UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 


 

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported) February 8, 2005

 


 

Radian Group Inc.

(Exact Name of Registrant as Specified in Its Charter)

 


 

Delaware

(State or Other Jurisdiction of Incorporation)

 

1-11356   23-2691170
(Commission File Number)   (IRS Employer Identification No.)
1601 Market Street, Philadelphia, Pennsylvania   19103
(Address of Principal Executive Offices)   (Zip Code)

 

215-564-6600

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former Name or Former Address, if Changed Since Last Report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 1.01 Entry into a Material Definitive Agreement.

 

Radian’s board of directors met on February 8, 2005 and approved the following recommendations made by the Compensation and Human Resources Committee of the board regarding management contracts and compensatory plans, contracts and arrangements in which Radian’s named executive officers are eligible to participate:

 

(1) The board approved an amendment to the Radian Group Inc. Equity Compensation Plan to allow for awards of performance shares under that plan. The amended and restated plan is attached as Exhibit 10.1 and incorporated herein by reference.

 

(2) The board approved the Radian Group Inc. Performance Share Plan. The plan is attached as Exhibit 10.2 and incorporated herein by reference. In 2004, the committee conducted an extensive review of Radian’s long-term equity incentive program. As a result of this review, Radian intends to deliver long-term equity incentives going forward through a balanced program comprising both stock options and performance shares. Key employees of Radian and its subsidiaries who, through their position or performance, can have a significant, positive impact on Radian’s financial results, are eligible to participate in the Performance Share Plan. The participants are expected to consist of the following, or their successors:

 

    Mark A. Casale – SVP, Strategic Investments

 

    Robert E. Croner – SVP, Human Resources

 

    Martin Kamarck – President, Radian Asset Assurance Inc.

 

    Roy J. Kasmar – President and Chief Operating Officer

 

    C. Robert Quint – EVP and Chief Financial Officer

 

    Howard S. Yaruss – EVP and General Counsel

 

In addition, due to the pending retirement of Frank P. Filipps as Radian’s Chairman and Chief Executive Officer, Radian currently is conducting a search for a new Chief Executive Officer. Radian expects that, once hired, its new Chief Executive Officer also will participate in the plan. In the future, the committee may expand the group of participants to include other key employees, or may contract the group of participants.

 

The Compensation and Human Resources Committee may grant performance shares to eligible participants with respect to performance periods of varying and overlapping durations. The first performance period under the plan is the three-year period that began January 1, 2005 and ends December 31, 2007. The committee expects that future performance periods will cover additional three year periods beginning January 1, 2006, January 1, 2007 and so on.

 

At the beginning of each performance period, a target number of performance shares is established for each participant in the plan. The performance shares are denominated in shares of Radian common stock and will be settled in shares, cash or a combination at the participant’s option, unless that participant has not yet reached the minimum stock ownership required of his or her position, in which case that participant’s performance shares will be settled in stock. The form of performance share award agreement for awards under the plan is attached as Exhibit 10.3 and incorporated herein by reference.

 

Each performance share award becomes payable at a multiple of the target amount depending on a combination of Radian’s growth of earnings per share, growth of adjusted book value and return on equity over the performance period. For the first performance period, one third of each award is based on each of the three metrics, and each metric is measured both on an absolute basis and relative to a group of Radian’s peers. For purposes of the deductibility requirements of Section 162(m) of the Internal Revenue Code, the maximum pay-out under any performance share award is 250,000 shares of Radian common stock or its equivalent market value as of the payment date.


If a change in control of Radian occurs (as defined in the Equity Compensation Plan) and at least twelve months has elapsed in any open performance period, then the target number of performance shares with respect to each such performance period will be paid immediately upon the change in control. Performance shares with respect to performance periods for which less than twelve months have elapsed will expire upon the change in control.

 

Upon retirement of a participant, payments with respect to the target number of performance shares related to performance periods for which the participant worked at least one full year will be made at the end of the performance period to the extent the performance goals for that period are met. Upon disability or death of a participant, payments with respect to the target number of performance shares related to all open performance periods will be made at the end of the performance period to the extent the performance goals for that period are met. Upon termination of employment for any reason other than retirement, disability or death, all performance shares with respect to open performance periods immediately will be forfeited and canceled.

 

Radian’s Compensation and Human Resources Committee administers the Performance Share Plan and may amend or terminate the Performance Share Plan at any time.

 

Radian expects to submit the material terms of the Performance Share Plan for stockholder approval at its 2005 Annual Meeting of Stockholders to qualify the compensation that may be granted under the plan for deductibility under Section 162(m) of the Internal Revenue Code. In that case, if the material terms are not approved, the performance shares granted under the Performance Share Plan will become null and void and no additional performance shares may be granted under that plan.

 

In addition, upon the recommendation of the Compensation and Human Resources Committee, Radian entered into retention agreements with each of Martin Kamarck, Roy J. Kasmar, C. Robert Quint and Howard S. Yaruss on February 14, 2005. The retention agreements provide for the issuance of 10,000 shares of Radian common stock to each of Messrs. Kamarck and Quint and 8,000 shares to Mr. Kasmar if he remains a Radian employee through January 1, 2007. Further, if Radian wishes to terminate the employment of Messrs. Kamarck, Kasmar, Quint or Yaruss before January 1, 2007 other than for “cause” (which generally requires misappropriation of funds, habitual insobriety, substance abuse, conviction of a crime involving moral turpitude, or gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of Radian and its subsidiaries taken as a whole), then Radian must provide the executive with (1) 180 days’ notice, (2) 8,000 shares of Radian common stock (except in the case of Mr. Yaruss, whose agreement does not entitle him to this Radian common stock), (3) twelve monthly installments of severance at the then rate of base salary beginning on the date of termination and (4) a lump sum payment equal to the executive’s target bonus for the year in which the notice of termination is delivered pro rated through the date of such notice. In addition, Mr. Kasmar’s agreement serves as an employment agreement with a term lasting through 2005, and provides that he is entitled to the payments described in the preceding sentence if he terminates his employment with Radian during 2006. If Messrs. Kamarck or Quint terminates his employment with Radian during 2006, he will be entitled to 5,000 shares of Radian’s common stock. All shares of Radian common stock issuable under the terms of the retention agreements will be issued pursuant to shares of phantom stock awarded under Radian’s Equity Compensation Plan at the inception of the retention agreements.

 

Exhibit 10.4, which is incorporated herein by reference, shows certain compensation arrangements with Radian’s directors and named executive officers for 2005, as recommended by the Compensation and Human Resources Committee and approved by the board of directors at its February 8, 2005 meeting. Exhibits 10.5 and 10.6 are forms of phantom stock grant agreements for Radian employees and non-employee directors, respectively.


Item 9.01 Financial Statements and Exhibits.

 

(c) Exhibits

 

+10.1   Radian Group Inc. Equity Compensation Plan, amended and restated as of February 8, 2005
+10.2   Radian Group Inc. Performance Share Plan
+10.3   Form of Performance Share Award Agreement
+10.4   Certain Compensation Arrangements with Directors and Named Executive Officers for 2005
+10.5   Form of Phantom Stock Grant Agreement for Employees
+10.6   Form of Phantom Stock Grant Agreement for Non-Employee Directors

+ Management contract or compensatory arrangement.


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    

RADIAN GROUP INC.

Date: February 14, 2005

   By:  

/s/ David L. Coleman


         David L. Coleman
         Vice President, Corporate & Securities Counsel

EXHIBIT 10.1

 

RADIAN GROUP INC.

EQUITY COMPENSATION PLAN

 

(Amended and Restated as of February 8, 2005)

 

The purpose of the Equity Compensation Plan (the “Plan”) of Radian Group Inc. (the “Company”) is to promote the interests of the Company by providing incentives to (i) designated officers and other employees of the Company or an Affiliate (as defined herein), and (ii) non-employee members of the Board of Directors of the Company (the “Board”), to encourage them to acquire a proprietary interest, or to increase their proprietary interest, in the Company. The Company believes that the Plan will cause participants to contribute materially to the growth of the Company, thereby benefiting the Company’s stockholders. For purposes of the Plan, the term “Affiliate” shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, the Company; and the terms “Parent Corporation” and “Subsidiary Corporation” shall have the meanings set forth in subsections (e) and (f) of Section 424 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

1. Administration

 

The Plan shall be administered and interpreted by a committee of the Board (the “Committee”); provided, however, that grant decisions made hereunder shall be made by at least two persons, each of whom may be (i) “outside directors” as defined under Section 162(m) of the Internal Revenue Code, and (ii) “non-employee directors” as defined under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board may appoint a subcommittee for this purpose, in which case references herein to the “Committee” shall mean the subcommittee as appropriate. The Committee shall have the sole authority to determine (i) who is eligible to receive Grants (as defined in Section 2 below) under the Plan, (ii) the type, size and terms of each Grant under the Plan (subject to Section 4 below), (iii) the time when each Grant will be made and the duration of any exercise or restriction period; (iv) any restrictions on resale applicable to the shares to be issued or transferred pursuant to the Grant; and (v) any other matters arising under the Plan. The Committee may, in its discretion or in accordance with a directive from the Board, waive any provisions of any Grant, provided such waiver is not inconsistent with the terms of this Plan as then in effect. The Committee may, if it so desires, base any of the foregoing determinations upon the recommendations of management of the Company. A majority of the Committee shall constitute a quorum thereof, and the actions of a majority of the Committee at a meeting at which a quorum is present, or actions unanimously approved in writing by all members of the Committee, shall be actions of the Committee. The Committee shall have full power and authority to administer and interpret the Plan and to adopt or amend such rules, regulations, agreements and instruments as it may deem appropriate for the proper administration of the Plan. The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any Grants under the Plan. No person acting under this subsection shall be held liable for any action or determination made with respect to the Plan or any Grant under the Plan, except for the willful misconduct or gross negligence of such person.


2. Grants

 

Incentives under the Plan shall consist of Incentive Stock Options (as defined in Section 5(b) below), Nonqualified Stock Options (as defined in Section 5(b) below), Restricted Stock Grants (as defined in Section 6 below), SARs (as defined in Section 7 below), Phantom Stock (as defined in Section 8 below), and Performance Share Awards (as defined in Section 9 below) (hereinafter collectively referred to as “Grants”). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions of any nature as the Committee deems appropriate and specifies in writing to the participant (the “Grant Letter”), as long as they are not inconsistent with the Plan. The Committee shall approve the form and provisions of each Grant Letter. Grants under any section of the Plan need not be uniform as among the participants receiving the same type of Grant, and Grants under two or more sections of the Plan may be combined in one Grant Letter.

 

3. Shares Subject to the Plan

 

(a) The aggregate number of shares of the Common Stock, par value $0.001 (“Common Stock”), of the Company that may be issued or transferred under the Plan is 9,400,000, subject to adjustment pursuant to Section 3(b) below. The maximum number of shares of Common Stock for which any Grantee may be granted options (and related stock appreciation rights) under the Plan is limited to 150,000 for any calendar year, subject to adjustment pursuant to Section 3(b) below. The shares may be authorized but unissued shares or reacquired shares. If and to the extent that options or SARs granted under the Plan terminate, expire or are canceled without having been exercised (including shares canceled as part of an exchange of Grants), or if any shares of restricted stock or Phantom Stock or any Performance Share Awards are forfeited, the shares subject to such Grant shall again be available for subsequent Grants under the Plan.

 

(b) If any change is made to the Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all outstanding Grants under the Plan, the Committee shall preserve the value of the outstanding Grants by adjusting the maximum number and class of shares issuable under the Plan to reflect the effect of such event or change in the Company’s capital structure, and by making appropriate adjustments to the number and class of shares, the exercise price of each outstanding Grant and otherwise, except that any fractional shares resulting from such adjustments shall be eliminated by rounding any portion of a share equal to .500 or greater up, and any portion of a share equal to less than .500 down, in each case to the nearest whole number.

 

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4. Eligibility for Participation

 

Officers and other employees of the Company or an Affiliate, and non-employee members of the Board, shall be eligible to participate in the Plan (hereinafter referred to individually as an “Eligible Participant” and collectively as “Eligible Participants”). Only Eligible Participants who are officers or other employees of the Company or a Parent Corporation or Subsidiary Corporation shall be eligible to receive Incentive Stock Options and Performance Share Awards. All Eligible Participants shall be eligible to receive Nonqualified Stock Options, Restricted Stock Grants, SARs and Phantom Stock. The Committee shall select from among the Eligible Participants those who will receive Grants (the “Grantees”) and shall determine the number of shares of Common Stock subject to each Grant. The Committee may, if it so desires, base any such selections or determinations upon the recommendations of management of the Company. Nothing contained in the Plan shall be construed to limit in any manner whatsoever the right of the Company to grant rights or options to acquire Common Stock or awards of Common Stock otherwise than pursuant to the Plan.

 

5. Stock Options

 

(a) Number of Shares . The Committee, in its sole discretion, shall determine the number of shares of Common Stock that will be subject to each option.

 

(b) Type of Option and Option Price.

 

(1) The Committee may grant options qualifying as incentive stock options within the meaning of Section 422 of the Code (“Incentive Stock Options”) and other stock options (“Nonqualified Stock Options”), in accordance with the terms and conditions set forth herein, or may grant any combination of Incentive Stock Options and Nonqualified Stock Options (hereinafter referred to collectively as “Stock Options”). The option price per share of each Stock Option shall not be less than the fair market value (as defined herein) of a share of Common Stock on the date of grant (subject to the following sentence). If the Grantee of an Incentive Stock Option is the owner of Common Stock (as determined under section 424(d) of the Code) who possesses more than 10% of the total combined voting power of all classes of stock of the Company or a Parent Corporation or Subsidiary Corporation, the option price per share in the case of an Incentive Stock Option shall not be less than 110% of the fair market value of a share of Common Stock on the date of grant.

 

(2) For all valuation purposes under the Plan, the fair market value of a share of Common Stock shall be the closing price at which the Common Stock shall have been sold regular way on the New York Stock Exchange on the date as of which such value is being determined or, if no sales occurred on such day, then on the next preceding day on which there were such sales, or, if at any time the Common Stock shall not be listed on the New York Stock Exchange, the fair market value as determined by the Committee on the basis of available prices for such Common Stock or in such manner as may be authorized by applicable regulations under the Code.

 

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(c) Exercise Period . The Committee shall determine the option exercise period of each Stock Option. The exercise period shall not exceed ten years from the date of grant. However, if the Grantee of an Incentive Stock Option is the owner of Common Stock (as determined under Section 424(d) of the Code) who possesses more than 10% of the total combined voting power of all classes of stock of the Company or a Parent Corporation or Subsidiary Corporation, the exercise period shall not exceed five years. Notwithstanding any determinations by the Committee regarding the exercise period of any Stock Option, all outstanding Stock Options shall become immediately exercisable upon a Change of Control of the Company (as defined in Section 11 below).

 

(d) Vesting of Options and Restrictions on Shares . The vesting period for Stock Options shall commence on the date of grant and shall end on the date or dates, determined by the Committee, that shall be specified in the Grant Letter; provided, however, that unless otherwise specified in the Grant Letter, each Stock Option shall vest and become exercisable in cumulative installments to the extent of 25% of the number of shares originally covered thereby on and after the first, second, third and fourth anniversaries of the grant of the Stock Option, if the Grantee is an employee of the Company or a Parent Corporation or Subsidiary Corporation (or an Affiliate, in the case of a Nonqualified Stock Option), or a non-employee member of the Board in the case of a Nonqualified Stock Option, on such anniversary. The Committee may impose upon the shares of Common Stock issuable upon the exercise of a Stock Option such restrictions as it deems appropriate and specifies in the Grant Letter. During any period in which such restrictions apply, the provisions of Section 6(d) below shall be applicable to such shares, and the Committee, in such circumstances as it deems equitable, may determine that all such restrictions shall lapse. Notwithstanding any other provision of the Plan, all outstanding Stock Options shall become immediately exercisable upon the earliest to occur of the following, if at such time the Grantee is an employee of the Company or a Parent Corporation or Subsidiary Corporation (or an Affiliate, in the case of a Nonqualified Stock Option), or a non-employee member of the Board in the case of a Nonqualified Stock Option: (i) the Grantee’s normal retirement date, (ii) five years from the date of the Grant, (iii) the Grantee’s death or Disability, or (iv) the occurrence of a Change of Control of the Company (as defined in Section 11 below). For purposes of this Plan, “Disability” shall mean a physical or mental impairment of sufficient severity that the Grantee is both eligible for and in receipt of benefits under the long-term disability program maintained by the Company.

 

(e) Manner of Exercise . A Grantee may exercise a Stock Option by delivering a duly completed notice of exercise to the Secretary of the Company. Unless other arrangements satisfactory to the Company are made, no shares of Common Stock shall be issued on the exercise of a Stock Option unless paid for in full at the time of purchase. Payment for shares of Common Stock purchased upon the exercise of a Stock Option shall be made in cash or, with the consent of the Committee, in whole or in part in such shares of Common Stock held for at least six months valued at the then fair market value thereof. Stock certificates for the shares of Common Stock so paid will be issued and delivered to the person entitled thereto only at the Company’s office in Philadelphia, PA. No person shall have any rights as a stockholder with respect to any share of Common Stock covered by a Stock Option unless and until such person shall have become the holder of record of such share, and, except as otherwise permitted in

 

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Section 3(b) hereof, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property or distributions or other rights) in respect of such share for which the record date is prior to the date on which such person shall have become the holder of record thereof.

 

(f) Termination of Employment, Retirement, Disability or Death.

 

(1) (A) If a Grantee is an employee and ceases to be an Eligible Participant for any reason other than retirement, Disability or death, any Stock Option which is otherwise exercisable by the Grantee shall terminate unless exercised by the Grantee within 90 days after the date on which the Grantee ceases to be an Eligible Participant (or within such other period of time, which may be longer or shorter than 90 days, specified in the Grant Letter), but in any event no later than the date of expiration of the option exercise period.

 

(B) In the event of the Disability or death of such Grantee, any Stock Option which was otherwise exercisable by such Grantee shall terminate unless exercised by the Grantee (or the Grantee’s personal representative) within one year after the date on which the Grantee ceases to be an Eligible Participant (or within such other period of time, which may be longer or shorter than one year, specified in the Grant Letter), but in any event no later than the date of expiration of the option exercise period. (C) In the event of the retirement of such Grantee, any Stock Option which was otherwise exercisable by such Grantee at the date of retirement may be exercised by the Grantee at any time prior to the normal expiration of the option exercise term. The term “retirement” as used herein shall mean a Grantee’s retirement as defined under the Company’s Pension Plan.

 

(2) If a Grantee is a non-employee director and ceases to be an Eligible Participant due to Grantee’s failure to be nominated for reelection to the Board or failure to be reelected after nomination, any Stock Option which is otherwise exercisable by the Grantee shall terminate unless exercised by the Grantee within 90 days after the date on which the Grantee ceases to be an Eligible Participant (or within such other period of time, which may be longer or shorter than 90 days, as may be specified in the Grant Letter), but in any event no later than the date of expiration of the option exercise period. In the event of a voluntary departure from the Board, Disability or death of such Grantee, any Stock Option which was otherwise exercisable by such Grantee at the date of such voluntary departure from the Board, Disability or death, may be exercised by the Grantee (or the Grantee’s personal representative) at any time prior to the normal expiration of the option exercise term.

 

(g) Limits on Incentive Stock Options . Each Grant of an Incentive Stock Option shall provide that:

 

(1) the Stock Option is not transferable by the Grantee, except, in the case of an individual Grantee, by will or the laws of descent and distribution;

 

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(2) the Stock Option is exercisable only by the Grantee, except as otherwise provided herein or in the Grant Letter in the event of the death of an individual Grantee; and

 

(3) the aggregate fair market value of the Common Stock on the date of the Grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year under the Plan and under any other stock option plan of the Company shall not exceed $100,000.

 

(h) Exchange Act Limitation . Unless the Grantee could otherwise transfer Common Stock issued pursuant to the Stock Option without incurring liability under Section 16(b) of the Exchange Act, at least six months must elapse from the date of acquisition of the Stock Option until the date of disposition of the Common Stock issued upon exercise thereof.

 

(i) Replacement Options . If a Stock Option granted pursuant to the Plan may be exercised by a Grantee by means of a stock-for-stock swap method of exercise as provided in 5(e) above, then the Committee may, in its sole discretion, authorize the Grantee to automatically receive a replacement Stock Option pursuant to this part of the Plan. This replacement option shall cover a number of shares determined by the Committee. The per share exercise price of the replacement option shall equal the then current fair market value of a share of Stock, and shall have a term extending to the expiration date of the original Stock Option. The Committee shall have the right, in its sole discretion and at any time, to discontinue the automatic grant of replacement options if it determines the continuance of such grants to no longer be in the best interest of the Company.

 

6. Restricted Stock Grants

 

The Committee may issue shares of Common Stock to an Eligible Participant pursuant to an incentive or long range compensation plan, program or contract approved by the Committee (a “Restricted Stock Grant”). The following provisions are applicable to Restricted Stock Grants:

 

(a) General Requirements . Shares of Common Stock issued pursuant to Restricted Stock Grants will be issued for or in consideration for cash or services rendered having a value, as determined by the Board, at least equal to the par value thereof. All conditions and restrictions imposed under each Restricted Stock Grant, and the period of years during which the Restricted Stock Grant will remain subject to such restrictions, shall be set forth in the Grant Letter and designated therein as the “Restriction Period.” All restrictions imposed under any Restricted Stock Grant shall lapse on such date or dates as the Committee may approve until the restrictions have lapsed as to 100% of the shares, except that upon a Change of Control of the Company, all restrictions on the transfer of the shares which have not been forfeited prior to such date shall immediately lapse and all such shares shall become fully vested. In addition, the Committee, in circumstances that it deems equitable, may determine as to any or all Restricted Stock Grants, that all the restrictions shall lapse, notwithstanding any Restriction Period.

 

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(b) Number of Shares . The Committee, in its sole discretion, shall determine the number of shares of Common Stock that will be granted in each Restricted Stock Grant.

 

(c) Requirement of Relationship with Company . If the Grantee’s relationship with the Company (as an employee or non-employee member of the Board, as the case may be) terminates during the period designated in the Grant Letter as the Restriction Period, the Restricted Stock Grant shall terminate as to all shares covered by the Grant as to which restrictions on transfer have not lapsed, and such shares shall be immediately returned to the Company. The Committee may, in its sole discretion, provide for complete or partial exceptions to the provisions of this Section 6(c).

 

(d) Restrictions on Transfer and Legend on Stock Certificate . During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of Common Stock to which such Restriction Period applies except to a Successor Grantee pursuant to Section 10(a) below. Each certificate representing a share of Common Stock issued or transferred under a Restricted Stock Grant shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate or certificates representing any such shares as to which all restrictions have lapsed.

 

(e) Shareholder Rights . Except as provided in this Section 6, the Grantee shall have, with respect to shares of Common Stock issued pursuant to a Restricted Stock Grant, all of the rights of a shareholder, including the right to vote the shares and the right to receive any cash dividends.

 

7. Stock Appreciation Rights

 

(a) General Provisions . Stock Appreciation Rights (“SARs”) may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Nonqualified Stock Option, such rights may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of grant of such Stock Option. The exercise price of each SAR shall be equal to (i) the exercise price or option price of the related Stock Option or (ii) the fair market value of a share of Common Stock as of the date of grant of such Stock Appreciation Right, but only in such circumstances where the SAR is granted subsequent to the date of grant of the related Stock Option and an exercise price established in accordance with clause (i) above would result in the disallowance of the Company’s expense deduction pursuant to Section 162(m) of the Code.

 

(b) Number of SARs . The number of SARs granted to a Grantee which shall be exercisable during any given period of time shall not exceed the number of shares of Common Stock which the Grantee may purchase upon the exercise of the related Stock Option during such period. Upon the exercise of a Stock Option, the SARs relating to the Common Stock covered by the Stock Option shall terminate. Upon the exercise of any SARs, the related Stock Option shall terminate to the extent of an equal number of shares of Common Stock.

 

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(c) Settlement Amount . Upon a Grantee’s exercise of some or all of the Grantee’s SARs, the Grantee shall receive in settlement of such SARs an amount equal to the stock appreciation (as defined herein) for the number of SARs exercised, payable in cash, Common Stock or a combination thereof. The “stock appreciation” for an SAR is the difference between the option price specified for the related Stock Option (or the exercise price otherwise determined under (a), above) and the fair market value of the underlying Common Stock on the date of exercise of the SAR.

 

(d) Settlement Election . Upon the exercise of any SARs, the Grantee shall have the right to elect the portions of the settlement amount that the Grantee desires to receive in cash and shares of Common Stock, respectively. For purposes of calculating the number of shares of Common Stock to be received upon settlement, shares of Common Stock shall be valued at their fair market value on the date of exercise of the SARs. Notwithstanding the foregoing, the Committee shall have the right (i) to disapprove a Grantee’s election to receive such settlement in whole or in part in cash, and to require that shares of Common Stock be delivered in lieu of cash or (ii) to require that settlement be made in cash if the Company does not or may not in the future have sufficient shares authorized for issuance. If shares of Common Stock are to be received upon exercise of an SAR, cash shall be delivered in lieu of any fractional share.

 

(e) Exercise . Any SAR is exercisable only during the period when the Stock Option to which it is related is also exercisable.

 

8. Phantom Stock

 

(a) General Provisions . The Committee may grant Phantom Stock in such amounts as it deems appropriate. Phantom Stock shall give the Grantee the right to receive shares of Common Stock on a conversion date specified by the Committee. The Committee may establish conditions on the conversion of Phantom Stock and restrictions on vesting, if any, as it deems appropriate. The period of years during which a Phantom Stock Grant will be subject to any vesting restrictions shall be set forth in the Grant Letter and designated as the “Restriction Period”. All vesting restrictions imposed under a Phantom Stock Grant shall lapse on such date or dates as the Committee may approve, except that upon a Change of Control of the Company, all restrictions shall immediately lapse and the Phantom Stock shall become fully vested. In addition, the Committee, in circumstances that it deems equitable, may determine as to any or all Phantom Stock Grants that the Grants shall not be subject to vesting restrictions, or that the restrictions shall lapse notwithstanding any Restriction Period. Each share of Phantom Stock shall be granted at full value with no exercise price.

 

(b) Number of Shares of Phantom Stock; Accounts. The Committee, in its sole discretion, shall determine the number of shares that will be granted pursuant to each Phantom Stock Grant. The Company shall credit to a bookkeeping account established on its records all shares of Phantom Stock credited to a Grantee.

 

(c) Requirement of Relationship with Company . Except as provided in the Grant Letter, if the Grantee’s relationship with the Company (as an employee or non-employee member

 

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of the Board, as the case may be) terminates during any period designated in the Grant Letter as the Restriction Period, the Phantom Stock Grant shall terminate as to all shares covered by the Grant as to which vesting restrictions have not lapsed, and such shares shall be forfeited. The Committee may, in its sole discretion, provide for complete or partial exceptions to the provisions of this Section 8(c).

 

(d) Dividend Equivalents . The Company shall credit dividend equivalents on Phantom Stock as and when dividends are payable on Common Stock. Dividend equivalents shall be converted to additional shares of Phantom Stock on the dividend payment date and credited to the Grantee’s accounts.

 

(e) Conversion. On the date specified in the Grant Letter as the conversion date for the Grantee’s Phantom Stock, the Grantee shall receive in settlement of such Phantom Stock a number of shares of common Stock equal to the Phantom Stock then credited to the Grantee’s account. Payment shall be made in whole shares of Common Stock, with fractional shares paid in cash.

 

(f) No Rights as a Shareholder . A Grantee shall not have any rights as a stockholder with respect to any Phantom Stock, including with respect to dividends and voting. Grantees shall be unsecured creditors of the Company with respect to Phantom Stock Grants.

 

9. Performance Share Awards

 

(a) General Provisions. The Committee may grant Performance Share Awards (“Performance Share Awards”) to key employees of the Company under and pursuant to this Section 9 and the Company’s Performance Share Plan adopted by the Board effective February 8, 2005, or any successor thereto (the “Performance Plan”). A Performance Share Award shall entitle the Grantee to receive shares of Common Stock or a payment in cash upon settlement of the Performance Share Award at the conclusion of the Award Term (as defined in the Performance Plan), contingent upon the satisfaction of certain Performance Goals (as defined in the Performance Plan) established by the Committee. The terms and conditions of each Performance Share Award, including the Grantee, the target number of shares thereunder, the Performance Goals, the Award Term, and the formula, method or matrix for determining payout, shall be determined by the Committee in accordance with the Performance Plan and set forth in the Grant Letter. Shares of Common Stock issued under a Performance Share Award shall be granted at full value with no exercise price.

 

(b) Number of Shares; Accounts. The Committee, in its sole discretion, shall determine the target number of shares of Common Stock that will be subject to each Performance Share Award. The actual number of shares that may be issued upon settlement of a Performance Share Award will be determinable at the conclusion of the Award Term. The Company shall establish on its records and maintain a bookkeeping account in which shall be recorded the number of shares of Common Stock subject to a Performance Share Award and the number of shares actually credited to a Grantee.

 

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(c) Termination of Relationship with Company. If the Grantee’s employment with the Company terminates during the Award Term of a Performance Share Award then, depending upon the reason for such termination, such Performance Share Award may continue in force or may terminate, as provided by the applicable provisions of the Performance Plan.

 

(d) Change of Control. Upon a Change of Control of the Company, any outstanding Performance Share Awards shall be treated in accordance with the Performance Plan.

 

(e) Settlement. Upon the conclusion of the Award Term of a Performance Share Award as specified in the Grant Letter, the Grantee shall receive in settlement of such Performance Share Award a number of shares of Common Stock or a payment in cash, or a combination thereof, as may be determined in accordance with the Performance Plan.

 

(f) No Rights as a Shareholder. A Grantee shall not have any rights as a stockholder with respect to shares of Common Stock subject to a Performance Share Award prior to the issuance of such shares, including with respect to dividends and voting. Grantees shall be unsecured creditors of the Company with respect to Performance Share Awards.

 

10. Transferability of Options and Grants

 

(a) Restrictions on Transferability. Only a Grantee (or, in the case of an individual Grantee, his or her authorized legal representative) may exercise rights under a Grant except as otherwise stated herein and in Section 10(b) below. No individual Grantee may transfer those rights except by will or by the laws of descent and distribution or, in the case of a Nonqualified Stock Option, if permitted by the Committee in its sole discretion, pursuant to a qualified domestic relations order as defined under the Code or Title I of ERISA or the rules thereunder or pursuant to Section 10(b) below. Upon the death of an individual Grantee, the personal representative or other person entitled to succeed to the rights of the Grantee (“Successor Grantee”) may exercise such rights. A Successor Grantee shall furnish proof satisfactory to the Company of such person’s right to receive the Grant under the Grantee’s will or under the applicable laws of descent and distribution.

 

(b) Nonqualified Stock Options. Notwithstanding the foregoing, the Committee may provide that a Grantee may transfer Nonqualified Stock Options to family members, one or more trusts for the benefit of family members, or one or more partnerships of which family members are the only partners, according to such terms as the Committee may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

 

11. Change of Control of the Company

 

As used herein, a “Change of Control” shall be deemed to have taken place if (i) any Person (except for an employee or his or her family, the Company or any employee benefit plan of the Company or of any Affiliate, or any Person or entity organized, appointed or established

 

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by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person shall become the Beneficial Owner in the aggregate of 20% or more of the shares of the Company then outstanding and entitled to vote for directors generally, (ii) any Person (except an employee and his or her family), together with all Affiliates and Associates of such Person, purchases substantially all of the assets of the Company, or (iii) during any twenty-four (24) month period, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of at least seventy-five percent (75%) of the directors who were not directors at the beginning of such period was approved by a vote of at least seventy-five percent (75%) of the directors in office at the time of such election or nomination who were directors at the beginning of such period. For purposes of this definition, “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act; “Person” shall mean any individual, firm, corporation, partnership or other entity; and “Beneficial Owner” shall mean:

 

(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided , however , that a Person shall not be deemed the “Beneficial Owner” of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange;

 

(ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 under the Exchange Act), including without limitation, pursuant to any agreement, arrangement or understanding (whether or not in writing); provided , however , that a Person shall not be deemed the “Beneficial Owner” of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable successor report); or

 

(iii) where voting securities are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy described in the proviso to subsection (ii) above) or disposing of any voting securities of the Company; provided , however , that nothing in this definition shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until expiration of forty (40) days after the date of such acquisition.

 

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12. Dissolution, Liquidation or Winding Up

 

If the Company is to be dissolved or liquidated, then, at least ten days prior to the effective date of such event, the Company shall give each Grantee with any outstanding Grants written notice of such event. Each such Grantee shall thereupon have the right to exercise in full any installments of such Grants not previously exercised (whether or not the right to exercise such installments has accrued pursuant to such Grants), within ten days after such written notice is sent by the Company. Any installments of such Grants not so exercised shall thereafter lapse and be of no further force or effect.

 

13. Amendment and Termination of the Plan and Grants

 

(a) Amendment. The Board may amend or terminate the Plan at any time, subject to the following limitations:

 

(1) the approval by the stockholders of the Company and approval by the Committee shall be required in respect of any amendment to the extent then required by applicable law or by the regulations of the U.S. Securities and Exchange Commission or the New York Stock Exchange or any other applicable exchange; and

 

(2) the Board shall not amend the Plan without stockholder approval if such amendment would cause the Plan, any Grant or the exercise of any right under the Plan to fail to comply with the requirements of Rule 16b-3 under the Exchange Act (or any successor provision), or if such amendment would cause the Plan or the Grant or exercise of an Incentive Stock Option to fail to comply with the requirements of Section 422 of the Code including, without limitation, a reduction of the option price set forth in Section 5(b) above or an extension of the period during which an Incentive Stock Option may be exercised as set forth in Section 5(c) above.

 

(b) Termination of Plan. The Plan shall terminate on December 31, 2006, unless earlier terminated by the Board or unless extended by the Board with the approval of the stockholders.

 

(c) Termination and Amendment of Outstanding Grants.

 

(1) General . A termination or amendment of the Plan that occurs after a Grant is made shall not result in the termination or amendment of the Grant unless the Grantee consents or unless the Committee acts under Section 21(b) below. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 21(b) below or may be amended by agreement of the Company and the Grantee which is consistent with the Plan.

 

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(2) No Repricing . Neither the Company, the Board nor the Committee shall, without the further approval of the stockholders of the Company either prior or subsequent to such action, authorize (i) the amendment of any outstanding Grant to reduce the exercise price per share of such Grant, or (ii) the cancellation and replacement of such Grant in exchange for a Grant having a lower exercise price per share, except for an exchange in connection with a merger, consolidation, acquisition, reorganization, spin-off or other corporate transaction. This Section 13(c)(2) is intended to prohibit the repricing of “underwater” Grants and shall not be construed to prohibit the adjustments provided for in Section 3(b) of this Plan.

 

14. Funding of the Plan

 

The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under the Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants.

 

15. Rights of Eligible Participants

 

Nothing in the Plan shall entitle any Eligible Participant or other person to any claim or right to any Grant under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Eligible Participant or Grantee any rights to be retained by the Company in any capacity, whether as an employee, non-employee member of the Board, independent contractor, consultant or otherwise.

 

16. Withholding of Taxes

 

The Company shall have the right to deduct from all Grants paid in cash any federal, state or local taxes required by law to be withheld with respect to such Grants paid in cash. In the case of Grants paid in Common Stock, the Company shall have the right to require the Grantee to pay to the Company the amount of any taxes which the Company is required to withhold in respect of such Grants or to take whatever action it deems necessary to protect the interests of the Company in respect of such tax liabilities, including, without limitation, withholding a portion of the shares of Common Stock otherwise deliverable pursuant to the Plan. The Company’s obligation to issue or transfer shares of Common Stock in connection with any Grant shall be conditioned upon the Grantee’s compliance with the requirements of this section to the satisfaction of the Committee.

 

17. Agreements with Grantees

 

Each Grant made under the Plan shall be evidenced by a Grant Letter containing such terms and conditions as the Committee shall approve.

 

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18. Requirements for Issuance of Shares

 

No Common Stock shall be issued or transferred under the Plan unless and until all applicable legal requirements have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Stock Option, Restricted Stock Grant, SAR, Phantom Stock Grant or Performance Share Award on the Grantee’s undertaking in writing to comply with such restrictions on any subsequent disposition of the shares of Common Stock issued or transferred thereunder as the Committee shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions.

 

19. Headings

 

The section headings of the Plan are for reference only. In the event of a conflict between a section heading and the content of a section of the Plan, the content of the section shall control.

 

20. Effective Dates

 

(a) Effective Date of the Plan. The Plan shall be effective as of January 1, 1995, subject to the approval of the Company’s stockholders within 12 months after such effective date.

 

(b) Effectiveness of Section 16 Provisions. The provisions of the Plan that refer to, or are applicable to persons subject to, Section 16 of the Exchange Act shall be effective, if at all, upon the registration of the Common Stock under the Exchange Act, and shall remain in effect thereafter for so long as the Common Stock is registered under the Exchange Act.

 

21. Miscellaneous

 

(a) Substitute Grants. The Committee may make a Grant to an employee, a non-employee director, or an independent contractor or consultant of another corporation, if such person shall become an Eligible Participant by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or an Affiliate and such other corporation. Any such Grant shall be made in substitution for a stock option or restricted stock grant granted by the other corporation (“Substituted Stock Incentives”), but the terms and conditions of the substitute Grant may vary from the terms and conditions required by the Plan and from those of the Substituted Stock Incentives. The Committee shall prescribe the provisions of the substitute Grants.

 

(b) Compliance with Law. The Plan, the exercise of Grants and the obligations of the Company to issue or transfer shares of Common Stock under Grants shall be subject to all applicable laws and required approvals by any governmental or regulatory agencies. With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan shall comply with all applicable conditions of Rule 16b-3 or any successor provisions under the Exchange Act. The Committee may revoke any Grant if it is contrary to law or modify any Grant to bring it into compliance with any valid and mandatory government regulations. The Committee may also adopt rules regarding the withholding of taxes on payments to Grantees. The Committee may, in its sole discretion, agree to limit its authority under this section.

 

This amendment and restatement of the Radian Group Inc. Equity Compensation Plan was adopted by the Board of Directors of the Company on February 8, 2005, effective as of such date.

 

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EXHIBIT 10.2

 

RADIAN GROUP INC.

 

PERFORMANCE SHARE PLAN

 

1. Purpose. The purpose of the Radian Group Inc. Performance Share Plan (the “Plan”) is to enhance the long-term stockholder value of Radian Group Inc. (the “Company”) by reinforcing the incentives of the Company’s key employees to achieve the Company’s long-term performance goals; to link a significant portion of a participant’s compensation to the achievement by the Company of such performance goals and to the value of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”); and to attract and motivate key employees and to encourage their continued employment on a competitive basis. The purposes of the Plan are to be achieved by the grant of Performance Share Awards, as defined below.

 

2. Eligibility and Participation. Key employees of the Company who, through their position or performance, can have a significant, positive impact on the Company’s financial results, shall be eligible to participate in the Plan. The Compensation and Human Resources Committee of the Company’s Board of Directors (the “Committee”) shall select the recipients of Performance Share Awards (the “Participants”). Newly-hired and newly-promoted employees may be selected as Participants subject to the provisions of Section 3(d)(ii), if applicable.

 

3. Performance Share Awards.

 

  (a) Performance Share Award Defined. A “Performance Share Award” is a right to receive shares of Common Stock, or a payment of the value thereof in cash, contingent on the achievement of certain performance goals of the Company specified by the Committee. A Performance Share Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine.

 

  (b) Combined Award Under Stock Plan. Each Performance Share Award shall be deemed to be a combined award under the Plan and under the Company’s Equity Compensation Plan, as amended, or under any successor to such plan (the “Stock Plan”). Any shares of Common Stock to be issued pursuant to a Performance Share Award shall be issued under and pursuant to the Stock Plan, and shall be subject to the terms and conditions of the Stock Plan and of any grant agreement issued thereunder.

 

  (c) Award Term. Performance Share Awards will be measured over such period of time as shall be established by the Committee (the “Award Term”). Unless the Committee determines otherwise, the Award Term shall be a period of three consecutive fiscal years of the Company. Award Terms may be of varying and overlapping durations. Performance Share Awards shall be subject to forfeiture until the conclusion of the Award Term except as may otherwise be provided in Section 3(f) below.


  (d) Section 162(m) Conditions. Performance Share Awards may be designated as “performance-based compensation” as that term is used in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

  (i) Performance Goals. The performance goal criteria (“Performance Goals”) that may be used by the Committee in granting Performance Share Awards shall include one or more of the following, as selected by the Committee:

 

    growth in earnings per share;
    growth in adjusted book value; and
    return on equity.

 

The Performance Goals may be measured with respect to the Company alone on an absolute basis, on a relative or comparative basis with such peer companies or index as the Committee may select, or in such combination thereof as may be determined by the Committee. Performance Goals may be based on the performance of the Company as a whole, or on the performance of a specified business unit or subsidiary. Performance Goals may be established on a cumulative basis, in the alternative, or in the form of a matrix combining various Performance Goals and weighting them in any manner that the Committee may determine.

 

  (ii) Establishment of Performance Goals. Performance Share Awards designated as “performance-based compensation” for purposes of Section 162(m) of the Code shall be granted, and Performance Goals shall be established, by the Committee in writing not later than 90 days after the commencement of the period of service to which the Performance Goals relate, or by such other date as may be required under Section 162(m) of the Code, provided that the outcome is substantially uncertain at the time the Committee establishes the Performance Goals. Following the establishment of the Performance Goals, the Committee shall advise each Participant, through the issuance of a “Grant Letter” under the Stock Plan, as to the target award and specific Performance Goals applicable to his or her Performance Share Award, and the method or formula for determining the payouts correlating to a range of performance results over the Award Term.

 

  (iii) Section 162(m) Maximum Award Limit. With respect to a Performance Share Award that is designated as “performance-based compensation” for purposes of Section 162(m) of the Code, the maximum number of shares of Common Stock that may be issued under the award shall be set at the time the Committee grants the award and establishes Performance Goals

 

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under the award. Notwithstanding any other provision of this Plan, the maximum payout under any Performance Share Award may not exceed 250,000 shares of Common Stock, or its equivalent dollar value, as of the end of the Award Term, subject to adjustment as provided in Section 4 and under the Stock Plan.

 

  (iv) Certification by Committee. Before any payment in shares of Common Stock or cash is made under a Performance Share Award to any Participant who is a person referred to in Section 162(m) of the Code, the Committee must certify in writing that the Performance Goals and any other material terms established with respect to such Performance Share Award have been achieved. To the extent necessary with respect to any fiscal year or Award Term, in order to avoid any undue windfall or hardship due to external causes, the Committee may make the determination as to whether a specific Performance Goal has been achieved without regard to the effect of any change in accounting standards, any acquisition or disposition by the Company not planned for at the time the Performance Goals were established or any other extraordinary, unusual or non-recurring event or item that would otherwise impact the Company’s reported financial performance. With respect to any Participant who is a person referred to in Section 162(m) of the Code, the Committee shall have the discretion to decrease an award payout under a Performance Share Award for circumstances that the Committee deems warranted, but may not under any circumstances increase such amount.

 

  (e) Settlement of Awards. Upon the conclusion of the Award Term of a Performance Share Award, the Company’s determination of the amount of the payout, if any, to which the Participant is entitled, and the certification by the Committee, if applicable, as provided in Section 3(d)(iv) above, the Participant may direct the form of settlement of the Performance Share Award, by written notice to the Company, as follows. With respect to any Participant who is then in compliance with all of the Company’s stock ownership guidelines, resolutions and requirements applicable to such Participant (the “Ownership Guidelines”), such Participant may elect to receive payout of the Performance Share Award in shares of Common Stock issued under and pursuant to Section 9 of the Stock Plan, in cash based on the fair market value of the Common Stock on the last trading day prior to the settlement date, or in any combination of Common Stock and cash. With respect to any Participant not then in compliance with the Ownership Guidelines, the Performance Share Award shall be settled in shares of Common Stock, at a minimum, to the extent necessary to bring such Participant into compliance therewith. Notwithstanding the foregoing, the Committee shall have the right (i) to disapprove a Participant’s election to receive such settlement in whole or in part in cash, and to require that shares of Common Stock be delivered in lieu of cash, or (ii) to require that settlement be made in cash if the Company does not

 

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or may not in the future have sufficient shares authorized or reserved for issuance. If shares of Common Stock are to be issued upon settlement, cash shall be delivered in lieu of any fractional share.

 

  (f) Termination of Employment, Change of Control and Other Circumstances. Notwithstanding anything to the contrary in the Stock Plan:

 

  (i) Death or Disability . If a Participant’s employment with the Company terminates as a result of such Participant’s death or disability, any outstanding Performance Share Awards shall remain in force, and such Participant (or his or her estate, representatives, heirs or beneficiaries, as applicable, in the case of death) shall be entitled to any payout that thereafter becomes due under such outstanding Performance Share Awards, at the same time, and to the same extent, as though such Participant had remained employed by the Company through the conclusion of the Award Term. For purposes of the Plan, “disability” shall mean a physical or mental impairment of sufficient severity that the Participant is both eligible for and in receipt of benefits under the applicable long-term disability program maintained by the Company.

 

  (ii) Retirement . If a Plan Participant’s employment with the Company terminates by reason of such Participant’s retirement prior to the end of an Award Term, but after the conclusion of not less than 33% of the Award Term, of any outstanding Performance Share Award, then such Performance Share Award shall remain in force, and such Participant shall be entitled to any payout that thereafter becomes due under such Performance Share Award, at the same time, and to the same extent, as though such Participant had remained employed by the Company throughout the Award Term. For purposes of the Plan, “retirement” shall mean Participant’s retirement as defined under the applicable pension plan maintained by the Company.

 

  (iii) Other Termination . In the event that a Participant’s employment with the Company terminates other than by reason of death, disability or retirement as provided in Sections 3(f)(i) and (ii) above, then all outstanding Performance Share Awards in such Participant’s name as to which the Award Term has not yet expired shall be deemed forfeited, shall automatically be canceled and shall have no further force or effect.

 

  (iv) Change of Control . Notwithstanding the provisions of Sections 3(c) and (d), in the event of a “Change of Control” of the Company as defined in Section 11 of the Stock Plan, or any successor definition, prior to the end of an Award Term, but after the conclusion of not less than 33% of the Award Term, of any outstanding Performance Share Award, then the Performance Goals applicable to such Performance Share Award shall be deemed to have been satisfied as of the date of such Change in Control at

 

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100% of the target level, and such Participant shall be entitled to the corresponding payment under such Performance Share Award as of such date.

 

  (g) Dividends and Voting. A Participant shall have no rights as a stockholder with respect to Performance Share Awards, including with respect to dividends and voting, unless and until shares of Common Stock are issued in settlement of the award.

 

  (h) Non-transferability. Neither Performance Share Awards, nor any interest therein, nor any shares of Common Stock or cash to be issued thereunder, may be anticipated, alienated, encumbered, sold, pledged, assigned, transferred or subjected to any charge or legal process, other than by will or the laws of descent and distribution, so long as the shares of Common Stock or cash have not been distributed in accordance with the Plan and the Stock Plan, and any such sale, pledge, assignment or other attempted transfer shall be null and void. A Participant may receive payment under a Performance Share Award only while an employee of the Company and only if continuously employed from the date the award was granted, except as may otherwise be provided in Section 3(f) above.

 

4. Adjustment of Shares Subject to Awards. In the event of a corporate transaction involving the Company, the Common Stock or the Company’s corporate or capital structure, including but not limited to any recapitalization, reorganization, merger, consolidation, stock dividend, stock split, combination or exchange of shares, or any other change in capital structure made without receipt of consideration, the benefits or potential benefits of the Performance Share Awards shall be preserved by appropriate adjustment of such awards by the Committee pursuant to Section 3(b) of the Stock Plan, or any successor provision.

 

5. Administration. The Plan shall be administered by the Committee. The Committee shall have the authority to administer the Plan; establish policies under the Plan; amend the Plan, subject to the provisions of Section 8; interpret provisions of the Plan; select Participants; establish Performance Goals; make Performance Share Awards; or terminate the Plan, in its sole discretion. The Committee may delegate administrative duties and all decisions not required to be exercised by it under Section 162(m) of the Code or Section 16 of the Exchange Act, as it solely determines, including to Company officers. All decisions of the Committee shall be final and binding upon all parties including the Company, its stockholders and Participants.

 

6. Tax Withholding . The Company shall have the right to deduct from any settlement made under the Plan or to require the Participant to pay the amount of any federal, state or local taxes of any kind required by law to be withheld with respect to the grant, vesting, payment or settlement of an award under this Plan, or to take such other action as may be necessary in the opinion of the Company to satisfy all

 

5


obligations for the payment of such taxes. If Common Stock is withheld or surrendered to satisfy tax withholding, such stock shall be valued at its fair market value as of the date it is withheld or surrendered. The Company may also deduct from any award settlement any other amounts due the Company by the Participant.

 

7. Governing Law . The Plan, agreements entered into under the Plan and Performance Share Awards shall be construed, administered and governed in all respects under and by the applicable laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation to the substantive law of another jurisdiction.

 

8. Plan Amendment and Termination. The Committee may, in its sole discretion, amend, suspend or terminate the Plan at any time, with or without advance notice to Participants, provided that no amendment to the Plan shall be effective that would increase the maximum award that may be granted under Section 3(d)(iii) to a Participant who is a person referred to in Section 162(m) of the Code; that would change the Performance Goal criteria applicable to a Participant who is a person referred to in Section 162(m) of the Code for payment of awards as set forth in Section 3(d)(i); or that would modify the requirements as to eligibility for participation under Section 2, unless the stockholders of the Company shall have approved such change in accordance with the requirements of Section 162(m) of the Code. No amendment, modification or termination of the Plan may adversely affect in a material manner any right of any Participant with respect to any Performance Share Award theretofore granted without such participant’s written consent.

 

9. General Provisions.

 

  (a) Certain Definitions. As used in this Plan, the term “Company” refers to Radian Group Inc. and its consolidated subsidiaries as a whole.

 

  (b) No Right to Awards or Continued Employment. Neither the establishment of the Plan nor the provision for or payment of any amounts hereunder nor any action of the Company, the Board of Directors of the Company or the Committee in respect of the Plan shall be held or construed to confer upon any person any legal right to receive, or any interest in, an award or any other benefit under the Plan, or any legal right to continued employment with the Company.

 

  (c) No Funding of Plan. The Company shall not be required to fund or otherwise segregate any Common Stock, cash or any other assets which may at any time be delivered to Participants under the Plan. The Plan shall constitute an “unfunded” plan of the Company. The Company shall not, by any provisions of the Plan, be deemed to be a trustee of any property, and any rights of any Participant or former Participant shall be no greater than those of a general unsecured creditor or shareholder of the Company, as the case may be.

 

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  (d) Non-Exclusivity. The Plan does not limit the authority of the Company, the Board of Directors of the Company or the Committee to grant awards or authorize any other compensation to any person under any other plan or program, including, without limitation, the issuance of stock options or any other awards under the Stock Plan.

 

  (e) Severability. If any provision of the Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect and shall be applied as though the unenforceable provision were not contained in the Plan.

 

10. Effective Date of the Plan and Amendments; Term. The Plan first became effective upon its adoption by the Board of Directors of the Company on February 8, 2005, for Award Terms commencing on January 1, 2005. Any amendment to the Plan shall be effective on the date established by the Committee, subject to stockholder approval, if required under the provisions of Section 8. The Plan shall expire on December 31, 2009, unless sooner terminated or extended pursuant to the provisions hereof; provided, however, that such expiration shall not affect the administration of any Performance Share Awards then outstanding.

 

* * *

 

7

EXHIBIT 10.3

 

RADIAN GROUP INC.

 

FORM OF PERFORMANCE SHARE AWARD AGREEMENT

 

This Agreement is entered into as of [                      , 20      ,] by and between [                      ] (“Executive” or “you”) and Radian Group Inc., a Delaware corporation (“Radian” or “we”), to set forth the terms and conditions of a Performance Share Award granted to you by the Compensation and Human Resources Committee of Radian’s Board of Directors (the “Committee”) pursuant to the Radian Group Inc. Performance Share Plan (the “Plan”). Capitalized terms used herein and not defined shall have the meanings given to them under the Plan.

 

1. Performance Share Award. Radian hereby grants to you a Performance Share Award under the Plan, for a performance period to be measured over the following three (3) Radian fiscal years: 2005, 2006 and 2007 (the “Award Term”), subject to the terms and conditions of this Agreement and of the Plan and to your consent to those terms and conditions. This Agreement shall also constitute a grant of a Performance Share Award under and pursuant to the Radian Group Inc. Equity Compensation Plan, and shall be subject to the terms thereof.

 

a. Nature of Award. A Performance Share Award is a right to receive shares of Radian Common Stock, par value $0.001 per share (the “Common Stock”), a payment of the value thereof in cash, or a combination of shares and cash (in each case, a “Payout”), contingent on the achievement of the Performance Goals specified herein.

 

b. Performance Goals and Target Levels. Exhibit A which is attached hereto and forms a part hereof sets forth, among other information determined by the Committee:

 

(i) your applicable Target Performance Share Award (your “Target Payout”);

 

(ii) a series of matrices for determining, with respect to each of three (3) specified performance criteria, your potential Payout as a percentage of your Target Payout, under specified combinations of absolute and relative financial performance by Radian (the “Performance Goals”); and

 

(iii) the method of calculating your actual Payout, if any, based on the relative weights assigned the Performance Goals by the Committee.

 

c. Form of Payout. Your Payout, if any, may be in the form of shares of Common Stock or cash, at your option, to the extent provided in Section 3(e) of the Plan. Such section may limit your discretion to elect the form of Payout.


d. Stockholder Approval. This Performance Share Award is subject to and contingent upon approval by Radian’s stockholders of the Plan or the material terms thereof at Radian’s 2005 Annual Meeting of Stockholders.

 

2. Important Considerations Regarding Potential Payout . If the Performance Goals are achieved at 100% of target levels, you will receive your Target Payout. If the Performance Goals are achieved at levels above or below the target levels, the Payout you will receive will be increased or reduced, including to zero, in accordance with Exhibit A and as provided in the Plan. You may not receive a greater number of shares of Common Stock or cash than the Maximum Potential Payout set forth on Exhibit A .

 

The Target Payout referred to in this Agreement is used solely as a component of a formula to calculate the actual Payout, if any, in accordance with this Agreement, and does not create any separate right or entitlement. THE ACTUAL PAYOUT, IF ANY, WILL BE CALCULATED FOLLOWING THE FISCAL YEAR ENDING DECEMBER 31, 2007, BASED ON THE METRICS AND METHODOLOGIES DESCRIBED IN EXHIBIT A, AND BASED ON ANY ADJUSTMENTS PERMITTED UNDER THE PLAN OR THIS AGREEMENT.

 

This Agreement represents Radian’s unfunded and unsecured promise to issue Common Shares or cash at a future date, subject to the terms of this Agreement and the Plan. Executive has no rights under this Agreement other than the rights of a general unsecured creditor.

 

The metrics and methodologies set forth in Exhibit A measure Radian’s performance on an absolute basis and relative to its peers. Such performance will be measured using the methods and procedures that Radian uses for its business purposes, and these methods and procedures may change without notice or consent.

 

If there is a significant change in accounting rules or in Radian’s business or business strategy (for example, an extraordinary event, acquisition or divestiture), as the Committee determines in its sole discretion, the Committee may adjust the calculation of the Performance Goals in such manner as they consider appropriate in light of the change.

 

The final determination of the Payout to which the Executive is entitled will be made by the Committee in its sole discretion. Compensation attributable to this Agreement is intended to constitute qualified “performance-based compensation” under Section 162(m) of the Code and the regulations thereunder. This Agreement shall be construed and administered by the Committee in a manner consistent with this intent.

 

3. Termination and Change of Control.

 

a. Termination of Relationship with Company. If your employment with Radian terminates during the Award Term then, depending upon the reason for such termination, this Performance Share Award may continue in force or may terminate, as provided in the applicable subsection of Section 3(f) of the Plan.

 

2


b. Change of Control. Upon a Change of Control of Radian, this Performance Share Award shall be treated in accordance with Section 3(f)(iv) of the Plan.

 

4. Dividends and Voting . You will have no rights as a stockholder with respect to Performance Share Awards, including with respect to dividends and voting, unless and until shares of Common Stock are issued in settlement of this award. No adjustments will be made for dividends or other rights for which the record date is prior to issuance of the Common Stock.

 

5. Non-transferability . Neither the Performance Share Award nor any interest in the award or this Agreement may be anticipated, alienated, encumbered, sold, pledged, assigned, transferred or subjected to any charge or legal process, other than by will or the laws of descent and distribution, so long as shares of Common Stock or cash have not been distributed in accordance with the Plan, and any such sale, pledge, assignment or other attempted transfer shall be null and void.

 

6. Successors and Heirs . This Agreement shall be binding upon and inure to the benefit of Radian and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of Radian’s assets and business. In the event of your death, any Payout to which you may become entitled will be delivered to your estate, personal representative, heirs or beneficiaries in accordance with the terms of the Plan.

 

7. Governing Law. This Performance Share Award Agreement and the Plan will be construed, administered and governed in all respects under and by the applicable laws of the State of Delaware.

 

8. Tax Withholding . Radian has the right to deduct from any award payment made under this Agreement or to require you to pay the amount of any federal, state or local taxes of any kind required by law to be withheld with respect to the grant, vesting, payment or settlement of an award under this Agreement, or to take such other action as may be necessary in our opinion to satisfy all obligations for the payment of such taxes. If Common Stock is withheld or surrendered to satisfy tax withholding, such stock will be valued at fair market value as of the date such Common Stock is withheld or surrendered. Radian may also deduct from any award payment any other amounts due by you to Radian.

 

9. Miscellaneous . Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to the terms of the Plan. In accordance with the Plan, all decisions of the Committee shall be final and binding upon you and Radian.

 

[Signatures appear on following page.]

 

3


IN WITNESS WHEREOF , this Performance Share Award Agreement has been executed and delivered by Radian on the terms and conditions set forth above.

 

RADIAN GROUP INC.

By:

 

 


Name:

   

Title:

   

 

Acknowledgement by Executive

 

I hereby agree to the terms and conditions of this Performance Share Award Agreement as a condition to the grant made to me.

 

   

 


    Signature of Executive
Name:    

 

4


Exhibit A

 

TARGET LEVELS AND PERFORMANCE GOALS

 

Name of Executive : [                                          ]

Award Term: Fiscal Years 2005, 2006 and 2007

Target Performance Share Award (in Shares):              [                      shares]

Maximum Potential Payout (in Shares):                        [                       shares]

Performance Matrices:

 

Performance Matrices:

 

1. Growth in Earnings per Share/Payout as a Percentage of Target

 

[Cumulative/Annual]

Growth
Rate Target


  Relative Performance (Rank among Peers)

  9 th /10 th

  7 th /8 th

  5 th /6 th

  3 rd /4 th

  1 st /2nd

             %                    
             %                    
             %                    
             %                    
             %                    

 

2. Growth in Adjusted Book Value/Payout as a Percentage of Target

 

[Cumulative/Annual]

Growth
Rate Target


  Relative Performance (Rank among Peers)

  9 th /10 th

  7 th /8 th

  5 th /6 th

  3 rd /4 th

  1 st /2nd

             %                    
             %                    
             %                    
             %                    
             %                    

 

3. Return on Equity/Payout As a Percentage of Target

 

[Cumulative/Annual]

R.O.E.
Target


  Relative Performance (Rank among Peers)

  9 th /10 th

  7 th /8 th

  5 th /6 th

  3 rd /4 th

  1 st /2nd

             %                    
             %                    
             %                    
             %                    
             %                    

 

5


Calculation of Payout:

 

Performance Criteria


  

Payout As a Percentage of

Target


       

Relative
Weight


       

Weighted
Payout As a
Percentage of
Target


Growth in Earnings per Share

   Percentage from Table 1    x    33%    =    A%

Growth in Adjusted Book Value

   Percentage from Table 2    x    33%    =    B%

Return on Equity

   Percentage from Table 3    x    33%    =    C%

 

Add: A% + B% + C% = D%

 

Multiply: Target No. of Shares x D% = No. of Shares for Payout

 

For Payout in Cash: No. of Shares for Payout x Price @

                                  Last Trade Date before Settlement = Cash Payment

 

Peer Group Companies (for Purposes of Relative Performance):

 

Ambac Financial

   Old Republic International

Assured Guaranty

   PMI Group

Genworth Financial

   Triad Guaranty

MBIA

   XL Capital

MGIC Investment

    

 

6

EXHIBIT 10.4

 

CERTAIN COMPENSATION ARRANGEMENTS WITH

DIRECTORS AND NAMED EXECUTIVE OFFICERS FOR 2005

 

Directors

 

All of our non-employee directors receive an annual fee for their services of $32,500 and an annual grant of phantom stock, awarded under our Equity Compensation Plan, equal to $97,500 based on the closing price of our common stock on the date the annual grant is made. The phantom stock awards vest and are payable in shares of common stock upon departure from the board. Each non-employee director also receives a $2,000 fee for each board meeting attended and a $2,000 fee for each committee meeting attended. In addition to the foregoing, our Lead Director receives an annual fee of $30,000, the chairperson of the Audit and Risk Management Committee receives an annual fee of $10,000, the chairperson of the Compensation and Human Resources Committee receives an annual fee of $7,500, and the chairpersons of the Executive, Governance and Investment Committees each receive an annual fee of $5,000, for serving as chairperson. Herbert Wender, our Lead Director, also received 2,000 shares of phantom stock in 2005 as compensation for his efforts related to Radian’s CEO transition. Directors who are our employees do not receive additional compensation for their service as directors. Radian requires each director to maintain a minimum direct investment in Radian common stock equal to $350,000, on or before the later of January 1, 2007 or four years from the date that a director’s service on the board begins.

 

Named Executive Officers

 

Named

Executive

Officer


   2004 Bonus

    2005 Base
Salary


    2005 Target
Bonus (1)


    Target
Performance
Shares under
Performance
Share Plan (2)


   Stock Options
Awarded (3)


Frank P. Filipps

   $ 2,700,000 (4)     (5 )     (5 )   N/A    N/A

Martin Kamarck

   $ 500,000     $ 455,000     $ 682,500     8,800    20,800

Roy J. Kasmar

   $ 615,000     $ 455,000     $ 682,500     8,800    20,800

C. Robert Quint

   $ 455,000     $ 335,000     $ 418,750     5,400    12,700

Howard S. Yaruss

   $ 355,000     $ 278,000     $ 347,500     4,000    9,500

(1) Subject to adjustment prior to payment after the conclusion of 2005.
(2) For the performance period that began January 1, 2005 and ends December 31, 2007. The performance shares are denominated in shares of Radian common stock and are payable in cash or stock, at the participant’s option (unless the participant is not in compliance with the minimum stock ownership required of his position upon payment, in which case the performance shares will be paid in shares) at between 0% and 200% of the target amount depending upon a combination of Radian’s growth of earnings per share, growth of adjusted book value and return on equity over the performance period, both on an absolute basis and as compared to a peer group.
(3) Vest ratably over a four year period beginning one year after the grant date and expire seven years after the grant date. The exercise price of the options is $48.39, the closing price of Radian’s common stock on the February 8, 2005 grant date.
(4) Consists of $1,350,000 in cash and $1,350,000 in phantom stock that is payable one year after the grant date.
(5) Pursuant to his retirement agreement, Mr. Filipps is entitled to base salary payments of $112,500 per month through his retirement date, which is expected to occur on or before June 30, 2005. He also is entitled to a cash bonus for 2005 at an annual rate of $2,700,000 prorated for the length of service in 2005 before the retirement date and payable when 2005 bonuses are otherwise paid to executives generally. The retirement agreement also provides for additional payments following retirement as described in Radian’s Current Report on Form 8-K dated November 22, 2004 and filed on November 24, 2004.

EXHIBIT 10.5

 

FORM OF PHANTOM STOCK GRANT LETTER FOR EMPLOYEES UNDER THE

RADIAN GROUP INC. EQUITY COMPENSATION PLAN

 

THIS PHANTOM STOCK GRANT, dated                      , is delivered by RADIAN GROUP INC., a Delaware corporation (the “Company”), to                      , an officer of the Company or one of its affiliates (the “Grantee”).

 

RECITALS

 

WHEREAS, the Radian Group Inc. Equity Compensation Plan (the “Plan”) provides for the grant of Phantom Stock to selected key employees of the Company and its affiliates, in accordance with the terms and provisions of the Plan.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1. Grant of Phantom Stock .

 

Subject to the terms and conditions hereinafter set forth, the Company hereby grants to the Grantee                  shares of phantom stock (“Phantom Stock”).

 

2. Account; Dividend Equivalents.

 

The Company shall establish a bookkeeping account on its records for the Grantee and shall credit the Grantee’s Phantom Stock to the bookkeeping account.

 

On each day on which dividends are payable with respect to shares of Common Stock of the Company (“Shares”), the Company shall credit dividend equivalents to the Grantee’s account. The Company shall determine the amount of the dividend that would have been paid with respect to Shares equal in number to those credited to the Grantee’s account and then shall convert that dividend amount into additional shares of Phantom Stock and credit those shares to the Grantee’s account.

 

3. Conversion of Phantom Stock .

 

The Phantom Stock credited to the Grantee’s account shall be convertible into Common Stock of the Company and vest on the earlier of: (i) the employee’s termination of employment with the Company (for any reason other than cause) or (ii) one (1) year from the date hereof (the “Conversion Date”). The Phantom Stock shall be paid in whole Shares, with fractional shares paid in cash.

 

Within 15 days after the Conversion Date, the Company shall deliver to the Grantee at the executive offices of the Company a certificate for whole Shares representing the Grantee’s Phantom Stock and a check for any fractional shares. The obligation of the Company to deliver Shares upon conversion of the Phantom Stock shall be subject to all applicable laws, rules, regulations and such approvals by governmental agencies as may be deemed appropriate by the Stock Option and Compensation Committee (the “Committee”), including, among other things, such steps as Company counsel shall deem necessary or

 

1


appropriate to comply with relevant securities laws and regulations. All obligations of the Company hereunder shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes.

 

4. Certain Corporate Changes .

 

In the event of a change in, reclassification of, subdivision of, split-up or spin-off with respect to, stock dividend on, or exchange of stock of the Company for outstanding Shares, the number and class of the Shares subject to the Phantom Stock grant shall be appropriately adjusted by the Committee.

 

If the Company is consolidated or merged with another corporation, the Grantee, at the time of issuance of Shares upon conversion of the Phantom Stock, shall be entitled to receive the same number and kind of shares, or the same amount of other property, cash or securities as the Grantee would have been entitled to receive upon the happening of such consolidation or merger if the Grantee had been, immediately prior to such event, the holder of the number of Shares as to which the Phantom Stock is being converted, adjusted in the manner provided in this Section; provided, that if the Company shall not be the surviving corporation, the surviving corporation shall substitute therefor a substantially equivalent number and kind of its shares of stock or other property, cash or securities.

 

In the event that there is any change, other than as specified above, in the number or kind of outstanding Shares or of any stock or other securities into which such Shares may be exchanged, or in the event of a dividend to holders of the Shares payable other than in cash or stock of the Company, then, if the Committee, in its discretion, determines that such event equitably requires an adjustment with respect to the number, price or kind of Shares subject to the Phantom Stock grant, such adjustment may be made and shall be final and binding.

 

All adjustments made by the Committee pursuant to this Section shall be subject to the approval of the Board.

 

5. Employment Not Affected .

 

Neither the grant of any Phantom Stock, nor any other action taken with respect to the Phantom Stock, shall confer upon the Grantee any right to continue in the employ of the Company or any of its affiliates or shall interfere in any way with the right of the Company or any affiliate to terminate Grantee’s employment at any time. Except as may be otherwise limited by another written agreement, the right of the Company or any of its affiliates to terminate at will the Grantee’s employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved.

 

6. No Stockholder Rights .

 

Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to the Shares subject to any Phantom Stock grant, except to the extent that certificates for such Shares shall have been issued upon the conversion of the Phantom Stock as provided for herein.

 

2


7. Cancellation or Amendment .

 

This grant may be canceled or amended by the Committee, in whole or in part, at any time if the Committee determines, in its sole discretion, that cancellation or amendment is necessary or advisable in light of any change after the date of this grant in (i) the Internal Revenue Code of 1986, as amended or the regulations issued thereunder or (ii) any federal or state securities law or other law or regulation, which change by its term is effective retroactively to a date on or before the date of this grant, provided, however, that no such cancellation or amendment shall, without the Grantee’s consent, apply to or affect installments that matured on or before the date on which the Committee makes such determination.

 

8. Notice .

 

Any notice to the Company provided for in this instrument shall be addressed to it in care of the Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company or of an affiliate, or to such other address as the Grantee may designate to the Company in writing. Any notice provided for hereunder shall be delivered by hand, sent by telecopy or telex or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage and registry fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service.

 

9. Incorporation of Plan by Reference; Nature of Phantom Stock .

 

This grant is made pursuant to the terms of the Radian Group Inc. 1995 Equity Compensation Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Committee shall be conclusive upon any question arising hereunder. The payment of amounts with respect to the Phantom Stock is subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan as established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions relating to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of Shares, (iii) capital or other changes of the Company and (iv) other requirements of applicable law. A copy of the Plan will be furnished to each Grantee upon request. Additional copies may be obtained from the Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197.

 

10. Governing Law .

 

The validity, construction, interpretation and effect of this instrument shall exclusively be governed by, and determined in accordance with, the law of the State of Delaware.

 

3


IN WITNESS WHEREOF, Radian Group Inc. has caused its duly authorized officers to execute and attest this instrument, and the Grantee has placed his or her signature hereon, effective as of the date of the grant set forth above.

 

RADIAN GROUP INC.        
By:  

 


       
             
        Accepted:  

 


 

4

EXHIBIT 10.6

 

FORM OF PHANTOM STOCK GRANT LETTER FOR NON-EMPLOYEE DIRECTORS

UNDER THE RADIAN GROUP INC. EQUITY COMPENSATION PLAN

 

THIS PHANTOM STOCK GRANT, dated as of                      , is delivered by RADIAN GROUP INC., a Delaware corporation (the “Company”), to                      , a non-employee director of the Company (the “Grantee”).

 

RECITALS

 

WHEREAS, the Radian Group Inc. Equity Compensation Plan (the “Plan”) provides for the grant of Phantom Stock to non-employee directors of the Company, in accordance with the terms and provisions of the Plan.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1. Grant of Phantom Stock .

 

Subject to the terms and conditions hereinafter set forth, the Company hereby grants to the Grantee                      shares of phantom stock (“Phantom Stock”). The Phantom Stock shall be fully vested as of the date hereof.

 

2. Account; Dividend Equivalents.

 

The Company shall establish a bookkeeping account on its records for the Grantee and shall credit the Grantee’s Phantom Stock to the bookkeeping account.

 

On each day on which dividends are payable with respect to shares of Common Stock of the Company (“Shares”), the Company shall credit dividend equivalents to the Grantee’s account. The Company shall determine the amount of the dividend that would have been paid with respect to Shares equal in number to those credited to the Grantee’s account and then shall convert that dividend amount into additional shares of Phantom Stock and credit those shares to the Grantee’s account.


3. Conversion of Phantom Stock .

 

The Phantom Stock credited to the Grantee’s account shall be convertible into Common Stock of the Company and paid to the Grantee when the Grantee ceases to be a director of the Company (the “Conversion Date”). The Phantom Stock shall be paid in whole Shares, with fractional shares paid in cash.

 

Within 15 days after the Conversion Date, the Company shall deliver to the Grantee at the executive offices of the Company a certificate for whole Shares representing the Grantee’s Phantom Stock and a check for any fractional shares. The obligation of the Company to deliver Shares upon conversion of the Phantom Stock shall be subject to all applicable laws, rules, regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including, among other things, such steps as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. All obligations of the Company hereunder shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes.

 

4. Certain Corporate Changes .

 

In the event of a change in, reclassification of, subdivision of, split-up or spin-off with respect to, stock dividend on, or exchange of stock of the Company for outstanding Shares, the number and class of the Shares subject to the Phantom Stock grant shall be appropriately adjusted by the Committee.

 

If the Company is consolidated or merged with another corporation, the Grantee, at the time of issuance of Shares upon conversion of the Phantom Stock, shall be entitled to receive the same number and kind of shares, or the same amount of other property, cash or securities as the Grantee would have been entitled to receive upon the happening of such consolidation or merger if the Grantee had been, immediately prior to such event, the holder of the number of Shares as to which the Phantom Stock is being converted, adjusted in the manner provided in this Section; provided, that if the Company shall not be the surviving corporation, the surviving corporation shall substitute therefor a substantially equivalent number and kind of its shares of stock or other property, cash or securities.

 

In the event that there is any change, other than as specified above, in the number or kind of outstanding Shares or of any stock or other securities into which such Shares may be exchanged, or in the event of a dividend to holders of the Shares payable other than in cash or stock of the Company, then, if the


Committee, in its discretion, determines that such event equitably requires an adjustment with respect to the number, price or kind of Shares subject to the Phantom Stock grant, such adjustment may be made and shall be final and binding.

 

All adjustments made by the Committee pursuant to this Section shall be subject to the approval of the Board.

 

5. No Stockholder Rights .

 

Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to the Shares subject to any Phantom Stock grant, except to the extent that certificates for such Shares shall have been issued upon the conversion of the Phantom Stock as provided for herein.

 

6. Cancellation or Amendment .

 

This grant may be canceled or amended by the Committee, in whole or in part, at any time if the Committee determines, in its sole discretion, that cancellation or amendment is necessary or advisable in light of any change after the date of this grant in (i) the Internal Revenue Code of 1986, as amended (the “Code”) or the regulations issued thereunder or (ii) any federal or state securities law or other law or regulation, which change by its term is effective retroactively to a date on or before the date of this grant, provided, however, that no such cancellation or amendment shall, without the Grantee’s consent, apply to or affect installments that matured on or before the date on which the Committee makes such determination.

 

7. Notice .

 

Any notice to the Company provided for in this instrument shall be addressed to it in care of the Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company or of a affiliate, or to such other address as the Grantee may designate to the Company in writing. Any notice provided for hereunder shall be delivered by hand, sent by telecopy or telex or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage and registry fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service.


8. Incorporation of Plan by Reference; Nature of Option .

 

This grant is made pursuant to the terms of the Radian Group Inc. Equity Compensation Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Committee shall be conclusive upon any question arising hereunder. The payment of amounts with respect to Phantom Stock is subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan as established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions relating to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of Shares, (iii) capital or other changes of the Company and (iv) other requirements of applicable law. A copy of the Plan will be furnished to each Grantee upon request. Additional copies may be obtained from the Secretary of the Company, 1601 Market Street, Philadelphia, Pennsylvania 19103-2197.

 

9. Governing Law.

 

The validity, construction, interpretation and effect of this instrument shall exclusively be governed by, and determined in accordance with, the laws of the State of Delaware.

 

IN WITNESS WHEREOF, Radian Group Inc. has caused its duly authorized officer to execute and attest this instrument, and the Grantee has placed his hereon, effective as of the date of the grant set forth above.

 

RADIAN GROUP INC.    
By:  

 


   
        Agreed to and Accepted By:
       

 

 


        [Non-Employee Director]