Employee Stock Ownership Plan ESOP 101 A better

Employee Stock Ownership Plan ESOP 101 A better understanding of our ESOP August 2015

What is an ESOP? An Employee Stock Ownership Plan (ESOP) is an employee benefit program It is a supplement to other retirement funds, like Social Security or a 401 k. § § It allows those who are eligible, at no cost to them, to own a portion of the company for which they work.

Some ESOP Facts: • 11, 000 ESOPs in U. S. • 2, 000 are 100% owned by the ESOP • Found in all industries (>25% in manufacturing) • 71% of ESOP’s are in companies <250 employees • 75% of ESOP’s used borrowed funds to acquire stock bought by the ESOP

Becoming an ESOP: What are the Advantages for the Company? • • • Substantial tax savings Entrepreneurial spirit among employees Employees have vested interest in the company’s success Provides Employee Retirement Benefits Retains Quality Employees Motivational tool

Becoming an ESOP: What are the Advantages for Employees? • Accumulated values are funded by EMPLOYER contributions only—no deduction from Employee’s take home pay! • Employees share directly in growth of company • Creates motivation • Builds unity and team spirit • Retains quality employees • Buy/sell agreements ensure future employee ownership through the ESOP

How is an ESOP Created? • The Company legally forms an ESOP Trust and places $ into the ESOP Trust. • The ESOP Trust uses the money to purchase stock from current shareholders. • Shares are held in the ESOP Trust and are allocated into employee accounts.

• On December 18, 2008, Radian implemented an Employee Stock Ownership Plan and became a 100% ESOP. • RADIAN acquired WECO in August 2011, and in January 2012, Pearl employees began earning Radian ESOP shares.

How does the value of the stock get transferred to the employees? Valuation Firm Cash Radian hares ing S Outstand ESOP Trust Radian Stock Value Employee Owners

Who is our ESOP Valuation Firm? Prairie Capital Advisors –Oakbrook, IL • Independent Firm Responsible for determining the annual value of Radian Research • Serves with the mutual approval of the ESOP Benefits Committee and the ESOP Trustee

Who is Radian’s ESOP Trustee? § Horizon Bank and Trust – Michigan City, Indiana – Tracy Woolsey, Trustee Representative

What is the function of the Trustee? • The Trustee is: – An independent entity serving with the approval of the ESOP Benefits Committee – The Caretaker of the stock of Radian Research, Inc. • The Trustee: – Has a fiduciary responsibility for overseeing the ESOP Trust Accounts – Elects the Board of Directors with recommendation from the ESOP Benefits Committee

What is the role of the ESOP Benefits Committee? • Tim Everidge, Chairman • Martin Rogers • Joe Thomas ØReports to the Board of Directors ØMembers require approval by the Board of Directors ØMaintains communication between the Trustee and the Board ØResponsible for communication between the Trustee and the Employee Owners ØResponsible for conducting annual shareholder meetings with the Trustee ØResponsible for presenting an annual slate of proposed Directors to the Trustee ØResponsible for education and communication to employee owners in matters relating to the ESOP.

What is the Role of the ESOP Ambassador Team • Created by, empowered by and reports to the ESOP Benefits Committee • Responsible for education, communication, and promotion of the ESOP to employee owners

Who is our ESOP Attorney? • Steve Smith, Kreig De. Vault Attorneys – Indianapolis, IN • Serves with mutual approval of the ESOP Benefits Committee and ESOP Trustee

Who controls the Radian Stock? • The ESOP Trust holds the company stock—The trustee oversees the management of the ESOP plan and distribution of assets, acting in the best interest of the employee owners • Employees are BENEFICIAL owners, and do not have direct control of the stock— • Employees are BENEFICIAL owners in the VALUE of the stock and benefit financially upon retirement

What did the employees give up for participation in the Radian Research ESOP? NOTHING! • No money contributed by any employee. – Employees didn’t buy the stock • No benefits were removed or reduced. – Kept 401 K and company matching contribution • No compensation was reduced. – Continued consideration of annual raises and bonuses.

What is the incentive for Employees in an ESOP? • Employees in ESOP Companies Have 2. 5 Times MORE Retirement Assets than Employees in Non-ESOP Companies • Employees do not contribute from their own pockets—growth is based on company success

How does Employee Ownership work? To make the new relationship work, employees need three things: Means Motive & Opportunity Doing our Share to Earn Our Shares!

Means Employees have the means to make the company more successful through their jobs. Individual Performance Department Performance *Employees have immediate control over how they perform in their jobs. *Their personal performance also helps determine the success of their department, which influences the success of the company.

Motive Employee-owners have the motive to make the company more successful because they share in the future success of the company. *When the company is successful, the value of the company increases. *So does the value of the company’s stock. *As the company’s stock value increases, so does the value of the stock in the ESOP, meaning employees’ benefits increase in value, too. ESOP Stock Value

Opportunity The opportunity to make the company successful happens in different ways. Individual Performance Department Performance Employees can also influence their co-workers to improve procedures, processes, and teamwork. This influence is “cooperation” or “collaboration” that improves department performance. Employees have immediate control over how they individually perform in their jobs.

When employees take advantage of these opportunities, the company is likely to be more successful. Individual Performance Department Performance Employees have the means The ESOP gives the motive Stock ESOP Value Employee-owners have an additional interest in company success through the ESOP.

Continuous Improvement Culture • “A shared mindset based on the belief that the long term success of a company comes from shareholders, executives, managers and employees constantly reviewing and improving what they do. ” • Change your mindset from just “doing your job” to “doing your job better. ” --Jeff Hajek

Radian Research’s ESOP Plan • Like most retirement plans, our ESOP Plan may seem complicated. • We are going to discuss several questions and answers designed to provide a general understanding of some of the key points of the Radian Plan. • However, the Employee Stock Ownership Plan document should be referenced when making any planning decisions and its content will always prevail if it should conflict with what is written here. • The Plan is available on the Radian intranet or can be referenced in the Human Resource Department. • Everyone should have a copy of the Summary Plan Description.

What are the eligibility requirements to participate in our ESOP? On the 1 st day of January or July following the date that you: • Attain age 21 • Are a covered employee (work for and paid by RADIAN/WECO) and • Complete a 12 month period in which you are credited with at least 1000 hours.

I am a 22 year old RADIAN/WECO employee and was hired on March 10 th 2014, when will I be eligible? • You meet the age and covered employee requirements. • You will be eligible on July 1 st 2015 – assuming you worked at least 1, 000 hours in the 12 month period from March 10 th 2014 to March 9 th 2015.

OK, I am eligible. What does that mean? • It means that at the end of the year in which you become eligible, and each succeeding year that you maintain eligibility: You will be provided with shares of Radian Research at no cost to you!

How many shares are allocated each year? • For the next 9 years (the remaining life of our ESOP loan) 5, 044 shares will be issued annually to the eligible participants of the Radian ESOP.

How many shares will I get? • Shares are allocated based upon a participant’s compensation as percentage of Radian’s total compensation. – For example, if a participant makes $30, 000 per year and the total compensation for all Radian participants is $3, 000, the participant would receive 50. 44 shares. 5, 044 (shares) X$30, 000 (participant’s annual compensation) 151, 320, 000 / $3, 000 (compensation for all Radian participants) 50. 44 shares * If a participant becomes eligible on July 1 of any given year, instead of January 1, only those wages earned from July 1 to December 31 will be included in the calculation.

I work as hard as anyone. Is this allocation system fair? • IRS and DOL regulations require that all ESOP share allocations be based, at least in part, upon compensation. • While our allocation plan could have been modified, 95% of all ESOPs use compensation to allocate shares. • Because hybrid plans are more complex, they cost more to implement, administer and test. • Our trustee, legal counsel and administrator all recommended this method. To insure fairness and accuracy, the government requires extensive annual testing and reporting.

How much are my shares worth? • Each year, an independent valuation company is engaged to determine the value of Radian. • By dividing the total value of Radian by the total number of outstanding shares the value of a single share is determined. For example: if Radian is valued at $5, 000 at the end of any given year and the total number of outstanding shares is 75, 667 the value of one share is $66. 08. If Radian continues to do well and has a positive outlook, the share value should go up each year. $5, 000 (Radian’s value) / 75, 667 (total number of outstanding shares 66. 08 (value of one share)

How does the valuation company determine value each year? • This is a complex formulation by which the valuation firm uses multiple methodologies to determine value, but give the greatest weight to the discounted cash flow method. – Each year Radian projects financial statements for the next five years and submits them to the valuation company. – The valuation company uses those projections in the discounted cash flow formulas used to calculate Radian’s value. – They consider other factors such as Radian’s past financial performance versus its projections, its analysis of other micro and macro economic conditions and subtract Radian’s debt to come up with the final value.

Radian ESOP Stock Price $100, 00 $92, 13 $90, 00 $80, 00 $66, 58 $66, 21 $70, 00 $60, 61 $60, 00 $50, 00 $35, 76 $40, 00 $30, 00 $20, 00 $10, 00 $4, 06 $0, 00 2008 2009 2010 2011 2012 2013

Can you explain that in simpler terms? What should I be concerned about? • Think and Act like an Owner: – How can we improve our processes ØIncrease efficiency ØLower Costs ØIncrease profits – How can we be easy to do business with? ØEasy for Sales Reps ØEasy for Customers ØBe the supplier of choice

Can you explain that in simpler terms? What should I be concerned about? • If we Think and Act like an Owner: We have the greatest ability to positively impact our stock price allowing it to continue to increase • Having a Continuous Improvement Mindset is what should concern you.

Once I have shares allocated to me are they mine? • Depending on your vesting schedule, you become a ‘beneficial’ owner meaning you benefit from the value of the stock. • In addition, your ability to collect the value of the shares allocated to you is governed by the Plan document.

What is vesting and how does it work? • Vesting is a means to convey ownership over a period of time. • Our ESOP vesting schedule allows 20% per year meaning you are 100% vested after 5 full years of participation. • For example, if you have 100 shares and you have been a participant for three full years you are 60% vested. • In other words you have ownership of 60 shares (100 shares x 60%) and will become 100% vested and ‘own’ the remaining shares when you have been a participant 5 full years. • Years of service carried over at both Lafayette & Pearl, so employees who had worked over 5 years were 100% vested immediately.

Can I collect the value of my shares as soon as I am fully vested? • Generally, no—The ESOP is a supplementary retirement plan and provisions in the Plan document prevent immediate distribution. • There are set of rules in the Plan document defining your ability to collect the value upon Retirement, death and permanent disability, • A different set of rules in the Plan document define your ability to collect the value upon Termination, voluntary or involuntary.

What are the distribution rules for retirement, death or permanent disability? • As soon as feasible in the plan year following the plan year in which the event occurred. • For example, if you retire on April 1 st of 2015 you are eligible to begin distributions as soon as feasible in 2016. • In practicality, ‘as soon as feasible’ is likely to be late spring or summer of 2016.

What are the distribution rules for other types of termination? • If your account balance is $5, 000 or less—as soon as feasible in the plan year following the plan year in which you terminate. • If your account balance exceeds $5, 000—as soon as feasible in the sixth plan year following the plan year in which you terminate. • In addition, there is an extended payout schedule and no funds can be distributed until the Trustee note is paid in full.

What is the extended payout schedule? • Once you are eligible for distributions, if your vested account balance is less than $25, 000 you will be paid in a single sum • If your balance is greater than $25, 000 but less than $50, 000 there will be two annual installments • Greater than $50, 000 but less than $100, 000 there will be three annual installments – please see the plan for the rest of the schedule.

Why can’t I receive my payment all at once and as soon as I terminate? • There are two primary reasons: – Radian must remain a viable company. Payout requirements that are not planned for or that occur all at once could create cash demands that are detrimental to Radian. – To avoid a tendency by participants to leave Radian so they can gain immediate access to their account balance.

As an owner can I participate in decision making at Radian? • As an employee owner you are always encouraged to participate whenever practical, however your voting rights as they pertain to ownership are limited to the approval or disapproval of certain corporate mergers or consolidations, the recapitalization or reclassification of Radian stock or the liquidation, dissolution or sale of substantially all of the assets of Radian.

Does each participant have a vote in such matters? • As with all corporations, each share represents one vote. • If you have a hundred shares you effectively have 100 votes. • The Trustee votes unallocated shares based upon the recommendations of the ESOP Benefits Committee.

What else should I know? There are many aspects of the Plan that can best be understood by reading it, however you should know that: • If a participant terminates before they are 100% vested their unvested shares, called forfeitures, are reallocated to the remaining participants.

• Share allocations are based on total compensation, therefore someone who makes less than you may receive more shares because they worked more overtime. • Shares repurchased due to retirement, termination, etc. , become available for redistribution after the original 75, 667 shares have been allocated.

• The Radian Research, Inc. Employee Stock Ownership Plan, the Summary Plan Description, your ESOP Ambassador Team and your Human Resource Department are excellent resources for any additional questions you may have.

QUESTIONS