommendations to the Compensation Committee with
regard to human resource and compensation matters. The President
and Chief Executive Officer is responsible for making
compensation recommendations to the Compensation Committee for
each of the other executive officers.
Credit
Risk Committee
The Credit Risk Committee, which was created in 2007, oversees
the credit risk inherent in the mortgage guaranty insurance
written and managed by Triad and establishes policies to govern
that risk. The Credit Risk Committee acts pursuant to the Credit
Risk Committee Charter, a copy of which is available on the
Companys website at:
http://www.triadguaranty.com.
The Credit Risk Committee, which is composed of
Messrs. Ratliff, III (Chairman), Austin, Swanson,
Williamson and Durham (ex officio, as Chairman of Audit
Committee), met seven (7) times in 2007.
7
Compensation
Committee Interlocks and Insider Participation
Messrs. Swanson, David and Roberts served on the
Compensation Committee during calendar year 2007. No member of
the Compensation Committee is or was formerly an officer or
employee of the Company or any of its subsidiaries.
REPORT OF
THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect
to the Companys audited financial statements for the
calendar year ended December 31, 2007.
The following report of the Audit Committee does not constitute
soliciting material and should not be deemed to be
filed with the Securities and Exchange Commission or
incorporated by reference into any other filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that the Company specifically
incorporates this report by reference in any of those filings.
Financial
Statements
The Audit Committee has reviewed and discussed the
Companys audited financial statements, internal controls
and the overall quality of the Companys financial
reporting with management and with Ernst & Young LLP
(E&Y), the Companys independent auditors.
The Audit Committee has discussed with E&Y the matters
required to be discussed by Statement of Auditing Standards
No. 61 (as adopted by the Public Company Accounting
Oversight Board in Rule 3200T), which includes, among other
items, matters related to the conduct of the audit of the
Companys financial statements.
The Audit Committee has also received written disclosures and
the letter from E&Y required by Independence Standards
Board Standard No. 1 (as adopted by the Public Company
Accounting Oversight Board in Rule 3600T), which relates to
the auditors independence from the Company and its related
entities, and has discussed with E&Y its independence from
the Company.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Companys Board of Directors
that the Companys audited financial statements be included
in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2007.
AUDIT COMMITTEE
H. Lee Durham, Jr., Chairman
Glenn T. Austin, Jr.
David W. Whitehurst
Henry G. Williamson, Jr.
COMPENSATION
COMMITTEE REPORT
The following is the report of the Compensation Committee with
respect to the Companys Compensation Discussion and
Analysis for the year ended December 31, 2007.
The following report of the Compensation Committee does not
constitute soliciting material and should not be
deemed to be filed with the Securities and Exchange
Commission or incorporated by reference into any other filing of
the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company
specifically incorporates this report by reference in any of
those filings.
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management of the
Company. Based on the review and discussions, the Compensation
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the
Companys proxy statement for the annual meeting of
stockholders to be held on September 11, 2008.
COMPENSATION COMMITTEE
Richard S. Swanson, Chairman
Glenn T. Austin, Jr.
Robert T. David
8
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
In 2007 we continued the work we began in 2006 to refine our
compensation program. Designed to create long-term value for our
stockholders, our compensation program prior to 2006 relied
principally on economic value added, or
EVA®
(a registered trademark of Stern Stewart & Co.). Under
EVA, we created a discretionary bonus pool using a portion of
the excess return to our stockholders over their cost of
capital. In 2006, we reduced our reliance on EVA, though EVA
continued to affect the processes and considerations that went
into our compensation decisions in 2006. In 2007, we adopted an
incentive-based program that relies on specific corporate and
individual performance goals, which are described in more detail
below. Although we do not use EVA in the compensation of our
named executive officers, we continue to monitor and utilize it
in the compensation of our middle management.
The change in our compensation program noted above was not,
however, the most critical factor affecting executive
compensation in 2007. The key drivers for 2007 were the
unprecedented upheaval in the mortgage industry, declining home
prices and rapidly escalating mortgage loan defaults, which
severely affected our performance over the past year. Primarily
as a result of these developments, we did not meet our 2007
corporate financial and operational goals and, accordingly, we
paid no incentive compensation to our named executive officers
for their performance in 2007.
Compensation
Philosophy and Objectives
Our compensation philosophy, as outlined in the Charter of the
Boards Compensation Committee, is to:
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attract, retain and motivate employees who contribute to our
long-term success;
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provide pay-for-performance by rewarding individual employee
success through the use of incentive compensation; and
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align the interests of all employees, especially executive
officers, with those of our stockholders in the pursuit of
creating long-term value.
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We try to ensure that a majority of an executives total
compensation is comprised of equity based, long-term
compensation. We believe overweighting long-term equity
compensation compared to current cash compensation motivates our
executive officers to achieve results that create long-term
value for our stockholders. Such an objective also supports our
primary mortgage insurance business line, which has a long-term
perspective to it. This means that ultimate financial and
stockholder success is measured over the long-term.
Below we discuss and analyze the compensation decisions that our
Compensation Committee made last year in an effort to create
long-term value through the application of these principles.
Role of
our Compensation Committee
The Compensation Committee, which is made up entirely of
independent directors, has primary authority to establish
compensation for our executive officers. The Compensation
Committees chairman at the beginning of the year was
Michael A.F. Roberts. He was succeeded as chairman by Richard S.
Swanson in May 2007. Mr. Roberts continued to serve on the
Compensation Committee until his resignation as a director in
December 2007.
The Compensation Committee has authority to hire outside
advisors and experts, including compensation consultants, to
assist it. In past years, the Compensation Committee has engaged
compensation consultants to provide benchmarking and related
data. However, the Compensation Committee did not do so in 2007.
In early 2008, however, the Compensation Committee engaged an
executive compensation expert, Pearl Meyer & Partners,
to advise it regarding a re-evaluation of our executive
compensation program.
Our Chairman often meets with the Compensation Committee and
participates in discussions regarding elements of our executive
compensation program, the engagement of outside advisors and
consultants, and similar matters. In addition, our Chief
Executive Officer aids the Compensation Committee by providing
recommendations regarding the compensation of all executive
officers, other than himself, including the performance goals
applicable to their incentive
9
awards. The Compensation Committee also works closely with our
Vice President of Human Resources in structuring and
implementing our executive compensation program.
2007
Executive Compensation
Due to the developments that impacted our industry and our
company over the past year, the compensation paid to our
executive officers in 2007 consisted only of salaries and
certain equity-based incentive awards made in early 2007 that,
in each case, reflected 2006 performance. We paid our executive
officers no annual incentives for 2007 performance that were not
guaranteed by the terms of their offers of employment. In this
discussion we will analyze why and how these payments were made.
We will also discuss the changes in our executive compensation
program that we made in 2007.
Base
Compensation Salary
We intend to offer competitive salaries consistent with our goal
of making the salary component of cash compensation smaller than
the incentive component. Our Compensation Committee makes salary
decisions in an annual review with input from the Chief
Executive Officer. Salaries for 2007 were established in early
2007 based on 2006 performance and the other factors described
below. The following table sets forth the salary for each of our
named executive officers for 2007 and the percentage increase in
such salary compared to 2006.
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Name and
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Increase Over
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Principal Position
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Year
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Salary ($)
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Previous Year (%)
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Mark K. Tonnesen,
President and Chief Executive Officer
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2007
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495,000
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10.0
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Kenneth W. Jones
Senior Vice President and Chief Financial Officer
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2007
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192,500
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10.0
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Kenneth C. Foster
Executive Vice President, Structured Transactions and Business
Development
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2007
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218,400
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4.0
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Ronnie D. Kessinger
Senior Executive Vice President
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2007
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360,000
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21.0
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Gregory J. McKenzie
President and Chief Executive Officer of Triad Guaranty
Insurance Corporation Canada
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2007
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226,202
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n/a
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In establishing the 2007 salaries of Messrs. Tonnesen,
Jones and Foster, our Compensation Committee considered their
individual responsibilities, experience and individual
performance in the context of our strong growth in earnings and
revenue for 2006 compared to 2005 (15.5% and 26.4%,
respectively).
The Compensation Committee considered additional factors in
setting the 2007 salaries of Mr. Tonnesen and
Mr. Jones. The Compensation Committee noted positively
Mr. Tonnesens role as Chief Executive Officer in
stabilizing the management team in 2006 following his arrival in
September 2005, maintaining a strong organizational sales effort
and leading the effort to diversify our business through the
establishment of our Canadian subsidiary. In setting the salary
of Mr. Jones, the Compensation Committee noted that his
starting salary at his hire date in March 2006 was below the
market for individuals holding similar positions with comparable
companies, based on benchmarking data the Compensation Committee
had obtained in 2006. (The percentage increase in
Mr. Jones 2007 salary set forth in the above table is
calculated based on the annualized amount of his 2006 salary and
not the amount actually paid to him during the nine months of
his employment with us during 2006 as set forth in the Summary
Compensation Table.) Except for Mr. Jones, the Compensation
Committee did not otherwise take into account compensation paid
to executives at comparable companies in establishing 2007
salaries.
The salary of Mr. Kessinger was fixed by the terms of his
employment agreement, which provides for a monthly salary and no
cash or equity incentive compensation. Mr. Kessingers
employment agreement was amended effective January 1, 2007
upon the authority of our Chief Executive Officer to extend his
term of employment through June 15, 2007 and to increase
his monthly salary from $25,000 to $30,000. Mr. Kessinger
continued to serve as an executive officer on a month to month
basis following the expiration of his employment agreement until
his resignation, effective
10
January 31, 2008. The salary of Mr. McKenzie, who
joined us on February 1, 2007, was determined by the terms
of his offer of employment, which our Chief Executive Officer
negotiated on behalf of the Company and was approved in advance
by the Compensation Committee. We terminated
Mr. McKenzies employment effective June 30, 2008.
Incentive
Compensation
The incentive-based components of our executive compensation
program are comprised of awards (principally equity-based) under
our 2006 Long-Term Stock Incentive Plan and cash awards under
our annual cash award program. In addition, we may make cash
awards to certain officers under our 2007 Key Executive
Incentive Compensation Plan.
Awards under the 2006 Long-Term Stock Incentive Plan
historically have emphasized long-term compensation, taking the
form of stock options and shares of restricted stock and phantom
stock. Our annual cash award program and the 2007 Key Executive
Incentive Compensation Plan are sources of short-term
compensation for our executives that provide for the payment of
cash incentives to participating officers upon the achievement
of corporate
and/or
individual goals, as described in more detail below.
2006 Long-Term Stock Incentive Plan. Under
this plan, the Compensation Committee establishes both a target
equity award and a maximum equity award that participating
officers may earn upon the achievement of corporate and
individual goals. The corporate goals are set forth in our
corporate plan for the year as approved by our Board of
Directors. The Compensation Committee reviews the individual
goals for participating officers. Our corporate plan for 2007
included performance goals for (i) premiums earned,
(ii) total revenue, (iii) losses incurred,
(iv) total expenses, (v) operating income,
(vi) operating earnings per share, (vii) return on
equity and (viii) production (flow and bulk). Due to our
failure to achieve our 2007 corporate plan goals, we paid no
equity awards to our named executive officers based on 2007
performance.
The shares of restricted stock and stock options set forth in
the Grants of Plan-Based Awards Table were awarded by the
Compensation Committee in early 2007 to our named executive
officers based on performance in 2006, except that
Mr. McKenzies award of stock options was fixed by the
terms of his offer of employment.
Annual Cash Award Program. Under our annual
cash award program, the Compensation Committee establishes both
a target cash award and a maximum cash award that participating
officers may earn upon the achievement of the same corporate and
individual goals as we use for equity awards under our 2006
Long-Term Stock Incentive Plan, as summarized above. No cash
bonuses were paid to our named executive officers under this
program for their performance in 2007, as evidenced by the
Summary Compensation Table. However, we paid Mr. McKenzie a
cash bonus in 2007 that was guaranteed by the terms of his offer
of employment.
2007 Key Executive Incentive Compensation
Plan. This plan is designed solely to enable
those key executives whose compensation may be subject to
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), to earn current cash
compensation that is deductible by us for federal income tax
purposes. Awards under the 2007 Key Executive Incentive
Compensation Plan, which were made for the first time in early
2007 and were limited to Mr. Tonnesen and Mr. Foster,
consisted of the right to receive cash payments of up to a
specified percentage (2% for Mr. Tonnesen and 1% for
Mr. Foster) of our pre-tax net income for 2007. The
Committee had sole discretion to eliminate or reduce the cash
payment. Because we earned no pre-tax income for 2007, these
executives received no cash payments under the 2007 plan, as
evidenced by the Summary Compensation Table.
Other Considerations. Reflecting our desire to
link equity-based awards with long-term performance, the
restricted stock and stock options granted to our named
executive officers as shown in the tables under the heading
Executive Compensation are typically subject to
three-year vesting schedules. Awards typically vest ratably over
a three year period, although the Compensation Committee will
consider other vesting schedules in appropriate circumstances.
For instance, the Compensation Committee established three-year
cliff vesting in connection with its 2008 awards described
below, and a three-year vesting schedule with 50% of the award
vesting in each of year two and year three in certain other
cases. In determining the relative percentage of cash,
restricted stock and options and the vesting periods, the
Compensation Committee considers the long-term nature of our
business, executive retention, market conditions and previous
stock volatility. Further, we generally expect that equity-based
compensation will represent, compared to cash compensation, a
larger portion of overall compensation for our named executive
officers, especially our Chief Executive Officer. We favor a
greater percentage of option-based compensation for our Chief
Executive Officer and
11
our Executive Vice President than for our other named executive
officers, primarily because we believe it is more appropriate
for the compensation of officers whose performance is more
likely to affect our stock price to be subject to the leveraging
effect of stock options. For 2007, stock options represented 50%
of the total equity awards made to Mr. Tonnesen and
Mr. Foster, compared to 30% for our other named executive
officers. We also consider the effects of Section 162(m) of
the Code, as further described below. For most of our other
named executive officers, we favor a higher percentage of
restricted stock as compared to options due to the emphasis
placed on long-term value creation, retention of the recipient
and the propensity for less variability in a restricted stock
award. We believe that granting awards that are tied to the
value of our common stock aligns the interests of our executive
officers with those of our stockholders.
Code
Section 162(m)
Section 162(m) of the Code limits the deductibility for
federal income tax purposes of certain compensation paid to top
executives of publicly held corporations. Certain types of
compensation may be excluded from the limitations under
Section 162(m). The tax consequences of executive
compensation awards are one of several important factors we
consider in determining executive compensation. Our Compensation
Committee will continue to review the applicability of the Code
limitations to our executive compensation programs and to
consider the value of staying within or deviating from such
limitations depending on the circumstances. As noted above, our
2007 Key Executive Incentive Compensation Plan is designed to
preserve tax deductibility of cash incentives paid to certain
members of senior management. For instance, in making awards
under the 2007 plan the Compensation Committee had the
discretion to eliminate or reduce the amount of the award even
when the performance target is met (but did not have the
discretion to increase award amounts).
Perquisites
and Other Benefits
All of our named executive officers have the opportunity to
participate in the benefit plans generally available to our
employees, including medical insurance, dental insurance,
disability insurance, life insurance, accidental death and
dismemberment insurance and our 401(k) Profit Sharing Retirement
Plan. The maximum coverage amount of Company paid life insurance
provided for our Chief Executive Officer, Executive Vice
Presidents and Senior Vice Presidents is greater than that
provided for other employees. In addition, we pay
Mr. Tonnesen cash amounts for a car allowance, country club
dues and financial planning services. We also pay
Mr. McKenzie cash amounts for a car allowance and club
membership dues (and a gross up for such amounts) in accordance
with his offer of employment. The value of this additional
coverage and other benefits which constitute perquisites are
included in the All Other Compensation column of the Summary
Compensation Table.
Severance
and Change in Control
Traditionally we have used employment agreements as a means to
address the impact of termination of an executive officer and
the consequences of a change in control on our executive
officers. The agreements currently in place are discussed under
Payments Upon Termination or Change in Control.
2008
Executive Compensation
In early 2008, the Compensation Committee and the Board approved
significant changes to our executive compensation program
applicable to 2008 only. The purpose of these changes is to
retain our executive-level employees, including our named
executive officers, and to motivate them to continue to achieve
our corporate goals and objectives. The Compensation Committee
and the Board determined that these changes were essential in
view of the unprecedented financial and operational challenges
to which we must respond in 2008. In connection with these
changes, the Compensation Committee awarded no salary increases
to our named executive officers, fixing 2008 base salaries at
2007 levels. In addition, the Compensation Committee neither
awarded cash incentives nor made equity awards for 2007
performance.
As part of our effort to retain individuals who are key to our
ability to meet the challenges that we face in 2008, the
Compensation Committee made equity-based retention awards in the
form of shares of restricted stock to Mr. Tonnesen
(40,500 shares) and Mr. Jones (20,000 shares).
These shares, which are subject to three-year cliff vesting,
were valued at $6.13 per share, based on the closing price of
our stock on February 27, 2008, the date of grant, and are
otherwise subject to the terms of our 2006 Long-Term Stock
Incentive Plan. (Mr. Tonnesens award is also provided
for in his amended and
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restated employment agreement dated April 23, 2008, which
is described below under Executive
Compensation Employment Agreements Mark
K. Tonnesen.) The Compensation Committee also awarded
Mr. McKenzie 35,800 shares of restricted stock in
accordance with the terms of his offer of employment. These
restricted shares were valued at $6.58 based on the closing
price of our stock on February 19, 2008, the date of grant,
and originally were expected to vest equally over three years.
In connection with our decision to terminate
Mr. McKenzies employment effective June 30,
2008, however, these shares of restricted stock fully vested on
June 30, 2008.
To address the importance of retaining our key executives during
the current business and economic environment, the Compensation
Committee and the Board approved the 2008 Executive Retention
Program. Under this program, certain members of senior
management were eligible to receive a cash retention award if
they were employed through June 30, 2008 and another cash
retention award if they remain employed through
December 31, 2008. Among our named executive officers, our
Chief Financial Officer received a retention payment of $70,000
as a result of his employment with us through June 30,
2008, and he will be entitled to receive a retention payment of
$130,000 if he remains employed through December 31, 2008.
An executive would forfeit the right to receive these retention
awards if the executive (i) resigns, (ii) is
terminated for cause or (iii) declines an offer of
employment made by a successor company in conjunction with our
termination of the executive (provided the offer is for
substantially the same position and with substantially the same
compensation). Mr. Tonnesen also received a retention award
pursuant to the terms of the amended and restated employment
agreement we entered into with him on April 23, 2008, as
described below under Executive Compensation
Employment Agreements Mark K. Tonnesen.
In addition, the Compensation Committee and the Board adopted
the 2008 Executive Severance Program in order to address the
pending expiration of employment agreements with certain
executive officers and the absence of any comprehensive
severance pay program. Under this program, certain executives,
including certain named executive officers, would be entitled to
receive monthly cash payments based on his or her annual base
salary and targeted cash bonus, as well as COBRA benefits and
access to outplacement services. Eligible executives would be
required to sign and deliver a general release and, under
certain circumstances, a non-compete agreement. The right to
receive these benefits would be forfeited if the executive
(i) resigns, (ii) is terminated for cause or
(iii) declines an offer of employment made by a successor
company in conjunction with our termination of the executive
(provided the offer is for substantially the same position and
with substantially the same compensation). The value of our
Chief Financial Officers severance package under this
program is $516,875. This severance program will expire on
December 31, 2008 unless extended. Mr. Tonnesen is
entitled to severance benefits pursuant to the terms of the
amended and restated employment agreement we entered into with
him on April 23, 2008, as described below under
Executive Compensation Employment
Agreements Mark K. Tonnesen.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth certain summary information
regarding the compensation paid or accrued by us to or for the
account of our Chief Executive Officer, Chief Financial Officer
and our other three (3) most highly compensated executive
officers for the year ended December 31, 2007:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Mark K. Tonnesen,
President and Chief Executive Officer
|
|
|
2007
|
|
|
|
495,000
|
|
|
|
0
|
|
|
|
642,617
|
|
|
|
1,008,731
|
|
|
|
0
|
|
|
|
|
|
|
|
26,370
|
(2)
|
|
|
2,172,718
|
|
|
|
|
2006
|
|
|
|
450,000
|
|
|
|
595,125
|
|
|
|
493,974
|
|
|
|
849,393
|
|
|
|
|
|
|
|
|
|
|
|
374,086
|
|
|
|
2,762,578
|
|
Kenneth W. Jones
Senior Vice President and Chief Financial Officer
|
|
|
2007
|
|
|
|
192,500
|
|
|
|
0
|
|
|
|
71,881
|
|
|
|
12,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,574
|
|
|
|
|
2006
|
|
|
|
127,324
|
(3)
|
|
|
108,550
|
|
|
|
28,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,361
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(1)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Kenneth C. Foster
Executive Vice President, Structured Transactions and Business
Development(4)
|
|
|
2007
|
|
|
|
218,400
|
|
|
|
0
|
|
|
|
133,879
|
|
|
|
52,859
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
405,138
|
|
|
|
|
2006
|
|
|
|
210,000
|
|
|
|
219,000
|
|
|
|
105,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
524,940
|
|
Ronnie D. Kessinger(5)
Senior Executive Vice President
|
|
|
2007
|
|
|
|
360,000
|
|
|
|
|
|
|
|
228,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588,855
|
|
|
|
|
2006
|
|
|
|
297,500
|
|
|
|
|
|
|
|
306,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
603,819
|
|
Gregory J. McKenzie(6)(7)
President and Chief Executive Officer of Triad Guaranty
Insurance Corporation Canada
|
|
|
2007
|
|
|
|
226,202
|
|
|
|
123,383
|
|
|
|
|
|
|
|
69,980
|
|
|
|
|
|
|
|
|
|
|
|
67,898
|
(8)
|
|
|
487,465
|
|
|
|
|
(1) |
|
Reflects the dollar amount of awards recognized for financial
statement reporting purposes for the year ended
December 31, 2007, in accordance with FAS 123(R). Grants
were made prior to 2007, except for the grant to
Mr. McKenzie, which was made pursuant to the terms of his
offer of employment. Grants in the form of shares of restricted
stock were valued at the market price of our common stock on the
date of grant. Grants in the form of options were ten
(10) year stock options exercisable at the market price on
the date of grant. We utilized a Black- Scholes pricing model
(or in certain cases, a derivative of such a model) and applied
a discount for non-transferability of options and deferred
vesting to determine the number of at the market
options. See Note 11 of the Notes to Consolidated
Financial Statements in our Annual Report on
Form 10-K
for the year ended December 31, 2007. |
|
(2) |
|
Effective as of July 18, 2008, Mr. Tonnesen resigned
as President and Chief Executive Officer and director of the
Company and will begin retirement on August 15, 2008. See
Executive Compensation Employment
Agreements Mark K. Tonnesen, below. The amount
shown under All Other Compensation for
Mr. Tonnesen includes a car allowance of $12,000 ($1,000
per month) and reimbursement of financial planning services of
$7,500, as well as payments for long term disability insurance,
life insurance and country club dues totaling $6,870. |
|
(3) |
|
Amount reflects salary paid for a portion of 2006 during which
Mr. Jones was employed (April 3, 2006 through
December 31, 2006). |
|
(4) |
|
Effective as of June 30, 2008, Mr. Foster resigned as
an officer and full-time employee. From July 1, 2008 until
June 30, 2010, Mr. Foster will serve as a part-time
employee for up to 10 days per month for $20,000 per month,
plus certain other benefits during the period of employment. |
|
(5) |
|
Mr. Kessinger resigned effective January 31, 2008, but
may work for Triad for up to 10 hours per month at a rate
of $300 per hour until January 1, 2009. |
|
(6) |
|
Amounts have been converted from Canadian Dollars to U.S.
Dollars using the average monthly exchange rate for 2007 of
1.073893. |
|
(7) |
|
Mr. McKenzies employment with us was terminated
effective June 30, 2008. |
|
(8) |
|
Amount includes a signing bonus of $46,558, a car allowance of
$6,175 and club membership dues of $5,220. Mr. McKenzie
also received a tax
gross-up of
$5,389 in respect of the car allowance and a
tax-gross up
of $4,556 in respect of the club membership dues. |
14
Grants of
Plan-Based Awards
The following table sets forth certain information regarding
grants of plan-based awards to our executive officers named in
the Summary Compensation Table during the year ended
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards Granted in 2007(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
2007 - Targets and Maximum
|
|
|
2007 - Targets and Maximum
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
Cash Incentive Opportunities
|
|
|
Equity Incentive Opportunities
|
|
|
Number
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair
|
|
|
|
|
|
|
Compensation
|
|
|
Estimated Future Payouts Under
|
|
|
Estimated Future Payouts Under
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Value
|
|
|
|
|
|
|
Committee
|
|
|
Non-Equity Incentive Plan Awards
|
|
|
Equity Incentive Plan Awards
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
of Each
|
|
|
|
Grant
|
|
|
Action
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Payout
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Payout
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Grant
|
|
Name
|
|
Date
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)(2)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)
|
|
|
Mark K. Tonnesen
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
450,000
|
|
|
|
945,000
|
|
|
|
0
|
|
|
|
|
|
|
|
900,000
|
|
|
|
1,080,000
|
|
|
|
0
|
|
|
|
11,829
|
|
|
|
|
|
|
|
|
|
|
|
512,787
|
|
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
43.35
|
|
|
|
545,650
|
|
Kenneth W. Jones
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
100,000
|
|
|
|
210,000
|
|
|
|
0
|
|
|
|
|
|
|
|
150,000
|
|
|
|
180,000
|
|
|
|
0
|
|
|
|
2,118
|
|
|
|
|
|
|
|
|
|
|
|
91,815
|
|
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,700
|
|
|
|
43.35
|
|
|
|
42,093
|
|
Kenneth C. Foster
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
136,000
|
|
|
|
285,600
|
|
|
|
0
|
|
|
|
|
|
|
|
275,000
|
|
|
|
330,000
|
|
|
|
0
|
|
|
|
3,955
|
|
|
|
|
|
|
|
|
|
|
|
171,449
|
|
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,700
|
|
|
|
43.35
|
|
|
|
182,403
|
|
Ronnie D. Kessinger(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. McKenzie(4)
|
|
|
03/08/07
|
|
|
|
03/08/07
|
|
|
|
|
|
|
|
123,383
|
|
|
|
259,104
|
|
|
|
123,383
|
|
|
|
|
|
|
|
246,765
|
|
|
|
296,118
|
|
|
|
246,765
|
|
|
|
|
|
|
|
16,000
|
(5)
|
|
|
43.35
|
|
|
|
249,440
|
|
|
|
|
(1) |
|
Equity awards for Messrs. Tonnesen, Jones and Foster were
in recognition of 2006 performance. |
|
(2) |
|
Messrs. Tonnesen, Jones and Foster received no payouts
under their non-equity incentive plan awards or under their
equity incentive plan awards due to our failure to meet the
applicable performance goals for the awards. The cash award
target and maximum payouts for Mr. Tonnesen and
Mr. Foster reflect the Compensation Committees
ability to exercise negative discretion to reduce the amounts
earned by them based on their 2007 performance goals under the
2007 Key Executive Incentive Compensation Plan. See
Compensation Discussion and Analysis 2007
Executive Compensation Incentive
Compensation 2007 Key Executive Incentive
Compensation Plan. |
|
(3) |
|
Mr. Kessinger did not participate in the annual cash and
equity awards programs in accordance with the terms of his
employment agreement. |
|
(4) |
|
Mr. McKenzie received the above targeted cash and equity
awards in accordance with the terms of his offer of employment.
Award amounts have been converted from Canadian dollars to U. S.
dollars using the average monthly exchange rate for 2007 of
1.073893. |
|
(5) |
|
Mr. McKenzies award of options for 16,000 shares
of common stock originally was expected to vest 50% at the
second anniversary and 50% at the third anniversary of his date
of employment. In connection with the termination of his
employment effective June 30, 2008, however, the entire
award became fully vested and fully exercisable as of that date. |
Employment
Agreements
Mark
K. Tonnesen
The material terms of our original employment agreement and
related letter agreement with Mr. Tonnesen, each dated
September 9, 2005, and the amended and restated employment
agreement dated April 23, 2008, are summarized below.
Pre-2008 Employment Agreement and Letter
Agreements. Under our original employment
agreement with Mr. Tonnesen, the term of
Mr. Tonnesens employment began September 14,
2005 and extended through September 30, 2008 and thereafter
for successive six (6) month terms unless either party gave
one years prior written notice of nonrenewal. We provided
a notice of nonrenewal in March 2008, which would have caused
the agreement to expire in accordance with its terms at the end
of March 2009. Mr. Tonnesens base annual salary under
the agreement was $450,000, subject to annual increases
determined by the Board. For calendar year 2006, the cash bonus
was guaranteed not to be less than $450,000. After 2006,
Mr. Tonnesen was eligible to participate in any Company
incentive plan for senior executives. We agreed to cover
relocation costs or $50,000 in lieu thereof, a monthly car
allowance of $1,000 per month, reimbursement for financial
planning services up to $7,500 per year and reimbursement for
the initiation fee and
15
annual membership dues to a country club in Winston-Salem, North
Carolina, with such initiation fee and relocation expenses
subject to
gross-up for
federal and state tax purposes.
Pursuant to the letter agreement dated September 9, 2005,
Mr. Tonnesen was awarded 108,225 stock options at an
exercise price of $41.12. In addition, Mr. Tonnesen
received a grant of 36,075 shares of restricted stock.
Fifty percent (50%) of the stock options and restricted stock
vested on September 13, 2007 and the remaining fifty
percent (50%) will vest on September 13, 2008. Beginning in
2007, any grants of equity awards under the 1993 Long-Term Stock
Incentive Plan or any subsequent plan vest pro rata if there is
a qualifying termination following any such grant. In such an
event, Mr. Tonnesen will have three (3) months from his
termination date to exercise any vested option awards.
In connection with our entering into a Phantom Stock Award
Agreement with Mr. Tonnesen on December 26, 2006, we
also amended the letter agreement with Mr. Tonnesen dated
September 9, 2005. The purpose of the Phantom Stock Award
Agreement and the amended letter agreement was to resolve an
ambiguity in the original letter agreement and to preserve tax
deductibility of certain equity awards pursuant to Internal
Revenue Code Section 162(m). Pursuant to the amended letter
agreement, on December 26, 2006, Mr. Tonnesen
forfeited to us the 36,075 shares of restricted Company
stock granted to him on May 9, 2006 pursuant to the
original letter agreement and under the Companys 1993
Long-Term Stock Incentive Plan. Pursuant to the amended letter
agreement and the Phantom Stock Award Agreement, on
December 26, 2006, Mr. Tonnesen was awarded Phantom
Stock rights with respect to 36,075 shares of the common
stock of the Company under the Triad Guaranty Inc. 2006
Long-Term Stock Incentive Plan.
2008 Employment Agreement. On April 23,
2008, we entered into an amended and restated employment
agreement with Mr. Tonnesen, which became effective on that
date and replaced our original employment agreement with
Mr. Tonnesen. The purpose of the amended and restated
agreement was to secure Mr. Tonnesens services during
a transition period while we explored various strategic
alternatives. The amended and restated agreement provided for
Mr. Tonnesens continued service as President and
Chief Executive Officer until his planned retirement on
December 31, 2008, unless he retired earlier with our
consent or his employment was earlier terminated in accordance
with the agreement. On July 18, 2008, we reached a mutual
agreement with Mr. Tonnesen to set his retirement date at
August 15, 2008 and he resigned as President and Chief
Executive Officer and as a member of our Board of Directors on
July 18, 2008. Mr. Tonnesens annual salary under
the amended and restated agreement was $495,000 (unchanged since
a salary adjustment effective January 1, 2007 previously
approved by the Board).
Other benefits payable to Mr. Tonnesen under the amended
and restated agreement include:
|
|
|
|
|
A retention bonus of $150,000 if his employment with us
continued through July 1, 2008, which was paid to
Mr. Tonnesen in July 2008, and a retention bonus of
$300,000 and a severance bonus of $225,000, which will be paid
to Mr. Tonnesen in August 2008 as a result of his
retirement effective August 15, 2008. These provisions
replaced corresponding provisions of the original employment
agreement that recognized Mr. Tonnesens ability to
participate in any bonus plan for senior executives that we
adopt.
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A grant of 40,500 shares of restricted stock under our 2006
Long-Term Stock Incentive Plan. These shares will vest in a lump
sum on August 14, 2010. This grant was awarded to
Mr. Tonnesen in February 2008 as part of our efforts to
retain key executives who are key to our ability to meet the
challenges that we face in 2008, as described above under
Compensation Discussion and Analysis 2008
Executive Compensation.
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Participation in all of our medical and employee plans on the
same basis as other executives, and paid time off in accordance
with our policy from time to time as though Mr. Tonnesen
had been employed by us for at least ten (10) years. This
provision was included in the original agreement and is not new.
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Reimbursement of his reasonable business expenses, including
reimbursement of up to $5,000 for his attorneys fees and
expense in the negotiation of the amended and restated
employment agreement.
|
Under the amended and restated employment agreement we will pay
certain post-termination benefits to Mr. Tonnesen as a
result of his retirement on August 15, 2008, provided he is
reasonably available to serve as an
16
independent consultant on the terms set forth in the agreement.
The nature and amount of the benefits depend on the
circumstances of his termination of employment, as follows:
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In the event of Mr. Tonnesens death prior to
August 15, 2008, we will pay Mr. Tonnesens
estate his salary to the end of the month in which he died plus
a lump sum amount equal to his annual salary at the time of his
death. This provision was included in the original agreement and
is not new.
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Following Mr. Tonnesens retirement on August 15,
2008 in accordance with the agreement, we will pay
Mr. Tonnesen an aggregate of $675,000 in eighteen
(18) equal monthly installments beginning six
(6) months after the retirement date (such twenty-four
(24) month period being referred to as the
post-termination period). In addition to these
monthly payments, Mr. Tonnesen will be entitled to
participate in our health care plan for the benefit of himself
and his dependents during the post-termination period. If we are
unable to include Mr. Tonnesen in our plan for any reason,
we will use our best efforts to obtain equivalent coverage for
Mr. Tonnesen and his dependents under an individual policy.
Mr. Tonnesen may elect COBRA coverage under the
circumstances provided in the agreement. We will pay
Mr. Tonnesen a monthly amount equal to the premium actually
paid by Mr. Tonnesen for the health care coverage described
above. These benefits replace the severance payment that we
would have had to pay Mr. Tonnesen under his original
employment agreement if we terminated his employment without
cause. The amount of the severance payment under the original
agreement would have been the greater of $1.8 million or
two times his annual salary during the two calendar years prior
to the year of termination.
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Upon Mr. Tonnesens retirement on August 15, 2008
as contemplated by the agreement, in addition to the benefits
described above, he will be entitled to participate during the
post-termination period in life insurance, accident and
disability policies and other welfare plans and arrangements
generally available to our active employees and in which he
participated prior to the termination date, subject to the terms
of such plans and arrangements and the provisions of
Section 409A of the Code. During the post-termination
period Mr. Tonnesen will not participate in sick leave,
vacation pay and similar programs or receive various perquisites
specified in the agreement.
|
The payment of the post-termination benefits described above is
subject to Mr. Tonnesens releasing us and our
affiliates of any and all claims under the agreement. The
amended and restated employment agreement also contains the same
non-competition and non-solicitation covenants that were
included in our original employment agreement with
Mr. Tonnesen.
Kenneth
C. Foster
We entered into an employment agreement with Mr. Foster in
May 2002. The agreement provides for an initial annual base
salary of $150,000 with the possibility of annual increases
subject to the determination of the Board. The agreement also
provides that Mr. Foster is eligible to receive an annual
incentive as determined by the Board, as well as other customary
benefits. This agreement automatically extends for successive
six (6) month terms unless either party gives one
years prior written notice of nonrenewal. The employment
agreement with Mr. Foster is terminable by us in the event
of his death, absence over a period of time due to incapacity, a
material breach of duties and obligations under the agreement or
other serious misconduct. The agreement also is terminable by us
without cause; provided, however, that in such event,
Mr. Foster is entitled to a cash amount equal to 200% of
the total base annual salary paid to him during the two
(2) previous calendar years. The employment agreement also
provides that in the event we experience a change of control (as
defined in the agreement) and the termination of
Mr. Fosters employment by him as a result of his
relocation or certain specified adverse changes in his
employment status or compensation, Mr. Foster is entitled
to a cash amount equal to 200% of the total base annual salary
paid to him during the two (2) previous calendar years. The
employment agreement contains certain noncompetition provisions
restricting Mr. Foster from competing with the business of
the Company for a period of two (2) years following
termination of his employment.
A notice of nonrenewal of Mr. Fosters employment
agreement provided in June 2007 caused the agreement to
terminate in accordance with its terms on June 30, 2008.
On March 28, 2008, we entered into a new employment
agreement with Mr. Foster that replaced his old employment
agreement with us. The new agreement, among other things,
provides for Mr. Fosters resignation as an officer
and full-time employee, effective as of June 30, 2008, and
for his employment as a part-time employee for a period
beginning July 1, 2008 and ending June 30, 2010
(unless terminated earlier for cause). The new agreement
requires Mr. Foster to be
17
available for up to ten (10) days per month for work that
is comparable to the work he has been performing for us. Under
the new agreement Mr. Foster will receive $20,000 per month
and certain other benefits during the period of employment and
will be subject to certain non-solicitation, non-competition and
non-disparagement covenants.
Gregory
J. McKenzie
By letter dated January 5, 2007, we agreed to the terms of
employment of Mr. McKenzie as Chief Executive Officer of
Triad Guaranty Canada. The agreement established an annual base
salary of $284,582, plus a $53,695 signing bonus. The agreement
also provided for a grant to Mr. McKenzie of options to
purchase 16,000 shares at the fair market value on the date
of grant. The options were originally scheduled to vest in two
equal installments on the second and third anniversaries of his
employment. In addition, the agreement guaranteed
Mr. McKenzie targeted incentive awards for 2007 of $123,383
in cash and $284,582 in equity (granted in March 2008) and
a flexible spending account in the amount of $26,847. The
agreement provides that Mr. McKenzie would be entitled to a
severance payment in an amount equal to two times his base
salary and targeted cash incentive if he were involuntarily
separated other than for cause during the first eighteen
(18) months of service. After that, if he were
involuntarily terminated other than for cause, he would receive
a minimum severance payment equal to one years base salary
and his targeted annual incentive award.
Mr. McKenzies employment with us was terminated
effective June 30, 2008, as described in more detail below
under Executive Compensation Payments Upon
Termination or Change in Control. Dollar amounts set forth
above are in U.S. dollars and have been converted from
Canadian dollars based on the average monthly exchange rate for
2007 of 1.073893.
Kenneth
W. Jones
By letter dated March 30, 2006, we agreed to the terms of
an at-will employment relationship with Kenneth W. Jones to
serve as Senior Vice President and Chief Financial Officer for
an annual base salary of $175,000 per year (prorated for 2006).
For calendar year 2006, Mr. Jones was guaranteed a minimum
bonus equal to 125% of paid salary with a minimum of 50% of the
bonus payable in equity vesting over three (3) years.
Outstanding
Equity Awards at Calendar Year-End
The following table sets forth certain information regarding
outstanding equity awards of our executive officers named in the
Summary Compensation Table at December 31, 2007:
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Option Awards
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Stock Awards (1 )
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Equity
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Equity
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Incentive
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Incentive
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Plan
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Equity
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Plan
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Awards:
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Incentive
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Number
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Awards:
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Market
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Plan
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of
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Number of
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or Payout
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Awards:
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Shares
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Market
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Unearned
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Value of
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Number
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or Units
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Value of
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Shares,
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Unearned
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Number of
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Number of
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of Securities
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of Stock
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Shares or
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Units or
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Shares,
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Securities
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Securities
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Underlying
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That
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Units of
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Other
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Units or
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Underlying
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Underlying
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Unexercised
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Option
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Have
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Stock That
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Rights
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Other
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Unexercised
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Unexercised
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Unearned
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Exercise
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Option
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Not
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Have Not
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That Have
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Rights That
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Options (#)
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Options (#)
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Options
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Price
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Expiration
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Vested
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Vested
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Not Vested
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Have
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Name
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Exercisable
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Unexercisable
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(#)
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($)
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Date
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(#)
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($)
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(#)
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Not Vested (#)
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Mark K. Tonnesen
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54,112
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54,113
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41.12
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9/14/15
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47,904
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$
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469,459
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|
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|
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11,666
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23,334
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|
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|
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43.35
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3/8/17
|
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|
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|
|
|
|
|
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Kenneth W. Jones
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900
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1,800
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43.35
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3/8/17
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3,785
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37,093
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Kenneth C. Foster
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7,000
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34.80
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5/10/11
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6,660
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65,268
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5,000
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47.60
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5/16/12
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7,500
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33.18
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2/6/13
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4,380
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36.00
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3/23/13
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3,900
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7,800
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43.35
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3/8/17
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Ronnie D. Kessinger
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3,775
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49.08
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1/20/08
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7,444
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72,951
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Gregory J. McKenzie
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16,000
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43.35
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3/8/17
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(1) |
|
Valued based on the closing price of our common stock on
December 31, 2007, which was $9.80. |
18
Option
Exercises and Stock Vested
The following table sets forth certain information regarding
option exercises and vesting of restricted stock held by our
executive officers named in the Summary Compensation Table
during the year ended December 31, 2007:
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Option Awards
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Stock Awards
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Number of Shares
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Value Realized on
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Number of Shares
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Value Realized on
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Acquired on Exercise
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Exercise
|
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Acquired on Vesting
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Vesting
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Name
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|
(#)
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|
|
($)
|
|
|
(#)
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($)
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|
Mark K. Tonnesen
|
|
|
|
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|
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|
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|
18,037
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|
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305,186
|
(1)
|
Kenneth W. Jones
|
|
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833
|
|
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|
37,468
|
|
Kenneth C. Foster
|
|
|
|
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|
|
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|
2,186
|
|
|
|
119,946
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|
Ronnie D. Kessinger
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|
6,285
|
|
|
|
344,858
|
|
Gregory J. McKenzie
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|
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(1) |
|
Pursuant to Mr. Tonnesens Phantom Stock Award
Agreement (described above), 18,037 of the shares awarded to
Mr. Tonnesen in December 2006 vested on September 13,
2007. However, the terms of the award preclude delivery of the
shares until the expiration of the six-month period following
the termination of Mr. Tonnesens employment with the
Company. The value reflected above is based on the $16.92
closing price of our common stock on the vesting date,
September 13, 2007. The value of the award at June 30,
2008 was $18,758 based on a closing price of $1.04 on that date.
The Company anticipates issuing the shares to Mr. Tonnesen
on or after February 15, 2009. |
Change in
Value of Managements Equity
As discussed in the Compensation Discussion and Analysis, in
2007 the mortgage industry experienced, and it continues to
experience, unprecedented upheaval. This upheaval has caused our
financial results and financial position to decline
precipitously over the course of 2007 and during the first half
of 2008. Our management team is well aware of the effect that
such performance has had on the value of our stockholders
investment in our common stock, having personally experienced
significant erosion in the value of the equity awards that we
granted to them in recent years. The magnitude of this decline
reflects the extent to which managements interests are
tied to those of our stockholders, as stated in our pay
philosophy.
The following table (which is not required by the rules of the
Securities and Exchange Commission to be included in this proxy
statement) sets forth the value, as of the date of grant, of the
shares of restricted stock, shares of phantom stock, and stock
options (computed using the Black-Scholes method) granted to
each of our named executive officers during the period
2006-2007
(except that we have included awards we made to
Mr. Tonnesen when he became President and Chief Executive
Officer in 2005), the value of such grants based on the closing
price of our stock on June 30, 2008 ($1.04 per share), and
the dollar amount and percentage decline in the aggregate value
of such grants between the date of grant and June 30, 2008:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value at Grant Date
|
|
|
Value at June 30, 2008
|
|
|
Total
|
|
|
|
Restricted
|
|
|
Phantom
|
|
|
Stock
|
|
|
Restricted
|
|
|
Phantom
|
|
|
Stock
|
|
|
Decline in Value
|
|
|
|
Stock ($)
|
|
|
Stock ($)
|
|
|
Options ($)
|
|
|
Stock ($)
|
|
|
Stock ($)
|
|
|
Options ($)
|
|
|
($)(%)
|
|
|
Mark K. Tonnesen
|
|
|
512,787
|
|
|
|
1,483,404
|
|
|
|
1,989,154
|
|
|
|
12,302
|
|
|
|
37,518
|
|
|
|
0
|
|
|
|
3,935,525
|
|
|
|
(98.7
|
)%
|
Kenneth W. Jones
|
|
|
227,990
|
|
|
|
|
|
|
|
39,015
|
|
|
|
4,803
|
|
|
|
|
|
|
|
0
|
|
|
|
262,202
|
|
|
|
(98.2
|
)%
|
Kenneth W. Foster
|
|
|
293,963
|
|
|
|
|
|
|
|
169,065
|
|
|
|
7,147
|
|
|
|
|
|
|
|
0
|
|
|
|
455,881
|
|
|
|
(98.5
|
)%
|
Ronnie D. Kessinger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. McKenzie
|
|
|
|
|
|
|
|
|
|
|
231,200
|
|
|
|
37,232
|
|
|
|
|
|
|
|
0
|
|
|
|
272,487
|
|
|
|
(88.0
|
)%
|
No
Pension Benefits or Nonqualified Deferred Compensation
Our executive officers named in the Summary Compensation Table
are not entitled to pension benefits or nonqualified deferred
compensation from the Company.
19
Payments
Upon Termination or Change in Control
The table below sets forth certain information regarding
payments upon termination of service or change in control to our
executive officers named in the Summary Compensation Table
assuming the triggering event for such payments occurred on
December 31, 2007. The table does not describe any benefits
available to such executive officers pursuant to a contract,
agreement, plan or arrangement that does not discriminate in
scope, terms or operation in favor of our executive officers and
is available generally to all salaried employees of the Company.
The amounts shown in the table below do not include any amounts
that would be realized upon the vesting of awards of stock
options, restricted stock or phantom stock to the extent such
awards were granted after December 31, 2007. On
April 23, 2008, the Company entered into an amended and
restated employment agreement with Mr. Tonnesen and
Mr. Tonnesen has agreed to retire as of August 15,
2008. See Executive Compensation Employment
Agreements above.
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|
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|
Value Realized on
|
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|
|
|
|
Cash Payment
|
|
|
Value Realized on
|
|
|
Vesting of Restricted
|
|
|
|
|
|
|
Assuming
|
|
|
Vesting of Options
|
|
|
Stock/Phantom Stock
|
|
|
|
|
|
|
Triggering Event
|
|
|
Assuming Triggering
|
|
|
Assuming Triggering
|
|
|
|
|
|
|
Occurred on
|
|
|
Event Occurred on
|
|
|
Event Occurred on
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2007
|
|
|
December 31, 2007
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Mark K. Tonnesen(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination (for Good Reason)
|
|
|
1,890,000
|
(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,890,000
|
|
Voluntary Termination (without Good Reason)(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination by Company without Cause
|
|
|
1,890,000
|
(2)
|
|
|
0
|
|
|
|
115,924
|
|
|
|
2,005,924
|
|
Termination by Company with Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control followed by Termination or Constructive
Termination by Company
|
|
|
1,890,000
|
(2)
|
|
|
0
|
(4)
|
|
|
115,924
|
|
|
|
2,005,924
|
|
Death
|
|
|
495,000
|
(5)
|
|
|
0
|
(4)
|
|
|
115,924
|
|
|
|
610,924
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Disability
|
|
|
0
|
|
|
|
0
|
(4)
|
|
|
115,924
|
|
|
|
115,924
|
|
Kenneth W. Jones(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination(3)
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination by Company without Cause
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
37,093
|
|
|
|
37,093
|
|
Termination by Company with Cause
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control without Termination(11)
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
16,337
|
|
|
|
16,337
|
|
Change in Control followed by Termination or Constructive
Termination by Company(12)
|
|
|
0
|
(6)
|
|
|
0
|
(4)
|
|
|
37,093
|
|
|
|
37,093
|
|
Death
|
|
|
0
|
(6)
|
|
|
0
|
(4)
|
|
|
37,093
|
|
|
|
37,093
|
|
Retirement
|
|
|
0
|
(6)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Disability
|
|
|
0
|
(6)
|
|
|
0
|
(4)
|
|
|
37,093
|
|
|
|
37,093
|
|
Kenneth C. Foster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination by Company without Cause
|
|
|
856,800
|
(7)
|
|
|
0
|
|
|
|
65,268
|
|
|
|
922,068
|
|
Termination by Company with Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control without Termination(11)
|
|
|
0
|
|
|
|
0
|
|
|
|
26,509
|
|
|
|
26,509
|
|
Change in Control followed by Termination or Constructive
Termination by Company(12)
|
|
|
856,800
|
(7)
|
|
|
0
|
(4)
|
|
|
65,268
|
|
|
|
922,068
|
|
Death
|
|
|
0
|
|
|
|
0
|
|
|
|
65,268
|
|
|
|
65,268
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Disability
|
|
|
109,200
|
(8)
|
|
|
0
|
|
|
|
65,268
|
|
|
|
174,468
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Realized on
|
|
|
|
|
|
|
Cash Payment
|
|
|
Value Realized on
|
|
|
Vesting of Restricted
|
|
|
|
|
|
|
Assuming
|
|
|
Vesting of Options
|
|
|
Stock/Phantom Stock
|
|
|
|
|
|
|
Triggering Event
|
|
|
Assuming Triggering
|
|
|
Assuming Triggering
|
|
|
|
|
|
|
Occurred on
|
|
|
Event Occurred on
|
|
|
Event Occurred on
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2007
|
|
|
December 31, 2007
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Ronnie D. Kessinger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination by Company without Cause or by Executive for Good
Reason
|
|
|
0
|
|
|
|
0
|
|
|
|
72,951
|
|
|
|
72,951
|
|
Termination by Company with Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control without Termination(11)
|
|
|
0
|
|
|
|
0
|
|
|
|
72,951
|
|
|
|
72,951
|
|
Change in Control followed by Termination or Constructive
Termination by Company(12)
|
|
|
0
|
|
|
|
0
|
|
|
|
72,951
|
|
|
|
72,951
|
|
Death
|
|
|
0
|
|
|
|
0
|
|
|
|
72,951
|
|
|
|
72,951
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Disability
|
|
|
0
|
|
|
|
0
|
|
|
|
72,951
|
|
|
|
72,951
|
|
Gregory J. McKenzie(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination by Company without Cause
|
|
|
740,297
|
(10)
|
|
|
0
|
|
|
|
0
|
|
|
|
740,297
|
(10)
|
Termination by Company with Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control without Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Change in Control followed by Termination or Constructive
Termination by Company(12)
|
|
|
740,297
|
(10)
|
|
|
0
|
(4)
|
|
|
0
|
|
|
|
740,297
|
(10)
|
Death
|
|
|
0
|
|
|
|
0
|
(4)
|
|
|
0
|
|
|
|
0
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Disability
|
|
|
0
|
|
|
|
0
|
(4)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
In accordance with the terms of the amended and restated
employment agreement with Mr. Tonnesen, upon his retirement
on August 15, 2008, all remaining unvested shares of stock
and unvested stock options become fully vested and fully
exercisable. These consist of 54,113 remaining options to
purchase shares of the Companys common stock pursuant to
the Executive Stock Option Agreement dated September 14,
2005, 23,334 remaining options to purchase shares of the
Companys common stock pursuant to the Executive Stock
Option Agreement dated March 8, 2007 and 7,886 shares of
restricted stock pursuant to the Executive/Key Employee
Restricted Stock Agreement dated March 8, 2007. We will
record an expense of $811,847 representing the unamortized
amount of the original grants of restricted stock and options
made to Mr. Tonnesen on August 15, 2008. The foregoing
excludes 36,075 shares of common stock issuable pursuant to
Mr. Tonnesens Executive/Key Employee Phantom Stock
Award Agreement dated December 26, 2006, as to which share
delivery is unconditionally deferred until February 15,
2009. |
|
(2) |
|
Greater of 200% of last two years salary or
$1.8 million. |
|
(3) |
|
Excludes death, disability and retirement. |
|
(4) |
|
Unvested stock options would automatically vest; however, no
gain is shown for accelerated stock option grants because the
intrinsic value of such options as of December 31, 2007 was
$0 due to the fact that the exercise price was higher than
$9.80, which was the price of our common stock on such date. |
|
(5) |
|
Amount represents Mr. Tonnesens salary in 2007. |
|
(6) |
|
Mr. Jones was not entitled to cash severance for any type
of termination in 2007. |
|
(7) |
|
Amount represents 200% of last two calendar years salary. |
|
(8) |
|
Maximum amount of payment due to disability. |
21
|
|
|
(9) |
|
In accordance with the original terms of his letter agreement,
following our decision to terminate Mr. McKenzie without
cause effective June 30, 2008, Mr. McKenzie was
entitled to a cash severance payment in an amount equal to two
times his base salary and targeted cash incentive, or $781,400
(converted from Canadian dollars to U.S. dollars based on the
exchange rate of 1.0185 at June 30, 2008), which was paid
to him in a lump sum on July 15, 2008. Additionally,
35,800 shares of restricted stock that were granted to
Mr. McKenzie in February 2008 as part of his guaranteed
bonus per the letter agreement fully vested, and a grant of
options to purchase 16,000 shares of the Companys
common stock made pursuant to the letter agreement fully vested
and became fully exercisable, on June 30, 2008. We recorded
an expense of $266,775 representing the unamortized amount of
the original grants of restricted stock and options made to
Mr. McKenzie as of June 30, 2008. In consideration of
the payments and benefits outlined above, Mr. McKenzie
executed a general release of all claims against the Company and
its subsidiaries. |
|
(10) |
|
Converted from Canadian dollars to U.S. dollars using the
average monthly exchange rate for 2007 of 1.073893. |
|
(11) |
|
Values for accelerated vesting of equity-based awards include
only equity-based awards granted under the 1993 Long Term Stock
Incentive Plan (if any), which awards accelerate upon a change
in control without regard to a termination in service. |
|
(12) |
|
Values for accelerated vesting of equity-based awards include
equity-based awards granted under (a) the 1993 Long Term
Stock Incentive Plan (if any), which awards accelerate upon a
change in control without regard to a termination in service;
and (b) the 2006 Long Term Stock Incentive Plan (if any),
which awards accelerate upon change in control followed by a
termination (including constructive termination) by the Company
within 12 months of the change in control. |
Currently, we provide for the payments and vesting described in
the table above upon certain events including a change in
control (with or without termination as set forth above) as
described in employment agreements, restricted stock agreements
and option agreements with the executive officers identified in
the table above. We also provide for the vesting of options upon
termination of employment and upon resignation for good reason
as provided in option agreements with Mr. Tonnesen. The
material terms under which the cash payments would be made are
described above under Executive Compensation
Employment Agreements. To the extent termination or
constructive termination is required in order to trigger a
payment following a change in control, such termination or
constructive termination must occur within 12 months of the
change in control. The agreements generally define a change of
control as the occurrence of any of the following events:
|
|
|
|
|
any person or persons acting as a group, other than a person
which as of the date of the particular agreement is the
beneficial owner of our voting securities and its affiliates, or
any of our employee benefit plans or the executive officer or a
group including the executive officer, shall become the
beneficial owner of our securities representing the greater of
(i) at least twenty-five percent (25%) of the combined
voting power of our then outstanding securities, or (ii) at
least the combined voting power of our outstanding securities
then held by Collateral Holdings, Ltd., an Alabama limited
partnership, and any of its affiliates; or
|
|
|
|
individuals who constitute our board of directors as of the date
of the particular agreement (the Incumbent Board)
cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent
to such date whose election or nomination for election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or a nominating committee thereof
(either by a specific vote or by approval of our proxy statement
in which such person is named as a nominee for director, without
objection to such nomination) will be considered as though such
person were a member of the Incumbent Board; or
|
|
|
|
any consolidation, merger or reorganization to which we are a
party, if following such consolidation, merger or
reorganization, our stockholders immediately prior to such
consolidation, merger or reorganization shall not beneficially
own securities representing at least fifty-one percent (51%) of
the combined voting power of the outstanding voting securities
of the surviving or continuing corporation; or
|
|
|
|
any sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions) of all, or substantially
all, of our assets, other than to an entity (or entities) of
which we or our stockholders immediately prior to such
transaction beneficially own securities representing at least
fifty-one percent (51%) of the combined voting power of the
outstanding voting securities.
|
22
The Compensation Committee previously approved changes to the
forms of restricted stock agreements and option agreements to be
used for grants to senior executive officers under the 2006 Long
Term Stock Incentive Plan. These new agreements, which were used
for the agreements and arrangements beginning in March 2007,
require termination or constructive termination of employment
following a change in control in order to trigger vesting.
Certain changes were also made to the definition of change in
control, primarily altering the required change in beneficial
ownership from the twenty-five percent (25%) level referenced
above to more than fifty percent (50%).
DIRECTOR
COMPENSATION
The following table sets forth certain information regarding
amounts paid or accrued by us to or for the account of our
directors during the year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
Stock
|
|
|
|
|
|
|
or Paid
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
in Cash ($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Glenn T. Austin, Jr.
|
|
|
69,500
|
|
|
|
63,387
|
|
|
|
132,887
|
|
Robert T. David
|
|
|
52,500
|
|
|
|
63,387
|
|
|
|
115,887
|
|
H. Lee Durham, Jr.
|
|
|
66,500
|
|
|
|
64,405
|
|
|
|
130,905
|
|
William T. Ratliff, III
|
|
|
112,500
|
|
|
|
264,818
|
|
|
|
377,318
|
|
Michael A. F. Roberts
|
|
|
52,500
|
|
|
|
63,387
|
|
|
|
115,887
|
|
Richard S. Swanson
|
|
|
66,250
|
|
|
|
63,387
|
|
|
|
129,637
|
|
David W. Whitehurst
|
|
|
65,415
|
(2)
|
|
|
64,437
|
(3)
|
|
|
129,852
|
|
Henry G. Williamson, Jr.
|
|
|
28,000
|
|
|
|
40,669
|
|
|
|
68,669
|
|
|
|
|
(1) |
|
Reflects the dollar amount recognized for financial statement
reporting purposes for the year ended December 31, 2007 in
accordance with Statement of Financial Accounting Standards
No. 123R (FAS 123R). Grants in the form of
shares of restricted stock were valued at the market price of
our common stock on the date of grant. See Note 11 of the
Notes to Consolidated Financial Statements in our Annual Report
on
Form 10-K
for the year ended December 31, 2007. The full grant date
fair value of awards granted during 2007 computed in accordance
with FAS 123(R) for Messrs. Austin, David, Durham,
Roberts, Swanson, Whitehurst and Williamson is $65,000 and for
Mr. Ratliff is $112,500. At December 31, 2007, the
aggregate number of unvested shares of restricted stock for each
director was as follows: for Messrs. Austin, David, Roberts
and Swanson, 1,955 shares, for Mr. Durham,
1,852 shares, for Mr. Ratliff, 6,975 shares, for
Mr. Whitehurst, 2,616 shares and for
Mr. Williamson, 1,474 shares. In April 2008,
Mr. Roberts relinquished his rights to the
1,474 shares of our restricted common stock that had been
granted to him in May 2007 as director compensation ($40,669 of
the $63,387 disclosed in the above table) and those shares
remain available for issuance under our 2006 Long-Term Incentive
Stock Plan. At December 31, 2007, the aggregate number of
shares of common stock which could be acquired through the
exercise of stock options was as follows: Mr. David,
7,680 shares; Mr. Ratliff, III,
69,735 shares; Mr. Roberts, 920 shares and
Mr. Whitehurst, 24,010 shares. |
|
(2) |
|
Includes $9,415 paid for services as a director of Triad
Guaranty Insurance Corporation Canada. |
|
(3) |
|
Includes $1,050 paid for services as a director of Triad
Guaranty Insurance Corporation Canada. |
In 2006, we adopted a plan of compensation for our directors.
Directors who are employees of us or any of our subsidiaries or
affiliates do not receive any compensation for serving as
directors of us. Each non-employee director shall receive an
annual retainer of $95,000, $30,000 of which shall be paid in
cash in four quarterly installments and $65,000 of which shall
be paid in restricted stock following the annual meeting of
stockholders. The non-executive Chairman of the Board shall
receive an annual retainer of $225,000, $112,500 of which shall
be paid in cash in four quarterly installments and $112,500 of
which shall be paid in restricted stock following the annual
meeting of stockholders. The Compensation Committee may also,
based upon the evaluation by the Corporate Governance and
Nominating Committee, recommend a discretionary payment for
services above and beyond those traditionally performed by a
non-executive Chairman of the Board. Grants of restricted stock
awards in 2006 to the non-employee directors and the
non-executive Chairman of the Board vest over a three
(3) year period from the date of award as follows: 60% upon
the first anniversary of issuance, 20% upon the second
anniversary of issuance and 20% upon the third anniversary of
issuance. Effective in 2007, grants of restricted stock to our
non-employee directors vest 100% on the first anniversary of the
grant date. Audit Committee
23
members shall receive $2,500 per meeting, up to an annual
maximum of $20,000. Other committee members shall receive $1,500
per meeting, up to an annual maximum of $6,000. The Compensation
Committee may award fees in excess of these amounts based upon
additional services that are required by the applicable
committee. The Audit Committee chairperson shall receive a
retainer of $15,000 per year. All other chairpersons of
committees shall receive a retainer of $7,500 per year, and the
Boards lead independent director shall receive an annual
retainer of $7,500 per year.
All directors are reimbursed for expenses incurred in attending
board meetings.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
The following table contains information regarding securities
authorized for issuance under our equity compensation plans as
of December 31, 2007.
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
(a)
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Securities to be
|
|
|
(b)
|
|
|
Under Equity
|
|
|
|
Issued upon
|
|
|
Weighted Average
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Reflected in Column
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
(a))
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
109,190
|
|
|
$
|
43.81
|
|
|
|
940,598
|
(2)
|
Equity compensation plans not approved by security holders(3)
|
|
|
536,007
|
|
|
$
|
38.74
|
|
|
|
0
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
645,197
|
|
|
$
|
39.60
|
|
|
|
940,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This information relates to our 2006 Long-Term Stock Incentive
Plan, which was approved by our stockholders in May 2006. |
|
(2) |
|
In addition to being available for future issuance upon exercise
of stock options, shares that remain available for future grant
may be issued pursuant to restricted stock awards under our 2006
Long-Term Stock Incentive Plan. |
|
(3) |
|
This information relates to our 1993 Long-Term Stock Incentive
Plan. |
|
(4) |
|
All shares that were available for issuance under our 1993
Long-Term Stock Incentive Plan at the time the 2006 Long-Term
Incentive Plan was adopted were carried forward to the 2006 plan
and became available for issuance under that plan. |
CERTAIN
TRANSACTIONS
Other than with respect to the conflicts of interest policies
contained in our Code of Ethics and Code of Conduct, which
require that all of our directors, officers and employees
disclose their personal or business interests in any transaction
in which we may engage and recuse themselves from any discussion
or decision affecting their personal or business interests, we
do not maintain a formal written related person transaction
policy. In addition to communicating with us as required by our
Code of Ethics and Code of Conduct, however, each of our
executive officers and directors or their immediate family
members (each, a related person), completes an
annual questionnaire that elicits information about ongoing and
potential transactions, arrangements or relationships, other
than certain specified employment and compensatory matters
(each, a transaction), in which we and any related
person are participants (a related person
transaction) in order to determine whether (i) such
related persons have or may have a direct or indirect material
interest in the transaction, (ii) the amount involved
exceeds $120,000, and (iii) any such transaction is or
would be in the best interest of us and our stockholders. The
appropriate committee of the Board, depending on the nature of
the transaction, reviews and approves or ratifies all related
person transactions, which are publicly disclosed if and as
required by SEC
24
rules. The appropriate committee of the Board is required to
consider all available relevant facts and circumstances in its
review of an ongoing or potential related person transaction,
including the benefits to us, the impact on a directors
independence in the event the related person is a director (or a
family member or entity affiliated with a director), the
availability of other sources for comparable products or
services, the proposed terms and the terms available to or from
parties that are not related persons. Any director who is a
related person with respect to a transaction under review may
not participate in the deliberations or vote with respect to
approval or ratification of the related person transaction.
The Board does not believe that a specific written related
person transaction policy is necessary because the Board
historically has not, and does not expect to, approve related
person transactions that require disclosure under SEC rules
other than in rare circumstances. Each related person
transaction is considered on a stand-alone basis based on facts
and circumstances at the time of consideration. In addition to
the conflicts of interest procedures set forth in our Code of
Conduct and Code of Ethics and the information elicited through
our annual questionnaire, the appropriate committees
procedures with respect to review and approval of related person
transactions are dictated by principles of Delaware corporate
law as in effect at the time and the discharge of our
directors fiduciary duties to us and our stockholders.
PROPOSAL TO
RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee of the Board has appointed Ernst &
Young LLP to be the Companys independent registered public
accounting firm for the year ending December 31, 2008.
The Board asks the stockholders to ratify the appointment of
Ernst & Young. If the stockholders do not ratify the
appointment, the Audit Committee will consider whether it should
appoint another independent registered public accounting firm.
Representatives of Ernst & Young are expected to be
present, and to be available to respond to appropriate
questions, at the annual meeting. They will be provided the
opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE YEAR ENDING DECEMBER 31, 2008.
RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our consolidated financial statements for the year ended
December 31, 2007 were audited by E&Y, independent
auditors. Representatives of E&Y are expected to attend the
annual meeting of stockholders to respond to appropriate
questions and to make an appropriate statement if they desire to
do so.
Audit
Fees
The aggregate fees, including expenses reimbursed, billed by
E&Y for professional services rendered for the integrated
audit of our consolidated financial statements and internal
control over financial reporting, the reviews of our quarterly
financial statements and the audits of our individual operating
subsidiaries, including our Canadian subsidiary in 2007, that
are required for regulatory purposes were $709,177 for calendar
year 2007 and $585,580 for calendar year 2006.
Audit
Related Services
The aggregate fees, including expenses reimbursed, billed by
E&Y for services related to the audit and review of our
financial statements were $50,545 for calendar year 2007 and
$53,439 in calendar year 2006. These services included an
actuarial certification for our Vermont captive reinsurance
subsidiary, an audit of our 401(k) plan and assistance rendered
with applications to certain Canadian provinces.
Tax
Fees
We did not engage E&Y for tax services in calendar years
2007 and 2006.
25
All Other
Fees
The aggregate fees, including expenses reimbursed, billed by
E&Y for services rendered to us, other than the services
described above, were $1,500 in calendar year 2007 and $1,500 in
calendar year 2006. These fees were for a subscription to
E&Ys online accounting and reporting database.
The Audit Committee pre-approves all auditing services and
permitted non-audit services, including the fees and terms
thereof, to be performed for us by its independent auditor,
subject to the de minimus exceptions for non-audit
services as provided for in the Sarbanes-Oxley Act and the rules
and regulations of the Securities and Exchange Commission. The
Audit Committee may form and delegate authority to
subcommittees, consisting of one or more members, to grant
pre-approvals of permitted non-audit services, provided that
decisions of such subcommittees to grant pre-approvals are
presented to the full Audit Committee at its next scheduled
meeting. In calendar year 2007, all non-audit services were
approved by the Audit Committee.
COMMUNICATIONS
WITH DIRECTORS
The Board of Directors of the Company believes that it is
important for stockholders to have a means of communicating with
the Board. Accordingly, stockholders desiring to send a
communication to the Board of Directors, or to a specific
director, may do so by delivering a letter to the Secretary of
the Company at Triad Guaranty Inc., 101 South Stratford Road,
Winston-Salem, North Carolina 27104. The mailing envelope must
contain a clear notation indicating that the enclosed letter is
a stockholder-board communication or
stockholder-director
communication, as applicable. All such letters must
identify the author as a stockholder and clearly state whether
the intended recipients of the letter are all members of the
Board of Directors or certain specified individual directors.
The Secretary will open such communications and make copies, and
then circulate them to the appropriate director or directors.
We strongly encourage all directors to attend the annual
meetings of stockholders. All of the directors were in
attendance at the 2007 Annual Meeting of Stockholders.
CODE OF
ETHICS
The Board of Directors has adopted a Code of Ethics for our
principal executive and senior financial officers which is
available at our website at:
http://www.triadguaranty.com.
This Code supplements our Code of Conduct applicable to all
employees and directors and is intended to promote honest and
ethical conduct, full and accurate reporting and compliance with
laws as well as other matters.
STOCKHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING OF STOCKHOLDERS
Stockholders intending to present a proposal for consideration
at the next annual meeting of stockholders may do so by
following the procedures prescribed in
Rule 14a-8
under the Securities Exchange Act of 1934 and our Certificate of
Incorporation. To be eligible for inclusion in the
Companys proxy statement, stockholder proposals must be
received by the Company no later than April 10, 2009.
Notice to the Company of a stockholder proposal, other than
director nominations, submitted otherwise than pursuant to
Rule 14a-8
will be considered untimely if received by the Company after
June 24, 2009, and the proxies named in the accompanying
form of proxy may exercise discretionary voting power with
respect to any such proposal as to which the Company does not
receive a timely notice. See General Nomination Right of All
Stockholders above for information regarding submission of
director nominations other than in accordance with
Rule 14a-8.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
Some banks, brokers or other nominee record holders may
participate in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy statement or annual report may have been sent to
multiple stockholders living in the same household. We will
promptly deliver a separate copy of either document to any
stockholder upon request submitted in writing to us at Triad
Guaranty Inc., 101 South Stratford Road, Winston-Salem, North
Carolina 27104, Attention: Secretary or by calling
(800) 451-4872.
Any stockholder who wants to receive separate copies of the
annual report and proxy statement in the future, or who is
currently receiving multiple copies and would like
26
to receive only one copy for his or her household, should
contact his or her bank, broker or other nominee record holder,
or contact us at the above address and telephone number.
OTHER
MATTERS
We are not aware of any matters, other than those referred to
herein, which will be presented at the meeting. If any other
appropriate business should properly be presented at the
meeting, the proxies named in the accompanying form of proxy
will vote the proxies in accordance with their best judgment.
EXPENSES
OF SOLICITATION
All expenses incident to the solicitation of proxies by the
Company will be paid by the Company. In addition to solicitation
by mail, arrangements have been made with brokerage houses and
other custodians, nominees, and fiduciaries to send the proxy
material to their principals, and the Company will reimburse
them for their reasonable out-of-pocket expenses in doing so.
Proxies may also be solicited personally or by telephone or
email by employees of the Company.
Winston-Salem, North Carolina
August 8, 2008
27
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000004 |
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000000000.000000 ext 000000000.000000 ext |
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000000000.000000 ext 000000000.000000 ext |
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000000000.000000 ext 000000000.000000 ext
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MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6
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Electronic
Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting
methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by
12:00 a.m., Eastern Time, on September 11, 2008. |
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Vote by Internet
Log on to the Internet and go to
www.investorvote.com/tgic
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Follow the steps outlined on the secured
website. |
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Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the United
States, Canada & Puerto Rico any time on a touch tone
telephone. There is NO CHARGE to you for the call. |
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Follow the instructions provided by the
recorded message. |
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. |
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x |
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Annual Meeting Proxy Card
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C0123456789
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12345 |
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6
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
A
Proposals The Board of Directors
recommends a vote FOR the listed nominees and FOR Proposal 2.
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1.
To elect five (5) directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and
qualified or until their earlier resignation or removal.
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01 - Robert T. David
04 - Richard S. Swanson |
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02 - H. Lee Durham, Jr.
05 - David W. Whitehurst |
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03 - William T. Ratliff, III |
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Mark here to vote
FOR all nominees*
*For all listed nominees or a substitute therefor if any nominee is unable, or for good cause, refuses to serve. |
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o |
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Mark here to
WITHHOLD vote from all nominees |
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05 |
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For All EXCEPT - To withhold a vote for one or more nominees, mark
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the box to the left and the corresponding numbered box(es) to the right. |
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Your shares will be voted for the remaining nominees. |
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For
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Against
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Abstain
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This Proxy is solicited on behalf of the Board of Directors. |
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2.
Ratification of the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for the
year ending December 31, 2008.
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o
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o
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o
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This proxy, when properly executed, will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposal 1 and FOR Proposal 2. This proxy
is revocable at any time before it is voted. |
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In their discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting. |
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B Non-Voting
Items Change of Address Please print your new address below.
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C Authorized
Signatures This section must be completed for your vote to be
counted. Date and Sign Below |
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NOTE: Please sign your
name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
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Date (mm/dd/yyyy) Please print date below. |
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Signature 1 Please keep signature within the box. |
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Signature 2 Please keep signature within the box. |
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/ |
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n
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C 1234567890
1 U P X
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J N T
0 1 8 8 4 9 1
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MR A SAMPLE (THIS AREA IS SET UP TO
ACCOMMODATE 140 CHARACTERS) MR A
SAMPLE AND MR A SAMPLE AND MR A SAMPLE
AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE
AND MR A SAMPLE AND MR A SAMPLE AND
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+ |
6
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
Proxy Triad Guaranty Inc.
101 South Stratford Road
Winston-Salem, North Carolina 27104
Proxy
Solicited by Board of Directors for Annual Meeting - September 11, 2008
Dear Stockholder,
Your vote is important to us, and we encourage you to exercise your right to vote your shares of
common stock. On behalf of the Board of Directors, we urge you to sign, date and return the proxy
card in the enclosed postage-paid envelope as soon as possible. You may also vote by Internet or
telephone using the instructions on the reverse side.
We appreciate your confidence in us and your cooperation with
this solicitation.
Sincerely,
Triad Guaranty Inc.
The holder(s) signing on the reverse side hereby appoint(s) William T. Ratliff, III and David W.
Whitehurst, or either of them, as attorneys in fact and proxies, each with the power to appoint a
substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse
side, all the shares of Common Stock of Triad Guaranty Inc. held of record by such holder(s) on
July 28, 2008, at the Annual Meeting of Stockholders to be held
at the offices of Triad Guaranty Inc., 101 South Stratford Road,
Winston-Salem, North Carolina on Thursday, September 11, 2008 at
9:00 a.m., Eastern Daylight Time, or any
adjournment or postponement thereof. The undersigned hereby ratifies
and confirms that all said attorneys in fact and proxies, or either
of them or their substitutes, may lawfully do or cause to be done by
virtue hereof, and acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, the accompanying proxy statement and the
2007 Annual Report to Stockholders on Form 10-K, as amended.