RDN Radian Group Inc

PROPOSAL 3 – AMENDMENT TO THE RADIAN GROUP INC. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE “ONLY FOR CAUSE” DIRECTOR REMOVAL PROVISION

Proposed Amendment

Our board of directors has approved and declared it advisable and in the best interests of the Company to amend Article FIFTH, Section 5.3, of our Amended and Restated Certificate of Incorporation to eliminate language providing that directors may be removed by the Company’s stockholders only for cause, so that members of the board of directors may be removed with or without cause. The amendment our board has proposed to Article FIFTH, Section 5.3 (the “Director Removal Amendment”) would give effect to the changes set forth in Appendix A to this proxy statement.

Reasons for the Amendment

Currently, Article FIFTH, Section 5.3 of our Amended and Restated Certificate of Incorporation provides, among other things, that the Company’s stockholders may remove directors from office only for cause. In light of a recent ruling by the Delaware Court of Chancery in a proceeding not involving the Company, the board of directors has approved and declared it advisable and in the best interests of the Company to amend the Amended and Restated Certificate of Incorporation, consistent with Section 141(k) of the Delaware General Corporation Law, so that any of the Company’s directors may be removed, with or without cause.

Effect of the Amendment

The Director Removal Amendment will provide that members of the board of directors of the Company may be removed by the Company’s stockholders with or without cause.

If approved at the Annual Meeting, the Director Removal Amendment would become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware, which we intend to file promptly if this Proposal 3 is approved by our stockholders.

Recommendation

RADIAN’S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “ FOR ” APPROVAL OF THE PROPOSAL TO AMEND OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE THAT DIRECTORS MAY BE REMOVED BY THE COMPANY’S STOCKHOLDERS WITH OR WITHOUT CAUSE. SIGNED PROXIES WILL BE VOTED “FOR” APPROVAL UNLESS A STOCKHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.

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BACKGROUND INFORMATION FOR TAX BENEFIT PRESERVATION PROPOSALS 4 AND 5

Background and Reasons for Proposals

In past years that followed the financial crisis that began in 2007, our business operations generated significant net operating losses and other tax attributes for U.S. federal income tax purposes (collectively, “NOLs”). Under federal tax laws, we generally can use the NOLs to offset certain taxable income or to reduce certain future federal taxable income of the Company before the NOLs expire. To the extent they are not used in any given tax year and are not expired, we can “carry forward” the NOLs and certain related tax credits to offset taxable income in future years through the period (generally 20 years) until the NOLs expire. As of December 31, 2015, we estimate that we had approximately $1.1 billion in U.S. Consolidated NOLs. While we cannot definitively predict the amount and timing of our future taxable income, we believe our NOLs will be fully utilized in the near term to reduce our future taxable income and therefore represent valuable assets of the Company. For example, we used approximately $346 million and $360 million of NOLs during the 2014 and 2015 tax years, respectively, which reduced our cash tax payments due to the Internal Revenue Service (the “IRS”).

Under our current earnings forecasts, we expect that we will be able to use all of our NOLs to reduce future income tax liability. However, under Section 382 (“Section 382”) of the Internal Revenue Code (the “Code”), our ability to use the NOLs could be substantially impaired if we experience an “ownership change,” as determined under Section 382. In general, an “ownership change” will occur if our “five-percent shareholders” (as defined under Section 382 and which we refer to as “Section 382 five-percent shareholders”) collectively increase their ownership in Radian by more than 50 percentage points over the lowest percentage of Radian stock owned by those stockholders at any time during a rolling three-year testing period. If an “ownership change” occurs, Section 382 imposes an annual limit on the amount of NOL carryforwards that we can use to offset future federal taxable income, which could result in a material amount of NOLs expiring unused and, therefore, significantly impair the value of the NOLs. While the complexity of Section 382’s provisions and the limited knowledge any public company has about the ownership of its publicly traded stock make it difficult to determine whether an “ownership change” has occurred, we currently believe that an “ownership change” has not occurred, which we attribute in large part to our tax benefit preservation strategy.

In 2009, we adopted certain amendments to our Amended and Restated By-Laws (the “Bylaw Amendment”), and at our 2010 annual meeting, our stockholders also approved certain amendments to our Amended and Restated Certificate of Incorporation (the “Charter Amendment”). Both the Charter Amendment and the Bylaw Amendment impose substantially similar transfer restrictions designed to block transfers of our common stock that could result in an “ownership change.” These amendments and the interrelationship between them are described below in the Questions and Answers and under Proposal 4, and their full terms can be found in Appendix B-1 and B-2 , respectively, to this proxy statement. In addition, effective October 9, 2009, we entered into a Tax Benefit Preservation Plan with The Bank of New York Mellon, as rights agent. The Tax Benefit Preservation Plan, which we subsequently amended in 2010, was approved by our stockholders at our 2010 annual meeting (as amended, the “Preservation Plan”). The Preservation Plan, which is designed to deter transfers of our common stock that could result in an “ownership change,” is described below in the Questions and Answers and under Proposal 5, and its full terms can be found in Appendix C to this proxy statement. The Bylaw Amendment, the Charter Amendment and the Preservation Plan are critical components of our tax benefit preservation strategy. By their terms, the transfer restrictions (the “Transfer Restrictions”) in the Charter Amendment and the Bylaw Amendment will terminate unless the Charter Amendment is re-approved by stockholders every three years. Additionally, by its terms, the Preservation Plan will expire unless re-approved by stockholders every three years. Our stockholders re-approved the Charter Amendment and Preservation Plan at our 2013 annual meeting.

Because it is important to retain the protections provided by the Transfer Restrictions and the Preservation Plan, and after careful consideration, including an evaluation of the significant value of the NOLs as discussed above, our board has determined to seek re-approval from our stockholders of both the Charter Amendment (Proposal 4) and the Preservation Plan (Proposal 5) at our 2016 Annual Meeting.

None of our tax benefit preservation measures alone is a complete solution for preventing an “ownership change;” therefore, the Transfer Restrictions and the Preservation Plan are designed to work together to

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Background Information for Tax Benefit Preservation Proposals 4 and 5  

prevent an “ownership change.” The Charter Amendment, the Bylaw Amendment, and the Preservation Plan are intended to protect our valuable tax assets and are not intended as anti-takeover devices, although they may have some anti-takeover consequences. The Company was careful to incorporate stockholder-friendly features in the Charter Amendment, the Bylaw Amendment and the Preservation Plan, including: (i) limiting the definition of ownership to the definition used for purposes of Section 382, as opposed to the broader definition of “beneficial ownership” used for securities laws purposes; (ii) providing “sunset provisions” that will terminate the Preservation Plan and the Transfer Restrictions if Section 382 is repealed or if the potential loss from limitation of the NOLs is no longer material to the Company, which our board of directors has agreed to review annually; and (iii) requiring the re-approval by our stockholders of both the Charter Amendment and the Preservation Plan every three years. Furthermore, our board may exempt particular persons or transactions from the Transfer Restrictions and the terms of the Preservation Plan if it determines that the acquisition would not jeopardize Radian’s NOLs or is otherwise in Radian’s best interests. In any event, the Preservation Plan is limited to a ten-year term and will expire on the close of business on October 9, 2019 (unless that date is advanced or extended).

Our board of directors urges our stockholders to carefully read each proposal, the Questions and Answers discussed below and the full terms of the Charter Amendment, the Bylaw Amendment and the Preservation Plan set forth in Appendix B-1, B-2 and C , respectively. The Charter Amendment and the Preservation Plan require stockholder approval for the Transfer Restrictions and Preservation Plan to remain effective after our 2016 Annual Meeting.

Questions and Answers about Section 382 and our NOLs Generally

The NOLs are the Company’s net operating losses that generally can be used to offset taxable income within the applicable NOL carryback period or certain future federal taxable income, and therefore, reduce our future federal income tax liabilities. NOLs generally can be carried forward for up to 20 years. The Company’s ability to use its NOL carryforwards to offset future federal taxable income could be adversely affected if we experience an “ownership change” as defined under Section 382.

We had approximately $1.1 billion of NOLs as of December 31, 2015. Assuming a 35% federal income tax rate, and that we are able to use all of our NOLs to offset future federal taxable income, we may be able to reduce our federal income tax payments in the coming years by approximately $385 million. Because the NOLs can be carried forward for 20 years, we may need to manage our Section 382 risk for a significant period of time. If unused, our NOLs will expire in tax years 2029-2032.

Upon an “ownership change,” Section 382 of the Code imposes limitations on a corporation’s ability to use its NOL carryforwards to reduce its future federal taxable income.

The determination of whether an “ownership change” has occurred under the rules of Section 382 is very complex and is beyond the scope of this summary discussion. Generally, however, an “ownership change” will have occurred if, over a three-year period, there has been an aggregate increase of 50 percentage points or more in the percentage of our shares owned by one or more “Section 382 five-percent shareholders.” A stockholder that acquires 5% of our outstanding common stock as measured pursuant to Section 382 will be a “Section 382 five-percent shareholder” for purposes of calculating this aggregate increase. For example, if a single investor acquired 50.1% of our common stock in a three-year period, an “ownership change” would be deemed to occur. Similarly, if ten unrelated persons, none of whom initially owned our common stock, each acquired slightly over 5% of our common stock as measured pursuant to Section 382 within a three-year period (so that those persons owned, in the aggregate, more than 50%), an “ownership change” also would be deemed to occur.

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Background Information for Tax Benefit Preservation Proposals 4 and 5  

Some of the factors that must be considered in applying Section 382 include the following:

If we experience an “ownership change,” as defined under Section 382, our annual use of the NOLs to offset future federal taxable income, and thereby reduce our federal income tax liabilities, could be substantially limited. Upon an “ownership change,” Section 382 imposes an annual limitation on the use of NOLs carried forward from periods before the ownership change. Generally, the annual limitation would equal our market capitalization at the time of the ownership change, multiplied by the “long-term tax-exempt rate” – which is a rate derived from market rates on long-term Treasury securities, adjusted for differences between rates on long-term taxable and tax-exempt obligations. For example, if our market capitalization at the time of an ownership change is $2.3 billion and the long-term tax-exempt rate is 2.65% (which is the rate as of February 2016), then the Section 382 limitation on the amount of NOLs that could be used each year would be approximately $60 million. Thus, an “ownership change” can have the effect of substantially deferring our ability to use our NOLs. Moreover, to the extent the amounts are deferred past the 20-year time limit that applies to NOL carryforwards, we may have to permanently write off a significant portion of these assets.

Ownership for Section 382 purposes is determined primarily by an economic test, while the SEC definition of “beneficial ownership” focuses generally on the right to vote or control disposition of the shares. In general, the Section 382 economic test looks to who has the right to receive dividends paid with respect to shares, and who has the right to receive proceeds from the sale or other disposition of shares. Section 382 also contains certain constructive ownership rules, which generally attribute ownership of stock held by estates, trusts, corporations, partnerships or other entities to the ultimate indirect individual

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Background Information for Tax Benefit Preservation Proposals 4 and 5  

owner of the shares, or to related individuals. Generally, a person’s direct or indirect economic ownership interest in shares (rather than record title, voting control or other factors) is taken into account for Section 382 purposes. For example, different portfolios in a single mutual fund complex and groups of customers advised by the same investment advisor will normally not be aggregated for Section 382 purposes even though they may be aggregated for determining beneficial ownership under SEC rules and reporting requirements. We believe that none of our stockholders that currently own more than 5% of our outstanding common stock for SEC “beneficial ownership” purposes are “Section 382 five-percent shareholders.”

For purposes of determining the existence and identity of, and the amount of common stock owned by, any stockholder, the Internal Revenue Service permits us to rely on the existence or absence of filings with the SEC of Schedules 13D, 13F and 13G (or similar filings) as of any date, subject to our actual knowledge of the ownership of our common stock.

Investors who file a Schedule 13G or Schedule 13D (or list our common stock in their Schedules 13F) may beneficially own 5% or more of our common stock for SEC reporting purposes but nonetheless may not be “Section 382 five-percent shareholders” and therefore their beneficial ownership will not affect our ownership change for purposes of Section 382.

General Questions and Answers about our Tax Benefit Preservation Strategy

Increases in ownership by our “Section 382 five-percent shareholders” and the creation of new “Section 382 five-percent shareholders” can limit our ability to use NOL carryforwards to reduce future federal taxable income. The Transfer Restrictions in the Charter Amendment and the Bylaw Amendment restrict direct and indirect transfers of our common stock that would create “Section 382 five-percent shareholders” or otherwise increase the percentage of stock that is owned by “Section 382 five-percent shareholders.” The Preservation Plan acts as an additional deterrent against any stockholder from becoming a “Section 382 five-percent shareholder” and any existing “Section 382 five-percent shareholder” from increasing their ownership under Section 382.

Our board of directors is recommending retaining the Transfer Restrictions and the Preservation Plan and, accordingly, re-approval of both the Charter Amendment and the Preservation Plan because none of these measures by itself is a complete solution.

The Charter Amendment and Bylaw Amendment impose substantially similar transfer restrictions, but there are limitations on their effectiveness and enforceability. The Bylaw Amendment does not cover shares issued before effectiveness of the amendment, but applies only to shares of common stock issued after its effective date of October 9, 2009. The Charter Amendment does restrict transfers of shares issued before its adoption as well as transfers of shares issued thereafter, but these restrictions may not prevent all transfers that could result in such an “ownership change.” Delaware law provides that, with respect to shares of common stock issued before the effectiveness of the Charter Amendment, the transfer restrictions in the Charter Amendment are effective against (1) stockholders with respect to all shares that were voted in favor of the Charter Amendment at the 2010 annual meeting, all shares that were voted in favor of its re-approval at the 2013 annual meeting and all shares that are voted in favor of its re-approval at the 2016 Annual Meeting (collectively, the “Restricted Shares”) and (2) transferees of Restricted Shares if (A) the transfer restriction is conspicuously noted on the certificates or book entry records representing such shares or (B) the transferee had actual knowledge of the transfer restrictions (even absent such conspicuous notation). Any shares of common stock issued after the effectiveness of the Charter

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Background Information for Tax Benefit Preservation Proposals 4 and 5  

Amendment have been, or will be, issued with the transfer restriction conspicuously noted on the certificates or book entry record representing such shares and therefore under Delaware law such shares are subject to the transfer restrictions in the Charter Amendment.

As noted above, shares of our common stock that were not voted “For” approval and re-approval of the Charter Amendment at the 2010, 2013 or 2016 annual meetings are not subject to the transfer restrictions, which is why the Preservation Plan also is required. As to those shares, the Preservation Plan will continue to apply to deter any person, entity or group from acquiring 4.9% or more of the outstanding shares of our common stock without the approval of our board of directors.

The Preservation Plan therefore complements the Transfer Restrictions to protect the NOLs. It applies to, and therefore deters, all transfers of our common stock that could contribute to an “ownership change” under Section 382 (regardless of when the shares were issued or how the particular shares were voted at an annual meeting). Although the Preservation Plan deters any transfer, it does not absolutely block the transfer or otherwise avoid the limitation under Section 382, which is why the Transfer Restrictions are also needed. In the absence of the Transfer Restrictions, under the Preservation Plan, if a person were to acquire 5% or more of our outstanding common stock under Section 382, that person would become a “Section 382 five-percent shareholder” and those shares would count toward the aggregate “ownership change” even if the Preservation Plan applies to such acquisition or causes such person to subsequently hold less than 5% of our outstanding common stock. As to those shares, so long as the shares were voted in favor of the Charter Amendment or its re-approval or were issued after the Bylaw Amendment or the Charter Amendment became effective, the Transfer Restrictions apply and would prevent the transfer of shares that creates a new “Section 382 five-percent shareholder” or increases the ownership of an existing “Section 382 five-percent shareholder.”

Yes. The Transfer Restrictions will expire unless the Charter Amendment is re-approved by the stockholders at the 2016 annual meeting. Similarly, the Preservation Plan will terminate and the Rights (as defined in Question and Answer 23 below) will expire if the Preservation Plan is not re-approved by our stockholders at the 2016 Annual Meeting.

As described above, the Charter Amendment and the Preservation Plan are designed to protect our NOLs, which are valuable assets to the Company and your investment. Without these measures, which will expire following the 2016 Annual Meeting unless we obtain stockholder approval, we believe that the Company is at significant risk of experiencing an “ownership change” in the future and therefore becoming subject to limitations on our use of our NOLs under Section 382, which could result in a significant loss of our important tax benefits.

Since the Transfer Restrictions effectively block transfers that create new “Section 382 five-percent shareholders,” the threshold is set at 5%. Since the Preservation Plan deters, but does not prevent, an acquiring stockholder from becoming a “Section 382 five-percent shareholder,” the threshold is set at a lower rate to provide some cushion before the acquisition would affect the calculation of a potential “ownership change” under Section 382.

Yes. Our board of directors may exempt an acquisition from the Transfer Restrictions if our board determines that the acquisition would not be likely to limit the availability of the NOLs or is otherwise in Radian’s best interests. Similarly, under the Preservation Plan, our board may exempt particular persons or transactions from the terms of the Preservation Plan if it determines that the acquisition would not jeopardize Radian’s NOLs or is otherwise in Radian’s best interests.

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Background Information for Tax Benefit Preservation Proposals  4 and 5

Acquisitions by Radian, our subsidiaries, and our employee benefit plans and related entities or trustees are exempt from the terms of the Preservation Plan. Further, direct issuances of common stock by Radian are not prohibited transfers.

Additionally, the Transfer Restrictions and Preservation Plan would not prevent us from experiencing an ownership change as a result of issuances of common stock upon the conversion of our outstanding convertible senior notes. As a result, if a holder of convertible senior notes were to exercise its conversion rights and we did not have sufficient liquidity to settle our obligations in cash, we may be required to issue shares of common stock, which could potentially cause or contribute to an ownership change.

Stockholder approval is required for the Transfer Restrictions and the Preservation Plan to continue (see Question and Answer 10). If the Charter Amendment is not re-approved at the 2016 Annual Meeting, the Transfer Restrictions in both the Charter Amendment and the Bylaw Amendment will terminate on the close of business on the second business day following adjournment. Further, if the Preservation Plan is not re-approved at the 2016 annual meeting, it will terminate and the Rights will expire on the close of business on the second business day following adjournment.

Both the Transfer Restrictions and the Preservation Plan are intended to protect our NOLs and will remain effective only for so long as a limitation under Section 382 on the use of the NOLs would be material to the Company. The Transfer Restrictions will terminate and the Rights will expire upon the earliest of:

In any event, the Preservation Plan is limited to a ten-year term and will expire on the close of business on October 9, 2019 (unless that date is advanced or extended). Our board also has the right to redeem the Rights or exchange the Rights for common stock.

Yes, many other companies have adopted similar plans, and some companies have adopted similar charter amendments to implement transfer restrictions, in order to protect their NOLs.

The full text of the Charter Amendment is found in Section 4.4 of our Amended and Restated Certificate of Incorporation included as Appendix B-1 , the full text of the Bylaw Amendment is found in Section 6.06 of our Amended and Restated By-Laws included as Appendix B-2 , and the full text of the Preservation Plan is included as Appendix C to this proxy statement. Additionally, our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and the Preservation Plan are all incorporated by reference as exhibits to our Annual Report on Form 10-K.

Additional Questions and Answers about the Transfer Restrictions

The Charter Amendment and the Bylaw Amendment each prohibit a person from becoming a “Section 382 five-percent shareholder” by restricting transfers, directly or indirectly, that would cause a person to

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Background Information for Tax Benefit Preservation Proposals  4 and 5

own, directly or by attribution, 5% or more of the outstanding shares of our common stock and they would also generally restrict existing “Section 382 five-percent shareholders,” if any, from increasing their ownership interest under Section 382.

Subject to the enforceability of the Charter Amendment as discussed in Question and Answer 19 below, transfers that violate the Transfer Restrictions are prohibited and will not be registered on our records. In the case of a purchase of shares on a national securities exchange that would create a “Section 382 five-percent shareholder” or increase the ownership of an existing “Section 382 five-percent shareholder,” the excess shares will be required to be transferred to an agent of the Company, and the agent will be required to sell the shares in an arms-length transaction and to apply the proceeds generally as follows: first, to cover the agent’s own costs; second, to reimburse the transferee to the extent of the price paid by the transferee for the shares; and third, if there are any remaining proceeds, to the original transferor (or if the original transferor cannot be readily identified, the proceeds will be donated to a charity determined by our board of directors). The seller of any shares on a national securities exchange will not be affected by the Transfer Restrictions where the seller cannot determine whether the acquirer is currently or will become a “Section 382 five-percent shareholder.” See Question and Answer 21 below regarding sales on a national securities exchange.

Shares issued after the 2010 annual meeting are subject to the transfer restrictions in the Charter Amendment. In general, Delaware law provides that the Transfer Restrictions included in the Charter Amendment are enforceable with respect to shares of common stock issued before the effectiveness of the Charter Amendment only if approved by the holder of those shares. If you owned shares at the time of the 2010 annual meeting and did not vote those shares in favor of the Charter Amendment at that time, to the extent you still hold those shares, they are not subject to the Transfer Restrictions in the Charter Amendment. Likewise, if you owned shares at the time of the 2013 annual meeting that were not subject to the Transfer Restrictions in the Charter Amendment and did not vote those shares in favor of re-approval of the Charter Amendment at that time, to the extent you still hold those shares, they are not subject to the Transfer Restrictions in the Charter Amendment. If, however, you vote “FOR” re-approval of the Charter Amendment at the 2016 Annual Meeting, even if your shares were not previously subject to the Transfer Restrictions included in the Charter Amendment, they will become subject to those restrictions. Further, if you, subsequent to the 2010 annual meeting, acquired or acquire additional shares that were either voted in favor of the Charter Amendment or its re-approval or issued after the effectiveness of the Charter Amendment, those shares will be subject to the Transfer Restrictions in the Charter Amendment. We intend to presume, with regard to each share of common stock issued before the effectiveness of the Charter Amendment that such share was voted in favor of the Charter Amendment (and in favor of the re-approval of the Charter Amendment at our 2013 and 2016 annual meetings) unless a stockholder can demonstrate otherwise to our reasonable satisfaction. For open-market transactions that have occurred or do occur after our 2010 annual meeting, it will likely be impossible for an acquiring stockholder to demonstrate that the shares subject to the transaction were voted against the Charter Amendment. See Question and Answer 21 below regarding sales on a national securities exchange.

See Question and Answer 11 above for the reasons to vote “For” re-approval of the Charter Amendment. In addition, if the Preservation Plan is re-approved, it will be enforceable against all holders of our common stock, whether or not they voted in favor of the Charter Amendment at the 2010 annual meeting or for re-approval of the Charter Amendment or the Preservation Plan at the 2013 or 2016 annual meetings.

Generally, if the Charter Amendment is re-approved, the Transfer Restrictions will not prevent you from purchasing additional shares of common stock unless by doing so you would become a “Section 382 five-percent shareholder” (or, if you are already a “Section 382 five-percent shareholder,” would increase your

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Background Information for Tax Benefit Preservation Proposals  4 and 5

ownership), unless you can establish that those additional shares: (x) were not voted “For” the Charter Amendment at the 2010 annual meeting; or (y) “For” its re-approval at the 2013 annual meeting and were issued before the Bylaw Amendment was adopted. In addition, if re-approved at our 2016 Annual Meeting, you will continue to be subject to the Preservation Plan and its potential dilutive impact on your ownership if you become a “Section 382 five-percent shareholder.”

You can freely sell your shares of common stock unless the sale would create a “Section 382 five-percent shareholder” or increase the ownership of an existing “Section 382 five-percent shareholder.” See Question and Answer 21 below regarding sales on a national securities exchange.

No, the Transfer Restrictions will not preclude any sale of shares on a national securities exchange. See Question and Answer 18 above for treatment of such sales that are prohibited transfers under the Charter Amendment and the Bylaw Amendment.

Additional Questions and Answers about the Preservation Plan

No, unless you or your affiliate enters into a transaction or other agreement by which you or your affiliate would own 4.9% or more of our common stock under Section 382, you will share the benefits of the Rights on a pro rata basis.

In connection with the Preservation Plan our board of directors declared a dividend distribution of one preferred share purchase right (each a “Right” and together the “Rights”) for each outstanding share of our common stock, which was paid to holders of record on October 19, 2009. In addition, Rights are issued with any shares of our common stock issued after October 19, 2009. The Rights are not initially exercisable. If they were exercisable, each Right would entitle the registered holder to purchase one one-thousandth of a share of our Series A Junior Participating Preferred stock, par value $0.001 per share, at a price of $70.00 per one-thousandth of a share of preferred stock, subject to adjustment.

Unless and until the Preservation Plan is triggered and the Rights become exercisable, the Rights are essentially “stapled” to the common stock and are deemed to be represented solely by the common stock certificates or the book entry records for the common stock. The Rights may only be transferred with the corresponding shares of common stock. Also, Rights are issued with any shares of our common stock issued after October 19, 2009.

The Rights currently are not exercisable. The Rights will “detach” from the common stock and become exercisable only if the Preservation Plan is triggered. This generally occurs upon the earlier of: (1) 10 business days following the public announcement that any person has acquired ownership of 4.9% or more of our common stock as measured under Section 382; or (2) 10 business days after the date of commencement of a tender offer or exchange that would result, upon consummation, in that person, entity or group owning 4.9% or more of our common stock as measured under Section 382. For stockholders who currently hold 4.9% or more of our common stock under Section 382, in the absence of the Transfer Restrictions, any further increase in ownership under Section 382 would trigger the Preservation Plan and cause the Rights to detach and become exercisable. Our board of directors can exempt transactions and persons from the impact of the Preservation Plan if it determines that the acquisition would not jeopardize our NOLs or is otherwise in Radian’s best interests. See Question and Answer 13 above.

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Background Information for Tax Benefit Preservation Proposals  4 and 5

After a triggering event under the Preservation Plan, each holder of a Right (other than the stockholder that triggered the Preservation Plan its related persons and transferees), will be entitled to purchase shares of our common stock, or if we do not have sufficient shares of common stock authorized for issuance, common stock equivalents, with a value of twice the exercise price of the Rights. The initial exercise price is set at $70.00 and is subject to anti-dilution adjustments under the terms of the Preservation Plan. This creates a dilutive effect for the stockholder that triggered the Preservation Plan, because our other stockholders have the opportunity to buy our common stock, or its equivalent, at a discount. See also Questions and Answers 28 and 29 below for other options available to our board of directors in the event the Preservation Plan is triggered.

If the Preservation Plan is triggered, the Rights will detach from each share of our common stock and certificates representing the rights (“Right Certificates”) will be distributed to the holders (except for an acquiring stockholder that triggers the Preservation Plan, related persons, and transferees, who will not be able to exercise the Rights). After that time, the Rights will be solely evidenced by the Right Certificates and will trade separately from the common stock.

If the Preservation Plan is triggered, the Rights Agent will mail Right Certificates representing the Rights to holders of record (except for the stockholder that triggered the Preservation Plan, its related persons and transferees), who may then return a completed Form of Election to Purchase along with the exercise price.

Additionally, if the Preservation Plan is triggered, our board of directors has the discretion to permit a “cashless exercise” of the Rights. A “cashless exercise” means that our board may permit the Rights to be exercised by the holders of Rights without payment of the exercise price simply by surrendering the Right Certificates and associated Rights for half the number shares of common stock (or common stock equivalents) that would otherwise be received upon exercise and payment.

Yes, after a triggering event and before the stockholder that triggered the Preservation Plan acquires 50% or more of the shares of our common stock, our board may choose to “exchange” the Rights into shares of common stock (or common stock equivalents) at a one-to-one ratio. The holders of Rights would not be required to pay an exercise price. An exchange effected by our board would likely give each holder of a Right fewer shares than the holder would receive under the two methods of exercise described in Question and Answer 28 and, therefore, would have a less dilutive effect on the stockholder who triggered the Preservation Plan.

Rights holders are not entitled to any additional rights as a stockholder, including voting or dividend rights, until a Right is exercised or exchanged as described in Questions and Answers 28 and 29.

Before the Preservation Plan is triggered, the Rights are essentially “stapled” to Radian’s common stock and are deemed to be represented by the common stock certificates or the book entry records for Radian common stock. The Rights are listed and traded on the NYSE with Radian’s common stock. There is no separate trading market for the Rights.

In general, our board of directors may redeem the Rights at any time until the Rights become exercisable. The redemption price is $0.001 per Right, subject to rounding to the nearest $0.01.

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Background Information for Tax Benefit Preservation Proposals  4 and 5

As described in Question and Answer 24, before the Preservation Plan is triggered, Rights are issued with any shares of our common stock issued after October 19, 2009.

If the Preservation Plan were triggered and Right Certificates were distributed, Rights would be issued in connection with future issuances of the common stock only in limited circumstances, such as (i) upon the exercise of stock options or under any employee plan or arrangement; (ii) upon the exercise, conversion or exchange of securities, including our outstanding convertible debt; or (iii) in connection with our contractual obligations, where such options, employee plans, securities, or obligations existed before the Preservation Plan was triggered.

As long as the Rights are redeemable, our board has the flexibility to amend the terms of the Preservation Plan other than to decrease the redemption price. Once the Rights become exercisable and Right Certificates are distributed, our board is free to amend the terms of the Preservation Plan so long as such amendment does not adversely affect the interests of holders of outstanding Rights.

Certain Considerations

The Charter Amendment is contained in Section 4.4 of Article FOURTH to our Amended and Restated Certificate of Incorporation which is attached as Appendix B-1 to this proxy statement, the Bylaw Amendment is contained in Section 6.06 of our Amended and Restated By-Laws which are attached as Appendix B-2 to this proxy statement and the full text of the Preservation Plan is attached as Appendix C to this proxy statement and each document is incorporated by reference as an exhibit to our Annual Report on Form 10-K. We urge you to read the Charter Amendment, the Bylaw Amendment and the Preservation Plan in their entirety, as the discussion in this proxy statement is only a summary. The Transfer Restrictions will terminate following the 2016 Annual Meeting unless the Charter Amendment is re-approved by the requisite vote of stockholders. The Preservation Plan also will terminate following the 2016 Annual Meeting unless it is re-approved by the requisite vote of stockholders at our 2016 Annual Meeting.

Enforceability

We intend to continue to presume, with regard to each share of common stock issued before the effectiveness of the Charter Amendment, that such share was voted in favor of the Charter Amendment (and in favor of re-approval of the Charter Amendment at our 2013 and 2016 annual meetings) unless it is shown otherwise to our reasonable satisfaction. In certain circumstances, we also intend to assert that stockholders have waived the right to challenge or are estopped from challenging the enforceability of the Charter Amendment, unless it is established, to our reasonable satisfaction, that the shares proposed to be transferred were not voted in favor of the Charter Amendment (or in favor of re-approval of the Charter Amendment at our 2013 or 2016 annual meetings). However, it is possible that one or more stockholders could challenge the enforceability of the transfer restrictions contained in the Charter Amendment, and a court could find that the Charter Amendment is unenforceable, either in general or as applied to a particular stockholder or particular fact situation. This potential for litigation regarding the enforceability of the transfer restrictions may discourage investors from acquiring shares of our common stock. However, as we intend to retain our Preservation Plan (subject to stockholder re-approval), we think it is unlikely that an investor would benefit from a challenge to our Charter Amendment, because avoiding the related Transfer Restrictions would still leave that investor at risk of the dilutive effect of triggering the Preservation Plan.

Potential IRS Challenge

The amount of our NOLs has not been audited or otherwise validated by the IRS. The IRS could challenge the amount of the NOLs, which could result in an increase in the amount of future federal income taxes that we may be required to pay. As mentioned above, calculating whether an “ownership change” has

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Background Information for Tax Benefit Preservation Proposals  4 and 5

occurred is subject to uncertainty, both because of the complexity and ambiguity of Section 382 and because of limitations on a publicly traded company’s knowledge as to the ownership of, and transactions in, its securities. Therefore, we cannot assure you that the IRS will not claim that we experienced an “ownership change” and attempt to reduce or eliminate the benefit of our NOLs even if the Charter Amendment, the Bylaw Amendment or the Preservation Plan is in place.

Potential Effects on Liquidity

The Transfer Restrictions and the Preservation Plan are all designed to deter a stockholder from acquiring, directly or indirectly, additional shares of common stock in excess of the specified limitations. Furthermore, a stockholder’s ability to dispose of common stock may be limited as a result of the reduction in the class of potential acquirers for such common stock and a stockholder’s ownership of common stock may become subject to the Transfer Restrictions or the Preservation Plan upon actions taken by persons related to, or affiliated with, them. The Transfer Restrictions may result in the delay or refusal of certain requested transfers of our common stock. As a result of these rules, the Transfer Restrictions could result in prohibiting ownership (thus requiring dispositions) of our common stock as a result of a change in the relationship between two or more persons or entities, or of a transfer of an interest in an entity other than us, such as an interest in an entity that, directly or indirectly, owns our common stock. Stockholders are advised to carefully monitor their ownership of our stock and consult their own legal advisors and/or us to determine whether their ownership of our stock approaches the proscribed levels.

Potential Impact on Value

It is possible that the Preservation Plan and the Transfer Restrictions could deter certain buyers, including persons who wish to acquire more than 4.9% of our common stock (as calculated pursuant to Section 382), and that this could result in diminished demand for and, therefore, potentially decrease the value of our common stock. We believe the value protected as a result of the preservation of the NOLs would outweigh any such potential decrease in the value of our common stock due to the Preservation Plan and the Transfer Restrictions.

Potential Anti-Takeover Impact

The Transfer Restrictions and the Preservation Plan are designed to preserve the long-term value of our accumulated NOLs and are not intended to prevent a takeover of Radian. However, they could be deemed to have an “anti-takeover” effect because, among other things, they each restrict the ability of a person, entity or group to accumulate our common stock above the applicable thresholds, without the approval of our board of directors.

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