COMPENSATION OF EXECUTIVE OFFICERS
AND DIRECTORS
Compensation Discussion and Analysis
I.
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Executive Summary and Compensation Philosophy
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The following is a review of our senior executive compensation programs and policies, including the material decisions affecting 2012
compensation under these programs with respect to the following executive officers, whom we refer to as our named executive officers or NEOs:
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Sanford A. Ibrahim, Chief Executive Officer (our principal executive officer)
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C. Robert Quint, Chief Financial Officer (our principal financial officer)
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Teresa Bryce Bazemore, President, Radian Guaranty
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Edward J. Hoffman, Executive Vice President, General Counsel and Corporate Secretary
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H. Scott Theobald, Executive Vice President, Chief Risk Officer, Radian Guaranty
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Overview of 2012 Performance and Compensation
2012 represented an important transition year for the
Company, both in terms of operating performance and with respect to our executive compensation program. In 2012, our TSR was 161.5%, outperforming all of the companies included on the NASDAQ Financial 100 Index and MGIC Investment
Corporation, which collectively constitute the peer group against which we measure performance for purposes of our 2011 and 2012 LTI awards. At the same time, our CEO total compensation decreased 42% from 2011, in part because of a public commitment
that we made in 2012 to reduce the grant date fair value of the 2012 LTI awards for each of our NEOs by at least 20% from the level of the 2011 LTI awards.
2012 Performance
. We insure mortgages and structured and public finance credits. Consequently, since
the beginning of the financial crisis and economic downturn in 2007, our performance has been negatively impacted by the slow macroeconomic recovery, including weakness in the housing market and high unemployment. During this period, we focused on
two principal objectives surviving the turbulent loss environment and repositioning the Company to capitalize on an eventual recovery in the mortgage insurance sector. Both of these objectives were embedded into our core executive
compensation programs, as discussed below.
Heading into 2012, we had positioned the Company to take advantage of improving market trends, including by restructuring our sales force
to diversify our customer base, strengthening our statutory capital and liquidity positions, and improving our risk management function to produce strong credit results and projected high levels of profitable returns on new insurance written.
Consequently, as the operating environment for our businesses improved in 2012, including a broad-based improvement in the housing market and a reduction in unemployment, we were ready to capitalize on these trends. By the end of 2012, the Company
was the market leader in the private mortgage insurance sector, ending the year with an industry leading market share for the fourth quarter of 2012 of 28.5%, after having written $37.1 billion in new insurance in 2012, approximately 94% above our
projected level of new business for the year. At the same time, our incurred losses were reduced, with a 22% decline in new primary mortgage insurance defaults in 2012 compared to 2011 and further stabilization of credit performance in our financial
guaranty portfolio. These positive trends translated into improved returns for our stockholders in 2012, which have continued during 2013.
2012 Compensation
. Similar to the recent improvement in our performance, 2012 has been a year of
transition and improvement in our executive compensation program. Since 2010, as the operating environment has become increasingly more certain and predictable for the Company, our overall compensation approach has become less qualitative, less
dependent on Committee discretion, and more formula based, with a heavier focus on more traditional measures of performance such as TSR. In 2012, we completed the transformation of our
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compensation program, instituting challenging LTI targets and price hurdles and reducing the overall LTI awards for our NEOs. In particular, we believe it is important to note the following with
respect to our 2012 executive compensation program:
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42% Decrease in 2012 Total CEO Compensation.
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Total CEO compensation decreased in 2012 compared to 2011, primarily related to a 40% decrease in the grant
date fair value of the LTI awards granted to our CEO in 2012 and a reduction in the payout percentage under our previously granted Non-Equity LTI Awards as discussed below.
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2012 LTI Awards Consist Entirely of Performance-Based Equity Awards with Challenging Targets and Hurdles.
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In 2012, the Company publicly committed to a number of
changes to its LTI program for its NEOs. These changes, which were designed to further align the interests of our NEOs with those of our stockholders and to enhance long-term stockholder value, included the following:
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The grant date fair value of the 2012 LTI awards for each of our NEOs was reduced by at least 20% from the level of the 2011 LTI awards, including a
40% reduction in the grant date fair value of the LTI awards granted to our CEO in 2012.
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The 2012 Performance-Based RSUs incorporate measures of absolute performance in addition to performance relative to the Companys peers. The 2012
Performance-Based RSUs require the Company to achieve at least a 150% TSR over a three-year performance period for an NEO to be eligible to receive an award at 100% of target. Also, if the Companys TSR is negative, no payment will be made
under these awards, regardless of how the Company has performed relative to its peer group. Similar to the 2011 awards, the 2012 awards will continue to be based on the Companys TSR performance as compared to its peer group, but with the
addition of these absolute performance requirements.
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The 2012 Performance-Based Stock Options only will vest if the closing price of the Companys common stock exceeds 200% of the option exercise
price for ten consecutive trading days ending on or after the third anniversary of the grant date.
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Improved Financial Strength and Business Outperformance Results in STI Awards Funded at or above Target for First Time in Last Six Years.
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We believe 2012 was a
strong performance year for the Company, characterized by an improvement in our operating results, significant new business growth, and enhanced financial strength, which collectively translated into a 161.5% TSR during the year. Commensurate with
these positive trends, the Committee awarded to our NEOs 2012 short-term incentive (STI) awards of between 114% and 125% of target. This represents the first time in the last six years that STI awards for our NEOs have been paid at or
above target. During the six years prior to 2012, our NEOs have received, on average, STI awards of 46.3% of target, with our CEO receiving no STI award in three of these years.
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Strong Credit Performance of 2011 Mortgage Insurance Portfolio Results in AboveTarget MTI Awards.
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In 2009, we replaced our short-term bonus plan with a
program consisting of short-term and medium-term cash incentive awards. This plan, the Radian Group Inc. Short-Term and Medium-Term Incentive Plan for Executive Employees (the STI/MTI Plan), enhanced our pay-for-performance and
risk-based approach to compensation by reducing cash awards for short-term (one-year) performance periods and introducing a medium-term (two-year) performance period during which our executive
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officers continue to have pay at risk associated with: (i) the performance of insurance written during the initial, short-term performance period; and (ii) the on-going integrity of our
financial results. The 2011 MTI award was based on the credit performance of our 2011 mortgage insurance portfolio through the end of 2012. Due to the strong credit performance of this portfolio through 2012 and the expected profitability of this
portfolio, the Committee paid to each of our NEOs the 2011 MTI award at 135% of target.
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Fixed Compensation Continues to Represent a Limited Portion of our NEOs Total Compensation.
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Base salary represented only 16% of Mr. Ibrahims
2012 total target compensation and, on average, only 26% of the total target compensation for our NEOs. A significant portion of the remaining target compensation is tied to Company and individual performance.
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Perquisite Program Eliminated.
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We eliminated our perquisite program for executive officers, effective January 1, 2012. See Other
CompensationPerquisites below.
Understanding our
Compensation Program and Performance
As both
a mortgage insurer and financial guarantor, the Companys circumstances are unique within the broader financial services industry and the specific industries in which we participate. In particular, more than most companies, our businesses were
severely and negatively affected by the financial crisis and economic downturn that began in 2007. Given these circumstances, our story can be complex, both with respect to evaluating our performance and with respect to assessing our compensation
program. In an effort to help you better understand our compensation program and our past and current performance, we offer the following questions and answers for your consideration.
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Why is Radians one-year TSR significantly better than its three-year TSR?
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As discussed above, the Companys circumstances are
unique within the financial services industry. Following the financial crisis and economic downturn that began in 2007, many financial services companies benefited reasonably quickly from a rebound in the economy, and (unlike us) received financial
support from the federal government through the U.S. Treasurys TARP program. We, however, have been particularly exposed to the protracted weakness in the housing market, including the impact of the job market and unemployment rates, which has
recovered much slower than the overall economy. Therefore, as this sector continued to languish, our performance also continued to be affected negatively, and this has further delayed our return to profitability compared to many financial services
companies and resulted in a comparatively worse TSR over the past three years. As discussed above, however, during this period, we focused on repositioning the Company to take advantage of an eventual improvement in market trends, including by
restructuring our sales force, strengthening our statutory capital and liquidity positions, and improving our risk management function.
Consequently, in 2012, as the operating environment for our business improved, including a broad-based
improvement in the housing market and a reduction in unemployment, we were ready to capitalize on these trends. In 2012, we experienced improvement in our results of operations, with a material decline in new mortgage insurance defaults and further
stabilization of credit performance in our financial guaranty portfolio, and we further enhanced our position as a market leader in the private mortgage insurance industry. This has translated into significant improvement in our TSR during the
one-year period, which has continued in 2013.
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Why does Radian continue to pay STI awards in light of the Companys net operating losses?
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Our STI program is intended to encourage and recognize
achievement of the Companys annual business plan. Accordingly, STI awards focus on more than earnings performance and include: (i) core business metrics such as the expected profitability of new business, market share, and capital
management; (ii) our success in executing upon strategic initiatives; and (iii) how we perform relative to our mortgage insurance peers. We believe our financial performance depends on our success in these areas, and so we continue to pay
our NEOs commensurate with their performance against our annual plans. Of course, our operating performance also continues to influence the amounts, if any, of STI awards that are paid to our NEOs, and in 2012, overall STI awards were negatively
affected by our failure to achieve our projected operating results for the year.
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The total compensation of Radians CEO decreased significantly in 2012 after having increased in 2011. What are the primary reasons for
this?
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The changes
in our CEOs total compensation have been driven primarily by two factors (1) the structure of our LTI awards and the applicable SEC reporting requirements relative to these awards and (as discussed above) and (2) our public
commitment in 2012 to reduce the grant date fair value of LTI awards for our NEOs. With respect to the form of our LTI awards, in response to economic and business conditions during the economic downturn, the Committee granted cash-based awards to
our NEOs beginning in 2008 that were designed to reward management based on their performance against a business plan focused on the survival and repositioning of the Company for future long-term success (Non-Equity LTI Awards). The
Committee granted these cash-based awards rather than equity due to the limited amount of equity available for issuance under our equity plan at that time. In addition, the Non-Equity LTI Awards also allowed the Committee greater flexibility for
assessing NEO performance during a period in which reliable projections were extremely difficult to develop and also to provide significant upside to NEOs for a high-level of performance.
In 2011, the first and largest (measured by target and
maximum payout) of these Non-Equity LTI Awards was paid to our NEOs and reported as part of our NEOs total compensation in 2011. 2011 also happened to be the first year since the financial crisis in which the Committee granted LTI awards to
our NEOs that consisted entirely of equity-based awards. In accordance with applicable SEC rules, equity-based awards are reported at their total grant date fair value when granted (as compared to the Non-Equity LTI Awards, which are not reported
until paid). As a result, beginning in 2011, our NEOs total reported compensation has been significantly impacted by the combination of the cycle-end payouts under the Non-Equity LTI Awards granted in prior years and the Committees
granting of equity-based LTI awards to motivate future performance. The following table illustrates the compounding effect this had on our CEOs total reported compensation in 2011 and 2012.
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The larger payout under our Non-Equity LTI Awards in 2011 compared to 2012 is due to the following factors: (i) the vesting period of the awards the award
that paid out in 2011 vested 100% over a three-year vesting performance period that ended in 2011, while the award that paid out in 2012 is part of an award that vests over three and four year periods, with 50% vesting in 2012 and the remaining 50%
vesting in 2013; and (ii) the actual payout under the awards, with the Committee assessing a payout of 167.5% of target for the award that paid out in 2011, compared to 75% of target for the award that paid out in 2012.
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To further illustrate the impact
of the form and timing of our LTI awards on total reported compensation, the following table illustrates what our CEOs total reported compensation would have been had his LTI awards been granted entirely in the form of equity-based awards
during the three-year period of 2008 through 2010. As discussed above, the Committee initially chose to grant the Non-Equity LTI Awards because of a lack of available shares under our 2008 Equity Plan at that time. More important, however, the
Non-Equity LTI Awards provided the Committee with greater flexibility to customize a performance plan for our CEO and our other NEOs with a focus on the significant challenges confronting the Company during this period.
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Has Radian maintained a strong connection between pay and performance?
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In light of the discussion above, we believe that we have
maintained a strong connection between pay and performance. However, we also recognize that based on our three-year TSR, this may not be immediately apparent. We believe that a deeper consideration of our unique circumstances, the critical
performance achieved by our CEO and other NEOs and our overall performance relative to other similarly situated companies, reflects a strong connection between pay and performance. Our NEOs have successfully led the Company through a period of
crisis by executing a business plan aimed at positioning the Company to deliver long-term stockholder value. We believe the Company is better positioned today due to these achievements, which is reflected in the Companys one-year TSR. This is
particularly true when considering that a number of the Companys former competitors failed to survive the financial downturn.
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Who are Radians most comparable peers for purposes of measuring corporate performance?
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We believe there are very few direct comparable peers
against which to measure our corporate performance. As discussed above, given our lines of business and particular exposure to the performance of the housing market, we are unique within the financial services industry. In addition, direct
comparisons also are difficult within our own specific sectors given that: (i) we are the only participant in these sectors with significant operations in both mortgage insurance and financial guaranty; and (ii) many participants in these
industries are subsidiaries of larger, more diversified companies. In evaluating our performance, however, we believe that Mortgage Guaranty Insurance
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Corporation (MGIC) serves as the most relevant comparator for purposes of evaluating our performance. MGIC is a publicly traded mortgage insurance company with a sizable portfolio of
insured business. As you can see from the following table, our performance (measured by TSR) over the past five years (through December 31, 2012) has exceeded that of MGIC.
II.
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Compensation Principles and Objectives
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We have designed our executive compensation program under the direction of the Committee to attract, motivate and retain high quality
executive officers and to align our pay-for-performance philosophy with sound risk management practices and our overall strategic objectives. This pay-for-performance philosophy is intended to connect our executive officers interests with
those of our stockholders, while not encouraging inappropriate actions, including unnecessary or excessive risk taking. We have developed the following set of principles and objectives for executive compensation. We use these to make decisions about
how to compensate executive officers appropriately for their contributions toward achieving our strategic, operational and financial objectives.
Radians executive compensation program should:
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Support the execution of Radians business strategy and performance;
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Maintain an appropriate balance between incentive compensation and total compensation;
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Focus executives on long-term performance that aligns with stockholders interests;
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Manage risk with appropriate protection/controls;
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Maintain pay practices that are externally competitive and reasonable; and
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Remain flexible to respond to current market developments.
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III.
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Compensation Process and Oversight
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A. Committee Process and Role
The Committee provides direction and oversight for our
compensation and human resources programs, processes and functions. The Committee is supported by our General Counsel and Head of Human Resources, who serve as liaisons between management and the Committee. The Committee has the sole authority to
engage and terminate consulting firms and legal counsel as the Committee deems appropriate to advise the Committee with respect to executive compensation and human resources matters, including the sole authority to approve the compensation and other
terms related to their engagement. The Committee currently retains Pay Governance as its sole independent compensation consultant. As described below, at the Committees direction, Pay Governance annually prepares a summary and analysis of
competitive market data for each NEO position. Other than providing services relating to non-employee director and executive officer compensation, Pay Governance currently performs no other work for the Company. The Committee chairman pre-approves
all work performed by the independent compensation consultant for the Company, and the Committee annually reviews the performance of Pay Governance. The Committee has also assessed the independence of Pay Governance and concluded that its work for
the Committee does not raise any conflict of interest. The Committee also engages, from time to time, external legal counsel to provide legal advice in connection with executive compensation matters. For a complete discussion of the responsibilities
delegated by our board of directors to the Committee, please see the Committee charter, which is available on our website at
www.radian.biz
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B. Consideration of Stockholder Input Regarding our Executive Compensation Program
At our Annual Meeting of Stockholders on May 30, 2012,
approximately 82% of the votes cast were in support of the overall compensation of our NEOs. We appreciate the support we received from our stockholders at last years meeting. As part of our commitment to engaging with our stockholders and in
order to better understand the reasons for the negative say-on-pay votes, management initiated an outreach program to contact those stockholders that we were able to identify as having voted against the say-on-pay proposal. In addition, as part of
our solicitation efforts in connection with our 2012 Annual Meeting of Stockholders, management and our Non-Executive Chairman met with stockholders to discuss our executive compensation program.
Through this process, we were able to meet with certain of
our stockholders, during which we learned about their voting considerations, influences and processes, as well as their perspectives and priorities with respect to executive compensation programs. Management and our Non-Executive Chairman shared
this information with the Committee. Management and the Committee considered the outcome of the most recent say-on-pay vote and the information we learned from our solicitation and outreach efforts, and in response to this feedback, we:
(1) designed our 2012 LTI awards, which were issued after our 2012 annual meeting, to: (i) incorporate measures of absolute performance in addition to performance relative to the Companys peers; and (ii) increase the performance
hurdles for our performance based option awards; and (2) have designed this Compensation Discussion and Analysis to explain more fully the Committees implementation of its pay-for-performance philosophy in the current economic and
operating environment.
C. Setting Compensation
In setting compensation for our NEOs, we utilize a number of
different compensation tools, including external benchmarking, internal equity and wealth accumulation analyses. These collectively represent our primary compensation tools, which we use to establish an appropriate compensation level for
each of our NEOs. In addition, in evaluating an NEOs compensation, the Committee typically will assess the NEOs overall performance, as well as current and potential future responsibilities within the Company. For the compensation of our
NEOs other than our Chief Executive Officer, the main participants in our compensation process are the Committee, its independent compensation consultant and three members of managementour Chief Executive Officer, General Counsel (except with
respect to his own compensation) and Head of Human Resources.
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On an annual basis, the independent compensation consultant prepares a summary and analysis
of competitive market compensation data for each NEO position. Based on this information, as well as other data from the primary compensation tools and the performance considerations discussed above, the Head of Human Resources prepares initial
compensation proposals for each NEO, other than the CEO, and reviews these recommendations with the CEO. With the approval and adjustments of the CEO, the compensation proposals are then submitted to the Committee for consideration. The Committee
may approve the proposals, make adjustments to the proposals based on its own view of the primary compensation tools or other factors, or may seek additional information from the Head of Human Resources or the independent compensation consultant
before making a final determination with respect to compensation. The Committee possesses ultimate authority over compensation decisions for our NEOs other than our CEO.
We believe that managements participation in the
compensation process is critical to create an equitably tailored program that is both effective in motivating our executive officers and in ensuring that the process appropriately reflects our pay-for-performance culture, current strategies and risk
management. Our executive officers collectively develop an annual set of shared performance goals and associated metrics, which are predominantly based on the Companys annual operating plan that is approved by our board of directors. In
addition, each executive officer develops a set of individual performance goals and presents them to the CEO, who adjusts and approves such goals and presents them to the Committee. These shared and individual performance goals and metrics serve as
the primary basis for determining an executive officers STI award. The process for assessing performance against these objectives is discussed in greater detail below.
With respect to the CEO, the Committee has the sole
responsibility to develop an annual compensation proposal, utilizing the primary compensation tools and data developed by the independent compensation consultant, and to recommend to our independent directors an appropriate compensation level for
the CEO. The independent directors may approve the proposal, make adjustments based on their own view of the primary compensation tools or other factors, or seek additional information from the Committee, our independent compensation consultant or
legal counsel before making a final determination with respect to compensation for the CEO.
Benchmarking Compensation
We consider external benchmarking an important analytical tool for helping us establish a market competitive point of reference for evaluating executive compensation. However, benchmarking is not the sole
factor used in setting compensation, and the Committee regularly assesses how and the extent to which benchmarking is used.
The primary components of our 2012 compensation program (
i.e.
, base salary and short-term, medium-term and long-term incentives),
as well as the 2012 total target cash and direct compensation for each NEO, were benchmarked (to the extent information was available) against similarly situated executive positions in one or all of the following three reference points (collectively
referred to as the benchmark references), as appropriate:
(1) Data from a primary compensation peer group approved by the Committee and consisting of the following companies: Assured Guaranty Ltd., Genworth Financial, Inc., MBIA Inc., MGIC, Old Republic
International Corporation, PMI, Fidelity National Financial, Inc., First American Corporation, Ocwen Financial Corporation, PHH Corporation, and Stewart Information Services Corporation;
(2) Financial services data from 199 organizations that participate in Towers Watsons Financial Services
Executive Compensation Database; and
(3) General
industry data from 1,068 organizations across a range of industries that participate in Towers Watsons General Industry Executive Compensation Database.
Primary Compensation Peer Group
. Management prepares and the Committee reviews and approves the primary
compensation peer group annually to develop a compensation peer group that is relevant for evaluating
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current compensation. We believe the roles and responsibilities of our NEOs are sufficiently similar to the executive positions within the primary compensation peer group, such that the companies
in this peer group represent a relevant benchmark for evaluating executive compensation. As discussed above, however, in light of our unique circumstances, we do not believe the companies included within our primary compensation peer group (other
than MGIC in 2012), represent appropriate peers for measuring enterprise-wide performance.
For purposes of assessing compensation, we compare ourselves with our primary compensation peers based on measures such as revenue, market capitalization and assets. For 2012 benchmarking, Radian was
close to the median of the primary compensation peer group in terms of total assets, but below the 25th percentile in revenue and market capitalization. The companies that comprise our primary compensation peer group vary in terms of size and
relative complexity, and because we compete for talent in markets other than those in which we compete for business, we also use, as necessary, the broader financial services and general industry reference points, as discussed below.
Financial Services and General Industry Reference
Points
. The financial services data and the general industry data are compiled annually by Towers Watson. For these two reference points, we use pre-established subsets of companies contained in the databases of Towers
Watson, an independent third party, so that we compare companies of reasonably similar size to us. The subsets are based on standard revenue ranges that are provided in published compensation surveys and we do not select or have any influence over
the companies that participate in these surveys. The subset of companies we use consists of a broad array of companies in the financial services industry, including property/casualty insurance, life/health insurance, and investment, brokerage,
retail and commercial bank organizations. The financial services data focuses on companies with assets of less than $20 billion, while the general industry data is composed of companies with revenues of less than $3 billion. We do not participate in
the selection of the companies for inclusion in these reference points and are not made aware of the companies that constitute these reference points.
We benchmark each executive officer position annually and, if necessary, when a search for a new executive officer position is undertaken.
In each case, it has been our practice to collaborate with our independent compensation consultant in this process in order to apply a consistent and disciplined approach in our benchmarking methodology and philosophy. In benchmarking an executive
officers total target
cash
compensation, we consider base salary plus cash-based short-term and medium-term incentives. Total target
direct
compensation consists of target cash compensation, plus the annualized accounting value
of long-term incentives.
Our goal in benchmarking
is to identify a competitive compensation range for each executive officer position. From a quantitative perspective, we generally consider an executive officers compensation to be market competitive if it is within a 15% range of the median
of the applicable benchmark references. However, because executive officer roles and responsibilities often vary within the industries in which we participate or in the broader financial services segment, our benchmarking process is tailored for
each executive officer position, with an emphasis on benchmark data for comparable positions and, in particular, comparable positions in our primary compensation peer group. For each executive officer, we may use one or more of the three benchmark
references or, in some cases, a subset of the primary compensation peer group of companies, depending on the Committees judgment concerning the comparability of executive officer roles in these benchmark references. As a result, our assessment
of market competitiveness, in addition to the quantifiable benchmark data, may take into consideration other factors such as the scale and scope of the companies and specific roles against which our executive officer positions are being compared and
the potential market demand for such positions. For each of
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our NEOs, the results of the benchmarking conducted by the independent compensation consultant for 2012 compensation was as follows:
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Executive Officer
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Primary
Compensation
Peer Group
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Financial
Services Reference Point
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General
Industry Reference Point
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Mr. Ibrahim (1)
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Between the 50
th
and 75
th
Percentiles
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Above the 75
th
Percentile
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Above the 75
th
Percentile
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Mr. Quint (2)
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Aligned with Median
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Between the 50
th
and 75
th
Percentiles
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Between the 50
th
and 75
th
Percentiles
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Ms. Bazemore (3)
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Aligned with Median
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Not compared to this peer group
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Not compared to this peer group
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Mr. Hoffman (4)
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Below Median
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Below Median
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Below Median
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Mr. Theobald (5)
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Below Median
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Between the 50
th
and 75
th
Percentiles
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Not compared to this peer group
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(1)
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For Mr. Ibrahim, the benchmarking process focused primarily on data for companies in our primary compensation peer group, supplemented with the
broader financial services data and general industry data. Mr. Ibrahims target LTI award generally represented a larger portion of his total compensation compared to CEOs in all three benchmark references. His comparatively larger target
LTI award is the primary reason that his total compensation was above the 75
th
percentile of the financial services and general industry reference points.
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(2)
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For Mr. Quint, the benchmarking process focused primarily on median data for companies in our primary compensation peer group, supplemented with the broader
financial services data and general industry data. When compared to CFOs in all three benchmark references, Mr. Quints target STI and LTI awards generally exceeded the targets of those executives in all three benchmark references,
offsetting his comparatively lower base salary.
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(3)
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For Ms. Bazemore, the benchmarking process focused on median data for companies in our primary compensation peer group. Ms. Bazemores target LTI award
generally represented a larger portion of her total compensation compared to comparable executives in this benchmark group.
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(4)
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For Mr. Hoffman, the benchmarking process focused on data for all three benchmark references, with a primary focus on companies in our primary compensation peer
group.
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(5)
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For Mr. Theobald, the benchmarking process focused on comparable positions in our primary compensation peer group using functional peers as well as broader
financial services data.
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Internal Equity
In addition to benchmarking, the Chief
Executive Officer and the Committee also consider internal equity among our executive officer group and other members of senior management in setting the primary components of compensation. While external benchmarking is critical in assessing the
overall competitiveness of our compensation program, we believe that our compensation program also must be internally consistent and equitable to reflect an executives responsibilities and contributions to value creation and to ensure teamwork
and coordination across the organization.
Our
review of internal equity involves comparing the compensation of positions within a given level of the organization and/or comparing the differences in compensation among various organization levels. For 2012 compensation, the Committee compared the
compensation for each NEO against their peers in the executive
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officer group. Although we monitor the difference in pay between our Chief Executive Officer and our other executive officers, given the uniqueness of the CEO position, we do not perform a formal
internal equity analysis of our CEO relative to other executive officer positions other than the President of Radian Guaranty.
Wealth Accumulation
The Committee annually reviews total reward tally sheets for each of our executive officers and considers the current value
and potential future value of existing equity awards along with potential future payouts under our Non-Equity LTI Awards as factors when setting each NEOs target LTI award.
IV.
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Primary Components of Compensation
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Our executive compensation program provides a balanced mix of pay through the following primary direct compensation components: base
salary; and short-term, medium-term, and long-term incentives. The incentive-based portions of our program are tied to: (i) the results of our corporate performance; (ii) achievement of strategic and individual performance goals; and
(iii) our long-term business and financial performance. Short-term incentives have been designed to recognize the achievement of annual objectives, while the medium-term and long-term incentives have been designed to ensure that decisions made
in achieving short-term objectives continue to have an appropriate impact on the Company in supporting our longer-term goals. In addition, awards of long-term incentives are used to recognize longer-term performance results designed to drive growth
in stockholder value.
Compensation for our NEOs
is heavily weighted towards performance-based, variable compensation. The following table highlights, for each of our NEOs, the percentage of 2012 total target compensation attributable to each component:
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A. Base Salary
Base salaries are paid to executive officers to provide them
with a competitive level of compensation for the day-to-day performance of their job responsibilities. Base salaries for our NEOs are based on competitive market compensation data for comparable executive positions within the benchmark groups and
internal equity. The following table shows the base salaries for each of our NEOs at year-end 2011 and 2012, as well as the most recent change in base salary for each executive:
2012 Base Salary
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|
|
|
|
|
|
|
|
|
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|
|
Named Executive
|
|
Year-end 2012
Salary
|
|
|
Year-end 2011
Salary
|
|
|
Most Recent Change in
Base Salary (1)
|
|
Mr. Ibrahim
|
|
$
|
900,000
|
|
|
$
|
900,000
|
|
|
|
2011
|
(2)
|
Mr. Quint
|
|
$
|
370,000
|
|
|
$
|
370,000
|
|
|
|
2013
|
(3)
|
Ms. Bazemore
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
2011
|
(4)
|
Mr. Hoffman
|
|
$
|
330,000
|
|
|
$
|
300,000
|
|
|
|
2013
|
(5)
|
Mr. Theobald
|
|
$
|
310,000
|
|
|
$
|
280,000
|
|
|
|
2013
|
(6)
|
(1)
|
|
The base salaries for Messrs. Ibrahim, Quint and Ms. Bazemore were determined to be market competitive and were not adjusted for 2012.
|
(2)
|
|
Under his most recent employment agreement, Mr. Ibrahims base salary was increased to $900,000, effective April 2011. Prior to this change,
Mr. Ibrahims last increase in base salary was in 2007.
|
(3)
|
|
Effective January 2013, Mr. Quints base salary was increased from $370,000 to $400,000 to improve the market competitiveness of his salary. Prior to this
change, Mr. Quints salary was last increased in 2006.
|
(4)
|
|
Effective March 2011, Ms. Bazemores salary was increased to $500,000 to improve the market competitiveness of her total target cash compensation. Prior to
this change, Ms. Bazemores salary was last increased in July 2008 in connection with her promotion to President of Radian Guaranty.
|
(5)
|
|
To improve the market competitiveness of his total target cash compensation, Mr. Hoffmans salary was increased from $300,000 to $330,000, effective January
2012, and from $330,000 to $350,000, effective January 2013.
|
(6)
|
|
Effective January 2012, Mr. Theobalds base salary was increased from $280,000 to $310,000 to reflect his additional responsibilities as head of the
Companys loss mitigation function. Effective January 2013, Mr. Theobalds base salary was further increased from $310,000 to $325,000 to improve the market competitiveness of his total target cash compensation.
|
B. Short-Term and Medium-Term Incentive Program
The following discussion contains statements regarding the Company and individual performance objectives for
2012 as well as our 2012 actual performance. These objectives and results are disclosed in the limited context of our compensation programs. We specifically caution investors not to apply these statements to other contexts.
In 2009, we replaced our previous short-term cash incentive
program with the STI/MTI Plan. As discussed above, the STI/MTI Plan enhances the Companys risk- and performance- based approach to compensation. The STI/MTI Plan provides the Companys senior officers with the opportunity to earn cash
incentive awards during a two-year performance period, with the STI period covering the first full calendar year in which the award is granted and the MTI period covering the full two-year performance period (from January 1 of the year of grant
through December 31 of the second performance year). By adding the MTI performance period and award, the STI/MTI Plan also serves to protect against unnecessary or excessive risk-taking because the medium-term
59
payout is dependent upon the credit performance of new insurance written over the entire two-year period, and thus, does not simply reward insurance origination without regard for its sustained
credit performance.
Short-Term Incentive
Award Process
The amount of STI
awarded to an NEO is based on the NEOs achievement of specified performance goals for the applicable year. Corporate and business unit/departmental objectives are established each year in the context of our annual business planning process and
are approved by our board of directors. Individual performance goals are established by each NEO and adjusted and approved by our CEO and the Committee as discussed in Compensation Process and Oversight above.
At the end of each performance year, each NEO provides his or
her performance self-assessment to our CEO (and the CEO provides a similar self-assessment to the Committee), including his or her level of attainment of the specified performance goals. Our CEO reviews the performance of each NEO against his or her
respective performance objectives and makes specific recommendations to the Committee regarding the amount of STI, if any, to be awarded.
The Committee (the independent directors in the case of the CEO) retains ultimate authority with respect to amounts awarded to the NEOs
under the STI/MTI Plan. Although actual performance measured against the performance goals is the primary consideration for the STI awards, the Committee or independent directors may, depending on the circumstances, exercise discretion in
determining the amount to be awarded to each NEO. Multiple factors in the complex business environment in which we currently operate may significantly impact the achievement of our performance objectives. As a result, the Committee retains
discretion over the STI awards in order to ensure that appropriate weightings are assigned to performance achievements (or disappointments) to reflect the impact of managements performance on the achievement of the Companys objectives.
Maximum achievement can result in an STI award of up to 200% of the target amount, while performance below expectations can result in a below-target award or no award. For each NEO, the Committee may weigh the various performance goals differently
in light of the NEOs role, giving appropriate significance to the potential impact that each NEO may have on our performance.
Once the amount of STI is determined for each executive officer, only 50% of this amount is actually paid to each executive officer as an
STI bonus. For 2012, these amounts are set forth in the Bonus column of our 2012 Summary Compensation Table. The remaining 50% of each executives STI award then becomes that executive officers target MTI award for the MTI
period. At the end of the MTI performance period, the Committee determines what percentage, if any, of the target MTI awards will be paid to the NEOs based on the Companys achievement of certain pre-established business and financial
performance metrics and goals (discussed below for the 2011 MTI award). Other than for determining the MTI target amount (which is derived based on each individuals STI performance), individual officer performance is not evaluated for purposes
of determining or paying the MTI awards and all NEOs receive the same percentage payout relative to target. Under the STI/MTI Plan, in prior years, maximum achievement could have resulted in an MTI award of up to 150% of the target amount. However,
for the 2012 and 2013 MTI awards, the Committee set a maximum payout of 125% of target. In addition, the Committee also may limit or decide not to pay the MTI award in the event there is a
60
material restatement of our earnings. The following diagram illustrates the award process under our STI/MTI Plan for the 2012 STI/MTI awards:
Short-Term and Medium-Term Incentive
Performance Period and Payout Timeline
Consistent with our
reporting in prior years, we report amounts awarded under our STI/MTI Plan in the Summary Compensation Table for the year in which they are earned. We report the STI portion of these awards as a Bonus given the nature of the performance
objectives and the high-degree of discretion exercised by the Committee in assessing whether objectives were achieved, including the Committees ability to exercise positive or negative discretion for each individual executive. We have
determined that MTI awards constitute non-equity incentive plan compensation based on the following: (1) the awards are based on only two correlated metricsthe credit default rate and projected profitability for a particular insurance
yearand although we do not establish a specific target for use in assessing our absolute performance, the current and historical credit default rates for our mortgage insurance portfolios and our competitors are well known and
tracked both internally and externally, and therefore, it can be easily determined whether the credit default rate for a particular insured portfolio is above or below historical averages and expectations, and therefore, the likelihood that a
specific vintage portfolio will be profitable; (2) the award metric is communicated to the NEOs; and (3) unlike the payout for the STI award, the percentage payout (relative to target) for the MTI award is applied consistently to all
executive officers, without Committee discretion to increase or decrease an award for individual executive officers.
61
2012 Short-Term Incentive Analysis
For 2012, our NEOs STI awards were determined based on
the Committees assessment of the Companys performance against the following four performance areas, weighted as indicated:
|
|
|
Radians Total Corporate Results generally consider two critical itemsthe Companys operating performance and liquidity and
capital management;
|
|
|
|
Radians Stand-Alone Results generally consider the Companys absolute performance against four business
metricsprofitability of new mortgage insurance business, the amount of new mortgage insurance written (NIW), mortgage insurance market share and expense management;
|
|
|
|
Peer Comparison compares Radians performance against its mortgage insurance peers in four areasmortgage insurance market share,
expense management, capital strength (measured by statutory risk-to-capital), and stock price performance; and
|
|
|
|
Radians Strategic Priorities consider the Companys performance against certain strategic priorities discussed in the footnotes
to the table below.
|
62
The following table highlights the Companys performance in each of the four
performance areas, including targets established by management and approved by the Committee, the Companys actual and relative performance against these targets and the payout allocated by the Committee for each of the four performance areas:
2012 Short-Term Incentive
Measures and Performance
(1)
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
2012 Total Corporate Results
|
|
|
|
Stand-Alone Results
|
|
|
|
Peer Comparison
(2)
|
|
|
|
Strategic
Priorities
(3)
|
Metric
|
|
Target
|
|
Status
|
|
|
|
Metric
|
|
Target
|
|
Status
|
|
|
|
Relative
Peer
Comparison
|
|
|
|
Radian's
Relative
Rank
|
|
|
|
Metric
|
After Tax
Operating
Income
(4)
|
|
($452M)
|
|
($500.3)
|
|
+
|
|
NIW ROE
(5)
|
|
11.5%
|
|
12.6%
|
|
+
|
|
Market Share
(6)
|
|
28.2%
|
|
2
|
|
+
|
|
Contingency
Planning
|
Capital
Management
|
|
Qualitative Metric
|
|
|
|
NIW
|
|
$19.1B
|
|
$37.1B
|
|
|
|
Expense
Ratio
(7)
|
|
22.5%
|
|
2
|
|
|
|
Promote MI
|
|
|
|
|
|
|
|
|
Market Share
(6)
|
|
25.0%
|
|
28.2%
|
|
|
|
Risk to Capital
|
|
20.8
|
|
1
|
|
|
|
Employee Retention
|
|
|
|
|
|
|
|
|
Expense Ratio
(7)
|
|
Max
25%
|
|
22.5%
|
|
|
|
Stock Growth
|
|
161.1%
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Payout
|
|
50%
|
|
|
|
|
|
Target Payout
|
|
25%
|
|
|
|
|
|
Target Payout
|
|
15%
|
|
|
|
|
|
Target Payout
|
|
10%
|
Approved Payout
|
|
|
|
30%
|
|
|
|
Approved Payout
|
|
|
|
45%
|
|
|
|
Approved Payout
|
|
|
|
25%
|
|
|
|
Approved Payout
|
|
15%
|
(1)
|
|
The potential payout range for each of the four performance areas was as follows2012 Total Corporate Results (-90% to 90%); Stand-Alone Results (0% to 50%); Peer
Comparison (0% to 30%); and Strategic Priorities (0% to 30%). Collectively, the ranges reflect a maximum potential payout of 200%, but also the potential to reduce the overall payout of this award for failure to achieve the Companys after tax
operating income target and capital management objectives.
|
(2)
|
|
The peers for comparative purposes were the most comparable peers for each metric as selected from among the following group of companies: MGIC; PMI; Genworth Financial
Inc.; United Guaranty; Essent; and CMG MI. In each case, the peer group consisted of at least three of the identified peers.
|
(3)
|
|
2012 Strategic Priorities were to: (a) effectively manage the Companys financial strength; (b) grow the Companys mortgage insurance franchise;
(c) promote the role of private mortgage insurance; (d) improve operational effectiveness and performance; (e) develop, engage and retain talent; and (f) develop contingency plans for unknown uncertainties. Each of these
priorities is reflected in the table above, with contingency planning, promoting private mortgage insurance and employee development, engagement and retention specifically included in the Strategic Priorities performance area.
|
(4)
|
|
Represents consolidated after-tax operating income, which is a non-GAAP financial measure that we calculate based on consolidated after-tax net (loss) income, as
presented in our audited consolidated financial statements, excluding the impact of non-operating activities. Consolidated after-tax operating income for 2012 excludes the impact of changes in fair value of derivatives, net gains (losses) on
investments and other financial instruments and OTTI (other than temporary impairment).
|
(5)
|
|
ROE, or return on equity, represents the projected lifetime return for NIW originated in 2012.
|
(6)
|
|
Market share represents the Companys average share for 2012, based on currently available public information.
|
(7)
|
|
Represents operating expense of our mortgage insurance segment, adjusted to exclude certain expenses associated with stock-based compensation, extraordinary/unplanned
board related expenses and net deferred policy acquisition costs.
|
63
We believe 2012 was a strong performance year for the Company. Our mortgage insurance
business significantly exceeded its growth targets, with 2012 new insurance written volumes positioning the Company as the leading private mortgage insurance provider and moving the Company closer to a return to operating profitability. These
results were the product of operational and sales efforts as well as a number of strategic initiatives to improve our financial strength. At the beginning of 2012, management presented an ambitious plan to effectively manage the Companys
mortgage insurance capital position and to increase the Companys available liquidity. This plan relied upon a broad spectrum of initiatives, ranging from internal restructurings and commutations of risk-in-force to external reinsurance and
exchange offers for outstanding long-term debt. Management executed on its planned proposals and developed others throughout the year. As a result of our improved operating results, business growth and improved financial strength, our TSR was 161.5%
in 2012.
With respect to the STI payout for 2012,
the Committee determined that we significantly outperformed our target metrics on a stand-alone basis and finished favorably against our peers in almost every category on a relative basis. As a result, the Committee assigned a 45% payout for our
absolute performance (compared to a target of 25%, see Stand-Alone Results) and a payout of 25% for our relative performance (compared to a target of 15%, see Relative Peer Comparison). Next, the Committee determined that we
satisfied each of our Strategic Priorities, assigning a payout at target. Our Total Corporate Results were mixed. With respect to capital management, during 2012, we positioned the Company to remain in compliance with statutory capital requirements
throughout 2013, while preserving enough liquidity to satisfy the Companys obligations through 2016. Given the financial state of the Company at the beginning of 2012, this represented a significant improvement, and the Committee assigned a
40% payout to our capital management efforts (compared to a 25% target assuming Capital Management and After-Tax Operating Income are weighted equally). With respect to After-Tax Operating Income, our results came in below our 2012 plan, and the
Committee acknowledged this negative variance, assigning a -10% payout for this metric (representing a 35% reduction from the target of 25%). Collectively, this resulted in a baseline payout for our NEOs at 115% of target as indicated below:
|
|
|
|
|
|
|
|
|
2012 Short-Term Incentive Metrics Summary
|
|
|
|
|
Funding Level
|
|
Target
|
|
|
Potential Payout
|
|
Approved
|
Total Corporate Results:
|
|
|
|
|
|
|
|
|
* After Tax Operating Income
|
|
|
25%
|
|
|
(45%) - 45% Max
|
|
(10%)
|
* Capital Management
|
|
|
25%
|
|
|
(45%) - 45% Max
|
|
40%
|
Stand-Alone Results
|
|
|
25%
|
|
|
0% - 50% Max
|
|
45%
|
Relative Peer Comparison
|
|
|
15%
|
|
|
0% - 30% Max
|
|
25%
|
Strategic Priorities
|
|
|
10%
|
|
|
0% - 30% Max
|
|
15%
|
Total Funding
|
|
|
100%
|
|
|
0% - 200%
|
|
115%
|
64
The following table sets forth, for each NEO: (i) the maximum amount that could have
been awarded under the STI/MTI Plan for 2012 short-term performance (column a); (ii) the NEOs target 2012 STI award (column b); (iii) the total amount actually awarded to the NEO based on 2012 short-term performance (column c);
(iv) the total amount paid as a bonus to the NEO for 2012 STI (50% of amount awarded)(column d); and (v) the NEOs 2012 MTI target (the remaining 50% of amount awarded)(column e):
2012 Short-Term/Medium-Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive
|
|
(a)
2012
Maximum STI Award
|
|
|
(b)
2012
Target STI Award
|
|
|
|
|
(c)
2012 Total Amount
Awarded
($ and % of
Target)
|
|
|
(d)
2012 STI
Amount Paid
|
|
|
(e)
2012
MTI Target
|
|
Mr. Ibrahim (1)
|
|
$
|
3,150,000
|
|
|
$
|
1,575,000
|
|
|
|
|
$
|
1,811,250
|
|
|
$
|
905,625
|
|
|
$
|
905,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Quint (2)
|
|
$
|
925,000
|
|
|
$
|
462,500
|
|
|
|
|
$
|
525,000
|
|
|
$
|
262,500
|
|
|
$
|
262,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Bazemore (3)
|
|
$
|
1,500,000
|
|
|
$
|
750,000
|
|
|
|
|
$
|
900,000
|
|
|
$
|
450,000
|
|
|
$
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Hoffman (4)
|
|
$
|
561,000
|
|
|
$
|
280,500
|
|
|
|
|
$
|
350,000
|
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Theobald (5)
|
|
$
|
465,000
|
|
|
$
|
232,500
|
|
|
|
|
$
|
275,000
|
|
|
$
|
137,500
|
|
|
$
|
137,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118%
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In assessing Mr. Ibrahims performance, the independent directors noted that he achieved a number of critical objectives in 2012, including enhancing the
Companys capital and liquidity positions, creating a dedicated function for evaluating future growth and diversification opportunities, overseeing the effective reduction of our financial guaranty exposure, growing our mortgage insurance
franchise by increasing market share and pursuing government relations aimed at enhancing the role of private capital in housing finance reform, ensuring a balanced and disciplined risk management strategy, managing key external relationships, and
managing operating expenses.
|
(2)
|
|
In assessing Mr. Quints performance, the Committee noted that he achieved a number of critical objectives in 2012, including enhancing our capital and
liquidity positions through statutory investment gains, inter-company and external reinsurance arrangements, and improving our long-term debt maturity profile.
|
(3)
|
|
In assessing Ms. Bazemores performance, the Committee noted that she achieved a number of critical objectives in 2012, including successfully increasing our
mortgage insurance market share, leading efforts to diversify our mortgage insurance customer base, ensuring a balanced and disciplined pricing strategy, enhancing our mortgage insurance operating model, promoting a significant role for mortgage
insurance in housing finance reform, and continuing to manage successfully our loss management efforts.
|
(4)
|
|
In assessing Mr. Hoffmans performance, the Committee noted that he achieved a number of critical objectives in 2012, including the successful management of
certain litigation and regulatory matters, overseeing the execution of the Companys capital and liquidity initiatives, managing the Companys annual meeting process (including board changes), and providing executive oversight for various
compensation and human resources initiatives, including the transformation of the 2012 executive compensation program discussed above.
|
(5)
|
|
In assessing Mr. Theobalds performance, the Committee noted that he achieved a number of critical objectives in 2012, including maintaining
the credit quality of new insurance written and improving the underwriting risk mix of our existing mortgage insurance portfolio, mitigating uncertainty with respect to our legacy insured portfolios (generally, insurance written prior to 2009),
mitigating losses through
|
65
|
borrower retention and property liquidation strategies and enhancing our claims management process to improve overall efficiency.
|
2011 Medium-Term Incentive Analysis
Pursuant to our STI/MTI Plan, the 2011 MTI target awards were
established in March 2012, at the time that the 2011 STI awards were paid to our NEOs. The amounts to be paid to our NEOs under the 2011 MTI award were determined based on the Committees assessment of the Companys credit default rate
(through the end of 2012) for mortgage insurance written by the Company in 2011. We believe that the credit default rate for the first two years of an insured portfolio is an important indicator of that portfolios current and future projected
credit performance.
As of December 31, 2012,
the default rate for the 2011 insured portfolio was 0.35%. This compares very favorably to historical two-year averages. Specifically, between 2000 and 2005, the average two-year default rate for our insured mortgage insurance portfolio was
approximately 3.91%. During the poor underwriting years of 2006 through 2008, the average two-year default rate increased to 12.85%. Beginning in 2008, as a result of our more restrictive underwriting guidelines, the default rates for new insurance
written have significantly improved, and the two-year default rates for our 2009 and 2010 insured portfolios were 0.93% and 0.28%, respectively. The following table illustrates these trends for the last six years:
In addition to credit
performance, we look at the profitability of an insured portfolio to assess its overall strength of performance and value creation. Based on the two-year default rate of 0.35% for the 2011 portfolio (through December 31, 2012), we expect this
portfolio to produce a return on equity of approximately 15.1%, representing one of the strongest performing portfolios that we have ever written. As a result, the Committee awarded a payout of 135% of target for the 2011 MTI awards. These amounts
are included in the Non-Equity Incentive Plan Compensation column of our 2012 Summary Compensation Table, and the following table illustrates for each NEO the target award amount and the amount awarded under the 2011 MTI award.
|
|
|
|
|
|
|
Executive Officers
|
|
2011 MTI
Maximum
|
|
2011 MTI
Target
|
|
Approved
Payout at
135%
|
Mr.
Ibrahim
|
|
$708,750
|
|
$472,500
|
|
$637,875
|
Mr. Quint
|
|
$208,125
|
|
$138,750
|
|
$187,313
|
Ms.
Bazemore
|
|
$337,500
|
|
$225,000
|
|
$303,750
|
Mr. Hoffman
|
|
$114,750
|
|
$ 76,500
|
|
$103,275
|
Mr.
Theobald
|
|
$ 94,500
|
|
$ 63,000
|
|
$ 85,050
|
66
C. Long-Term Incentive Program
The contributions of our NEOs to the creation of stockholder
value are primarily recognized through our LTI program. This program consists of a series of annual grants, including equity instruments and Non-Equity LTI Awards, with overlapping performance periods and varying performance metrics. As a result, in
any given period, our NEOs are motivated to perform based on their:
|
|
|
Outstanding restricted stock, stock options and SARs, which collectively are designed to motivate our NEOs to drive performance that will lead to stock
price growth and wealth creation for all of our stockholders;
|
|
|
|
Performance-Based RSUs, which focus our NEOs on outperforming our primary industry competitors as well as other companies of similar size in other
industries; and
|
|
|
|
Non-Equity LTI Awards, which are intended to focus our NEOs on selected business fundamentals (
e.g.
, mortgage insurance credit performance,
mortgage insurance market share and capital and expense management) that are critical to our long-term success.
|
Because our LTI program consists of a series of annual awards, established at different times and with different performance periods and
metrics, the amounts paid to our NEOs pursuant to any given award may not be consistent with our short-term financial performance at the time of such payment. This is particularly true of the Non-Equity LTI Awards, which focus on fundamental
business metrics rather than changes in our stock price. Each of our LTI awards is intended to support our ultimate goal of creating future long-term stockholder value. While certain of the LTI awards are designed to reward our NEOs for satisfying
significant objectives in pursuit of this overall objective, other awards are designed to reward executive officers only if and when this objective has been achieved (
e.g.,
restricted stock, stock options, SARs and Performance-Based RSUs).
Payment of Initial Performance Period under
2009 Non-Equity LTI Awards
Between 2008
and 2010, the Committee granted Non-Equity LTI Awards to our NEOs pursuant to our 2008 Executive Long-Term Incentive Cash Plan (the Executive LTI Cash-Based Plan). Beginning in 2009, eligibility for 50% of each award is measured over a
three-year performance period (beginning May 30, 2009 and ending May 30, 2012 for the 2009 Non-Equity LTI Award), with performance for the remaining 50% of each award measured over a four-year performance period (beginning May 30,
2009 and ending May 30, 2013 for the 2009 Non-Equity LTI Award). At the end of each performance period, the Committee determines in its sole discretion the specific cash payout to each participant, which may range from 0% to 300% of the amount
of the target award then under consideration, based on the Committees view of the Companys overall corporate performance, the participants performance and the degree to which each of the following performance measures have been
satisfied: (1) mortgage insurance market share; (2) capital management; (3) mortgage insurance credit quality; (4) expense management; and (5) operating profitability. All payouts are paid in cash in a lump sum (there is no
stock awarded under the Executive LTI Cash-Based Plan), net of applicable withholdings.
The initial three-year performance period under the 2009 Non-Equity LTI Award ended on May 30, 2012. In evaluating the Companys performance over the three-year performance period, the Committee
performed a qualitative and quantitative evaluation of each of the five performance metrics. Based on this evaluation, the Committee determined (for each performance metric) whether the Company Significantly Underperformed,
67
Underperformed, Met Expectations, Exceeded Expectations, or Significantly Exceeded Expectations. The Committee then assigned a percentage payout
for each performance metric based on the following ranges:
|
|
|
Designation
|
|
Payout Range
(% of Target)
|
Significantly Underperform
|
|
0%
|
Underperform
|
|
25% - 75%
|
Met
Expectations
|
|
75% - 125%
|
Exceeded Expectations
|
|
125% - 200%
|
Significantly Exceeded Expectations
|
|
200% - 300%
|
The following is a discussion
of the Committees assessment of the Companys performance against each metric during the three-year performance period, including the Committees performance designation and assigned payout.
Market Share
Committee Assessment Exceeded Expectations (125% of Target)
In assessing Market Share performance, the Committee considered the following:
|
|
|
Our share of the private mortgage insurance market increased during the performance period from 22.8% to 29.0%.
|
|
|
|
During the period, we restructured our sales force to increase the amount of insurance we were writing with new and existing customers. As evidence of
our success, approximately $1.0 billion of the new insurance that we wrote in the first quarter of 2012 was from new customers.
|
|
|
|
During the performance period, we developed new marketing campaigns, introduced competitive products and enhanced our training regarding the benefits
of private mortgage insurance compared to insurance provided by the Federal Housing Authority, the largest insurer in the insured mortgage market. By the end of the performance period, the penetration rate of private mortgage insurance in the
overall mortgage insurance market had increased from 2.7% to approximately 6.7%.
|
68
Credit Quality
Committee Assessment Met Expectations (100% of Target)
In assessing Credit Quality performance, the Committee considered the following:
|
|
|
During the performance period, we implemented numerous changes to our underwriting guidelines, risk management processes, counterparty policies,
pricing and surveillance capabilities aimed at improving the risk characteristics of the loans we were insuring. As a result, the default rates for insured vintages during the performance period have been some of the lowest in our history and
contrast strongly when compared to the 2005 through the first half of 2008 vintages (see the graph below). Since 2009, our insured portfolios consist of loans with significantly improved risk characteristics, including predominantly prime credit
quality, with FICO scores of 740 or above and loan-to-value or LTV ratios lower than any of our previous policy years.
|
69
Operating Profitability
Committee Assessment Significantly Underperformed (0% of Target)
With respect to Operating Profitability during the performance period, the Committee focused on the operating
profitability of our mortgage insurance segment, which comprises our primary, on-going business operations. In assessing Operating Profitability for this business segment, the Committee considered the following:
|
|
|
The Companys mortgage insurance operating results often were below our operating plan during the performance period, primarily driven by higher
incurred losses. The overall increase in incurred losses during this period was driven primarily by the unanticipated aging of our defaulted portfolio (which requires a higher reserve amount) and the effect of the prolonged macroeconomic recovery,
in particular with respect to housing, on new mortgage insurance defaults as discussed above.
|
|
|
|
After reaching their lowest-point in the first quarter of 2010, our mortgage insurance operating results steadily improved during the performance
period, such that we now anticipate a return to marginal operating profitability in our mortgage insurance business in 2013.
|
70
Expense Management
Committee Assessment Met Expectations (100% of Target)
With respect to Expense Management during the performance
period, the Committee considered the following:
|
|
|
The Company successfully completed two significant expense reduction initiatives (including both compensation and non-compensation expenses) that
reduced overall expenses in 2010 and 2011.
|
|
|
|
As demonstrated below, the Company generally maintained an expense ratio during the period at or below a target of 25%. For the quarters in which we
exceeded 25%, this was mainly attributable to: (i) an increase in premium refund accruals due to the impact of our loss mitigation activities; and (ii) the impact of our stock price on cash-settled equity awards.
|
Capital Management
Committee Assessment Exceeded Expectations (125% of Target)
With respect to Capital Management, the Committee considered
the following:
|
|
|
During the performance period, we overcame a number of challenges through a series of proactive capital initiatives, including: (i) risk
commutations and discounted bond purchases; (ii) raising approximately $1.0 billion in new capital; (iii) the sale of certain assets; (iv) harvesting statutory gains in our investment portfolio; (v) releasing contingency reserves
in our financial guaranty business after successfully reducing our financial guaranty exposure; (v) internal and external reinsurance transactions; and (vii) securing approval from the GSEs to enable us to continue to write mortgage
insurance business through a subsidiary other than Radian Guaranty, if necessary.
|
|
|
|
As a result of the above initiatives, at the end of the performance period, we continued to maintain approximately $350 million of cash and securities
at our holding company and a competitive risk-to-capital ratio for Radian Guaranty.
|
71
Following the Committees assessment of each of the performance metrics discussed
above, the Committee assigned a specific weighting to each metric, based on the Committees view of the significance of the metric to the Companys overall performance during the performance period. From this, the Committee derived the
average weighted payout to serve as a baseline for each NEOs performance payout. The following table illustrates the percentage payout designated by the Committee for each metric, the weighting assigned to each metric and the total average
weighted payout percentage based on Company performance:
|
|
|
|
|
|
|
|
|
Metric
|
|
Committee
Assessment
|
|
Payout level
|
|
Weighting
|
|
Weighted
Average
|
Market Share
|
|
Exceeded
Expectations
|
|
125%
|
|
15%
|
|
18.75%
|
Credit Quality
|
|
Met Expectations
|
|
100%
|
|
15%
|
|
15.00%
|
Operating
Profitability
|
|
Significantly
Underperformed
|
|
0%
|
|
35%
|
|
0.00%
|
Expense Management
|
|
Met Expectations
|
|
100%
|
|
10%
|
|
10.00%
|
Capital Management
|
|
Exceeded
Expectations
|
|
125%
|
|
25%
|
|
31.25%
|
Total
Award Payout
|
|
|
|
|
|
|
|
75.00%
|
The following table
illustrates for each NEO, the target award amount and the amount awarded under the 2009 Non-Equity LTI Award.
|
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
Maximum
Payout
|
|
|
Performance
Target
|
|
|
Approved Payout
at 75%
|
Mr. Ibrahim
|
|
$
|
2,160,000
|
|
|
$
|
720,000
|
|
|
$540,000
|
Mr. Quint
|
|
$
|
619,380
|
|
|
$
|
206,460
|
|
|
$154,845
|
Ms. Bazemore
|
|
$
|
1,080,000
|
|
|
$
|
360,000
|
|
|
$270,000
|
Mr. Hoffman
|
|
$
|
178,200
|
|
|
$
|
59,400
|
|
|
$ 44,550
|
Mr. Theobald
|
|
$
|
321,750
|
|
|
$
|
107,250
|
|
|
$ 80,438
|
LTI Awards Granted in
2012
Each year, in designing the annual
LTI awards for our NEOs, the Committee reviews and assesses the type of awards that would best complement our existing LTI program in aligning the interests of our NEOs with those of our stockholders and enhancing long-term stockholder value. In
addition, the Committee also considers, among other things: (1) an appropriate balance between retention and performance-based objectives; (2) the potential financial, accounting and tax impact of awards; (3) whether the award
objectives are clear to the NEOs, stockholders and other constituencies; (4) the potential impact of the awards on risk behavior; and (5) as discussed above, input from our stockholders with respect to the form and performance metrics for
our awards.
For the 2012 LTI awards, the
Committee designed an award composed entirely of performance-based equity, including: (1) Performance-Based RSUs, representing 75% of the total value of the LTI award; and (2) Performance-Based Stock Options, representing 25% of the total
value of the LTI award. The Performance-Based RSUs are intended to measure the Companys relative performance, while the stock options are intended to reward the NEOs for absolute increases in our stock price, regardless of how this increase
compares to our peers. Further, while the 2012 LTI Awards are similar in structure to the 2011 Awards, the 2012 Awards include more challenging vesting targets and exercise hurdles as discussed below.
72
2012 Performance-Based RSU Awards.
The
Performance-Based RSU awards generally measure performance from June 5, 2012 through June 5, 2015, and vest, if at all, upon the conclusion of that three year performance period based on the performance achieved versus the established
targets. As further described below, at the end of the performance period, the NEOs will be entitled to receive a number of RSUs (from 0 to 200% of their target Performance-Based RSU awards) based on the Companys absolute and relative TSR over
the three year performance period. Each vested Performance-Based RSU will be payable in cash, in an amount equal to the closing price of the Companys common stock on the New York Stock Exchange (the NYSE) on the applicable
vesting date.
The Companys absolute TSR
will be determined based on the change in market value of the Companys common stock during the performance period, as measured by comparing (x) the average closing price of the Companys common stock on the NYSE for the 20
consecutive trading days ending on June 6, 2012 and (y) the average closing price for the 20 consecutive trading days ending on June 5, 2015. The Companys relative TSR will be measured against the median TSR of a peer group
consisting of the companies listed on the NASDAQ Financial Index and MGIC Investment Corporation (the Peer Group).
If the Companys absolute TSR during the performance period is negative, the payout under the Performance-Based RSU award will be 0%
and none of the Performance-Based RSUs will vest. If the Companys absolute TSR is positive, the payout will be determined based on an analysis of both the Companys relative TSR and absolute TSR, beginning with an assessment of
Companys relative TSR. The Companys TSR initially will be compared to the median TSR of the companies included in the Peer Group (the Median Peer Group TSR). The starting point for the payout determination (the
Relative Payout Percentage) will be 100% of target. For every 1% that the Companys TSR exceeds the Median Peer Group TSR, the Relative Payout Percentage will increase by 2 percentage points above 100% of target. For every
1% that the Companys TSR is below the Median Peer Group TSR, the Relative Payout Percentage will decrease by 3 percentage points below 100% of target.
Once the Relative Payout Percentage has been determined, the actual payout percentage under the Performance-Based RSU award (the
Final Payout Percentage) will be calculated by reference to a maximum payout percentage that cannot be exceeded regardless of the Companys relative TSR. This is intended to ensure that regardless of the Companys
performance against the Peer Group, the award remains closely correlated to the Companys stock price performance. Accordingly, the maximum payout percentage ranges are correlated to the Companys absolute TSR, as set forth below:
|
|
|
Companys Absolute TSR(1)
|
|
Maximum Payout Percentage(1)
(% of Target)
|
225% or Greater
|
|
200%
|
200%
|
|
167%
|
175%
|
|
133%
|
150%
|
|
100%
|
125%
|
|
67%
|
100%
|
|
33%
|
0% - 75%
|
|
0%
|
|
(1)
|
|
If the Companys Absolute TSR falls between two referenced percentages, the Maximum Payout Percentage will be interpolated.
|
With respect to Mr. Ibrahims Performance-Based RSU
award, Mr. Ibrahims maximum RSU award is limited to the number of shares that would result in his receiving 1,000,000 shares subject to grants made to him in 2012 (including the stock options granted to him as discussed below), which is
the maximum number of shares
73
that may be awarded to a participant under the 2008 Equity Plan in any calendar year. As a result, Mr. Ibrahims maximum payout is limited to approximately 117% of his target
Performance-Based RSU award.
The
Performance-Based RSU awards provide for double trigger vesting in the event of a change of control. In the event of a change of control of the Company (as generally defined in the 2008 Equity Plan), the Performance-Based RSUs will
become payable at target upon the vesting of the awards on June 5, 2015, provided that the executive officer remains employed by the Company through such date. However, if an NEOs employment is terminated by the Company without
cause, or the NEO terminates employment for good reason, in each case within 90 days before or one year after a change of control, the Performance-Based RSUs will become fully vested and payable at target upon such
termination.
The Performance-Based RSUs also
include covenants pursuant to which the executive officer has agreed not to compete with the Company or to solicit the Companys employees or customers for a period of time (either twelve (12) or eighteen (18) months, the
Restricted Period) following termination of the executive officers employment for any reason.
Additionally, the Performance-Based RSUs will become fully vested and payable at target in the event of an NEOs death or disability.
If the NEO retires before the end of the three- year performance period, the award will remain outstanding and will become payable at the end of the performance period to the extent that the performance criteria discussed above have been satisfied,
or will vest at the target level in the event of a change of control.
2012 Stock Option Awards.
In 2012, the Committee granted Performance-Based Stock Options under the 2008 Equity Plan to each of the NEOs. Each Performance-Based Option
has a per share exercise price of $2.45 (the closing price of the Companys common stock on the NYSE on the date of grant) and a ten-year term, with 50% of the award vesting on or after the third anniversary of the grant date (i.e.,
June 6, 2015) and the remaining 50% of the award vesting on or after the fourth anniversary of the grant date (i.e., June 6, 2016); provided, however, that the Performance-Based Options only will vest if the closing price of the
Companys common stock on the NYSE exceeds $4.90 (200% of the Performance Based Option exercise price) for ten consecutive trading days ending on or after the third anniversary of the grant date (i.e., June 6, 2015) (the Stock Price
Vesting Hurdle).
The Performance-Based
Stock Options provide for double trigger vesting in the event of a change of control. Except as provided below, upon a change of control (as generally defined in the 2008 Equity Plan), the Performance-Based Stock Options will continue to
vest 50% on the third and fourth anniversaries of the grant date, regardless of whether the Stock Price Vesting Hurdle has been satisfied, as long as the named executive remains employed by the Company through such date. However, if an NEOs
employment is terminated by the Company without cause, or the NEO terminates employment for good reason, in each case within 90 days before or one year after a change of control, the Performance-Based Stock Options will
become fully vested and exercisable upon such termination.
The Performance-Based Stock Options also include covenants pursuant to which the executive officer has agreed not to compete with the Company or to solicit the Companys employees or customers during
the Restricted Period following termination of the executive officers employment for any reason.
Additionally, the Performance-Based Stock Options will become fully vested and exercisable in the event of an NEOs death, disability
or retirement. However, if Messrs. Ibrahim or Quint retires before the Performance-Based Stock Options are otherwise exercisable, his Performance-Based Stock Options will remain outstanding and become exercisable in accordance with the three- and
four-year vesting schedule and the Stock Price Vesting Hurdle for such Performance-Based Stock Options, or as provided above in the event of a change of control.
Equity awards are not coordinated with the release of
material nonpublic information. The Committee does not take the release of such information into account as an element of when to make grants.
74
Stock Ownership
Consistent with our compensation philosophy, we believe that
senior management, including the NEOs, should have a significant equity investment in Radian in order to further align their interests and actions with the interests of our stockholders and to further focus the NEOs on sustained performance.
Under our Stock Ownership Guidelines, our NEOs
and certain other officers designated by our Chief Executive Officer are expected to hold shares with a market value equal to at least the values provided below. Unless the officer holds more than this threshold market value of shares, the officer
is not permitted to sell shares of our common stock that he or she owns, subject to certain limited exceptions. The levels of stock ownership are outlined below:
|
|
|
|
|
Officer Level
|
|
Ownership Guidelines
|
|
CEO
|
|
|
5 times salary
|
|
CFO and President of Radian Guaranty
|
|
|
2.5 times salary
|
|
All other designated officers
|
|
|
1.5 times salary
|
|
In addition to the primary components of their compensation, our NEOs receive additional compensation through their participation in our
benefit plans as well as, to a lesser extent, through their receipt of perquisites.
A. Retirement Compensation
We are committed to providing all of our employees with competitive benefits, including retirement benefits that make sense for their
financial security, while positioning us for future growth and improved profitability.
Savings Incentive Plan
The Radian Group Inc. Savings Incentive Plan (the Savings Plan) serves as a retirement vehicle for our NEOs and other employees. The Savings Plan, among other things, provides for quarterly
matching contributions by Radian equal to 100% of employee contributions (up to 6% of eligible pay). In addition, the Savings Plan also provides participants who had attained at least five years of service and who were active participants on
December 31, 2006 in Radians Pension Plan, which was terminated effective, June 1, 2007, with yearly cash transition credits (initially for up to five years, if employed by us during this time) under the Savings Plan
equal to a fixed percentage of their eligible pay, calculated based on a formula that takes into account their age and years of completed vesting service as of January 1, 2007. Each of our NEOs participated in the Savings Plan in 2012.
Benefit Restoration Plan
Effective January 1, 2007, we replaced our Supplemental
Executive Retirement Plan (SERP) with the Benefit Restoration Plan (BRP). For additional information regarding the BRP, see Nonqualified Deferred CompensationBenefit Restoration Plan below. The BRP, as
amended, is intended to provide additional retirement benefits to our employees who are eligible to participate in the Savings Plan and whose benefits under the Savings Plan are limited by applicable IRS limits on eligible compensation. As compared
to the SERP, we believe the BRP better represents our compensation philosophy and objectives, including our goal of enhancing the equitable distribution of benefits among our employees. In particular, we believe the BRP is a more appropriate plan
for employees and stockholders for the following reasons:
|
|
|
Participation is predominately based on compensation earned rather than an employees title or position. All employees whose eligible pay exceeds
the IRS compensation limit ($250,000 for 2012)
|
75
|
are eligible to participate in the BRP in the same year in which they exceed the IRS limit. The Company makes annual contributions to each participants account based on eligible
compensation;
|
|
|
|
The same formula for calculating benefits under the BRP is used for all participants, creating alignment throughout the organization;
|
|
|
|
Based on plan design, the BRP is dependent on company contributions each year, which makes it more flexible and fiscally responsible for Radian;
|
|
|
|
In determining benefits under the BRP, bonus and commissions will affect a participants contribution only for the year in which they occur. As a
result, compensation in one year is not locked into the benefit formula as it was under the SERP; and
|
|
|
|
Unlike the SERP, the BRP permits the investment of contributions in the Radian common stock fund, thus permitting participants to invest in Radian.
|
B. Deferred Compensation Plan
We maintain a voluntary deferred compensation plan for our
executive officers. The deferred compensation plan allows executive officers to defer (or if amounts were previously deferred, to re-defer subject to certain limitations) all or a portion of their STI and MTI awards. Deferring compensation allows
executive officers to earn on the deferred amounts a rate of return calculated under different options available to participating executive officers. The deferred compensation program complies with the requirements of applicable IRS regulations.
None of our NEOs contributed to the deferred compensation plan in 2012. See Nonqualified Deferred Compensation below.
C. Perquisites
In the ordinary course, perquisites generally represent an immaterial component of our executive officer compensation. Effective
January 1, 2012, the Committee terminated the annual flexible spending allowance that previously had been provided to our NEOs. This program had provided executive officers access to a wide range of market competitive perquisites (equal to up
to $15,000 for the CEO, and up to $12,500 for each of the other NEOs) for predefined services and fees not covered under our compensation and benefits programs, including auto leasing, estate planning, financial planning, tax preparation, executive
health assessments and health/fitness club memberships.
VI.
|
|
Change of Control and Severance Agreements
|
The Committee believes that maintaining severance arrangements on a limited basis is a necessary means for recruiting, motivating and
retaining executive officers in the competitive and consolidating industries in which we participate. Having experienced the dislocation caused by a proposed merger in the not too distant past, and given the current volatile operating and regulatory
environment, we want our executive officers sole focus to be on our business and the interests of our stockholders. Further, we believe it is important to be transparent with respect to amounts that our NEOs could receive in the event of their
termination. We believe our existing termination pay agreements, including the amounts provided for, are consistent with, and in some cases more conservative than, current market practice.
The Committee regularly evaluates the on-going need for change of control and severance agreements for our
NEOs. In 2010, we adopted a new termination pay strategy for the Company to be applied generally to executive agreements going forward. This strategy is designed with the primary purposes of:
|
|
|
Responsibly tailoring termination payment levels based on current market standards;
|
|
|
|
Enhancing clarity regarding future potential severance payments to our NEOs;
|
|
|
|
Applying a consistent approach to severance among the Companys executive officers;
|
76
|
|
|
Imposing certain restrictive covenants that are important to the Company; and
|
|
|
|
Eliminating enhanced payouts on an executive officers termination in connection with a change of control of the Company.
|
As part of this new strategy,
we replaced various existing severance and change of control agreements for each of our NEOs (each with differing terms) with a consistent and reasonable severance-based approach. In general, these agreements provide the covered executive with
between one and two times the sum of his or her base salary and target incentive award under our STI/MTI Plan as well as a pro-rated target incentive award for the year of termination. Under these agreements, there is no accelerated or enhanced
payment in the event of a change of control, no accelerated vesting of equity awards and no gross-up for taxes.
In addition, effective April 5, 2011, we entered into a new employment agreement with Mr. Ibrahim. This agreement replaced
Mr. Ibrahims previous employment agreement and made the following notable changes from his previous arrangement:
|
|
|
Consistent with our termination pay strategy, the agreement eliminated any accelerated or enhanced severance payment in the event of a change of
control and included a reasonable severance provision at two times the sum of Mr. Ibrahims base salary and target incentive award under our STI/MTI Plan, as well as a pro-rated target incentive award for the year of termination; and
|
|
|
|
The agreement eliminated any tax gross-up as a result of any excess parachute payment within the meaning of section 280G of the Internal
Revenue Code.
|
See
Potential Payments upon Termination of Employment or Change of Control below for a detailed discussion, including a quantification of, potential payments to the NEOs in connection with a termination event.
VII.
|
|
Compliance with Internal Revenue Code Section 162(m)
|
Section 162(m) of the Code limits the deductibility of
compensation over $1 million paid to a companys chief executive officer and up to the four next most highly compensated executive officers (with the chief financial officer being excluded). To qualify for deductibility under
Section 162(m), compensation in excess of $1 million per year paid to each of these executive officers generally must be performance-based compensation as determined under Section 162(m). To be performance-based compensation,
the material terms of the performance goals under which the compensation is to be paid must be disclosed to and approved by our stockholders before the compensation is paid. To the extent determinable and as one of the factors in its consideration
of compensation matters, the Committee considers the anticipated tax treatment to the Company and to the executive officers of various payments and benefits. The Committee may decide to provide non-deductible compensation if it determines that such
action is in our best interests and those of our stockholders. For example, the Executive LTI Cash-Based Plan was designed to motivate, retain, and reward our executive officers through an unprecedented volatile housing and related credit market
cycle. The Committee decided to retain significant discretion in determining whether objectives were achieved for awards under the plan, and therefore, the awards under the plan will be non-deductible compensation under Section 162(m).
VIII.
|
|
Anti-Hedging, Clawbacks and Pledging of Securities
|
Our Code of Conduct and Ethics specifically prohibits engaging in certain speculative transactions in Radian securities, including short
sales and buying or selling puts or calls of Radian securities. In addition, we strongly discourage any other form of hedging or monetization transactions that would allow an employee or director to own securities without the full risks and rewards
of ownership. Accordingly, any person wishing to enter into such an arrangement must first pre-clear the proposed transaction with our General Counsel and Chief Financial Officer. No such transactions were pre-cleared during 2012.
77
The SEC has not yet adopted final rules implementing the requirements of Section 954 of
the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) regarding the recoupment of compensation, including equity-based compensation, paid to executive officers where the payments were based on the achievement of
financial results that were subsequently the subject of a financial restatement. Proposed rules are expected to be issued in 2013. We plan to adopt a formal compensation recovery, or clawback, policy once the SEC rules are finalized. During this
interim period before the SEC adopts final rules, we believe the restructuring of our STI program to incorporate an MTI component gives us the ability to effectively claw back compensation, as warranted. As discussed above, under the STI/MTI
plan, 50% of an STI award is withheld for an additional one year performance period, with a possibility that the eventual payout under this medium term award may be reduced to zero in the unlikely event the Committee determines there was
a material restatement of our earnings. In addition, under our STI and LTI awards, the Committee retains certain negative discretion to reduce or eliminate payouts, which also could serve as an effective means for eliminating certain
performance-based compensation in the unlikely event of a financial misstatement.
Currently, none of our directors or NEOs has pledged any shares of the Companys common stock as collateral for any loan or other borrowing.
Annual Report on Form 10-K
We filed our Annual Report on Form 10-K for the year ended
December 31, 2012 with the SEC on February 22, 2013. We will mail without charge, upon written request, a copy of our 2012 Form 10-K, excluding exhibits. Please send a written request to Investor Relations, Radian Group Inc., 1601 Market
Street, Philadelphia, Pennsylvania. Our 2012 Form 10-K may also be accessed and printed directly from our website at
www.ir.radian.biz
. Our 2013 Annual Report to Stockholders, which includes our 2012 Form 10-K, is not incorporated into this
proxy statement and is not considered proxy soliciting material.
Important Notice of Internet Availability of Proxy Materials for the Annual Meeting
Pursuant to rules issued by the SEC, we have elected to
provide access to our proxy materials both by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy statement on the Internet. This proxy statement and our 2013 Annual Report to
Stockholders are available on the Investor Relations page of our website at www.radian.biz/StockholderReports.
Householding Proxy Materials
Stockholders residing in the same household who hold their stock through a bank or broker may receive only one set of proxy materials in
accordance with a notice sent earlier by their bank or broker. This practice of sending only one copy of proxy materials is called householding. This saves us money in printing and distribution costs. This practice will continue unless
instructions to the contrary are received by your bank or broker from one or more of the stockholders within the household. Additional copies of this proxy statement are available upon request to Investor Relations, Radian Group Inc., 1601 Market
Street, Philadelphia, Pennsylvania.
If you hold
your shares in street name and reside in a household that received only one copy of the proxy materials, you can request to receive a separate copy in the future by following the instructions sent by your bank or broker. If your
household is receiving multiple copies of the proxy materials, you may request that only a single set of materials be sent by following the instructions sent by your bank or broker.
Other Matters
Management knows of no matters to be presented for action at
the annual meeting other than those discussed in this proxy statement. However, if any other matters properly come before the annual meeting, it is intended that the persons named as proxies will vote on such other matters in accordance with their
judgment of the best interests of Radian.
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APPENDIX A
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
RADIAN GROUP INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
RADIAN GROUP INC.
Radian Group Inc.
, a corporation organized and existing under and by virtue of the Delaware General Corporation Law of the State of Delaware (the Corporation),
DOES HEREBY CERTIFY THAT:
FIRST:
The Board of Directors of the Corporation has
adopted the following resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of the Corporation:
RESOLVED
, that the amendment and restatement of Section 4.1 of Article FOURTH of the Corporations Certificate of
Incorporation is hereby amended to read in its entirety as follows (the Amendment):
Authorized Shares. The total number of shares of all classes of capital stock which the Corporation shall be authorized to issue is five hundred five million (505,000,000) shares of capital stock, of
which four hundred eighty-five million (485,000,000) shares shall be Common Stock, par value $0.001 per share (Common Stock), and twenty million (20,000,000) shares shall be Preferred Stock, par value $0.001 per share
(Preferred Stock).
The designations,
powers, privileges and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation are as follows:
SECOND:
Thereafter, pursuant to the resolution of its
Board of Directors, at the annual meeting of the stockholders of the corporation held May [15], 2013, the necessary number of shares as required by statute were voted in favor of the Amendment.
THIRD:
The Amendment has been duly adopted in
accordance with the provisions of Section 242 of the Delaware General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by the
undersigned and attested by its Secretary this [ ] day of May, 2013.
RADIAN GROUP INC.
By: __________________________
Name: Edward J. Hoffman
Title: Executive Vice President
Attest: __________________________
Name: Tami Bohm
Title: Assistant Secretary
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APPENDIX B-1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
AND
AMENDMENTS
OF
RADIAN GROUP INC.
SECOND AMENDMENT
TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RADIAN GROUP INC.
Radian Group Inc., a corporation organized and existing under the laws of the State of Delaware (the
Corporation
), does
hereby certify that:
1. This Second Amendment to
the Amended and Restated Certificate of Incorporation, as amended (the
Certificate of Incorporation
), of the Corporation has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
2. This Second Amendment
to the Certificate of Incorporation amends Article FOURTH of the Certificate of Incorporation by adding new Section 4.4 of Article FOURTH to read in its entirety as follows:
Section 4.4 Transfer Restrictions.
Section 4.4.1 Certain Definitions.
As used in Section 4.4 of this Article FOURTH:
Acquire
or
Acquisition
and similar terms mean the direct or indirect acquisition of record, legal, beneficial or any other ownership of Corporation Securities by any means, including (a) the exercise of any rights under any option,
warrant, convertible security, pledge or other security interest or similar right to acquire shares or (b) the entering into of any swap, hedge or other arrangement that results in the acquisition of any of the economic consequences of
ownership of Corporation Securities if, as a result of such direct or indirect acquisition, the acquirer would be considered an owner of Corporation Securities under the direct, indirect or constructive ownership rules of Section 382 of the
Code.
Agent
shall have the
meaning set forth in Section 4.4.3(b) of this Article FOURTH.
Business Day
means any day, other than a Saturday, Sunday or day on which banks located in New York City, New York or Philadelphia, Pennsylvania, are authorized or required by law to
close.
Code
means the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
Controlled Person
shall have the meaning set forth in Section 4.4.3(f) of this Article FOURTH.
Corporation Securities
means
(a) shares of Common Stock, (b) shares of Preferred Stock of any class or series of Preferred Stock, (c) warrants, rights or options (including within the meaning of Treasury Regulation Section 1.382-2T(h)(4)(v) (or any successor
provision)) to purchase other Corporation Securities of the Corporation, and (d) any other interests that would be treated as stock of the Corporation pursuant to Treasury Regulation Section 1.382-2T(f)(18) (or any successor
provision).
Effective Date
means the date of filing of the Second Amendment to the Amended and Restated Certificate of Incorporation first containing this provision.
Entity
means an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1) (or any successor
provision).
Excess Securities
shall have the meaning set forth in Section 4.4.3(a) of this Article FOURTH.
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Exchange Act
means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
Exempt Person
means any Existing Holder, unless and until such time as such Existing Holder shall (i) have a
Percentage Stock Ownership that is more than the Existing Holder Ownership Cap of such Existing Holder or (ii) no longer be a five-percent shareholder of the Corporation Securities pursuant to Treasury Regulation
Section 1.382-2T(g)(1) (or any successor provision). Notwithstanding the foregoing, no Exempt Person shall cease to be an Exempt Person solely as the result of an Acquisition of Corporation Securities by the Corporation which, by reducing the
number of Corporation Securities outstanding, increases the Percentage Stock Ownership of such Person.
Existing Holder
means any Person who, immediately before the Effective Date, is a five-percent shareholder
of the Corporation Securities pursuant to Treasury Regulation Section 1.382-2T(g)(1) (or any successor provision).
Existing Holder Initial Ownership
means, with respect to any Existing Holder, the aggregate Percentage Stock Ownership
of such Existing Holder immediately before the Effective Date (as reflected in the most recent Schedule 13D, Schedule 13F or Schedule 13G filed by such Existing Holder before the Effective Date).
Existing Holder Ownership Cap
means, as
determined from time to time with respect to any Existing Holder, the sum of (a) the difference of (i) the Existing Holder Initial Ownership of such Existing Holder minus (ii) the total shares of Stock that such Existing Holder has
disposed of on or after the Effective Date plus (b) the difference (which difference shall in no event be less than zero) of (i)
150,000
shares of Common Stock (subject to adjustment for any stock split, reverse stock split,
recapitalization or similar transaction) minus (ii) the total shares of Stock that such Existing Holder has Acquired on or after the Effective Date; provided, however, that in no event shall the Existing Holder Ownership Cap of such Existing
Holder ever exceed the Existing Holder Initial Ownership of such Existing Holder. For purposes of clause (a)(ii) of this definition, disposed means any direct or indirect sale, transfer, assignment, conveyance, pledge or other
disposition or other action in any manner whatsoever, whether voluntary or involuntary, by operation of law or otherwise, that reduces the Percentage Stock Ownership of the Existing Holder.
Five Percent Shareholder
means a Person that is identified as a five-percent
shareholder of the Corporation Securities pursuant to Treasury Regulation Section 1.382-2T(g)(1) (or any successor provision), but excluding (a) any direct public group with respect to the Corporation, as that term is
defined in Treasury Regulation Section 1.382-2T(j)(2)(ii) (or any successor provision) or (b) any Exempt Person.
Percentage Stock Ownership
and similar terms means the direct and indirect percentage stock ownership of any Person for
purposes of Section 382 of the Code as determined in accordance with Treasury Regulation Section 1.382-2T(g), (h), (j) and (k) (or any successor provisions) including any ownership by application of constructive ownership rules.
Person
means an individual,
corporation, estate, trust, association, limited liability company, partnership, joint venture or similar organization, and also includes a group of Persons that is an entity within the meaning of Treasury Regulation
Section 1.382-3(a)(1) (or any successor provision).
Prohibited Distributions
shall have the meaning set forth in Section 4.4.3(b) of this Article FOURTH.
Prohibited Transfer
shall have the meaning
set forth in Section 4.4.2(a) of this Article FOURTH.
Purported Transferee
shall have the meaning set forth in Section 4.4.3(a) of this Article FOURTH.
Request
shall have the meaning set forth
in Section 4.4.2(b) of this Article FOURTH.
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Restriction Release Date
means such date, after the Effective Date, that
(i) the repeal of Section 382 or any successor statute occurs if the Board determines that Section 4.4 of this Article FOURTH is no longer necessary for the preservation of Tax Benefits, (ii) is the beginning of a taxable year of
the Company to which the Board determines that no Tax Benefits may be carried forward, or (iii) is such date as the Board determines that a limitation on the use of the Tax Benefits under Section 382 would no longer be material to the
Company. In addition, the Restriction Release Date shall occur on the close of business on the second Business Day after the final adjournment of the third consecutive annual meeting of the stockholders of the Company held after this
Section 4.4 was most recently approved by the stockholders of the Company unless this Section 4.4 is re-approved by a majority of the stockholders voting at such meeting.
Restricted Holder
means a Person that
(a) is a Five Percent Shareholder and Acquires or proposes to Acquire additional Corporation Securities, or (b) is proposing to Acquire Corporation Securities, and after such proposed Acquisition of Corporation Securities, would be a Five
Percent Shareholder.
Securities
Act
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Security
or
Securities
shall have the meaning set forth in Section 4.4.3(d) of this Article
FOURTH.
Stock
means any
interest that would be treated as stock of the Corporation pursuant to Treasury Regulation Section 1.382-2T(f)(18) (or any successor provision).
Tax Benefits
means all net operating loss
carryovers, capital loss carryovers, general business carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, if any, as well as any loss or deduction attributable to a net unrealized built-in loss within
the meaning of Section 382 of the Code and the Treasury Regulations promulgated thereunder, of the Corporation or any of its subsidiaries.
Transfer
means any direct or indirect Acquisition, sale, transfer, assignment, conveyance, pledge or other disposition
or other action in any manner whatsoever, whether voluntary or involuntary, by operation of law or otherwise, by any Person that alters the Percentage Stock Ownership of any Person, or any attempt to do any of the foregoing. A Transfer shall also
include the creation or grant of an option (including within the meaning of Treasury Regulation Section 1.382-2T(h)(4)(v) (or any successor provision)). A Transfer shall include a repurchase of Corporation Securities by the Corporation but
shall not include an issuance or grant of Corporation Securities by the Corporation.
Treasury Regulation
means a Treasury Regulation promulgated under the Code.
Section 4.4.2 Transfer Restrictions.
(a) In order to preserve the Tax Benefits, from and after the Effective Date and before the Restriction Release Date, no Transfer other
than to the Corporation shall be permitted, and any such purported Transfer shall be null and void
ab initio
, as to the amount of any such purported Transfer of Corporation Securities that causes, after giving effect to such purported
Transfer (or any series of Transfers of which such Transfer is a part), (i) any Person to become a Five Percent Shareholder or (ii) the Percentage Stock Ownership interest in the Corporation of any Five Percent Shareholder to increase (a
Prohibited Transfer
). The prior sentence is not intended to prevent the Corporation Securities from being DTC-eligible and shall not preclude the settlement of any transactions in the Corporation Securities entered into through
the facilities of a national securities exchange or any national securities quotation system, provided, that if the settlement of the transaction would result in a Prohibited Transfer, such Transfer shall nonetheless be a Prohibited Transfer.
(b) The restrictions contained in this Article
FOURTH are for the purposes of reducing the risk that any ownership change (as defined in the Code) of the Corporation Securities may limit the Corporations ability to utilize its Tax Benefits. In connection therewith, and to
provide for effective policing of these provisions, a
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Restricted Holder who proposes to Acquire Corporation Securities shall, before the date of such proposed Acquisition, request in writing (a
Request
) that the Board of Directors
of the Corporation review such proposed Acquisition and authorize or not authorize such proposed Acquisition in accordance with this Section 4.4.2(b) of Article FOURTH. A Request shall be made in accordance with this Section 4.4.2(b) of
Article FOURTH and shall be delivered by fax and by registered mail, return receipt requested, to the Secretary of the Corporation at the principal executive offices of the Corporation. Such Request shall be deemed to have been received by the
Corporation only when actually received by the Corporation. To be made in accordance with this Section 4.4.2(b) of Article FOURTH, a Request shall include (i) the name, address and telephone number of the Restricted Holder, (ii) a
description of the Restricted Holders existing direct and indirect ownership of Corporation Securities, together with such ownership of all affiliates and associates of the Restricted Holder, (iii) a description of the Corporation
Securities that the Restricted Holder proposes to Acquire, (iv) the date on which such proposed Acquisition is expected to take place (or, if such Acquisition is proposed to be made in a transaction on a national securities exchange or any
national securities quotation system, a statement to that effect), (v) the name, address and telephone number of the proposed transferor of the Corporation Securities that the Restricted Holder proposes to Acquire (or, if such Acquisition is
proposed to be made in a transaction on a national securities exchange or any national securities quotation system, a statement to that effect), (vi) a reasonably detailed description of the Acquisition, and (vii) a request that the Board
of Directors authorize, if appropriate, such Acquisition pursuant to this Section 4.4.2(b) of Article FOURTH. The Board of Directors may authorize an Acquisition by a Restricted Holder, if it determines in its sole discretion, that, such
Acquisition will not be likely to directly or indirectly limit the availability to the Corporation of the Tax Benefits or is otherwise in the best interests of the Corporation and, in such case, the restrictions set forth in Section 4.4.2(a) of
this Article FOURTH shall not apply to such Acquisition. If the Board of Directors authorizes an Acquisition by a Restricted Holder, it may, in its sole discretion, deem such Restricted Holder to be an Existing Holder (and to determine the deemed
Existing Holder Initial Ownership) under this Article FOURTH. Any determination by the Board of Directors not to authorize a proposed Acquisition by a Restricted Holder shall cause such proposed Acquisition to be deemed a Prohibited Transfer. Any
determination to authorize a proposed Acquisition by a Restricted Holder granted hereunder may be granted in whole or in part, and may be subject to any limitations or conditions (including restrictions on the ability of the Restricted Holder to
subsequently transfer Corporation Securities acquired through such authorized Acquisition), in each case as and to the extent the Board shall determine in its sole discretion. In addition, the Board of Directors may, in its sole discretion, require
representations from the Restricted Holder or an opinion of counsel to be rendered by counsel selected by the Board of Directors, that the Transfer will not result in the application of any Section 382 limitation on the use of the Tax Benefits
or other matters that the Board of Directors may determine. Any Restricted Holder who makes a Request to the Board of Directors shall reimburse the Corporation, on demand, for all costs and expenses incurred by the Corporation with respect to any
proposed Acquisition of Corporation Securities, including the Corporations costs and expenses incurred in determining whether to authorize the proposed Acquisition, which costs may include any expenses of counsel and/or tax advisors engaged by
the Board of Directors to advise the Board of Directors or deliver an opinion thereto.
Section 4.4.3 Treatment of Excess Securities.
(a) No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of a Prohibited Transfer (the
Purported Transferee
) shall not be
recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities that are the subject of the Prohibited Transfer (the
Excess Securities
). The Purported Transferee shall not be
entitled with respect to such Excess Securities to any rights of a stockholder of the Corporation, including the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof.
Once the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, such Corporation Securities shall cease to be Excess Securities.
(b) If the Board of Directors determines that a Prohibited Transfer has been recorded by an agent or employee of the Corporation
notwithstanding the prohibition in Section 4.4.3(a) of this Article FOURTH, such
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recording and the Prohibited Transfer shall be null and void
ab initio
and have no legal effect and, upon written demand by the Corporation, the Purported Transferee shall transfer or
cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferees possession or control, together with any dividends or other distributions that were received by the Purported
Transferee from the Corporation with respect to the Excess Securities (the
Prohibited Distributions
), to an agent designated by the Board of Directors (the
Agent
). In the event of an attempted Prohibited
Transfer involving the purchase or Acquisition of Corporation Securities in violation of this Article FOURTH by a Restricted Holder, the Agent shall thereupon sell to a buyer or buyers, which may include the Corporation or the purported transferor,
the Excess Securities transferred to it in one or more arms-length transactions (including over a national securities exchange or national securities quotation system on which the Corporation Securities may be traded); provided, however, that
the Agent, in its sole discretion, shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if the Agent determines such sale or sales could disrupt the market for the
Corporation Securities, could adversely affect the value of the Corporation Securities or may be in violation of applicable securities laws. If the Purported Transferee has resold the Excess Securities before receiving the Corporations demand
to surrender the Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, unless
the Corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to Section 4.4.3(c) of this
Article FOURTH if the Agent, rather than the Purported Transferee, had resold the Excess Securities.
(c) The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee had previously resold the
Excess Securities, any amounts received by it from a Purported Transferee, as follows: (i) first, to reimburse itself to the extent necessary to cover its costs and expenses incurred in accordance with its duties hereunder; (ii) second, to
reimburse the Purported Transferee for the amounts paid by the Purported Transferee for the Excess Securities (or in the case of any Prohibited Transfer by gift, devise or inheritance or any other Prohibited Transfer without consideration, the fair
market value, calculated on the basis of the closing market price for the Corporation Securities on the day before the Prohibited Transfer), and (iii) third, the remainder, if any, to the original transferor, or, if the original transferor
cannot be readily identified, to an entity designated by the Corporations Board of Directors that is described in Section 501(c) of the Code, contributions to which must be eligible for deduction under each of Sections 170(b)(1)(A), 2055
and 2522 of the Code. The recourse of any Purported Transferee with respect to any Prohibited Transfer shall be limited to the amount payable to the Purported Transferee pursuant to clause (ii) of this Section 4.4.3(c) of this Article
FOURTH. Except as may be required by law, in no event shall the proceeds of any sale of Excess Securities pursuant to this Article FOURTH inure to the benefit of the Corporation or the Agent, except to the extent used to cover expenses incurred by
the Agent in performing its duties hereunder.
(d)
In the event of any Transfer to the Corporation, or any Transfer that does not involve a transfer of securities of the Corporation within the meaning of Delaware law (
Securities
, and individually, a
Security
),
that would in either case cause (i) any Person to become a Five Percent Shareholder or (ii) the Percentage Stock Ownership interest of any Five Percent Shareholder to increase, the application of Section 4.4.3(b) and
Section 4.4.3(c) shall be modified as described in this Section 4.4.3(d). In such case, no such Five Percent Shareholder shall be required to dispose of any interest that is not a Security, but such Five Percent Shareholder and/or any
Person whose ownership of Securities is attributed to such Five Percent Shareholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which
they were acquired) to cause such Five Percent Shareholder, after such disposition, not to be in violation of this Article FOURTH. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this
provision, and such number of Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Section 4.4.3(b) and Section 4.4.3(c), except that the maximum
aggregate amount payable either to such Five Percent Shareholder, or to such other Person that was the direct holder of such Excess Securities, in connection with such sale shall be the fair market value of such Excess Securities at the time of the
purported Transfer. All
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expenses incurred by the Agent in disposing of such Excess Securities shall be paid out of any amounts due such Five Percent Shareholder or such other Person. The purpose of this
Section 4.4.3(d) is to extend the restrictions in Section 4.4.2(a) and Section 4.4.3(a) to situations in which there is a Five Percent Shareholder without a direct Transfer of Securities, and this Section 4.4.3(d), along with the
other provisions of this Article FOURTH, shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.
(e) If the Purported Transferee fails to surrender the Excess
Securities or the proceeds of a sale thereof to the Agent within thirty (30) days from the date on which the Corporation makes a demand pursuant to Section 4.4.3(b) of this Article FOURTH or any written demand with respect to a deemed
disposition pursuant to Section 4.4.3(d) of this Article FOURTH, then the Corporation may take any actions it deems necessary to enforce the provisions hereof, including the institution of legal proceedings to compel such surrender.
(f) If any Person shall knowingly violate, or knowingly cause
any other Person under control of such Person (a
Controlled Person
) to violate this Article FOURTH (including failure to surrender the Excess Securities or the proceeds of a sale thereof as demanded by the Corporation pursuant to
Section 4.4.3(e) of this Article FOURTH), then that Person and any Controlled Person shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all losses and damages
suffered as a result of such violation, including any attorneys and auditors fees incurred in connection with such violation.
Section 4.4.4 Legends; Compliance.
(a) All certificates reflecting Corporation Securities on or after the Effective Date shall, until the Restriction Release Date, bear a
conspicuous legend in substantially the following form:
THE TRANSFER OF SECURITIES REPRESENTED HEREBY IS SUBJECT TO RESTRICTION PURSUANT TO ARTICLE FOURTH OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF RADIAN GROUP INC., AS AMENDED, A COPY OF
WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS. IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOID AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER THE
EXCESS SECURITIES (AS DEFINED IN THE CERTIFICATE OF INCORPORATION) TO THE CORPORATIONS AGENT.
(b) The Corporation shall have the power to make appropriate notations upon its stock transfer records and to instruct any transfer agent, registrar, securities intermediary or depository with respect to
the requirements of this Article FOURTH for any uncertificated Corporation Securities or Corporation Securities held in an indirect holding system. As a condition to the registration of the Transfer of any Corporation Securities, any Person who is a
beneficial, legal or record holder of Corporation Securities, and any proposed transferee of such Corporation Securities and any Person controlling, controlled by or under common control with the proposed transferee of such Corporation Securities,
shall provide such information as the Corporation may request from time to time in order to determine compliance with this Article FOURTH or the status of the Tax Benefits of the Corporation.
(c) Nothing contained in this Article FOURTH shall limit the authority of the Board of Directors of the
Corporation to take such other action to the extent permitted by law as it deems necessary or advisable to preserve the Corporations Tax Benefits. The Board of Directors of the Corporation shall have the power to determine all matters
necessary for determining compliance with this Article FOURTH, including determining (i) the identification of Five Percent Shareholders, Exempt Persons and Restricted Holders, (ii) whether a Transfer or proposed Transfer is a Prohibited
Transfer, (iii) the Percentage Stock Ownership in the Corporation of any Five Percent Shareholders, Exempt Persons and Restricted Holders, (iv) whether an instrument constitutes a Corporation Security, (v) the amount (or fair market
value) due to a Purported Transferee, (vi) whether
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compliance with any restriction or limitation on stock ownership and Transfers are no longer required for preservation of Tax Benefits, (vii) the interpretation of the provisions of this
Article FOURTH and the applicability to stockholders of the Corporation of the restrictions on Transfer set forth herein, including the establishment of presumptions and procedures related thereto, and the correction or clarification of any errors
or ambiguities therein, and (viii) any other matters which the Board of Directors deems relevant. Without limiting the generality of the foregoing, for the purposes of determining the existence and identity of, and the amount of Corporation
Securities owned by, any Person, the Corporation and the Board of Directors are entitled to rely on (a) the existence and absence of filings of Schedule 13D, Schedule 13F, or Schedule 13G under the Exchange Act (or any similar schedules) as of
any date, and (b) its actual knowledge of the ownership of the Corporation Securities. In the case of an ambiguity in the application of any of the provisions of this Article FOURTH, including any definition used herein, the Board of Directors
shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event that this Article FOURTH requires an action by the Board
of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the express provisions of this Article FOURTH.
All such actions, calculations, interpretations and determinations that are done or made by the Board of Directors in good faith shall be final, conclusive and binding on the Corporation, the Agent, and all other parties to a Transfer. The Board of
Directors may delegate all or any portion of its duties and powers under this Article FOURTH to a committee of the Board of Directors as it deems advisable or necessary.
(d) Nothing contained in this Article FOURTH shall be
construed to give any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Article FOURTH. This Article FOURTH shall be for the sole and exclusive benefit of the Corporation and the Agent.
(e) With regard to any power, remedy or right
provided herein or otherwise available to the Corporation or the Agent provided under this Article FOURTH, (i) no waiver will be effective unless expressly contained in a writing signed by the waiving party, and (ii) no alteration,
modification, or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.
(f) If any provision of this Article FOURTH or the application of any such provision to any Person or under any circumstances shall be
held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Article FOURTH.
(g) The Board shall at least annually consider whether to
make the determination provided by clause (iii) of the definition of Restriction Release Date in Section 4.4.1 of this Article FOURTH in light of all relevant factors, including the amount and anticipated utilization of the
Corporations Tax Benefits and the Corporations market capitalization.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Second Amendment to the Corporations Amended and Restated
Certificate of Incorporation, as amended, has been executed by a duly authorized officer of the Corporation on this 12th day of May, 2010.
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Radian Group Inc.
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By:
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/s/ Edward J. Hoffman
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Name:
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Edward J. Hoffman
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Title:
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Senior Vice President, Secretary and Corporate Secretary
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RADIAN GROUP INC.
Radian Group Inc
., a corporation organized and existing under and by virtue of the Delaware General Corporation Law of the State of
Delaware (the Corporation),
DOES
HEREBY CERTIFY THAT:
FIRST
: The Board of
Directors of the Corporation has adopted the following resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of the Corporation:
RESOLVED
, that the amendment and
restatement of Section 4.1 of Article FOURTH of the Corporations Certificate of Incorporation is hereby amended to read in its entirety as follows (the Amendment):
Authorized Shares. The total number of shares of all classes of capital stock which the Corporation shall be
authorized to issue is three hundred forty-five million (345,000,000) shares of capital stock, of which three hundred twenty-five million (325,000,000) shares shall be Common Stock, par value $0.001 per share (Common Stock),
and twenty million (20,000,000) shares shall be Preferred Stock, par value $0.001 per share (Preferred Stock).
The designations, powers, privileges and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of
capital stock of the Corporation are as follows:
SECOND
: Thereafter, pursuant to the resolution of its Board of Directors, at the annual meeting of the stockholders of the
corporation held May 22, 2008, the necessary number of shares as required by statute were voted in favor of the Amendment.
THIRD
: The Amendment has been duly adopted in accordance with the provisions of Section 242 of the Delaware General
Corporation Law of the State of Delaware.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by the undersigned and attested by its Secretary this 22nd day of May, 2008.
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RADIAN GROUP INC.
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By:
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/s/ Edward J. Hoffman
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Name: Edward J. Hoffman
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Title: Senior Vice President
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Attest: /s/ Teresa A. Bryce
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Name: Teresa A. Bryce
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Title: Secretary
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THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RADIAN GROUP INC.
Radian Group Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the
Corporation), DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation was filed with the Secretary of State of Delaware on December 6, 1991, under the
name CMAC Investment Corporation. The initial Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on October 20, 1992 under the name CMAC Investment
Corporation. Certificates of Designation were filed with the Secretary of State of Delaware on October 29, 1992 and on May 1, 1998 under the name CMAC Investment Corporation. A Certificate of Merger was filed with the
Secretary of State of Delaware on June 9, 1999, merging Amerin Corporation, a Delaware corporation, with and into CMAC Investment Corporation under the name Radian Group Inc., and further amending and restating the Certificate of
Incorporation. A Certificate of Amendment was filed with the Secretary of State of Delaware on June 14, 2001 under the name Radian Group Inc. A Certificate of Designations was filed with the Secretary of State of Delaware on
October 7, 2002 under the name Radian Group Inc.
SECOND: The Corporation now desires to further amend and restate its existing Amended and Restated Certificate of Incorporation, incorporating all subsequent amendments and designations and further
amending such certificate.
THIRD: The Amended and
Restated Certificate of Incorporation of the Corporation in the form attached hereto as
Exhibit A
has been duly adopted in accordance with the provisions of Sections 245 and 242 of the General Corporation Law of the State of Delaware by the
directors and stockholders of the Corporation.
FOURTH: The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in
Exhibit A
attached hereto
and is hereby incorporated herein by this reference.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the
following officers of the Corporation this 11th day of May, 2004.
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RADIAN GROUP INC.
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By:
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/s/ Frank P. Filipps
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Frank P. Filipps, Chairman and
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Chief Executive Officer
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ATTEST:
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By:
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/s/ Howard S. Yaruss
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Howard S. Yaruss, Executive Vice President,
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Secretary and General Counsel
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RADIAN GROUP INC.
FIRST: CORPORATE NAME. The name of the corporation is Radian Group Inc. (hereinafter referred to as the Corporation).
SECOND: REGISTERED OFFICE. The registered office
of the Corporation is to be located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: CORPORATE PURPOSE. The purpose of the
Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law.
FOURTH: CAPITAL STOCK.
4.1 Authorized Shares. The total number of shares of all classes of capital stock which the Corporation shall be authorized to issue is
two hundred twenty million (220,000,000) shares of capital stock, of which two hundred million (200,000,000) shares shall be Common Stock, par value $.001 per share (Common Stock), and twenty million (20,000,000) shares
shall be Preferred Stock, par value $.001 per share (Preferred Stock).
The designations, powers, privileges and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation are as follows:
4.2 Common Stock.
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(a)
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General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock
of any series as may be designated by the Board of Directors in accordance with this Article FOURTH.
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(b)
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Voting. Each holder of Common Stock shall be entitled to one vote for each share thereof held by such holder for the election of directors and on all matters submitted
to a vote of stockholders of the Corporation.
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The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law.
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(c)
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Dividends. Dividends may be declared and paid on the Common Stock from assets lawfully available therefore as and when determined by the Board of Directors, subject to
any preferential dividend rights of any then outstanding Preferred Stock.
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(d)
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Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of
the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.
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4.3 Authority of Board of Directors to Fix Terms of Preferred Stock. The Preferred Stock authorized by this Certificate of Incorporation
may be issued from time to time in one or more series. The Board of Directors of the Corporation shall have the full authority permitted by law to establish one or more series and the number of shares constituting each such series and to fix by
resolution full or limited, multiple or fractional, or no voting rights, and such designations, preferences, qualifications, privileges, limitations, restrictions, options, conversion
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rights and other special or relative rights of any series of the Preferred Stock that may be desired. Subject to the limitation on the total number of shares of Preferred Stock which the
Corporation has authority to issue hereunder, the Board of Directors is also authorized to increase or decrease the number of shares of any series, subsequent to the issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such
series.
FIFTH: BOARD OF DIRECTORS.
5.1 Number; Election. The Board of Directors of the
Corporation shall consist of such number of directors, which number shall not be less than 9 or more than 14, as shall be fixed from time to time by resolution of the Board of Directors. Notwithstanding the original length of the term to which any
director of the Corporation was elected prior to the filing of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, the terms of office of all directors who hold office immediately prior to the
closing of the polls for the election of directors at the annual meeting of stockholders of the Corporation held in 2005 shall expire at such time. At each annual meeting of stockholders beginning with the annual meeting of stockholders of the
Corporation held in 2005, the Board of Directors shall not be classified, and the directors of the Corporation, other than those who may be elected by the holders of any then outstanding Preferred Stock, shall be elected by the stockholders entitled
to vote at such meeting, and shall hold office until the next annual meeting of stockholders and until their respective successors shall have been elected and qualified, subject to their prior death, resignation or removal from office.
5.2 Qualifications. No person shall be appointed or elected a
director of the Corporation unless:
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(a)
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such person is elected to fill a vacancy in the Board of Directors (including any vacancy resulting from any increase in the authorized number of directors) by a vote
of the majority of the Board of Directors then in office, and any director so elected shall hold office until the next election of the Board of Directors and until a successor shall have been elected and qualified, subject to such directors
prior death, resignation or removal from office; or
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(b)
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the name of such person, together with such consents and information concerning present and prior occupations, transactions with the Corporation or its subsidiaries and
other matters as may at the time be required by or pursuant to the By-laws, shall have been filed with the Secretary of the Corporation no later than a time determined by or pursuant to the By-laws immediately preceding the annual or special meeting
at which such person intends to be a candidate for director.
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5.3 Removal of Directors. Directors of the Corporation may only be removed for cause by a vote of the holders of shares entitled to cast a majority of the votes which all stockholders are entitled to cast
at an election of directors. No decrease or increase in the size of the Board of Directors shall shorten or otherwise affect the term of any incumbent director.
5.4 Elections of Directors. Elections of directors need not be by written ballot unless the By-laws of the Corporation shall so provide.
SIXTH: BY-LAWS. The Board of Directors shall have
the power, in addition to the stockholders, to make, alter, or repeal the By-laws of the Corporation.
SEVENTH: LIABILITY OF DIRECTORS. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except for liability (i) for any breach of the directors duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, as the same exists or hereafter may be amended, or
(iv) for any transaction from which
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the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended or supplemented to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of a director to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the Delaware General Corporation Law, as so amended or supplemented from time
to time. Any repeal or modification of this Article SEVENTH shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
EIGHTH: INDEMNIFICATION. The Corporation shall,
to the fullest extent permitted by the Delaware General Corporation Law, as the same may be amended or supplemented from time to time, indemnify any and all past, present and future directors and officers of the Corporation from and against any and
all costs, expenses (including attorneys fees), damages, judgments, penalties, fines, punitive damages, excise taxes assessed with respect to an employee benefit plan and amounts paid in settlement in connection with any action, suit or
proceeding, whether by or in the right of the Corporation, a class of its security holders or otherwise, in which the director or officer may be involved as a party or otherwise, by reason of the fact that such person was serving as a director,
officer, employee or agent of the Corporation, including service with respect to an employee benefit plan. The right of indemnification provided in this Article EIGHTH shall not be exclusive, and shall be in addition to any rights to which any
person may otherwise be entitled by law, under the By-laws of the Corporation, or under any agreement, vote of stockholders or directors, or otherwise. Any repeal or modification of this Article EIGHTH shall be prospective only, and shall not
adversely affect the rights of any person referred to in this Article EIGHTH for or with respect to acts or omissions occurring prior to such repeal or modification.
NINTH: AMENDMENTS. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders are granted subject to this reservation.
* * *
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APPENDIX B-2
AMENDED AND RESTATED
BYLAWS
OF
RADIAN GROUP INC.
AMENDED AND RESTATED
BY LAWS
OF
RADIAN GROUP INC.
(a Delaware corporation)
ARTICLE I
Offices and Fiscal Year
SECTION 1.01.
Registered Office
. The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware until otherwise established by resolution of
the board of directors, and a certificate certifying the change is filed in the manner provided by statute.
SECTION 1.02.
Other Offices
. The corporation may also have offices at such other places within or without the State of Delaware as
the board of directors may from time to time determine or the business of the corporation requires.
SECTION 1.03.
Fiscal Year
. The fiscal year of the corporation shall end on the 31st day of December in each year.
ARTICLE II
NoticeWaiversMeetings
SECTION 2.01.
Notice, What Constitutes
. Whenever,
under the provisions of the Delaware General Corporation Law (GCL) or the certificate of incorporation or of these By-laws, notice is required to be given to any director or stockholder, it shall not be construed to require personal
notice, but such notice may be given in writing, by mail or by telegram (with messenger service specified), electronic transmission or courier service, charges prepaid, or by telephone or facsimile transmission to the address (or to the e-mail
address, facsimile or telephone number) of the person appearing on the books of the corporation, or in the case of directors, supplied to the corporation for the purpose of notice. If the notice is sent by mail, telegram or courier service, it shall
be deemed to be given when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of electronic transmission, when sent, or in the case of facsimile transmission, when received.
SECTION 2.02.
Notice of Meetings of Board of
Directors
. Notice of a regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director in person or by telephone or in writing at least 24 hours (in the case
of notice in person or by telephone, electronic transmission or facsimile transmission) or 48 hours (in the case of notice by telegram, courier service or express mail) or five days (in the case of notice by first class mail) before the time at
which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting.
SECTION 2.03.
Notice of Meetings of
Stockholders
. Written notice of the place, date and hour of every meeting of the stockholders, whether annual or special, shall be given to each stockholder of record entitled to vote at the meeting not less than ten nor more than 60 days before
the date of the meeting. Every notice of a special meeting shall state the purpose or purposes thereof. If the notice is sent by mail, it shall be deemed to have been given when deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of the corporation.
SECTION 2.04.
Waivers of Notice
.
(a) Written Waiver. Whenever notice is required to be given under any provisions of the GCL or the certificate of incorporation or these By-laws, a written waiver, signed by the person or persons entitled
to the
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notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice of such meeting.
(b) Waiver by Attendance. Attendance of a person at a meeting, either in person or by proxy, shall constitute a waiver of notice of such
meeting, except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened.
SECTION 2.05.
Exception to Requirements of Notice
.
(a) General Rule. Whenever notice is required to
be given, under any provision of the GCL or of the certificate of incorporation or these By-laws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply
to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
(b) Stockholders Without Forwarding Addresses. Whenever notice is required to be given, under any provision of the GCL or the certificate
of incorporation or these By-laws, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between
such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such person at his address as shown on
the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and
effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth the persons then current address, the requirement that notice be given to such person shall be reinstated.
SECTION 2.06.
Conference Telephone
Meetings
. One or more directors may participate in a meeting of the board, or of a committee of the board, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting.
ARTICLE III
Meetings of Stockholders
SECTION 3.01.
Place of Meeting
. All meetings of the stockholders of the corporation shall be held at such place within or without
the State of Delaware as shall be designated by the board of directors in the notice of such meeting.
SECTION 3.02.
Annual Meeting
. The board of directors may fix and designate the date and time of the annual meeting of the
stockholders. At said meeting the stockholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting.
SECTION 3.03.
Special Meetings
. Special meetings of
the stockholders of the corporation may be called at any time by the chairman of the board, a majority of the board of directors or the holders of a majority of the total number of shares of common stock of the corporation then-outstanding. At any
time, upon the written request of any person or persons who have duly called a special meeting, which written request shall state the purpose or purposes of the meeting, it shall be the duty of the secretary to fix the date of the meeting which
shall be held at such date and time as the secretary may fix, not less than ten nor more than 60 days after the receipt of the request, and to give due notice thereof. If the secretary shall neglect or refuse to fix the time and date of such meeting
and give notice thereof, the person or persons calling the meeting may do so.
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SECTION 3.04.
Quorum, Manner of Acting and Adjournment
.
(a) Quorum. The holders of a majority of the shares entitled
to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders except as otherwise provided by the GCL, by the certificate of incorporation or by these By-laws. If a quorum is not present or
represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time. In addition, whether or not there is a quorum, the
chairman of the meeting may adjourn any meeting of stockholders to any other time and to any other place at which a meeting of stockholders may be held under these By-laws. It shall not be necessary to notify any stockholder of any adjournment of
less than 30 days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At any such adjourned meeting at which a
quorum is present or represented, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
(b) Manner of Acting. Directors shall be elected in the manner provided in Section 4.13. In all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote thereon shall be the act of the stockholders, unless the question is one upon which, by express provision of the
applicable statute, the certificate of incorporation or these By-laws, a different vote is required in which case such express provision shall govern and control the decision of the question. The stockholders present in person or by proxy at a duly
organized meeting can continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum.
SECTION 3.05.
Stockholder Proposals
. Nominations by stockholders of persons for election to the board of directors of the
corporation may be made at an annual or special meeting only in compliance with Section 4.13 hereof. The proposal of other business to be considered by the stockholders at an annual meeting of stockholders may only be made (i) pursuant to
the corporations notice of meeting, (ii) by or at the direction of the board of directors, or (iii) by any stockholder of the corporation who (x) was a stockholder of record at the time of giving of notice provided for in this
By-law and at the time of the annual meeting, (y) is entitled to vote at the meeting and (z) provides timely notice in writing to the secretary of the corporation and complies with the procedures and requirements set forth in this By-law;
clause (iii) shall be the exclusive means for a stockholder to submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act) and included in the
corporations notice of meeting) before an annual meeting of stockholders. To be properly brought before a meeting of stockholders, business must be of a proper subject for action by stockholders under applicable law and must not, if
implemented, cause the corporation to violate any state, federal or foreign law or regulation, each as determined in good faith by the board of directors.
To be timely, a stockholders notice shall be delivered to or mailed to, and received by, the secretary at the
principal executive offices of the corporation not more than 120 days nor less than 90 days prior to the first anniversary of the preceding years annual meeting; provided, however, that in the event that the date of the annual meeting is more
than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120
th
day prior to the date of such annual meeting and not later than the close of business on the later of the 90
th
day prior to the date of such annual meeting or, if the first public
announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the
10
th
day following the day on which public announcement of
the date of such meeting is first made by the corporation. In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above. Such
stockholders notice to the secretary shall set forth (a) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is made, (i) their name and record address, (ii) the class and number of
shares of capital stock of the corporation which are, directly or indirectly, owned beneficially and/or of record by each of them, (iii) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or
beneficial owner, if any, has a right to vote any shares of any
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security of the corporation, (iv) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons
(including their names) in connection with the proposal of such business by such stockholder, and (v) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement
or other filing required to be made in connection with solicitations of proxies for the proposal pursuant to the Exchange Act and the rules and regulations promulgated thereunder, (b) a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is made, (c) an agreement by
the stockholder that the stockholder will appear in person or by proxy at the meeting to propose the consideration of the business, and (d) the information required by Section 3.06. Only such business shall be conducted at a special
meeting of stockholders as shall have been brought before the meeting pursuant to the corporations notice of meeting. Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this section.
The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that any proposal made at the meeting was not made in accordance with the foregoing procedures and, in such
event, the proposal shall be disregarded. Any decision by the chairman of the meeting shall be conclusive and binding upon all stockholders of the corporation for any purpose.
Notwithstanding the foregoing provisions of this By-law, a
stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law; provided, however, that any references in these By-laws to the Exchange
Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to proposals of business to be considered pursuant to this By-Law.
SECTION 3.06.
Disclosure by Stockholders of Hedged
Positions
. A notice submitted by a stockholder under Section 3.05 or 4.13 must describe, with respect to the stockholder and any Stockholder Associated Person, (i) any Derivative Instrument directly or indirectly beneficially owned by
the stockholder or a Stockholder Associated Person, or any other direct or indirect opportunity for the stockholder or Stockholder Associated Person to profit or share in any profit derived from any increase or decrease in the value of shares of the
corporation, (ii) any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which the stockholder or Stockholder Associated Person is a general partner
or, directly or indirectly, beneficially owns an interest in a general partner, (iii) any short interest in any security of the corporation (for purposes of this By-law a person shall be deemed to have a short interest in a security if such
person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (iv) any
performance-related fees (other than an asset-based fee) that such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, and
(v) any hedging or other transaction or series of transactions that has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including, without limitation, any put, short position or any borrowing or
lending of shares) that has been made, the effect or intent of which is to mitigate loss to or manage risk of share price changes for, or to increase or decrease the voting power of, the stockholder or any Stockholder Associated Person with respect
to any share of the corporation.
Definitions. As
used in this Section 3.06 the following terms have the meanings indicated:
Derivative Instrument means an option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism
at a price related to any class or series of shares of the corporation or with a value derived in whole or in part from the value of any class or series of shares of the corporation, whether or not such instrument or right is subject to settlement
in the underlying class or series of shares of the corporation or otherwise.
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Stockholder Associated Person of a stockholder means (i) any person
controlling, controlled by, under common control with, or acting in concert with, the stockholder, (ii) any beneficial owner of shares of the corporation owned of record or beneficially by the stockholder, and (iii) any person controlling,
controlled by or under common control with, a person that is a Stockholder Associated Person pursuant to clause (ii) of this definition.
SECTION 3.07.
Organization
. At every meeting of the stockholders, the chairman of the board, if there be one, or in the case of a
vacancy in the office or absence of the chairman of the board, one of the following persons present in the order stated: the vice chairman, if one has been appointed, the chief executive officer, the president, the vice presidents in their order of
rank or seniority, a chairman designated by the board of directors present at the meeting or a chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast,
shall act as chairman, and the secretary, or, in the absence of the secretary, an assistant secretary, or in the absence of the secretary and the assistant secretaries, a person appointed by the chairman, shall act as secretary.
SECTION 3.08.
Voting
.
(a) General Rule. Unless otherwise provided in the
certificate of incorporation, each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock having voting power held by such stockholder.
(b) Voting and Other Action by Proxy.
(1) A stockholder may execute a writing authorizing another
person or persons to act for the stockholder as proxy. Such execution may be accomplished by the stockholder or the authorized officer, director, employee or agent of the stockholder signing such writing or causing his or her signature to be affixed
to such writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorize another person or persons to act for the stockholder as proxy by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the
proxy to receive such transmission if such telegram, cablegram or other means of electronic transmission sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder.
(2) No proxy shall
be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.
SECTION 3.09.
Voting Lists
. The officer who has charge
of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
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SECTION 3.10.
Inspectors of Election
.
(a) Appointment. All elections of directors shall be by
written ballot; the vote upon any other matter need not be by ballot. In advance of any meeting of stockholders the board of directors may appoint one or more inspectors, who need not be stockholders, to act at the meeting and to make a written
report thereof. The board of directors may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to
the persons best ability.
(b) Duties. The
inspectors shall ascertain the number of shares outstanding and the voting power of each, shall determine the shares represented at the meeting and the validity of proxies and ballots, shall count all votes and ballots, shall determine and retain
for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and shall certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
(c) Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder
shall determine otherwise.
(d) Reconciliation of
Proxies and Ballots. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information transmitted in accordance with
Section 3.08, ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks,
brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for
the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b) shall specify the precise information considered by them including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors belief that such information is accurate and reliable.
ARTICLE IV
Board of Directors
SECTION 4.01.
Powers
. All powers vested by law in the corporation shall be exercised by or under the authority of, and the business
and affairs of the corporation shall be managed under the direction of, the board of directors.
SECTION 4.02.
Number
. Subject to the provisions of the certificate of incorporation, the board of directors shall consist of such number of directors as may be determined only by resolution adopted
by a majority of the directors present at a meeting at which a quorum is present.
SECTION 4.03.
Term of Office
. Subject to the provisions of the certificate of incorporation, directors of the corporation shall hold office until the next annual meeting of stockholders and until
their successors shall have been elected and qualified, except in the event of death, resignation or removal.
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SECTION 4.04.
Vacancies
.
(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors
may be filled by resolution adopted by a majority of the directors then in office, though less than a quorum of the full board, or the sole remaining director, and a director so chosen shall hold office until the next annual election of directors
and until a successor is duly elected and qualified. If there are no directors in office, then an election of directors may be held in the manner provided by statute.
(b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by
such class or classes or series thereof then in office, or by a sole remaining director so elected.
(c) If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the entire board (as constituted immediately prior to
any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorship, or to replace the directors chosen by the directors then in office.
SECTION 4.05.
Resignations
. Any director may resign at any time upon written notice to the chairman, chief executive officer,
president or secretary of the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation and, unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it effective.
SECTION 4.06.
Organization
. At every meeting of the board of directors, the chairman of the board, if there be one, or, in the case of a vacancy in the office or absence of the chairman of the
board, one of the following officers present in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a chairman chosen by a majority of the directors present,
shall preside, and the secretary, or, in the absence of the secretary, an assistant secretary, or in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary.
SECTION 4.07.
Place of Meeting
. Meetings of the board
of directors, both regular and special, shall be held at such place within or without the State of Delaware as the board of directors may from time to time determine, or as may be designated in the notice of the meeting.
SECTION 4.08.
Regular Meetings
. Regular meetings of
the board of directors shall be held without notice at such time and place as shall be designated from time to time by resolution of the board of directors.
SECTION 4.09.
Special Meetings
. Special meetings of the board of directors shall be held whenever called by the chairman or by a
majority of the members of the board of directors.
SECTION 4.10.
Quorum, Manner of Acting and Adjournment
.
(a) General Rule. At all meetings of the board of directors a
majority of the entire board of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by the GCL or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present.
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(b) Unanimous Written Consent. Unless otherwise restricted by the certificate of
incorporation, any action required or permitted to be taken at any meeting of the board of directors may be taken without a meeting, if all members of the board consent thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board.
SECTION 4.11.
Committees of the Board
.
(a)
Establishment. The board of directors may, by resolution adopted by a majority of the entire board, establish an Executive Committee and one or more other committees, each committee to consist of one or more directors. The board may designate one or
more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee and the alternate or alternates, if any,
designated for such member, the member or members of the committee present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member.
(b) Powers.
The Executive Committee, if established, and any such other committee, to the extent provided in the resolution establishing such committee, shall have and may exercise all the power and authority of the board of directors in the management of the
business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have such power or authority in reference to amending the certificate of
incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the GCL, fix the designation
and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any
other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of shares of any series), adopting an agreement of merger or consolidation
under Section 251, 252, 254, 255, 256, 257, 258, 263 or 264 of the GCL, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporations property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the By-laws of the corporation. The Executive Committee shall have the power or authority to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger pursuant to Section 253 of the GCL. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee so formed
shall keep regular minutes of its meetings and report the same to the board of directors when required.
(c) Committee Procedures. The term board of directors or board, when used in any provision of these By-laws
relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to the Executive Committee or other committee of the board.
SECTION 4.12.
Compensation of Directors
. Unless
otherwise restricted by the certificate of incorporation, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for attending committee meetings.
SECTION 4.13.
Qualifications and Election of Directors
.
(a) All directors of the corporation shall be natural persons
of full age, but need not be residents of Delaware or stockholders of the corporation. Except in the case of vacancies, directors shall be elected by the stockholders.
(b) Nominations of persons for election to the board of
directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors.
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(c) Nominations of persons for election to the board of directors of the corporation may
also be made by any stockholder of the corporation who (x) was a stockholder at the time of giving of notice provided for in this By-law and at the time of the applicable meeting of stockholders, (y) is entitled to vote for the election of
directors at such meeting of stockholders and (z) provides timely notice in writing to the secretary of the corporation and complies with the procedures and requirements set forth in this Section 4.13(c), which shall be the exclusive means
for a stockholder to make nominations of persons for election to the board of directors of the corporation. No person may be appointed, nominated or elected a director of the corporation unless such person, at the time such person is nominated and
appointed or elected, would then be able to serve as a director without conflicting in any manner with any state, federal or foreign law or regulation applicable to the corporation, as determined in good faith by the board of directors.
To be timely, a stockholders
notice pertaining to an annual meeting of stockholders at which directors are to be elected shall be delivered to or mailed to, and received by, the secretary at the principal executive offices of the corporation not more than 120 days or less than
90 days prior to the first anniversary of the preceding years annual meeting; provided, however, that in the case of an annual meeting the date of which is more than 30 days before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of business on the 120
th
day prior to the date of such annual meeting and not later than the close of business on the later of the 90
th
day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting
is less than 100 days prior to the date of such annual meeting, the 10
th
day following the day on which public announcement of the date of such meeting is first made by the corporation; provided, further, however, that in the event that the number of directors to be elected
to the board of directors at an annual meeting is increased and there is no public announcement by the corporation naming all of the nominees for director or specifying the size of the increased board of directors at least 100 days prior to the
first anniversary of the preceding years annual meeting, a stockholders notice required by this Section 4.13 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 10
th
day following the day on which such public announcement is first made by the corporation. In the event the corporation
calls a special meeting of stockholders for the purpose of electing one or more directors to the board of directors, any stockholder otherwise meeting the requirement of this Section 4.13 may nominate a person or persons (as the case may be)
for election to such position(s) as specified in the corporations notice of meeting, if the stockholders notice required above with respect to any nomination (including the completed and signed representation and agreement required by
Section 4.13(e) of these By-Laws) shall be delivered to the secretary at the principal executive offices of the corporation not earlier than the close of business on the 120
th
day prior to the date of such special meeting and not later than the close of business on the later of the 90
th
day prior to the date of such special meeting or, if the first
public announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the 10
th
day following the day on which public announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as
described above.
Such stockholders notice
to the secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation which are directly or indirectly owned beneficially and/or of record by the person, (iv) a description of all direct and
indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships (including any familial relationships), between or among the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination is made, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective
affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder
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making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the
registrant for purposes of such rule and the nominee were a director or executive officer of such registrant, and (v) any other information relating to the person that is required to be disclosed in a proxy statement or other filing
required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (including such persons
written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made (i) their
names and record addresses, (ii) the class and number of shares of capital stock of the corporation which are, directly or indirectly, owned beneficially and/or of record by each of them, (iii) any proxy, contract, arrangement,
understanding, or relationship pursuant to which such stockholder or beneficial owner, if any, has a right to vote any security of the corporation; (c) a representation that the stockholder will appear in person or by proxy at the meeting to
nominate the individual or individuals proposed in the notice; (d) with respect to each nominee for election or reelection to the board of directors, include a completed and signed representation and agreement required by Section 4.13(e)
of these By-Laws; and (e) the information required in Section 3.06. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation or that could be material to a reasonable stockholders understanding of the independence, or lack thereof, of such nominee.
(d) The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that any
nomination made at the meeting was not made in accordance with the foregoing procedures and, in such event, the nomination shall be disregarded. Any decision by the chairman of the meeting shall be conclusive and binding upon all stockholders of the
corporation for any purpose.
(e) To be eligible
to be a nominee for election or reelection as a director of the corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 4.13) to the secretary at the principal executive
offices of the corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided
by the secretary upon written request) and a written representation and agreement (in the form provided by the secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or
understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the corporation, will act or vote on any issue or question (a Voting Commitment) that has not
been disclosed to the corporation or (2) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the corporation, with such persons fiduciary duties under applicable law,
(B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with
service or action as a director that has not been disclosed to the company and (C) in such persons individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected
as a director of the corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation.
(f) Directors of the corporation shall be elected by the
stockholders at an annual or special meeting of the stockholders, unless such election of directors is required by the terms of any series of preferred stock. If the number of nominees exceeds the number of directorships to be filled, the directors
shall be elected by a plurality of the votes cast. If the number of nominees does not exceed the number of directors to be elected, a nominee shall be elected only if he or she receives a majority of the votes cast. If a nominee is an incumbent
director who is standing for re-election and such nominee does not receive a majority of the votes cast in an election in which the number of nominees does not exceed the number of directors to be elected, the governance committee, or any other or
successor committee responsible for the nomination of directors, must make a recommendation to the
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board on whether to accept the directors resignation or whether other action should be taken, unless the director retires from the board before committee action or board action if there is
no committee action. The board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The board will consider the committees recommendation and publicly disclose
the boards decision and the basis for that decision within 90 days from the date of certification of the final election results. However, if less than two members of the governance or successor committee are elected as directors at a meeting
for the election of directors in an election in which the number of nominees does not exceed the number of directors to be elected, then the board shall consider and act upon the tendered resignation without a recommendation from the committee. The
governance committee and the board may consider any factors that they deem relevant in deciding whether to accept a directors resignation. Each share of the corporation entitled to be voted on the election of directors may only be voted
noncumulatively. For purposes of this paragraph, a majority of the votes cast means that the number of shares voted for must exceed the number of shares voted against with respect to that directors election (with
abstentions and broker non-votes not counted as for or against that directors election). If the number of nominees does not exceed the directors to be elected, each share of the corporation
entitled to be voted on the election of directors may be voted for or against, or the person voting such share may abstain with respect to, each candidate for election. If directors are to be elected by a plurality of the votes cast, stockholders
shall not be permitted to vote against a nominee.
(g) Each director who is nominated to stand for election shall, as a condition to such nomination, tender an irrevocable resignation in
advance of the election of directors. Such resignation will be effective if, pursuant to Section 4.13(f) of these By-laws (a) the director does not receive a majority vote in the next election of directors in which the number of nominees
does not exceed the number of directors to be elected, and (b) the board accepts the resignation, unless the director retires from the board before committee action or board action if there is no committee action. In addition, the board shall
fill new director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment by the board, the same form of irrevocable resignation.
SECTION 4.14.
Voting of Stock
. Unless otherwise ordered by the board of directors, each of the chairman
of the board, the principal executive officer (as defined by the rules and regulations of the United States Securities and Exchange Commission) and the principal accounting officer (as defined by the rules and regulations of the United States
Securities and Exchange Commission) shall have full power and authority, on behalf of the corporation, to attend and to act and vote, in person or by proxy, at any meeting of the stockholders of any company in which the corporation may hold stock,
and at any such meeting shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock which, as the owner thereof, the corporation might have possessed and exercised if present. The board of directors,
by resolution adopted from time to time, may confer like powers upon any other person or persons.
SECTION 4.15.
Endorsement of Securities for Transfer
. Each of the chairman of the board, the principal executive officer and the principal accounting officer shall have the power to endorse and
deliver for sale, assignment or transfer certificates for stock, bonds or other securities, registered in the name of or belonging to the corporation, whether issued by the corporation or by any other corporation, government, state or municipality
or agency thereof; and the board of directors from time to time may confer like power upon any other officer, agent or person by resolution adopted from time to time. Every such endorsement shall be countersigned by the treasurer or an assistant
treasurer.
SECTION 4.16.
Lead Director
.
Unless the corporation shall have a non-executive Chairman of the Board, the directors will elect one of their numbers to serve as Lead Director. The Lead Director will assume such duties as the directors may designate from time to time.
Notwithstanding anything contained in Section 8.06, this
Section 4.16 may only be altered, amended or repealed (a) by vote of the stockholders at a duly organized annual or special meeting of stockholders in accordance with the certificate of incorporation, or (b) by vote of 75% of the
entire board of directors at any regular or special meeting of directors.
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ARTICLE V
Officers
SECTION 5.01.
Number, Qualifications and Designation
.
The officers of the corporation shall be chosen by the board of directors and shall be a president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of
Section 5.03 of this Article. Any number of offices may be held by the same person. Officers may, but need not, be directors or stockholders of the corporation. The board of directors may elect from among the members of the board a chairman of
the board and a vice chairman of the board.
SECTION 5.02.
Election and Term of Office
. The officers of the corporation, except those elected by delegated authority pursuant to
Section 5.03 of this Article, shall be elected annually by the board of directors, and each such officer shall hold office for a term of one year and until a successor is elected and qualified, or until his or her earlier resignation or
removal. Any officer may resign at any time upon written notice to the corporation.
SECTION 5.03.
Subordinate Officers, Committees and Agents
. The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as it deems
necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as are provided in these By-laws, or as the board of directors may from time to time determine. The board of directors may delegate to any
officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents.
SECTION 5.04.
The Chairman of the Board
.
(a) Chairman of the Board. The Chairman of the
Board, if one shall have been elected, shall be a member of the board of directors, an officer of the corporation and, if present, shall preside at each meeting of the board of directors and of the stockholders. He shall advise and counsel with the
chief executive officer and, in his absence, with other executives of the corporation, and shall perform such other duties as may from time to time be assigned to him by the board of directors.
(b) Non-executive Chairman of the Board. If the board of
directors does not choose to elect a Chairman of the Board as described in (a) above, then the board of directors shall elect a non-executive Chairman of the Board, who shall be a member of the board of directors but not an officer of the
corporation. If present, the non-executive Chairman of the Board shall preside at each meeting of the board of directors and of the stockholders. He shall advise and counsel with the chief executive officer and, in his absence, with other executives
of the corporation, and shall perform such other duties as may from time to time be assigned to him by the board of directors.
SECTION 5.05.
The Vice Chairman of the Board
. The vice chairman of the board, if there be one, shall in the absence of a Chairman
of the Board or non-executive Chairman of the Board preside at all meetings of the board of directors and of the stockholders, and shall perform such other duties as may from time to time be assigned to him by the board of directors.
SECTION 5.06.
The Chief Executive Officer
. The chief
executive officer of the corporation shall have general supervision over the business and operations of the corporation, subject, however, to the control of the board of directors, and shall perform all duties incident to his office which may be
required by law and all such other duties as are properly required of him by the board of directors. He shall make reports to the board of directors and the stockholders, and shall see that all orders and resolutions of the board of directors and of
any committee thereof are carried into effect.
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SECTION 5.07.
The President
. The president shall perform such duties as may from time
to time be assigned to him by the board of directors or by the chairman of the board.
SECTION 5.08.
The Vice Presidents
. The vice presidents shall perform the duties of the chairman of the board and president in his absence and such other duties as may from time to time be assigned
to them by the board of directors or by the chairman of the board.
SECTION 5.09.
The Secretary
. The secretary, or an assistant secretary, shall attend all meetings of the stockholders and of the board of directors and shall record the proceedings of the
stockholders and of the directors and of committees of the board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the
custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as
may from time to time be assigned by the board of directors or the chairman of the board.
SECTION 5.10.
The Treasurer
. The treasurer, or an assistant treasurer, shall have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide
for the collection and receipt of moneys earned by or in any manner due to or received by the corporation; shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the board of directors may from time to
time designate; whenever so required by the board of directors, shall render an account showing his or her transactions as treasurer and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time
to time be assigned by the board of directors or the chairman of the board.
SECTION 5.11.
Officers Bonds
. No officer of the corporation need provide a bond to guarantee the faithful discharge of the officers duties unless the board of directors shall by
resolution so require a bond in which event such officer shall give the corporation a bond (which shall be renewed if and as required) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of office.
SECTION
5.12.
Salaries
. The salaries of the officers and agents of the corporation elected by the board of directors shall be fixed from time to time by the board of directors, except that the compensation of the corporations chief executive
officer shall be subject to the approval of the independent (as defined by the applicable rules of the New York Stock Exchange and the Securities and Exchange Commission) members of the board of directors rather than the full board of directors.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
SECTION 6.01.
Form and Issuance
.
(a)
Issuance
. Shares of the capital stock of the
corporation may be certificated or uncertificated, as provided under the General Corporation Law of the State of Delaware. Any certificated shares shall remain certificated until the certificate representing such shares is surrendered to the
corporation. Every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice chairman of the board
of directors, or the chief executive officer, president or vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary, representing the number of shares registered in certificate form.
(b)
Form and Records
. Stock certificates of the
corporation shall be numbered and in such form as approved by the board of directors. The stock record books and the blank stock certificate books shall be kept by the secretary or by any agency designated by the board of directors for that purpose.
The shares of common stock of the corporation shall be registered in the stock ledger and transfer books of the corporation as they are issued.
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(c)
Signatures
. Any of or all the signatures upon the stock certificates of the
corporation may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar, before the
certificate is issued, it may be issued with the same effect as if the signatory were such officer, transfer agent or registrar at the date of its issue.
SECTION 6.02.
Transfer
. Subject to Section 6.06, transfers of shares shall be made on the share register or transfer books of
the corporation by the holder of record thereof or by an attorney lawfully constituted in writing and, if certificated, upon surrender of the certificate therefor, endorsed by the person named in the certificate. No transfer shall be made which
would be inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform Commercial Code-Investment Securities.
SECTION 6.03.
Lost, Stolen, Destroyed or Mutilated Certificates
. The board of directors may direct a new certificate of stock or
uncertificated shares to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the legal representative of the owner, to give the corporation a bond sufficient to indemnify against any claim that may be made against the corporation on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate or uncertificated shares.
SECTION 6.04.
Record Holder of Shares
. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to
vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
SECTION 6.05.
Determination of Stockholders of Record
.
(a) Meetings of Stockholders. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the board of directors, and which record date shall not be more than 60 nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the board of directors fixes a new record date for the
adjourned meeting.
(b) Consent of Stockholders.
In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the
board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by the GCL, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery made to a
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corporations registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by
the board of directors is required by the GCL, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the
resolution taking such prior action.
(c)
Dividends. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record
date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the
resolution relating thereto.
SECTION 6.06.
Transfer Restrictions
.
Section 6.06.1. Definitions. As used in this Section 6.06 the following terms have the meanings indicated:
Acquire or Acquisition and similar
terms mean the direct or indirect acquisition of record, legal, beneficial or any other ownership of Corporation Securities by any means, including (a) the exercise of any rights under any option, warrant, convertible security, pledge or other
security interest or similar right to acquire shares or (b) the entering into of any swap, hedge or other arrangement that results in the acquisition of any of the economic consequences of ownership of Corporation Securities if, as a result of
such direct or indirect acquisition, the acquirer would be considered an owner of Corporation Securities under the direct, indirect or constructive ownership rules of Section 382 of the Code.
Agent shall have the meaning set forth in
Section 6.06.3(b).
Business Day
means any day, other than a Saturday, Sunday or day on which banks located in New York City, New York or Philadelphia, Pennsylvania, are authorized or required by law to close.
Charter Amendment means the Second Amendment to
the Amended and Restated Certificate of Incorporation containing transfer restrictions substantially similar to those included in this Section 6.06.
Code means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
Controlled Person shall have the meaning set
forth in Section 6.06.3(f).
Corporation Securities means (a) shares of Common Stock, (b) shares of Preferred Stock of any class or series of
Preferred Stock, (c) warrants, rights or options (including within the meaning of Treasury Regulation Section 1.382-2T(h)(4)(v) (or any successor provision)) to purchase other Corporation Securities of the corporation, and (d) any
other interests that would be treated as stock of the corporation pursuant to Treasury Regulation Section 1.382-2T(f)(18) (or any successor provision).
Effective Date means the effective date of the
provisions set forth in this Section 6.06.
Entity means an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1) (or any successor provision).
Excess Securities shall have the
meaning set forth in Section 6.06.3(a).
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Exempt Person means any Existing Holder, unless and until such time as such
Existing Holder shall (i) have a Percentage Stock Ownership that is more than the Existing Holder Ownership Cap of such Existing Holder or (ii) no longer be a five-percent shareholder of the Corporation Securities pursuant to
Treasury Regulation Section 1.382-2T(g)(1) (or any successor provision). Notwithstanding the foregoing, no Exempt Person shall cease to be an Exempt Person solely as the result of an Acquisition of Corporation Securities by the corporation
which, by reducing the number of Corporation Securities outstanding, increases the Percentage Stock Ownership of such Person.
Existing Holder means any Person who, immediately before the Effective Date, is a five-percent shareholder of the
Corporation Securities pursuant to Treasury Regulation Section 1.382-2T(g)(1) (or any successor provision).
Existing Holder Initial Ownership means, with respect to any Existing Holder, the aggregate Percentage Stock Ownership of such
Existing Holder immediately before the Effective Date (as reflected in the most recent Schedule 13D, Schedule 13F or Schedule 13G filed by such Existing Holder before the Effective Date).
Existing Holder Ownership Cap means, as determined from time to time with respect to any Existing
Holder, the Percentage Stock Ownership represented by the sum of (a) the difference of (i) the Existing Holder Initial Ownership of such Existing Holder multiplied by the number of outstanding shares of Stock immediately before the
Effective Date minus (ii) the total shares of Stock that such Existing Holder has disposed of on or after the Effective Date plus (b) the difference (which difference shall in no event be less than zero) of (i) 150,000 shares of
Common Stock (subject to adjustment for any stock split, reverse stock split, recapitalization or similar transaction) minus (ii) the total shares of Stock that such Existing Holder has Acquired on or after the Effective Date; provided,
however, that in no event shall the Existing Holder Ownership Cap of such Existing Holder ever exceed the Existing Holder Initial Ownership of such Existing Holder. For purposes of clause (a)(ii) of this definition, disposed means any
direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition or other action in any manner whatsoever, whether voluntary or involuntary, by operation of law or otherwise, that reduces the Percentage Stock Ownership of the
Existing Holder.
Five Percent
Shareholder means a Person that is identified as a five-percent shareholder of the Corporation Securities pursuant to Treasury Regulation Section 1.382-2T(g)(1) (or any successor provision), but excluding (a) any
direct public group with respect to the corporation, as that term is defined in Treasury Regulation Section 1.382-2T(j)(2)(ii) (or any successor provision) or (b) any Exempt Person.
Percentage Stock Ownership and similar terms
means the direct and indirect percentage stock ownership of any Person for purposes of Section 382 of the Code as determined in accordance with Treasury Regulation Section 1.382-2T(g), (h), (j) and (k) (or any successor
provisions) including any ownership by application of constructive ownership rules.
Person means an individual, corporation, estate, trust, association, limited liability company, partnership, joint venture or similar organization, and also includes a group of Persons that is
an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1) (or any successor provision).
Prohibited Distributions shall have the meaning set forth in Section 6.06.3(b).
Prohibited Transfer shall have the meaning set
forth in Section 6.06.2(a).
Purported
Transferee shall have the meaning set forth in Section 6.06.3(a).
Request shall have the meaning set forth in Section 6.06.2(b).
Restriction Release Date means such date, after the Effective Date, that (i) the 2010 annual meeting of stockholders of
the corporation is concluded if the Charter Amendment has not been approved and adopted by the stockholders, or (ii) constitutes the Restriction Release Date under the Charter Amendment.
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Restricted Holder means a Person that (a) is a Five Percent Shareholder and
Acquires or proposes to Acquire additional Corporation Securities, or (b) is proposing to Acquire Corporation Securities, and after such proposed Acquisition of Corporation Securities, would be a Five Percent Shareholder.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
Security or Securities shall have the meaning set forth in Section 6.06.3(d).
Stock means any interest that would be treated as stock of the corporation pursuant to Treasury Regulation
Section 1.382-2T(f)(18) (or any successor provision).
Tax Benefits means all net operating loss carryovers, capital loss carryovers, general business carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, if any,
as well as any loss or deduction attributable to a net unrealized built-in loss within the meaning of Section 382 of the Code and the Treasury Regulations promulgated thereunder, of the corporation or any of its subsidiaries.
Transfer means any direct or indirect
Acquisition, sale, transfer, assignment, conveyance, pledge or other disposition or other action in any manner whatsoever, whether voluntary or involuntary, by operation of law or otherwise, by any Person that alters the Percentage Stock Ownership
of any Person, or any attempt to do any of the foregoing. A Transfer shall also include the creation or grant of an option (including within the meaning of Treasury Regulation Section 1.382-2T(h)(4)(v) (or any successor provision)). A Transfer
shall include a repurchase of Corporation Securities by the corporation but shall not include an issuance or grant of Corporation Securities by the corporation.
Treasury Regulation means a Treasury Regulation promulgated under the Code.
Section 6.06.2. Transfer Restrictions.
(a) In order to preserve the Tax Benefits, from and after the
Effective Date and before the Restriction Release Date, no Transfer other than to the corporation shall be permitted, and any such purported Transfer shall be null and void
ab initio
, as to the amount of any such purported Transfer of
Corporation Securities that causes, after giving effect to such purported Transfer (or any series of Transfers of which such Transfer is a part), (i) any Person to become a Five Percent Shareholder or (ii) the Percentage Stock Ownership
interest in the corporation of any Five Percent Shareholder to increase (a Prohibited Transfer). The prior sentence is not intended to prevent the Corporation Securities from being DTC-eligible and shall not preclude the settlement of
any transactions in the Corporation Securities entered into through the facilities of a national securities exchange or any national securities quotation system, provided, that if the settlement of the transaction would result in a Prohibited
Transfer, such Transfer shall nonetheless be a Prohibited Transfer.
(b) The restrictions contained in this Section 6.06 are for the purposes of reducing the risk that any ownership change (as defined in the Code) of the Corporation Securities may limit
the corporations ability to utilize its Tax Benefits. In connection therewith, and to provide for effective policing of these provisions, a Restricted Holder who proposes to Acquire Corporation Securities shall, before the date of such
proposed Acquisition, request in writing (a Request) that the board of directors of the corporation review such proposed Acquisition and authorize or not authorize such proposed Acquisition in accordance with this Section 6.06.2(b).
A Request shall be made in accordance with this Section 6.06.2(b) and shall be delivered by fax and by registered mail, return receipt requested, to the secretary of the corporation at the principal executive offices of the corporation. Such
Request shall be deemed to have been received by the corporation only when actually received by the corporation. To be made in accordance with this Section 6.06.2(b), a Request shall include (i) the name, address and telephone number of
the Restricted Holder, (ii) a description of the Restricted Holders existing direct and indirect ownership of Corporation Securities, together with such ownership of all affiliates and
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associates of the Restricted Holder, (iii) a description of the Corporation Securities that the Restricted Holder proposes to Acquire, (iv) the date on which such proposed Acquisition
is expected to take place (or, if such Acquisition is proposed to be made in a transaction on a national securities exchange or any national securities quotation system, a statement to that effect), (v) the name, address and telephone number of
the proposed transferor of the Corporation Securities that the Restricted Holder proposes to Acquire (or, if such Acquisition is proposed to be made in a transaction on a national securities exchange or any national securities quotation system, a
statement to that effect), (vi) a reasonably detailed description of the Acquisition, and (vii) a request that the board of directors authorize, if appropriate, such Acquisition pursuant to this Section 6.06.2(b). The board of
directors may authorize an Acquisition by a Restricted Holder, if it determines in its sole discretion, that, such Acquisition will not be likely to directly or indirectly limit the availability to the corporation of the Tax Benefits or is otherwise
in the best interests of the corporation and, in such case, the restrictions set forth in Section 6.06.2(a) shall not apply to such Acquisition. If the board of directors authorizes an Acquisition by a Restricted Holder, it may, in its sole
discretion, deem such Restricted Holder to be an Existing Holder (and to determine the deemed Existing Holder Initial Ownership) under this Section 6.06. Any determination by the board of directors not to authorize a proposed Acquisition by a
Restricted Holder shall cause such proposed Acquisition to be deemed a Prohibited Transfer. Any determination to authorize a proposed Acquisition by a Restricted Holder granted hereunder may be granted in whole or in part, and may be subject to any
limitations or conditions (including restrictions on the ability of the Restricted Holder to subsequently transfer Corporation Securities acquired through such authorized Acquisition), in each case as and to the extent the board shall determine in
its sole discretion. In addition, the board of directors may, in its sole discretion, require representations from the Restricted Holder or an opinion of counsel to be rendered by counsel selected by the board of directors, that the Transfer will
not result in the application of any Section 382 limitation on the use of the Tax Benefits or other matters that the board of directors may determine. Any Restricted Holder who makes a Request to the board of directors shall reimburse the
corporation, on demand, for all costs and expenses incurred by the corporation with respect to any proposed Acquisition of Corporation Securities, including the corporations costs and expenses incurred in determining whether to authorize the
proposed Acquisition, which costs may include any expenses of counsel and/or tax advisors engaged by the board of directors to advise the board of directors or deliver an opinion thereto.
Section 6.06.3. Treatment of Excess Securities.
(a) No employee or agent of the corporation shall record any Prohibited Transfer, and the purported transferee
of a Prohibited Transfer (the Purported Transferee) shall not be recognized as a stockholder of the corporation for any purpose whatsoever in respect of the Corporation Securities that are the subject of the Prohibited Transfer (the
Excess Securities). The Purported Transferee shall not be entitled with respect to such Excess Securities to any rights of a stockholder of the corporation, including the right to vote such Excess Securities and to receive dividends or
distributions, whether liquidating or otherwise, in respect thereof. Once the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, such Corporation Securities shall cease to be Excess Securities.
(b) If the board of directors determines that a Prohibited
Transfer has been recorded by an agent or employee of the corporation notwithstanding the prohibition in Section 6.06.3(a), such recording and the Prohibited Transfer shall be null and void
ab initio
and have no legal effect and, upon
written demand by the corporation, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferees possession or control, together with
any dividends or other distributions that were received by the Purported Transferee from the corporation with respect to the Excess Securities (the Prohibited Distributions), to an agent designated by the board of directors (the
Agent). In the event of an attempted Prohibited Transfer involving the purchase or Acquisition of Corporation Securities in violation of this Section 6.06 by a Restricted Holder, the Agent shall thereupon sell to a buyer or buyers,
which may include the corporation or the purported transferor, the Excess Securities transferred to it in one or more arms-length transactions (including over a national securities exchange or national securities quotation system on which the
Corporation Securities may be traded); provided, however, that the Agent, in its
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sole discretion, shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if the Agent determines such sale or sales
could disrupt the market for the Corporation Securities, could adversely affect the value of the Corporation Securities or may be in violation of applicable securities laws. If the Purported Transferee has resold the Excess Securities before
receiving the corporations demand to surrender the Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited
Distributions and proceeds of such sale, unless the corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the
Agent pursuant to Section 6.06.3(c) if the Agent, rather than the Purported Transferee, had resold the Excess Securities.
(c) The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee had previously resold the
Excess Securities, any amounts received by it from a Purported Transferee, as follows: (i) first, to reimburse itself to the extent necessary to cover its costs and expenses incurred in accordance with its duties hereunder; (ii) second, to
reimburse the Purported Transferee for the amounts paid by the Purported Transferee for the Excess Securities (or in the case of any Prohibited Transfer by gift, devise or inheritance or any other Prohibited Transfer without consideration, the fair
market value, calculated on the basis of the closing market price for the Corporation Securities on the day before the Prohibited Transfer), and (iii) third, the remainder, if any, to the original transferor, or, if the original transferor
cannot be readily identified, to an entity designated by the corporations board of directors that is described in Section 501(c) of the Code, contributions to which must be eligible for deduction under each of Sections 170(b)(1)(A), 2055
and 2522 of the Code. The recourse of any Purported Transferee with respect to any Prohibited Transfer shall be limited to the amount payable to the Purported Transferee pursuant to clause (ii) of this Section 6.06.3(c). Except as may be
required by law, in no event shall the proceeds of any sale of Excess Securities pursuant to this Section 6.06 inure to the benefit of the corporation or the Agent, except to the extent used to cover expenses incurred by the Agent in performing
its duties hereunder.
(d) In the event of any
Transfer to the corporation, or any Transfer that does not involve a transfer of securities of the corporation within the meaning of Delaware law (Securities, and individually, a Security), that would in either case cause
(i) any Person to become a Five Percent Shareholder or (ii) the Percentage Stock Ownership interest of any Five Percent Shareholder to increase, the application of Section 6.06.3(b) and Section 6.06.3(c) shall be modified as
described in this Section 6.06.3(d). In such case, no such Five Percent Shareholder shall be required to dispose of any interest that is not a Security, but such Five Percent Shareholder and/or any Person whose ownership of Securities is
attributed to such Five Percent Shareholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which they were acquired) to cause such Five
Percent Shareholder, after such disposition, not to be in violation of this Section 6.06. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of Securities
that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Section 6.06.3(b) and Section 6.06.3(c), except that the maximum aggregate amount payable either to such Five
Percent Shareholder, or to such other Person that was the direct holder of such Excess Securities, in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. All expenses incurred by
the Agent in disposing of such Excess Securities shall be paid out of any amounts due such Five Percent Shareholder or such other Person. The purpose of this Section 6.06.3(d) is to extend the restrictions in Section 6.06.2(a) and
Section 6.06.3(a) to situations in which there is a Five Percent Shareholder without a direct Transfer of Securities, and this Section 6.06.3(d), along with the other provisions, shall be interpreted to produce the same results, with
differences as the context requires, as a direct Transfer of Corporation Securities.
(e) If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof to the Agent within thirty (30) days from the date on which the corporation makes a demand
pursuant to Section 6.06.3(b) or any written demand with respect to a deemed disposition pursuant to Section 6.06.3(d), then the corporation may take any actions it deems necessary to enforce the provisions hereof, including the
institution of legal proceedings to compel such surrender.
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(f) If any Person shall knowingly violate, or knowingly cause any other Person under control
of such Person (a Controlled Person) to violate this Section 6.06 (including failure to surrender the Excess Securities or the proceeds of a sale thereof as demanded by the corporation pursuant to Section 6.06.3(e)), then that
Person and any Controlled Person shall be jointly and severally liable to the corporation for, and shall indemnify and hold the corporation harmless against, any and all losses and damages suffered as a result of such violation, including any
attorneys and auditors fees incurred in connection with such violation.
Section 6.06.4. Legends; Compliance.
(a) All certificates reflecting Corporation Securities issued on or after the Effective Date shall, until the Restriction Release Date, bear a conspicuous legend in substantially the following form:
THE TRANSFER OF SECURITIES REPRESENTED HEREBY IS
SUBJECT TO RESTRICTION PURSUANT TO SECTION 6.06 OF THE AMENDED AND RESTATED BYLAWS OF RADIAN GROUP INC. A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS. IF THE TRANSFER RESTRICTIONS ARE
VIOLATED, THEN THE TRANSFER WILL BE VOID AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER THE EXCESS SECURITIES (AS DEFINED IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND THE AMENDED AND RESTATED BYLAWS) TO THE
CORPORATIONS AGENT.
(b) The corporation
shall have the power to make appropriate notations upon its stock transfer records and to instruct any transfer agent, registrar, securities intermediary or depository with respect to the requirements of this Section 6.06 for any uncertificated
Corporation Securities or Corporation Securities held in an indirect holding system. As a condition to the registration of the Transfer of any Corporation Securities, any Person who is a beneficial, legal or record holder of Corporation Securities,
and any proposed transferee of such Corporation Securities and any Person controlling, controlled by or under common control with the proposed transferee of such Corporation Securities, shall provide such information as the corporation may request
from time to time in order to determine compliance with this Section 6.06 or the status of the Tax Benefits of the corporation.
(c) Nothing contained in this Section 6.06 shall limit the authority of the board of directors of the corporation to take such other
action to the extent permitted by law as it deems necessary or advisable to preserve the corporations Tax Benefits. The board of directors of the corporation shall have the power to determine all matters necessary for determining compliance
with this Section 6.06, including determining (i) the identification of Five Percent Shareholders, Exempt Persons and Restricted Holders, (ii) whether a Transfer or proposed Transfer is a Prohibited Transfer, (iii) the Percentage
Stock Ownership in the corporation of any Five Percent Shareholders, Exempt Persons and Restricted Holders, (iv) whether an instrument constitutes a Corporation Security, (v) the amount (or fair market value) due to a Purported Transferee,
(vi) whether compliance with any restriction or limitation on stock ownership and Transfers are no longer required for preservation of Tax Benefits, (vii) the interpretation of the provisions of this Section 6.06 and the applicability
to stockholders of the corporation of the restrictions on Transfer set forth herein, including the establishment of presumptions and procedures related thereto, and the correction or clarification of any errors or ambiguities therein, and
(viii) any other matters which the board of directors deems relevant. Without limiting the generality of the foregoing, for the purposes of determining the existence and identity of, and the amount of Corporation Securities owned by, any
Person, the corporation and the board of directors are entitled to rely on (a) the existence and absence of filings of Schedule 13D, Schedule 13F, or Schedule 13G under the Exchange Act (or any similar schedules) as of any date, and
(b) its actual knowledge of the ownership of the Corporation Securities. In the case of an ambiguity in the application of any of the provisions of this Section 6.06, including any definition used herein, the board of directors shall have
the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event that this Section 6.06 requires an action by the board of
directors but fails to provide specific guidance with respect to such action, the board of directors shall have the power to determine the action to be taken so long as such action is not contrary to the express provisions of this Section 6.06.
All such actions, calculations, interpretations and determinations
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that are done or made by the board of directors in good faith shall be final, conclusive and binding on the corporation, the Agent, and all other parties to a Transfer. The board of directors may
delegate all or any portion of its duties and powers under this Section 6.06 to a committee of the board of directors as it deems advisable or necessary.
(d) Nothing contained in this Section 6.06 shall be construed to give any Person other than the corporation or the Agent any legal or
equitable right, remedy or claim under this Section 6.06. This Section 6.06 shall be for the sole and exclusive benefit of the corporation and the Agent.
(e) With regard to any power, remedy or right provided herein
or otherwise available to the corporation or the Agent provided under this Section 6.06, (i) no waiver will be effective unless expressly contained in a writing signed by the waiving party, and (ii) no alteration, modification, or
impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.
(f) If any provision of this Section 6.06 or the application of any such provision to any Person or under any circumstances shall be
held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Section 6.06.
Section 6.06.5. Effectiveness. The restrictions on
Transfer set forth in this Section 6.06 shall apply only to Corporation Securities issued by the corporation (whether from treasury securities or newly issued) on or after the Effective Date and before the Restriction Release Date.
ARTICLE VII
Indemnification of Directors, Officers and Other Authorized
Representatives
SECTION 7.01.
Indemnification
of Authorized Representatives
. The corporation shall, except to the extent prohibited by the GCL, as amended or modified from time to time (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), indemnify any person who was or is an authorized representative of the corporation at any time during which this By-law is in effect
(whether or not such person continues to serve in such capacity at the time any indemnification is sought or at the time any proceeding relating thereto exists or is brought), and who was or is a party, or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, including without limitation actions by or in right of the corporation, a class of its security holders or otherwise, and whether civil, criminal, administrative or investigative, by
reason of the fact that such person was or is an authorized representative of the corporation, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or
proceeding; provided, however, that except for actions to enforce indemnification rights under this Article, the corporation shall indemnify an authorized representative seeking indemnification in connection with an action, suit or proceeding
initiated by such person (other than on behalf of the corporation or one of its subsidiaries) only if the action, suit or proceeding was authorized by the board of directors of the corporation. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of
nolo contendere
or its equivalent, shall not of itself create a presumption that the authorized representative did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful.
SECTION 7.02.
Mandatory Indemnification of Authorized
Representatives
. To the extent that an authorized representative or other employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith. The rights provided by this Section 7.02 shall be in addition to, and not in lieu of, the rights provided
under Section 7.01.
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SECTION 7.03.
Determination of Entitlement to Indemnification
. Any indemnification
under Section 7.01 of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the authorized representative or other employee or agent is
proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 7.01 and the amount requested has been actually and reasonably incurred. Such determination shall be made:
(1) by a majority vote of the directors who were not parties
to such action, suit or proceeding, even though less than a quorum; or
(2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum; or
(3) if there are no such directors, or if such directors so
direct or the claimant so requests, by independent legal counsel in a written opinion; or
(4) by the stockholders.
In the event the determination of entitlement to indemnification is to be made by independent counsel at the request of the claimant, the independent counsel shall be selected by the board of directors
unless there shall have occurred within two years prior to the date of the commencement of the action, suit or proceeding for which indemnification is claimed a change of control as defined in the corporations 2008 Equity
Compensation Plan, as in effect on the date of adoption of these By-Laws, in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the board of directors.
SECTION 7.04.
Advancing Expenses
. Expenses actually
and reasonably incurred in defending an action, suit or proceeding shall automatically be paid on behalf of an authorized representative by the corporation, without the need for action by the board of directors, in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the authorized representative to repay such amount if it shall ultimately be determined that the authorized representative is not entitled to be indemnified by the
corporation as authorized in this Article. The financial ability of any authorized representative to make a repayment contemplated by this section shall not be a prerequisite to the making of an advance. Expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.
SECTION 7.05.
Settlement of Claims
. The corporation shall not be liable to indemnify any authorized representative under this
Article for (a) any amounts paid in settlement of any action or claim effected without the corporations written consent, which consent shall not be unreasonably withheld; or (b) any judicial award if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense of such action.
SECTION 7.06.
No Duplication of Payments
. The corporation shall not be liable under this Article to make any payment in connection with any claim made against the authorized representative to the
extent the authorized representative has otherwise actually received payment (under any insurance policy, agreement, vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
SECTION 7.07.
Subrogation
. In the event of payment under this Article, the corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the authorized representative, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such
documents necessary to enable the corporation effectively to bring suit to enforce such rights.
SECTION 7.08.
Definitions
. For purposes of this Article:
(1) authorized representative shall mean any and all present and former directors and officers of the corporation, including
any such persons to the extent serving as a director, officer, trustee, employee or agent of
B-2-22
another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the corporation (whether the
basis of such proceeding is alleged action in an official capacity as a director, officer, trustee, employee or agent or in any other capacity while serving as a director, officer, trustee, employee or agent), and any other persons designated by the
board of directors from time to time, which may include, without limitation, directors and officers of any direct or indirect, majority-owned or wholly-owned subsidiary of the corporation;
(2) corporation shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any
person who is or was a director or officer of such constituent corporation shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued;
(3) expenses shall include attorneys fees and disbursements;
(4) fines shall include any excise taxes assessed on a person with respect to an employee benefit plan;
(5) include shall mean include without limitation
and shall be interpreted to provide as broad as possible a meaning to the term so modified or defined in this Section 7.08; and
(6) party shall include the giving of testimony or similar involvement.
SECTION 7.09.
Insurance
. The corporation may purchase
and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or any of its direct or indirect subsidiaries, or any person who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against the person and incurred by the person in any such capacity, or arising out of his or her status
as such, whether or not the corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article.
SECTION 7.10.
Scope of Article
. The indemnification of
authorized representatives and advancement of expenses, as authorized by the preceding provisions of this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled
under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and such indemnification and advancement rights cannot be
terminated by the corporation, the board of directors or the stockholders of the corporation with respect to a persons service prior to the date of such termination. The indemnification and advancement of expenses provided by or granted
pursuant to this Article shall continue as to a person who has ceased to be an authorized representative and shall inure to the benefit of the heirs, executors and administrators of such a person. The duties of the corporation to indemnify and to
advance expenses to a director or officer as provided in this Article VII shall be in the nature of a contract between the corporation and each such person, which contractual rights vest at the time of such persons service to or at the request
of the corporation, and no amendment or repeal of any provision of this Article VII shall alter, to the detriment of such person, the right of such person to the advancement of expenses or indemnification related to a claim, whether brought or
threatened before or after such amendment or repeal, based on an act or failure to act that took place prior to such amendment or repeal.
SECTION 7.11.
Reliance on Provisions
. Each person who shall act as an authorized representative of the corporation shall be deemed
to be doing so in reliance upon rights of indemnification provided by this Article.
B-2-23
ARTICLE VIII
General Provisions
SECTION 8.01.
Dividends
. Subject to the restrictions
contained in the GCL and any restrictions contained in the certificate of incorporation, the board of directors may declare and pay dividends upon the shares of capital stock of the corporation.
SECTION 8.02.
Contracts
. Except as otherwise provided
in these By-laws, the board of directors may authorize any officer or officers including the chairman and vice chairman of the board of directors, or any agent or agents, to enter into any contract or to execute or deliver any instrument on behalf
of the corporation and such authority may be general or confined to specific instances. Any officer so authorized may, unless the authorizing resolution otherwise provides, delegate such authority to one or more subordinate officers, employees or
agents, and such delegation may provide for further delegation.
SECTION 8.03.
Corporate Seal
. The corporation shall have a corporate seal, which shall have inscribed thereon the name of the corporation, the year of its organization and the words Corporate
Seal, Delaware. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
SECTION 8.04.
Deposits
. All funds of the corporation shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to
time determine.
SECTION 8.05.
Corporate
Records
.
(a) Examination by Stockholders.
Every stockholder shall, upon written demand under oath stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business, for any proper purpose, the stock ledger, list of stockholders,
books or records of account, and records of the proceedings of the stockholders and directors of the corporation, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such persons interest as a
stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. Where the stockholder seeks to inspect the books and records of the
corporation, other than its stock ledger or list of stockholders, the stockholder shall first establish (1) that the stockholder has complied with the provisions of this section respecting the form and manner of making demand for inspection of
such documents; and (2) that the inspection sought is for a proper purpose. Where the stockholder seeks to inspect the stock ledger or list of stockholders of the corporation and has complied with the provisions of this section respecting the
form and manner of making demand for inspection of such documents, the burden of proof shall be upon the corporation to establish that the inspection sought is for an improper purpose.
(b) Examination by Directors. Any director shall have the right to examine the corporations stock ledger,
a list of its stockholders and its other books and records for a purpose reasonably related to the persons position as a director.
SECTION 8.06.
Amendment of By-laws
. These By-laws may be altered, amended or repealed or new By-laws may be adopted either
(a) by vote of the stockholders at a duly organized annual or special meeting of stockholders in accordance with the certificate of incorporation, or (b) by vote of two-thirds of the entire board of directors at any regular or special
meeting of directors if such power is conferred upon the board of directors by the certificate of incorporation.
B-2-24
APPENDIX C
Execution Copy
RADIAN GROUP INC.
and
COMPUTERSHARE SHAREOWNER SERVICES LLC
as Rights Agent (as successor to The Bank of New York
Mellon)
TAX BENEFIT PRESERVATION PLAN
Dated as of October 9, 2009
Amended and Restated as of
February 12, 2010
and
FIRST AMENDMENT TO THE
AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN
Dated as of May 3, 2010
TABLE OF CONTENTS
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Page
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1.
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Certain Definitions.
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C-1
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2.
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Appointment of Rights Agent.
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C-5
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3.
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Issue of Right Certificates.
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C-5
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4.
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Form of Right Certificates.
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C-6
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5.
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Countersignature and Registration.
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C-7
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6.
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Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
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C-7
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7.
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Exercise of Rights, Purchase Price; Expiration Date of Rights.
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C-8
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8.
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Cancellation and Destruction of Right Certificates.
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C-9
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9.
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Availability of Shares of Capital Stock.
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C-9
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10.
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Capital Stock Record Date.
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C-10
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11.
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Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights.
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C-11
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12.
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Certificate of Adjusted Purchase Price or Number of Shares.
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C-16
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13.
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[Reserved].
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C-16
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14.
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Fractional Rights and Fractional Shares.
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C-16
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15.
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Rights of Action.
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C-18
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16.
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Agreement of Right Holders.
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C-18
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17.
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Right Certificate Holder Not Deemed a Stockholder.
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C-18
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18.
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Concerning the Rights Agent.
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C-19
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19.
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Merger or Consolidation or Change of Name of Rights Agent.
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C-19
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20.
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Duties of Rights Agent.
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C-20
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21.
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Change of Rights Agent.
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C-21
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22.
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Issuance of New Right Certificates.
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C-22
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23.
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Redemption.
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C-22
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24.
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Exchange.
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C-23
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25.
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Notice of Certain Events.
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C-24
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26.
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Notices.
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C-24
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27.
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Supplements and Amendments.
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C-25
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28.
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Successors.
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C-25
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29.
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Benefits of this Plan.
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C-25
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30.
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Process to Seek Exemption.
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C-26
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31.
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Determinations and Actions by the Board of Directors.
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C-26
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32.
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Severability.
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C-26
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33.
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Governing Law.
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C-27
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34.
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Counterparts.
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C-27
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35.
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Descriptive Headings.
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C-27
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36.
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Force Majeure.
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C-27
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37.
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Interpretation.
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C-27
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Exhibit A
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Form of Certificate of Designation
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Exhibit B
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Form of Right Certificate
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Exhibit C
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Summary of Rights
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i
TAX BENEFIT PRESERVATION PLAN
This Tax Benefit Preservation Plan, dated as of October 9, 2009 (Plan), is entered into
between Radian Group Inc., a Delaware corporation (the Company), and The Bank of New York Mellon, a New York banking corporation, as Rights Agent (the Rights Agent). As of February 12, 2010, the parties desire to amend
and restate the Plan in its entirety, as set forth below.
Background
The Company has generated certain substantial net operating loss carryovers and other tax attributes for United States federal income tax purposes (collectively, NOLs), which will potentially
provide valuable Tax Benefits (as defined below) to the Company. The ability to use the NOLs may be adversely affected by an ownership change of the Company within the meaning of Section 382 (as defined below). The Company desires
to avoid such an ownership change and thereby preserve the ability to use the NOLs. In furtherance of such objective, the Company desires to enter into this Plan.
The Board of Directors of the Company (the Board)
has adopted resolutions creating a series of preferred stock designated as Series A Junior Participating Preferred Stock and has authorized and declared a dividend of one preferred share purchase right (a Right) for each
share of Common Stock (as hereinafter defined) of the Company outstanding as of the Close of Business (as defined below) on October 19, 2009 (the Record Date), each Right initially representing the right to purchase one
one-thousandth (subject to adjustment) of a share of Preferred Stock (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined); provided, however, that
Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and before the Expiration Date in accordance with Section 22.
Accordingly, in consideration of the premises and the mutual agreements herein set forth and intending to be
legally bound hereby, the parties agree as follows:
1.
Certain Definitions
. For purposes of this Plan, the following terms have the meaning indicated:
(a) Acquiring Person shall mean any Person (other than any Exempt Person) that has become, in itself or together with all
Affiliates of such Person, the Beneficial Owner of 4.90% or more of the shares of Common Stock then outstanding; provided, however, that, subject to the following sentence, any Existing Holder (as defined below) will not be deemed to be an Acquiring
Person for any purpose of this Plan on and after the date on which the adoption of this Plan is first publicly announced; provided, further, that a Person will not be deemed to have become an Acquiring Person solely as a result of (i) a
reduction in the number of shares of Common Stock outstanding, (ii) the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees, (iii) any
unilateral grant of any security by the Company or any issuance by the Company of shares of its capital stock to such Person, or (iv) an Exempt Transaction.
If a Person is not deemed an Acquiring Person by reason of
the Persons status as an Existing Holder or pursuant to the provisions in subsections (i) through (iv) above, such Person will become an Acquiring Person if that Person thereafter acquires Beneficial Ownership of any additional
shares of Common Stock (other than (a) pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Stock, (b) pursuant to a split or subdivision of the outstanding Common Stock, or (c) pursuant to any
of the provisions in subsections (i) through (iv) above), unless, upon becoming the Beneficial Owner of such additional share or shares of Common Stock, such Person is not then the Beneficial Owner of 4.90% or more of the shares of Common
Stock then outstanding.
C-1
Notwithstanding the foregoing, if a Person who would otherwise be an Acquiring
Person, as defined pursuant to the foregoing provisions of this Section 1(a), has become such inadvertently (including, because (A) such Person was unaware that it Beneficially Owned a percentage of shares of outstanding Common Stock
that would otherwise cause such Person to be an Acquiring Person or (B) such Person was aware of the extent of its Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of such Beneficial Ownership
under this Plan), then the Board may, in its sole discretion, determine that if such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this Section 1(a), then such Person shall not be deemed to be or to have become an Acquiring Person for purposes of this Plan as a result of such inadvertent acquisition.
Further notwithstanding the foregoing, if a Person who would
otherwise be an Acquiring Person, as defined pursuant to the foregoing provisions of this Section 1(a), has become such as a result of an acquisition of Beneficial Ownership of shares of Common Stock that the Board in its sole
discretion determines in good faith, prior to the Distribution Date that would otherwise occur as a result of such acquisition, will not jeopardize or endanger the availability to the Company of the Tax Benefits or is otherwise in the best interests
of the Company, then such Person shall not be deemed to be or to have become an Acquiring Person for purposes of this Plan as a result of such acquisition. For the sake of clarity, any Person deemed not to have become an Acquiring
Person pursuant to the preceding sentence will be subject to the provisions of this Section 1(a) with respect to any future acquisitions of Beneficial Ownership of shares of Common Stock.
The percentage of shares of the outstanding Common Stock for
purposes of this Plan shall be determined in accordance with Sections 1.382-2(a)(3), 1.382-2T(g), (h), (j) and (k) of the Treasury Regulations, and any comparable successor provisions; provided, however, that for the sole purpose of
determining the percentage of shares of the outstanding Common Stock owned by any particular Person (and not for the purpose of determining the percentage of shares of outstanding Common Stock owned by any other Person), Common Stock held by such
Person shall not be treated as no longer owned by such Person pursuant to Treasury Regulation § 1.382-2T(h)(2)(i)(A), or any comparable successor provision.
(b) Affiliate shall mean, with respect to any
Person, any other Person (whether or not an Exempt Person) whose shares of Common Stock would be deemed constructively owned by such first Person, owned by a single entity as defined in Section 1.382-3(a)(1) of the Treasury
Regulations, or any comparable successor provision, or otherwise aggregated with shares owned by such first Person for purposes of Section 382.
(c) Associate, with respect to any Person, shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
(d) Authorized
Officer shall have the meaning set forth in Section 20(b) hereof.
(e) A Person shall be deemed the Beneficial Owner of, and shall be deemed to Beneficially Own and have Beneficial Ownership of, any securities of which such Person is
the beneficial owner for federal income tax purposes or would be deemed to constructively own or which otherwise would be aggregated with shares owned by such Person pursuant to Section 382. Under Section 382 as currently in
effect, a Person will not be deemed the Beneficial Owner of Securities owned by another Person solely because both Persons are portfolios in the same mutual fund family or are advised by the same investment advisor, nor will an investment advisor be
deemed the Beneficial Owner of securities solely because such advisor has control over the voting and disposition of such securities.
(f) Board shall have the meaning set forth in the background hereto.
(g) Book Entry shall mean an uncertificated book entry for the Common Stock.
(h) Business Day shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the Commonwealth of Pennsylvania, the State of New York or the State of New Jersey are authorized or obligated by law or executive order to close.
C-2
(i) Capital Stock when used with reference to any Person other than the Company
shall mean the common stock (or, in the case of any entity other than a corporation, the equivalent equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(j) Cashless Exercise shall have the meaning set forth in Section 11(o) hereof.
(k) Certificate of Incorporation shall mean the Amended and Restated Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on May 12, 2004, together with the Certificate of Amendment to the Certificate of Incorporation as filed with the Secretary of State of the State of Delaware on May 22, 2008, as the same
may be amended and restated from time to time.
(l) Close of Business on any given date shall mean 5:00 P.M., Eastern time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Eastern time, on the next succeeding Business Day.
(m) Code shall mean the Internal Revenue Code of 1986, as amended.
(n) Common Stock when used with reference to the Company shall mean the common stock, par value $0.001 per share, of the
Company.
(o) Common Stock Equivalents
shall have the meaning set forth in Section 11(a)(iii) hereof.
(p) Current Value shall have the meaning set forth in Section 11(a)(iii) hereof.
(q) Distribution Date shall have the meaning set forth in Section 3(a) hereof.
(r) Equivalent Preferred Shares shall have the
meaning set forth in Section 11(b) hereof.
(s) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(t) Exchange Ratio shall have the meaning set
forth in Section 24(a) hereof.
(u)
Exemption Request shall have the meaning set forth in Section 30 hereof.
(v) Exempt Person shall mean (i) the Company or any Subsidiary (as such term is hereinafter defined) of the Company, in each case including in its fiduciary capacity, (ii) any
employee benefit and/or savings plan of the Company or of any Subsidiary of the Company, or (iii) any entity or trustee holding (or acting in a fiduciary capacity in respect of) Common Stock for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other benefits for employees of the Company or of any Subsidiary of the Company.
(w) Exempt Transaction shall mean any transaction that the Board, in its sole discretion, has declared exempt pursuant to
Section 30, which determination shall be irrevocable with respect to such transaction.
(x) Existing Holder shall mean any Person who, together with all Affiliates, Beneficially Owned shares of Common Stock in excess of 4.90% of the shares of Common Stock then outstanding
immediately before the first public announcement hereof.
(y) Expiration Date shall have the meaning set forth in Section 7(a) hereof.
(z) Invalidation Time shall have the meaning set forth in Section 11(a)(ii) hereof.
C-3
(aa) NASDAQ shall mean The Nasdaq Stock Market.
(bb) New York Stock Exchange shall mean the New
York Stock Exchange, Inc.
(cc) NOLs
shall have the meaning set forth in the background hereto.
(dd) Person shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust, association, unincorporated organization or other legal
entity or any group of persons making a coordinated acquisition of shares or otherwise treated as an entity within the meaning of Section 1.382-3(a)(1) of the Treasury Regulations, or any comparable successor provision.
(ee) Plan shall have the meaning ascribed thereto
in the preamble to this Plan, and such term shall include all amendments to this Plan.
(ff) Preferred Stock shall mean the Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company having the rights and preferences set forth in the Form of
Certificate of Designations attached to this Plan as Exhibit A.
(gg) Purchase Price shall have the meaning set forth in Section 7(b) hereof.
(hh) Record Date shall have the meaning set forth in the background hereto.
(ii) Redemption Date shall have the meaning set
forth in Section 7(a) hereof.
(jj)
Redemption Price shall have the meaning set forth in Section 23(a) hereof.
(kk) Requesting Person shall have the meaning set forth in Section 30 hereof.
(ll) Right shall have the meaning set forth in the background hereto.
(mm) Right Certificate shall have the meaning set forth in Section 3(a) hereof.
(nn) Securities Act shall mean the Securities Act
of 1933, as amended.
(oo) Section 11(a)(ii)
Trigger Date shall have the meaning set forth in Section 11(a)(iii) hereof.
(pp) Section 382 shall mean Code section 382, and all Treasury Regulations promulgated under it, and any comparable successor provision.
(qq) Spread shall have the meaning set forth in
Section 11(a)(iii) hereof.
(rr) Stock
Acquisition Date shall mean the first date of public announcement (which, for purposes of this definition, shall include, a report filed or amended pursuant to Section 13(d) of the Exchange Act) (i) by the Company or a Person or an
Affiliate or Associate of the Person, that the Person has become an Acquiring Person or (ii) by the Company, that the Board has concluded, based on information from any source, that a Person has become an Acquiring Person.
(ss) Subsidiary of any Person shall mean any
Person of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other Persons performing similar functions are Beneficially Owned, directly or indirectly, by such first
Person, and any Person that is otherwise controlled by such first Person.
C-4
(tt) Substitution Period shall have the meaning set forth in
Section 11(a)(iii) hereof.
(uu)
Summary of Rights shall have the meaning set forth in Section 3(b) hereof.
(vv) Tax Benefits shall mean all net operating loss carryovers, capital loss carryovers, general business carryovers, alternative minimum tax credit carryovers and foreign tax credit
carryovers, if any, as well as any loss or deduction attributable to a net unrealized built-in loss within the meaning of Section 382 and the Treasury Regulations promulgated thereunder, of the Company or any of its Subsidiaries.
(ww) Trading Day shall have the
meaning set forth in Section 11(d)(i) hereof.
(xx) Treasury Regulations shall mean final, temporary and proposed income tax regulations promulgated under the Code.
(yy) Trust shall have the meaning set
forth in Section 24(a) hereof.
(zz)
Trust Agreement shall have the meaning set forth in Section 24(a) hereof.
Any determination required by the definitions in the Plan shall be made by the Board in its good faith judgment, which determination shall be binding on the Rights Agent and the holders of Rights.
2.
Appointment of Rights Agent
. The
Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it
may deem necessary or desirable, upon 10 days prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent.
3.
Issue of Right Certificates
.
(a) Until the earlier of (i) the Close of Business on
the tenth Business Day after the Stock Acquisition Date or (ii) the Close of Business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Board) after the
commencement by any Person (other than an Exempt Person) of, or of the first public announcement of the intention of such Person to commence, a tender or exchange offer, the consummation of which would result in any Person (other than an Exempt
Person) becoming an Acquiring Person (the earlier of such dates being referred to as the Distribution Date; provided, however, that if either of such dates occurs after the date of this Plan and on or before the Record Date, then the
Distribution Date shall be the Record Date), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) solely by the certificates representing the Common Stock registered in the names of the holders thereof (or by
Book Entry shares in respect of such Common Stock) and not by separate Right Certificates, and (y) the Rights will be transferable only in connection with the transfer of Common Stock. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all necessary information, send) by first-class, postage-prepaid mail, to
each record holder of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Affiliate or Associate of an Acquiring Person), at the address of such holder shown on the records of the Company or the
transfer agent or registrar for the Common Stock, one or more right certificates, in substantially the form of Exhibit B hereto (a Right Certificate), evidencing one Right (subject to adjustment as provided herein) for each share of
Common Stock so held. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such
notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the
Distribution Date has not occurred.
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(b) As promptly as practicable following the Record Date, the Company will send a copy of a
Summary of Rights to Purchase Shares of Preferred Stock, in substantially the form of Exhibit C hereto (the Summary of Rights), by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Close of Business on
the Record Date (other than any Acquiring Person or any Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company or the transfer agent or registrar for the Common Stock. Any failure to send a copy of the
Summary of Rights shall not invalidate the Rights or affect their transfer with the Common Stock. With respect to certificates representing Common Stock (or Book Entry shares of Common Stock) outstanding as of the Record Date, until the Distribution
Date, the Rights will be evidenced solely by such certificates registered in the names of the holders thereof (or the Book Entry shares). Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any
certificate for Common Stock (or any Book Entry shares of Common Stock) outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate or Book Entry shares.
(c) Rights shall be issued in respect of all
shares of Common Stock issued or disposed of after the Record Date but before the earlier of the Distribution Date and the Expiration Date (or in certain circumstances provided in Section 22 hereof, after the Distribution Date). Certificates
issued for Common Stock after the Record Date but before the earlier of the Distribution Date and the Expiration Date (or in certain circumstances provided in Section 22 hereof, after the Distribution Date) shall have impressed on, printed on,
written on or otherwise affixed to them substantially the following legend:
This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Tax Benefit Preservation Plan between Radian Group Inc. (the Company) and The Bank of New
York Mellon, as Rights Agent, dated as of October 9, 2009 and as amended from time to time (the Plan), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices
of the Company. Under certain circumstances, as set forth in the Plan, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the
Plan without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Plan, Rights owned by or transferred to any Person who is or becomes an Acquiring Person (as defined in the Plan) and certain
transferees thereof will become null and void and will no longer be transferable.
With respect to any Book Entry shares of Common Stock, such legend shall be included in a notice to the registered holder of such shares in accordance with applicable law. With respect to certificates
containing the foregoing legend or Book Entry shares, the holders of which were delivered (or otherwise had) notice of the foregoing legend, until the Distribution Date the Rights associated with the Common Stock represented by such certificates or
Book Entry shares shall be evidenced solely by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the
Rights associated with the Common Stock represented thereby. In the event that the Company purchases or otherwise acquires any Common Stock after the Record Date but before the Distribution Date, any Rights associated with such Common Stock shall be
deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), neither the omission of
the legend required hereby, nor the failure to deliver the notice of such legend, shall affect the enforceability of any part of this Plan or the rights of any holder of the Rights.
4.
Form of Right Certificates
. The Right Certificates (and the forms of election to purchase
shares and of assignment and the certificates to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties, liabilities or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this
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Plan, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of the New York Stock Exchange or of any other
stock exchange or automated quotation system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the provisions of this Plan, the Right Certificates shall entitle the holders thereof to purchase such
number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the Purchase Price (as determined pursuant to Section 7), but the amount and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
5.
Countersignature and Registration
.
(a) The Right Certificates shall be executed on behalf of the Company by the President of the Company, either manually or by facsimile signature, shall have affixed thereto the Companys seal or a
facsimile thereof and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be countersigned by the Rights Agent, either manually or by facsimile
signature, and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign
such Right Certificate, although at the date of the execution of this Plan any such Person was not such an officer.
(b) Following the Distribution Date, receipt by the Rights Agent of written notice to that effect and all other relevant information
referred to in Section 3(a), the Rights Agent will keep or cause to be kept, at an office or agency designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
6.
Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates
.
(a) Subject to
the provisions of this Plan, at any time after the Close of Business on the Distribution Date and at or before the Close of Business on the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or other securities, cash or assets as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office or agency of the Rights Agent designated for such purpose. The Right Certificates are transferable
only on the registry books of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have
(i) properly completed and duly executed the certificate set forth in the form of assignment on the reverse side of such Right Certificate, (ii) provided such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Right Certificate or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request, and (iii) paid a sum sufficient to cover any tax or charge that may be
imposed in connection with any transfer, split up, combination or exchange of Right Certificates as required by Section 9(e) hereof. Thereupon the Rights Agent, subject to the provisions of this Plan, shall countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Rights Agent shall forward any such sum collected by it to the Company or
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to such Persons as the Company shall specify by written notice. The Rights Agent shall have no duty or obligation under any Section of this Plan which requires the payment of taxes or charges
unless and until it is satisfied that all such taxes and/or charges have been paid.
(b) Subject to the provisions of this Plan, at any time after the Distribution Date and before the Expiration Date, upon receipt by the Company and the Rights Agent of evidence satisfactory to them of the
loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Companys request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
7.
Exercise of Rights, Purchase Price; Expiration Date of Rights
.
(a) Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date, and thereafter the registered
holder of any Right Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights evidenced thereby in whole or in part upon surrender of the Right Certificate, with the form of election to
purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each
one-thousandth of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which the Rights are exercised and an amount equal to any tax or charge required to be paid under Section 9(e) hereof, at any
time which is both after the Distribution Date and before the time (the Expiration Date) that is the earliest of: (i) the Close of Business on October 9, 2019, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the Redemption Date), (iii) the time at which such Rights are exchanged as provided in Section 24 hereof, (iv) the final adjournment of the Companys 2010 annual meeting of stockholders if
stockholder approval of this Plan has not been received before such time, (v) the repeal of Section 382 or any successor statute if the Board determines that this Plan is no longer necessary for the preservation of Tax Benefits,
(vi) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward, or (vii) such time as the Board determines that a limitation on the use of the Tax Benefits under
Section 382 would no longer be material to the Company. The Board shall at least annually consider whether to make the determination provided by Section 7(a)(vii) in light of all relevant factors, including, in particular, the amount and
anticipated utilization of the Companys Tax Benefits and the Companys market capitalization. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Expiration Date and, if such notification is given
orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes, prior to the Close of Business on
October 9, 2019, that the Expiration Date has not occurred.
(b) The Purchase Price shall be initially $70.00 for each one one-thousandth of a share of Preferred Stock purchasable upon the exercise of a Right (Purchase Price). The Purchase Price and the
number of one one-thousandths of a share of Preferred Stock or other securities or property to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Section 11 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase properly completed and duly executed, accompanied
(subject to the following sentence and Section 11(o)) by payment of the aggregate Purchase Price for the number of shares of Preferred Stock to be purchased and an amount equal to any applicable tax or charge required to be paid by the holder
of such Right Certificate in accordance with Section 6 hereof, in cash or by certified check, cashiers check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from
any transfer agent of the Preferred Stock, or make available if the Rights Agent is the
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transfer agent for the Preferred Stock, certificates for the number of shares of Preferred Stock to be purchased, and the Company hereby irrevocably authorizes each such transfer agent to comply
with all such requests, or (B) requisition from the depositary agent appointed by the Company depositary receipts representing interests in such number of shares of Preferred Stock as are to be purchased (in which case certificates for the
Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company hereby directs any such depositary agent to comply with such request, (ii) when necessary to comply with this
Plan, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered
to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when necessary to comply with this Plan, after receipt of the cash requisitioned from the
Company, deliver such cash to or upon the order of the registered holder of such Right Certificate. If the Company is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Plan.
(d) Except as otherwise provided herein, in case the
registered holder of any Right Certificate shall exercise less than all of the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the exercisable Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 6 and Section 14 hereof.
(e) Notwithstanding anything in this Plan to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights or other securities into which the Rights have been converted or exchanged upon the occurrence of any purported transfer or exercise of Rights pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have (i) properly completed and duly executed the certificate contained in the form of assignment or form of election to purchase set forth on the reverse side of the Right Certificate
surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner, former Beneficial Owner and/or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably
request.
8.
Cancellation and Destruction of
Right Certificates
. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation
or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in respect thereof except as expressly permitted by any of the provisions of this Plan. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled
Right Certificates to the Company, or shall, at the written request of the Company, destroy or cause to be destroyed such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
9.
Availability of Shares of Capital Stock
.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock or any shares of Preferred Stock held in its treasury, the number of shares of Preferred Stock that will be sufficient to permit the exercise in
full of all outstanding Rights.
(b) So long as
the shares of Preferred Stock (and, following the time that a Person becomes an Acquiring Person, shares of Common Stock and other securities) issuable upon the exercise of Rights may be listed or admitted to trading on the New York Stock Exchange
or listed on any other national securities exchange or quotation system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed or admitted to
trading on the New York Stock Exchange or listed on such other national securities exchange or quotation system upon official notice of issuance upon such exercise.
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(c) From and after such time as the Rights become exercisable, the Company shall use its
best efforts, if then necessary, to permit the issuance of shares of Preferred Stock (and following the time that a Person first becomes an Acquiring Person, shares of Common Stock and other securities) upon the exercise of Rights, to register and
qualify such shares of Preferred Stock (and following the time that a Person first becomes an Acquiring Person, shares of Common Stock and other securities) under the Securities Act and any applicable state securities or Blue Sky laws
(to the extent exemptions therefrom are not available), cause such registration statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective until the earlier of
(x) the date as of which the Rights are no longer exercisable for such securities and (y) the Expiration Date. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days, the exercisability of the Rights
in order to prepare and file a registration statement under the Securities Act and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. The Company shall notify the Rights Agent whenever it makes a public announcement pursuant to this Section 9(c) and give the Rights
Agent a copy of such announcement. Notwithstanding any provision of this Plan to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification or exemption in such jurisdiction shall have been obtained and
until a registration statement under the Securities Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Preferred Stock
(and following the time that a Person first becomes an Acquiring Person, shares of Common Stock and other securities) delivered upon exercise of Rights (subject to payment of the Purchase Price) or delivered pursuant to an exchange for Common Stock
under Section 24, shall, at the time of delivery of the certificates therefor, be duly and validly authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any shares of Preferred Stock (or shares of Common Stock and other securities) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax or charge which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Stock (or shares of Common Stock and other securities) in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates or
depositary receipts for Preferred Stock (or shares of Common Stock and other securities) upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by that holder of such Right Certificate
at the time of surrender) or until it has been established to the Companys or the Rights Agents satisfaction that no such tax or charge is due.
10.
Capital Stock Record Date
. Each Person in whose name any certificate for Preferred Stock (or Common Stock or other
securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Preferred Stock (or Common Stock or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges ) was made or, if issued pursuant to
Section 24, the date upon which the Company issues such certificate in exchange for the Rights; provided, however, that if the applicable transfer books of the Company are closed on such date, such Person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which such transfer books are open. Before the exercise of the Rights evidenced thereby (or an exchange pursuant to Section 24), the
holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Stock (or Common Stock or other securities, as the case may be) for which the Rights shall be exercisable, including the right to vote or to receive dividends
or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
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11.
Adjustment of Purchase Price, Number and Kind of Shares and Number of
Rights
. The Purchase Price, the number of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a)
(i) In the event the Company shall at any time after the
date of this Plan (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number
of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, as the case
may be, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately before such date and at a time when the Preferred Stock transfer books of the Company were open, the holder would have owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification.
(ii) Subject to Section 24 of this Plan, and except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes an Acquiring Person, each
holder of a Right shall thereafter have the right to receive, upon exercise thereof at a price equal to the then-current Purchase Price, in accordance with the terms of this Plan and in lieu of shares of Preferred Stock, such number of shares of
Common Stock (or at the option of the Company, such number of one-thousandths of a share of Preferred Stock) as shall equal the result obtained by multiplying (x) the then-current Purchase Price, by (y) the number of one-thousandths of a
share of Preferred Stock for which a Right is then exercisable and dividing the product of (x) and (y) by (z) 50% of the then-current per share market price of the Common Stock (determined pursuant to Section 11(d) hereof) on the
date of the occurrence of such event; provided, however, that the Purchase Price (as so adjusted) and the number of shares of Common Stock so receivable upon exercise of a Right shall thereafter be subject to further adjustment as appropriate in
accordance with this Section 11 hereof. Notwithstanding anything in this Plan to the contrary, however, from and after the time (the Invalidation Time) when any Person first becomes an Acquiring Person, any Rights that are
Beneficially Owned by (x) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Invalidation Time or
(z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee before or concurrently with the Invalidation Time pursuant to either (I) a transfer from the Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer that the Board has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent transferees of such Persons, shall be void without any further action, and any holder of such Rights shall thereafter have no rights whatsoever with respect to such
Rights under any provision of this Plan. The Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Right Certificates or other Person as
a result of the Companys failure to make any determinations with respect to an Acquiring Person or its Affiliates or Associates or transferees hereunder. From and after the Invalidation Time, no Right Certificate shall be issued pursuant to
Section 3 or Section 6 hereof that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void
pursuant to the provisions of this paragraph shall be canceled. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Invalidation Time and, if such notification is given orally, the Company shall confirm same in
writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Invalidation Time has not occurred.
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(iii) The Company may at its option (or, if required to comply with its Certificate of
Incorporation, shall) substitute for a share of Common Stock issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fraction of shares of Preferred Stock (or, if required to comply with its
Certificate of Incorporation, equivalent shares of its capital stock) having an aggregate current market value equal to the current per share market price of a share of Common Stock. In the event that there shall be an insufficient number of shares
of Common Stock authorized but unissued (and unreserved) to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board shall, with respect to such deficiency, to the extent permitted by applicable law and
any material agreements then in effect to which the Company is a party, (A) determine the excess of (x) the value of the shares of Common Stock issuable upon the exercise of a Right in accordance with the foregoing subparagraph
(ii) (the Current Value) over (y) the then-current Purchase Price multiplied by the number of one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately before the time that the Acquiring Person
became such (such excess, the Spread), and (B) with respect to each Right (other than Rights which have become void pursuant to Section 11(a)(ii)), make adequate provision to substitute for the shares of Common Stock issuable
in accordance with subparagraph (ii) upon exercise of the Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other equity securities of the
Company (including shares or fractions of shares of preferred stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the shares of Common Stock, are deemed in good faith by the Board to have
substantially the same value as the shares of Common Stock (such shares of preferred stock and shares or fractions of shares of preferred stock are hereinafter referred to as Common Stock Equivalents)), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having a value which, when added to the value of the shares of Common Stock actually issued upon exercise of such Right, shall have an aggregate value equal to the Current
Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board upon the advice of a nationally recognized investment banking firm selected in good faith by the Board; provided, however,
that if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the date that the Acquiring Person became such (the Section 11(a)(ii) Trigger Date), then the
Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of such Purchase
Price, shares of Common Stock (to the extent available), and then, if necessary, such number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. If, within the thirty (30) day period referred to above the Board shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board elects, such thirty (30) day period may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is hereinafter called the Substitution Period). To the extent that the Company determines that some action need be taken
pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such second sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the shares of Common Stock shall be the current per share market price (as determined
pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or fractional value of any Common Stock Equivalent shall be deemed to equal the current per share market price of the Common Stock on such
date. The Board may, but shall not be required to, establish procedures to allocate the right to receive shares of Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).
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(b) In case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having similar rights, privileges and preferences as the
Preferred Stock (Equivalent Preferred Shares)) or securities convertible into Preferred Stock or Equivalent Preferred Shares at a price per share of Preferred Stock or Equivalent Preferred Shares (or having a conversion price per share,
if a security convertible into shares of Preferred Stock or Equivalent Preferred Shares) less than the then current per share market price of the Preferred Stock (determined pursuant to Section 11(d) hereof) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately before such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock and Equivalent
Preferred Shares outstanding on such record date plus the number of shares of Preferred Stock and Equivalent Preferred Shares which the aggregate offering price of the total number of such shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock and Equivalent Preferred Shares outstanding on such record
date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and which
shall be binding on the Rights Agent. Shares of Preferred Stock and Equivalent Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record
date for the making of a distribution to all holders of the Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect immediately before such record date by a fraction, the numerator of which shall be the then-current per share market price of the Preferred Stock (determined pursuant
to Section 11(d) hereof) on such record date, less the fair market value (as determined in good faith by the Board whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent) of
the portion of such assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Preferred Stock, and the denominator of which shall be such current per share market price of the
Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price that would then be in effect if such record date
had not been fixed.
(d)
(i) Except as otherwise provided herein, for the purpose of
any computation hereunder, the current per share market price of any security (a Security for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately before, but not including, such date; provided, however, that in the event that the current per share market price of the Security is determined
during a period following, but not including, the announcement by the issuer of such Security of (A) a dividend or distribution on
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such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security, and before the
expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be
appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported by the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Security is not
listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if on such date the Security is not so quoted or reported, the average of the high and low asked
prices in the over-the-counter market as reported by any system then in use, or, if not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board. The
term Trading Day shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred Stock is publicly traded, the current per share market price of the Preferred Stock shall be determined in accordance with
the method set forth in Section 11(d)(i). If the Preferred Stock is not publicly traded but the Common Stock is publicly traded, the current per share market price of the Preferred Stock shall be conclusively deemed to be the
current per share market price of the Common Stock as determined pursuant to Section 11(d)(i) multiplied by the then applicable Adjustment Number (as defined in and determined in accordance with the Certificate of Designation for the Preferred
Stock). If neither the Common Stock nor the Preferred Stock is publicly traded, current per share market price shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments not
required to be made by reason of this Section 11(e) shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one ten-thousandth
of a share of Preferred Stock or share of Common Stock or other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date. If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the Company other than the Preferred Stock, thereafter the Purchase Price and the number of such other shares so receivable upon exercise of a Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) and the provisions of Sections
7, 9, 10 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right
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outstanding immediately before the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest ten-thousandth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right immediately
before such adjustment by (y) the Purchase Price in effect immediately before such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(h) The Company may elect on or after the
date of any adjustment of the Purchase Price or any adjustment made to the number of shares of Preferred Stock for which a Right may be exercised pursuant to Section 11(a)(i), 11(b) or 11(c) hereof to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the
number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately before such adjustment. Each Right held of record before such adjustment of the number of Rights shall become that number of Rights (calculated
to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately before adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public
announcement (with prompt written notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for
the Right Certificates held by such holders before the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled as a result of such
adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the
public announcement.
(i) Irrespective of any
adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase
Price and the number of one-thousandths of a share of Preferred Stock which were expressed in the initial Right Certificates issued hereunder without effect on the Purchase Price payable to exercise a Right or the number of one one-thousandths of a
share of Preferred Stock issuable upon the exercise of a Right as provided herein.
(j) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the shares of Preferred Stock or other shares of capital stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock or other such
shares at such adjusted Purchase Price.
(k) In
any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent) until
the occurrence of such event issuing to the holder of any Right exercised after such record date the Preferred Stock, Common Stock or other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred
Stock, Common Stock or and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect before such adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holders right to receive such additional shares upon the occurrence of the event requiring such adjustment.
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(l) Notwithstanding anything in this Section 11 to the contrary, the Company shall be
entitled to make such adjustments in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Stock, issuance wholly for cash of any shares of Preferred Stock at less than the current market price, issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into
or exchangeable for Preferred Stock, dividends on Preferred Stock payable in shares of Preferred Stock or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(m) Notwithstanding anything in this Plan to the contrary, in the event that at any time after the date of this Plan and before the Distribution Date, the Company shall (i) declare and pay any
dividend on the Common Stock payable in Common Stock, or (ii) effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of a dividend payable in Common Stock) into a greater or
lesser number of shares of Common Stock, then, in any such case, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately before such event by a fraction the numerator
of which shall be the total number of shares of Common Stock outstanding immediately before the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence
of such event.
(n) The Company agrees that, after
the earlier of the Distribution Date or the Stock Acquisition Date, it will not, except as permitted by Section 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or eliminate the benefits intended to be afforded by the Rights.
(o) In the event that the Rights become exercisable, the Board in its sole discretion may permit the Rights, subject to Section 7(e),
to be exercised for 50% of the shares of Common Stock (or other securities, cash or other assets, as the case may be) that would otherwise be purchasable under subsection (a), in consideration of the surrender to the Company of the Right Certificate
representing the Right so exercised and without other payment of the Purchase Price (Cashless Exercise). Rights exercised under this Section 11(o) shall be deemed to have been exercised in full and shall be canceled.
12.
Certificate of Adjusted Purchase Price or Number of
Shares
. Whenever an adjustment is made as provided in Section 11 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock or the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or if before the Distribution
Date, to each holder of a certificate representing shares of Common Stock or Book Entry shares in respect thereof) in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any
adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of any such adjustment or any such event unless and until it shall have received such certificate. Any
adjustment to be made pursuant to Section 11 hereof shall be effective as of the date of the event giving rise to such adjustment.
13.
[Reserved]
.
14.
Fractional Rights and Fractional Shares
.
(a) The Company shall not be required to issue fractions of
Rights (except before the Distribution Date in accordance with Section 11(m) hereof) or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to
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which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately before the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Rights are not listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by such system then in use or, if on any such date the Rights are not so quoted, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected by the Board. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the
Board shall be used.
(b) The Company shall not be
required to issue fractions of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) or to distribute certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon the exercise or exchange of Rights. Interests in fractions of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock
may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners (for the purposes of this Section 14(b), as such term is defined in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act) of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised for shares of Preferred Stock as herein provided an amount in cash equal to the same fraction of the current market value of one share of Preferred Stock. For the
purposes of this Section 14(b), the current market value of a share of Preferred Stock shall be the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately before the
date of such exercise.
(c) The Company shall not
be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company shall pay
to the registered holders of the Right Certificates at the time such Rights are exercised or exchanged for shares of Common Stock as herein provided an amount in cash equal to the same fraction of the current market value of a whole share of Common
Stock (as determined in accordance with Section 11(d)(i) hereof), for the Trading Day immediately before the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise or exchange of a Right (except as provided above).
(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth
in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The
Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any Section of this Plan
relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.
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15.
Rights of Action
. All rights of action in respect of this Plan, excepting
the rights of action given to the Rights Agent under Section 18 and Section 20 hereof, are vested in the respective registered holders of the Right Certificates (and, before the Distribution Date, the registered holders of the Common
Stock); and any registered holder of any Right Certificate (or, before the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, before the Distribution Date, of the
Common Stock), on such holders own behalf and for such holders own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holders
right to exercise the Rights evidenced by such Right Certificate (or, before the Distribution Date, such Common Stock) in the manner provided in such Rights Certificate and in this Plan. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Plan and will be entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of, the obligations of any Person subject to this Plan.
16.
Agreement of Right Holders
. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) before the Distribution Date, the Rights
will not be evidenced by a Right Certificate and will be transferable only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at
the office or agency of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer, and such additional evidence of the identity of the Beneficial Owner, former Beneficial Owner and/or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request;
(c) the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, before the Distribution Date, the Common Stock certificate (or Book Entry shares in respect of
Common Stock)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the Common Stock certificate (or notices provided to holders of Book
Entry shares of Common Stock) made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the penultimate sentence of Section 11(a)(ii), shall be affected by
any notice to the contrary; and
(d)
notwithstanding anything in this Plan to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Plan by
reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court or by a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its reasonable best efforts to have any such
injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.
17.
Right Certificate Holder Not Deemed a Stockholder
. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of
the Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon
the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in this Plan), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by such Right Certificate
shall have been exercised or exchanged in accordance with the provisions hereof.
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18.
Concerning the Rights Agent
.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable out of pocket expenses, including the reasonable fees and disbursements of its counsel, and other disbursements, incurred in
connection with the preparation, negotiation, delivery, amendment, administration and execution of this Plan and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent (each as determined by a final, non-appealable judgment of a court of competent jurisdiction), for any action taken, suffered or omitted to be taken by the Rights Agent in connection with the acceptance and
administration of this Plan, or the exercise or performance of its duties hereunder, including without limitation, the costs and expenses of defending against any claim of liability hereunder, directly or indirectly. The costs and expenses incurred
in successfully enforcing this right of indemnification shall be paid by the Company. The provisions of this Section 18 and Section 20 below shall survive the termination of this Plan, the exercise or expiration of the Rights and the
resignation, replacement or removal of the Rights Agent hereunder, including, without limitation, the reasonable costs and expenses of defending against a claim of liability hereunder.
(b) The Rights Agent shall be authorized and protected and shall incur no liability for, or in respect of any
action taken, suffered or omitted to be taken by it in connection with, its acceptance and administration of this Plan and the exercise and performance of its duties hereunder in reliance upon any Right Certificate or certificate for the Preferred
Stock, the Common Stock, or for any other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by
it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. The Rights Agent shall not be deemed to have
knowledge of any event of which it was supposed to receive notice thereof hereunder but as to which no notice was provided, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection
therewith unless and until it has received such notice.
19.
Merger or Consolidation or Change of Name of Rights Agent
.
(a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the stock transfer or corporate trust or stockholder services businesses of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this Plan without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Plan, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Plan.
(b) In
case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name and in all such cases
such Right Certificates shall have the full force provided in the Right Certificates and in this Plan.
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20.
Duties of Rights Agent
. The Rights Agent undertakes to perform only the
duties and obligations expressly imposed by this Plan (and no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company and/or the Board and/or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted to be taken by it in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Plan the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and the determination of the current per share market price of any security) be proved or established by the Company before taking or suffering or omitting to take any
action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief Executive Officer, President
(or any Vice President) and the Secretary (or any Assistant Secretary) of the Company (each, an Authorized Officer) and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the
Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Plan in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own gross negligence, bad faith or willful misconduct (each as determined by a final, non-appealable judgment of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or
damage. Any liability of the Rights Agent under this Plan will be limited to the amount of annual fees paid by the Company to the Rights Agent.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Plan or in the
Right Certificates or be required to verify the same (except as to its countersignature on such Right Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any liability for or be
under any responsibility in respect of the validity of this Plan or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy conditions contained in this Plan or in any Right Certificate; nor shall it be responsible for any change in
the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 11(a)(ii) hereof) or any change or adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections
3, 11, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to
Section 12, describing such change or adjustment, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock
or other securities to be issued pursuant to this Plan or any Right Certificate or as to whether any shares of Preferred Stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights
Agent of its duties under this Plan.
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(g) The Rights Agent is hereby authorized and directed to accept instructions with respect
to the performance of its duties hereunder from any Person believed by the Rights Agent to be one of the Authorized Officers of the Company, and to apply to such Authorized Officers for advice or instructions in connection with its duties, and such
instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall not be liable for or in respect of any action taken, suffered or omitted to be taken by it in accordance with instructions of any such Authorized
Officer or for any delay in acting while waiting for those instructions. The Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received by any such Authorized Officer. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted to be taken by the Rights Agent under this Plan and the date on and/or after which such
action shall be taken or suffered or such omission shall be effective. The Rights Agent shall not be liable for any action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or
after the date specified in such application (which date shall not be less than five Business Days after the date any Authorized Officer of the Company actually receives such application unless any such Authorized Officer shall have consented in
writing to an earlier date) unless, before taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or
omitted.
(h) The Rights Agent and any
stockholder, affiliate, director, officer, employee or agent of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Plan. Nothing herein shall preclude the Rights Agent or any stockholder, affiliate, director, officer,
employee or agent from acting in any other capacity for the Company or for any other Person.
(i) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on
the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
(j) No provision of this Plan shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of its
rights hereunder if the Rights Agent believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
21.
Change of Rights Agent
. The Rights Agent or
any successor Rights Agent may resign and be discharged from its duties under this Plan upon 30 days prior notice in writing mailed to the Company and to each transfer agent of the Common Stock or Preferred Stock known to the Rights Agent, by
registered or certified mail, and if such resignation occurs after the Distribution Date, to the holders of the Rights Certificates by first class mail. In the event the transfer agency relationship in effect between the Company and the Rights Agent
terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Plan as of the effective date of such termination. The Company may remove the Rights Agent or any successor Rights Agent upon 30
days prior notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock or Preferred Stock by registered or certified mail, and, following the Distribution Date, to
the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who
shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any
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successor Rights Agent, whether appointed by the Company or by such a court, shall be (A) a Person organized and doing business under the laws of the United States or any state thereof,
which is authorized under such laws to exercise corporate trust or stock transfer or shareholder service powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million or (B) an affiliate (as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of a Person described in clause (A) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock or Preferred Stock, and, following the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
22.
Issuance of New Right
Certificates
. Notwithstanding any of the provisions of this Plan or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such forms as may be approved by its Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Plan. In addition, in connection with the
issuance or sale of Common Stock following the Distribution Date and before the Expiration Date, the Company may with respect to shares of Common Stock so issued or sold pursuant to (i) the exercise of stock options, (ii) under any
employee plan or arrangement, (iii) the exercise, conversion or exchange of securities, notes or debentures issued by the Company or (iv) a contractual obligation of the Company, in each case existing before the Distribution Date, issue
Right Certificates representing the appropriate number of Rights in connection with such issuance or sale.
23.
Redemption
.
(a) The Board may, at any time before such time as any Person first becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring in respect of the Common Stock after the date hereof (the Redemption Price).
The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the current market price of the Common Stock at the time of redemption as determined pursuant to Section 11(d)(i) hereof) or any other form of consideration deemed appropriate by the Board. Notwithstanding the foregoing, the aggregate
Redemption Price payable to any holder of Rights upon the redemption of all Rights held by such holder shall be rounded to the nearest $0.01 (such that fractions of $0.01 greater than or equal to $0.005 shall be rounded up and fractions of $0.01
less than $0.005 shall be rounded down); and further provided that the aggregate Redemption Price payable to any holder of Rights upon the redemption of all Rights held by such Person shall in no event be less than $0.01.
(b) Immediately upon the action of the Board ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the Board may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption (with prompt written notice thereof to the Rights Agent);
provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board ordering the redemption of the Rights (or such later time as the Board may
establish for the effectiveness of such redemption), the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the
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registry books of the Rights Agent or, before the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made. The failure to give notice required by this Section 23(b) or
any defect therein shall not affect the validity of the action taken by the Company.
(c) In the case of a redemption under Section 23(a) hereof, the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, before the Distribution Date,
on the registry books of the transfer agent of the Common Stock, and upon such action, all outstanding Right Certificates shall be void without any further action by the Company.
24.
Exchange
.
(a) The Board may, at its option, at any time after any
Person first becomes an Acquiring Person, exchange all or part of the then outstanding Rights (which shall not include Rights that have not become effective or that have become null and void pursuant to the provisions of Section 11(a)(ii)
hereof ) for shares of Common Stock at an exchange ratio of one share of Common Stock (or one-thousandth of a share of Preferred Stock) per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such amount per Right being hereinafter referred to as the Exchange Ratio). Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after an Acquiring Person becomes the
Beneficial Owner of 50% or more of the outstanding shares of Common Stock. The exchange of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Before
effecting an exchange pursuant to this Section 24, the Board may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board shall then approve (the Trust Agreement). If the Board so directs, the
Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the Trust) all of the shares of Common Stock issuable pursuant to the exchange, and all Persons entitled to receive shares pursuant to
the exchange shall be entitled to receive such shares (and any dividends or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and
provisions of the Trust Agreement.
(b)
Immediately upon the effectiveness of the action of the Board ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange (with prompt written notice thereof to the Rights Agent) and shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the
registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in the
event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued (and unreserved) to permit an exchange of Rights as contemplated in accordance with this Section 24 (or if the issuance of
Common Stock in exchange for any Rights would not otherwise be permitted under the Certificate of Incorporation), the Company shall
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substitute, to the extent of such insufficiency or to the extent necessary to comply with its Certificate of Incorporation, for each share of Common Stock that would otherwise be issuable upon
exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or Equivalent Preferred Shares, as such term is defined in Section 11(b), or other equivalent shares of its capital stock) such that the current per share market
price (determined pursuant to Section 11(d) hereof) of one share of Preferred Stock (or Equivalent Preferred Share or other equivalent share) multiplied by such number or fraction is equal to the current per share market price of one share of
Common Stock (determined pursuant to Section 11(d) hereof) as of the date of such exchange.
25.
Notice of Certain Events
.
(a) In case the Company shall at any time after the earlier of the Distribution Date or the Stock Acquisition Date propose (i) to pay any dividend payable in stock of any class to the holders of its
Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision or
combination of outstanding Preferred Stock), (iv) to effect the liquidation, dissolution or winding up of the Company, or (v) to declare or pay any dividend on the Common Stock payable in Common Stock, to effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in Common Stock), then, in each such case, the Company shall give to the Rights Agent and to each holder of a Right Certificate, in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend or distribution or offering of rights or warrants, or the date on which such liquidation, dissolution, winding up,
reclassification, subdivision, combination or consolidation is to take place and the date of participation therein by the holders of the Common Stock and/or Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 10 days before the record date for determining holders of the Preferred Stock for purposes of such action, and in the case of any such other action, at least 10 days before
the date of the taking of such proposed action or the date of participation therein by the holders of the Common Stock and/or Preferred Stock, whichever shall be the earlier.
(b) In the event that any Person becomes an Acquiring Person,
then the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Right Certificate (or if occurring before the Distribution Date, the holders of the Common Stock) in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii).
(c) The failure to give notice required by this
Section 25 or any defect therein shall not affect the validity of the action taken by the Company or the vote upon any such action.
26.
Notices
. Except as otherwise provided herein, notices or demands authorized by this Plan to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by overnight delivery service or first-class mail, postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
RADIAN GROUP INC.
1601 Market Street
Philadelphia, Pennsylvania 19103
Attention: Corporate Secretary
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Subject to the provisions of Section 21 hereof, any notice or demand authorized by this
Plan to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by overnight delivery service or first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
THE BANK OF NEW YORK MELLON
480 Washington Boulevard - 29th Floor
Jersey City, NJ 07310
Attention: Kiernan McGovern, Senior Associate
With a copy to:
THE BANK OF NEW YORK MELLON
480 Washington Boulevard
Jersey City, NJ 07310
Attention: Legal Department
Notices or demands authorized by this Plan to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or if before the Distribution Date, to each holder of a
certificate representing shares of Common Stock or Book Entry shares in respect thereof) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
27.
Supplements and Amendments
. Except as otherwise provided in this Section 27, for so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Plan in any respect without the approval of any holders of the Rights. At any time when the Rights are no longer redeemable, except as otherwise provided in this Section 27, the Company may,
and the Rights Agent shall, if the Company so directs, supplement or amend this Plan without the approval of any holders of Rights, in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv) change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable;
provided, however, that no such supplement or amendment may adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no such amendment may cause the
Rights again to become redeemable or cause this Plan again to become amendable other than in accordance with this sentence. Notwithstanding anything contained in this Plan to the contrary, no supplement or amendment shall be made which decreases the
Redemption Price. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall promptly execute
such supplement or amendment. Notwithstanding anything contained in this Plan to the contrary, the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agents own rights, duties,
immunities or obligations under this Plan. The Rights Agent hereby acknowledges that in all matters arising under this Plan, including any amendment hereto pursuant to this Section 27, time is of the essence.
28.
Successors
. All the covenants and
provisions of this Plan by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
29.
Benefits of this Plan
. Nothing in this Plan
shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, before the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this
Plan; but this Plan shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, before the Distribution Date, the Common Stock).
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30.
Process to Seek Exemption
. Any Person who desires to effect any
acquisition of Common Stock that would, if consummated, result in such Person becoming an Acquiring Person, may, in accordance with this Section 30, request that the Board grant an exemption with respect to such acquisition under this Plan (the
Person requesting such exemption, a Requesting Person) so that such acquisition will be deemed to be an Exempt Transaction for purposes of this Plan (an Exemption Request). An Exemption Request shall be in proper
form and shall be delivered by fax and by registered mail, return receipt requested, to the Secretary of the Company at the principal executive offices of the Company. To be in proper form, an Exemption Request shall set forth (i) the name and
address of the Requesting Person, (ii) the number and percentage of shares of Common Stock then Beneficially Owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, and (iii) a reasonably
detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial Ownership of Common Stock, such that the Requesting Person would otherwise become an Acquiring Person, and the maximum number
and percentage of shares of Common Stock that the Requesting Person proposes to acquire. The Board shall make a determination whether to grant an exemption in response to an Exemption Request as promptly as practicable (and, in any event, within 10
Business Days) after receipt thereof pursuant to registered mail; provided, that the failure of the Board to make a determination within such period shall be deemed to constitute the denial by the Board of the Exemption Request. The Board shall
grant an exemption in response to an Exemption Request only if the Board determines in its sole discretion that the acquisition of Beneficial Ownership of Common Stock by the Requesting Person will not jeopardize or endanger the availability to the
Company of the Tax Benefits or is otherwise in the best interests of the Company. Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the Requesting Person
agree that it will not acquire Beneficial Ownership of shares of Common Stock in excess of the maximum number and percentage of shares of Common Stock approved by the Board), in each case as and to the extent the Board shall determine in its sole
discretion to be necessary or desirable to provide for the protection of the Companys Tax Benefits or otherwise in the best interests of the Company. Any Exemption Request may be submitted on a confidential basis and, except to the extent
required by applicable law, the Company shall maintain the confidentiality of such Exemption Request and the Boards determination with respect thereto.
31.
Determinations and Actions by the Board of Directors
. The Board shall have the exclusive power and authority to
administer this Plan and to exercise the rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Plan, including the right and power to (i) interpret the
provisions of this Plan and (ii) make all determinations deemed necessary or advisable for the administration of this Plan (including a determination to redeem or not redeem the Rights or to amend or not amend this Plan). All such actions,
calculations, interpretations and determinations that are done or made by the Board in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties. The Rights Agent is
entitled always to presume that the Board acted in good faith and shall be fully protected and incur no liability in reliance thereon. The Board may delegate all or any portion of its power and authority to administer this Plan and to exercise the
rights and powers hereunder to a committee of and appointed by the Board.
32.
S
everability
. If any term, provision, covenant or restriction of this Plan or applicable to this Plan is held by a court of competent jurisdiction or other authority to be invalid, null
and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and
provided
,
further
, that if
any such excluded term, provision, covenant or restriction shall adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately;
provided
,
however
, that
notwithstanding anything in this Plan to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, null and void or unenforceable and the Board determines in its good faith judgment that
severing the invalid language from this Plan would adversely affect the purpose or effect of this Plan, the right of redemption set forth in Section 23 hereof shall be reinstated (with prompt notice to the Rights Agent) and shall not expire
until the Close of Business on the tenth Business Day following the date of such determination by the Board.
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33.
Governing Law
. This Plan and each Right Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.
34.
Counterparts
. This Plan may be
executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Plan transmitted
electronically shall have the same authority, effect and enforceability as an original signature.
35.
Descriptive Headings
. Descriptive headings of the several sections of this Plan are inserted for convenience only and shall not control or affect the meaning or construction of any of
the provisions hereof.
36.
Force
Majeure
. Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control, including acts of God, terrorist acts,
shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil
unrest.
37.
Interpretation
. In this
Plan, unless a clear contrary intention appears:
(a) where not inconsistent with the context, words in the plural number include the singular number and vice versa;
(b) reference to any Person includes such Persons
successors and assigns but, if applicable, only such successors and assigns permitted by this Plan;
(c) reference to any gender includes each other gender;
(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect
from time to time in accordance with the terms thereof and includes all addenda, exhibits and schedules thereto;
(e) all references to Sections refer to the Sections of this Plan and all references to Exhibits refer to the Exhibits attached to this
Plan, each of which is made a part of this Plan for all purposes;
(f) reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder,
and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other
provision;
(g) hereunder,
hereof, hereto, and words of similar import shall be deemed references to this Plan as a whole and not to any particular Section or other provision hereof and, unless the context otherwise requires, references herein to a
specific Section, subsection, preamble, recital, or Exhibit refer, respectively, to Articles, Sections, subsections, preamble, recitals, or Exhibits of this Plan;
(h) including (and with correlative meaning,
include) means including without limitation;
(i) or is used in the inclusive sense of and/or;
(j) with respect to the determination of any period of time, from means from and including and to
means to but excluding; and
(k) the
terms Dollars and $ mean United States Dollars.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan, as amended and restated in its
entirety, to be duly executed as of the 12th day of February, 2010.
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RADIAN GROUP INC.
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By:
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/s/ C. Robert Quint
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Name:
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C. Robert Quint
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Title:
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Chief Financial Officer and
Executive Vice President
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THE BANK OF NEW YORK MELLON,
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as Rights Agent
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By:
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/s/ Kieran McGovern
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Name:
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Kieran McGovern
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Title:
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Senior Associate
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Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
RADIAN GROUP INC.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
RADIAN GROUP INC., a corporation organized
and existing under the laws of the State of Delaware (the Corporation), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of
Directors of the Corporation (the Board of Directors) in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the said Corporation (the Certificate of Incorporation), the said Board of
Directors on October 8, 2009 adopted the following resolution creating a series of 325,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that in connection with the adoption of the
Corporations Tax Benefit Preservation Plan and pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of its Amended and Restated Certificate of Incorporation, as amended (the
Certificate of Incorporation), the Board of Directors hereby creates a series of 325,000 shares of preferred stock, to be known as Series A Junior Participating Preferred Stock, par value $0.001 per share, and hereby states the
designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows.
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of
Preferred Stock that shall be designated as Series A Junior Participating Preferred Stock, and the number of shares constituting such series shall be 325,000. Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, however, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to less than the number of shares then issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Corporation ranking prior
and superior to the shares of Series A Junior Participating Preferred Stock with respect
1
to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of shares of any class or series of stock of the Corporation ranking junior to
the Series A Junior Participating Preferred Stock in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 1st day
of March, June, September and December, in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number
times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, par value $0.001 per share, of the Corporation (the Common Stock), or a
subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. The Adjustment Number shall initially be 1,000. In the event the Corporation shall at any time after October 19, 2009
(i) declare and pay any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately before such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately before such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is before the record date for the first Quarterly Dividend Payment Date; in
which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days before the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating
Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as required by law, by Section 3(C) and by
Section 10 hereof, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
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(C) If, at the time of any annual meeting of stockholders for the election of directors, the
equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Junior Participating Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall
be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Junior Participating Preferred Stock, voting separately as a class to
the exclusion of the holders of Common Stock, shall be entitled at said meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends in arrears on the Series A Junior Participating Preferred Stock have been
paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Junior Participating Preferred Stock being entitled to cast a number of votes per share of Series A
Junior Participating Preferred Stock as is specified in paragraph (A) of this Section 3. Each such additional director shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be
elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C). Until the default in payments of all dividends which permitted the election of said directors shall cease to exist,
any director who shall have been so elected pursuant to the provisions of this Section 3(C) may be removed at any time, without cause, only by the affirmative vote of the holders of the shares of Series A Junior Participating Preferred Stock at
the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If
and when such default shall cease to exist, the holders of the Series A Junior Participating Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors
constituting the Board of Directors shall be reduced by two. The voting rights granted by this Section 3(C) shall be in addition to any other voting rights granted to the holders of the Series A Junior Participating Preferred Stock in this
Section 3.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of
Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating
Preferred Stock, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
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5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof. All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, voluntary or otherwise, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount per share (the Series A Liquidation Preference) equal to the greater of (i) $1.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed in respect of the Common Stock upon
such liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other classes and series
of stock of the Corporation, if any, that rank on a parity with the Series A Junior Participating Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Junior
Participating Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or with another entity nor the merger or consolidation of any other entity
into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in
which the outstanding shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged.
8. No Redemption.
Shares of Series A Junior Participating Preferred Stock shall not be subject to redemption by the Corporation.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Preferred Stock as to the
payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation of the Corporation shall not be amended, by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
4
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 9th day of October,
2009.
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RADIAN GROUP INC.
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By:
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Name:
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Title:
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Exhibit B
Form of Right Certificate
Certificate No.
R-
NOT EXERCISABLE AFTER OCTOBER 9, 2019 OR SUCH EARLIER DATE AS PROVIDED BY THE TAX BENEFIT PRESERVATION PLAN OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE TAX BENEFIT PRESERVATION PLAN. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE TAX BENEFIT PRESERVATION PLAN, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE TAX BENEFIT PRESERVATION PLAN) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
RADIAN GROUP INC.
This certifies that
or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Tax Benefit Preservation Plan, dated as of October 9, 2009 , as the same may be amended from time to time (the Plan), between Radian Group Inc., a Delaware corporation
(the Company), and The Bank of New York Mellon, as Rights Agent (the Rights Agent), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Plan) and before 5:00 P.M., Eastern
time, on October 9, 2019 at the office or agency of the Rights Agent designated for such purpose, or of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, par
value $0.001 per share (the Preferred Stock), of the Company at a purchase price of $[ ] per one one-thousandth of a share of Preferred Stock (the Purchase
Price), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Rights Certificate (and the number of one one-thousandths of a share of Preferred
Stock which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of
[ , 20 ], based on the Preferred Stock as constituted at such date. As provided in the Plan, the Purchase
Price, the number of one one-thousandths of a share of Preferred Stock (or other securities or property) which may be purchased upon the exercise of the Rights and the number of Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events. Any capitalized terms used herein and not otherwise defined shall have the meaning attributed to them in the Plan.
Except as otherwise provided in the Plan, in the event that
any person, entity or group becomes an Acquiring Person, if the Rights evidenced by this Right Certificate are Beneficially Owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person, (ii) a transferee of any
such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights.
As provided in the Rights Agreement, the Purchase Price and the number and kind of Preferred Stock or other securities that may be
purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events, including any person, entity or group becoming an Acquiring Person.
1
This Right Certificate is subject to all of the terms, provisions and conditions of the
Plan, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Plan reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Plan are on file at the principal executive offices of the Company. The Company will mail to the holder of this Right Certificate a copy
of the Plan without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon surrender at the office or agency of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Plan, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of $0.001 per Right or (ii) may be exchanged in whole or in part for shares of the Companys Common Stock, par value $0.001 per share, or shares of Preferred
Stock.
No fractional shares of Common Stock or
Preferred Stock will be issued upon the exercise or exchange of any Right or Rights evidenced hereby (other than fractions of Preferred Stock which are integral multiples of one one-thousandths of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Plan.
No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of
the Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise or exchange hereof, nor shall anything contained in the Plan or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Plan) or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised or exchanged as provided
in the Plan.
This Right Certificate shall not be
valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of
, 20 .
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RADIAN GROUP INC.
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By:
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Name:
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Title:
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Countersigned:
THE BANK OF NEW YORK MELLON, as Rights Agent
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Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
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FOR VALUE RECEIVED
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hereby sells, assigns and
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transfers unto
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(Please print name and address of transferee)
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Rights represented by this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
Attorney, to transfer said Rights on the
books of the within-named Company, with full power of substitution.
Dated:
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee
medallion program.
The undersigned hereby certifies that the
Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being sold, assigned or transferred to an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Plan).
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Form of Reverse Side of Right Certificatecontinued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by Right Certificate)
TO RADIAN GROUP INC.:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Right Certificate to purchase the shares of Preferred Stock (or other securities or property) issuable upon the exercise of such Rights and
requests that certificates representing such shares of Preferred Stock (or such other securities) be issued in the name of:
(Please print
name and address)
If such number of Rights shall not be all the
Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
(Signature must conform to
holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a bank, trust company, broker,
dealer or other eligible institution participating in a recognized signature guarantee medallion program.
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Form of Reverse Side of Right Certificatecontinued
The undersigned hereby certifies that the
Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being sold, assigned or transferred to, an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Plan).
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NOTICE
The signature in the Form of Assignment or Form of Election
to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase,
as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.
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Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE TAX BENEFIT
PRESERVATION PLAN, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE TAX BENEFIT PRESERVATION PLAN) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
RADIAN GROUP INC.
On October 8, 2009, the Board of Directors of Radian Group Inc. (the Company) declared a dividend of one preferred share purchase right (a Right) for each outstanding share of
Common Stock, par value $0.001 per share (the Common Stock). The dividend is payable on October 19, 2009 (the Record Date) to the stockholders of record on that date. Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the Preferred Stock) at a price of $70.00 per one one-thousandth of a share of Preferred Stock
(the Purchase Price), subject to adjustment. The description and terms of the Rights are set forth in the Tax Benefit Preservation Plan, dated as of October 9, 2009 , as the same may be amended from time to time (the
Plan), between the Company and The Bank of New York Mellon, as Rights Agent (the Rights Agent).
The Plan is designed to help protect the Companys tax net operating loss carryforwards. The Plan is intended to act as a deterrent
to any person or group from becoming or obtaining the right to become a 5-percent shareholder (as such term is used in Section 382 of the Internal Revenue Code of 1986, as amended (the Code), and the Treasury Regulations
promulgated thereunder) or, in certain cases, increasing such persons or groups ownership of Common Stock, without the approval of the Board of Directors. The Rights may cause substantial dilution to a person or group that attempts to
acquire a certain percentage of shares in the Company on terms not approved by the Board of Directors. Because of the dilution to a person or group that attempts to acquire a certain percentage of shares in the Company, the Plan may also have
certain anti-takeover effects. Additionally, the Board of Directors may redeem the Rights, as discussed more fully below.
Until the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated persons (with
certain exceptions, an Acquiring Person) has acquired beneficial ownership of 4.90% or more of the shares of Common Stock then outstanding or (ii) 10 business days (or such later date as may be determined by action of the Board of
Directors before such time as any person or group of affiliated persons becomes an Acquiring Person) after the date of commencement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or
group of 4.90% or more of the then-outstanding shares of Common Stock (the earlier of such dates being called the Distribution Date), the Rights will be evidenced, with respect to any of the Common Stock certificates (or book entry
shares in respect of the Common Stock) outstanding as of the Record Date, solely by such Common Stock certificate (or such book entry shares).
The Plan provides that, until the Distribution Date (or earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates (or book entry shares in respect of the Common Stock) issued after the Record Date upon transfer or
new issuances of Common Stock, as applicable, will contain a notation incorporating the Plan by reference and, with respect to any uncertificated book entry shares issued after the Record Date, proper notice will be provided that incorporates the
Plan by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for shares of Common Stock (or book entry shares of Common Stock) outstanding as of the Record Date,
even without a notation incorporating the Plan by reference (or such notice, in the case of Book Entry
1
shares), notice or a copy of this Summary of Rights, will also constitute the transfer of the Rights associated with the shares of Common Stock represented by such certificate or book entry
shares, as the case may be. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (Right Certificates) will be mailed to (or credited to the account of) holders of record of the Common Stock
as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will expire upon the earliest of the close of business on
October 9, 2019 (unless that date is advanced or extended), the time at which the Rights are redeemed or exchanged under the Plan, the final adjournment of the Companys 2010 annual meeting of stockholders if stockholder approval of the
Plan has not been received before that time, the repeal of Section 382 of the Code or any successor statute if the Board determines that the Plan is no longer necessary for the preservation of the Companys tax benefits, or the beginning
of a taxable year of the Company to which the Board determines that no tax benefits may be carried forward.
The Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred
Stock of certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then-current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above).
The Rights are also subject to adjustment in the
event of a stock dividend on the Common Stock payable in shares of Common Stock, or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, before the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of an amount equal to 1,000 times the dividend declared per share of Common Stock. In the
event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential liquidation payment of the greater of (a) $1.00 per share (plus any accrued but unpaid dividends) or
(b) an amount equal to 1,000 times the payment made per share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock. Finally, in the event of any merger, consolidation or other transaction
in which outstanding shares of Common Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are protected by customary anti-dilution
provisions.
Because of the nature of the
Preferred Stocks dividend, liquidation and voting rights, the value of the one one-thousandth interest in a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.
If any person or group of affiliated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that
number of shares of Common Stock having a market value of two times the Purchase Price.
If any person or group of affiliated persons becomes an Acquiring Person, the Board of Directors may permit, in its sole discretion, the Rights, other than Rights beneficially owned by the Acquiring
Person (which will thereupon become void), to be exercisable for 50% of the shares of Common Stock that would otherwise be purchasable upon the payment of the Purchase Price in consideration of the surrender to the Company of the exercised Rights.
2
At any time after any person or group becomes an Acquiring Person and before the acquisition
by such person or group of 50% or more of the outstanding shares of Common Stock, the Board of Directors may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, for shares of Common
Stock or Preferred Stock (or a series of the Companys preferred stock having similar rights, preferences and privileges), at an exchange ratio of one share of Common Stock, or a fractional share of Preferred Stock (or of a share of a similar
class or series of the Companys preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at
least 1% in such Purchase Price. No fractional shares of Common Stock or Preferred Stock will be issued (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading day before the date of exercise.
At any time before the time an Acquiring Person becomes such,
the Board of Directors may redeem the Rights in whole, but not in part, at a price of $0.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of adoption of the Plan (the
Redemption Price). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price as rounded to the nearest $0.01.
For so long as the Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Plan in any manner.
After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Plan in any manner that does not adversely affect the interests of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof,
as such, will have no rights as a stockholder of the Company, including the right to vote or to receive dividends.
A copy of the Plan has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Plan is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Plan, as the same may be amended from time to time, which is
hereby incorporated herein by reference.
3
Execution Copy
FIRST AMENDMENT TO THE
AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN
This First Amendment to the Amended and Restated Tax Benefit
Preservation Plan (this
Amendment
) dated as of May 3, 2010, is entered into between Radian Group Inc., a Delaware corporation (the
Company
), and The Bank of New York Mellon, a New York banking corporation,
as Rights Agent (the
Rights Agent
).
Background
A. The Company and Rights Agent are parties to that certain Amended and Restated Tax Benefit Preservation Plan, dated as of February 12, 2010 (the
Preservation Plan
).
B. The Company wishes to amend the Preservation Plan to add a
termination provision if the Preservation Plan is not re-approved by the stockholders of the Company every three years.
NOW, THEREFORE
, in consideration of the mutual promises, agreements and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1.
Amendment
. The Preservation Plan shall be amended by inserting a new provision (Section 7(f)) that reads in its entirety as
follows:
In addition to the provision set
forth in Section 7(a) of this Plan, the Expiration Date shall occur on the Close of Business on the second Business Day after the final adjournment of the third consecutive annual meeting of the stockholders of the Company held after this Plan
was most recently approved by the stockholders of the Company unless the Plan is re-approved by the stockholders at such meeting.
2.
Counterparts
. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment transmitted electronically shall have the same authority, effect and enforceability as an original
signature.
3.
Severability
. If any term,
provision, covenant or restriction of this Amendment or applicable to this Amendment is held by a court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and
provided
,
further
, that if any such excluded term, provision, covenant or restriction shall adversely
affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately.
4.
Governing Law
. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.
5.
Descriptive Headings
. Descriptive headings of the several sections of this Amendment are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions hereof.
6.
Defined Terms
. All capitalized terms used herein and not otherwise defined shall have the meaning given to them in the Preservation Plan.
7.
Preservation Plan in Full Force and Effect as Amended
. Except as specifically amended hereby, all of
the terms and conditions of the Preservation Plan shall be in full force and effect. All references to the Preservation Plan in any other document or instrument shall be deemed to mean such Preservation Plan as amended by this Amendment. The parties
hereto agree to be bound by the terms and obligations of the Preservation Plan, as amended by this Amendment, as though the terms and obligations of the Preservation Plan were set forth herein.
[
Signatures of the parties intentionally appear on
the next page.
]
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the 3rd day of May, 2010.
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RADIAN GROUP INC.
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By:
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/s/ C. Robert Quint
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Name:
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C. Robert Quint
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Title:
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Chief Financial Officer
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THE BANK OF NEW YORK MELLON,
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as Rights Agent
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By:
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/s/ Kieran McGovern
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Name:
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Kieran McGovern
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Title:
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Senior Associate
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5
RADIAN GROUP INC.
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IMPORTANT ANNUAL MEETING INFORMATION
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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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