REDEMPTION AGREEMENT
Exhibit 10.1
This REDEMPTION AGREEMENT (this “Agreement”) dated as of June 29, 2006, is entered into by and
between Standard Management Corporation, and Indiana corporation (“Seller”) and Capital Assurance
Corporation, a Delaware corporation (“Buyer”).
W
I T N E S S E T H
WHEREAS, Seller and Buyer entered into that certain Stock and Asset Purchase Agreement dated
as of February 9, 2005 (the “Purchase Agreement”) whereby Buyer issued to Seller 5,000 shares of
Series A Preferred Stock with an initial aggregate liquidation preference of $5,000,000 (the
“Preferred Shares”) as part of the Purchase Price (capitalized terms not otherwise defined hereby
shall have the meanings set forth in the Purchase Agreement); and
WHEREAS, as set forth in the Purchase Agreement, Seller and Buyer mutually agreed to negotiate
in good faith to resolve all issues with respect to the calculation of the Final Cash Consideration
and a resolution with respect to the Final Cash Consideration has been reached (such resolution to
be reflected in separate documentation between the parties); and
WHEREAS, as set forth in the Purchase Agreement, Seller agreed to indemnify Buyer and its
affiliates for Buyer Losses arising out of certain Actions set forth on Schedule 3.05 of the
Purchase Agreement to the extent the Buyer Losses exceed, in the aggregate, the litigation reserves
reflected in the calculation of the Final Cash Consideration; and
WHEREAS, Seller desires for Purchaser to redeem the Preferred Shares and Buyer desires to so
redeem the Preferred Shares.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
1. Agreement to Redeem Preferred Shares. Upon the terms and subject to the conditions
set forth in this Agreement, simultaneously with the execution of this Agreement, Seller shall
assign and deliver to Buyer, and Buyer shall redeem from Seller, the Preferred Shares. The
certificate for the Preferred Shares shall, when so delivered by Seller to Buyer, be duly endorsed
for transfer to the Buyer, or have an executed stock power endorsed to Buyer attached to the
certificate.
2. Agreement to Terminate the Pledge Agreement. Upon the terms and subject to the
conditions set forth in this Agreement, simultaneously with the execution of this Agreement, Seller
and Buyer agree that the Pledge Agreement is hereby terminated.
3. Release. Upon the terms and subject to the conditions set forth in this Agreement,
simultaneously with the execution of this Agreement, Seller agrees to release Buyer, and Buyer
agrees to release Seller from any future obligations related to the Preferred Shares.
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4. Redemption Price. As consideration for the redemption of the Preferred Shares and
the other terms and conditions set forth in this Agreement, Buyer agrees to pay Seller the sum of
One Million Twenty Thousand Dollars ($1,020,000) (the “Redemption Price”), payable in two equal
amounts of Five Hundred Ten Thousand Dollars ($510,000), the first payable simultaneously with the
execution of this Agreement and the second payable on June 30, 2006. The parties agree that the
Redemption Price consists of the agreed value of the Preferred Shares of One Million Five Hundred
Thousand Dollars ($1,500,000) reduced by (i) Three Hundred Thousand Dollars ($300,000) as an
adjustment to reflect the resolution of the issues with respect to the calculation of the Final
Cash Consideration, (ii) One Hundred Seventy Thousand Dollars ($170,000) to reflect certain
outstanding legal fees and expenses incurred in connection with the Actions, and (iii) Ten Thousand
Dollars ($10,000) to reflect the legal fees and other expenses of the Buyer associated with the
redemption of the Preferred Shares. Seller and Buyer agree that the payment of the Redemption
Price is final and not subject to future adjustment.
5. Additional Consideration. As additional consideration for the Preferred Shares,
Buyer hereby releases and discharges the Seller Indemnified Parties from any further
indemnification obligations under Section 11.01(a)(iv) of the Purchase Agreement (relating to the
Actions) or any Action listed on Exhibit “A”.
6. Seller’s Representations and Warranties. Seller represents and warrants that it
has good title to the Preferred Shares, free and clear of all pledges, warrants, liens, charges,
encumbrances, security interests, voting trusts or agreements, proxies, unpaid taxes, adverse
claims and other claims of whatever nature, other than those created under the Pledge Agreement.
Seller also represents and warrants that the transactions contemplated in this Agreement have been
duly authorized by Seller’s Board of Directors and when consummated will be valid and binding
obligations of Seller and will not violate: (a) any court order, decree, agreement or other
document to which Seller is a party; (b) Seller’s Articles of Incorporation or By-Laws; or (c) any
Applicable Law.
7. Buyer’s Representations and Warranties. Buyer represents and warrants that the
transactions contemplated in this Agreement have been duly authorized by Buyer’s Board of Directors
and when consumed will be valid and binding obligations of Buyer and will not violate: (a) any
court order, decree, agreement or other document to which Buyer is a party; (b) the Buyer’s
Articles of Incorporation or By-Laws; or (c) any Applicable Law.
8. Entire Agreement. This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and thereof and supersede all prior agreements, written
or oral, with respect thereto.
9. Waivers and Amendments; Preservation of Remedies. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any
right, power, remedy or privilege, nor any single or partial exercise of any such right, power,
remedy or privilege, preclude any further exercise thereof or the exercise of any
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other such right, remedy, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
10. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without giving effect to the
principles of conflicts of laws thereof. The parties hereto irrevocably consent to the
jurisdiction of, and venue in, any federal or state court of competent jurisdiction located in
Indianapolis, Indiana, in connection with any dispute based on or arising out of or in connection
with this Agreement.
11. Binding Effect; No Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors, assigns and legal representatives,
whether by merger, consolidation or otherwise. This Agreement may not be assigned by any party
without the prior written consent of the other parties hereto.
12. Expenses. Except as otherwise provided herein, the parties hereto shall each bear
their respective expenses incurred in connection with the negotiation, preparation, execution, and
performance of this Agreement and the transactions contemplated hereby.
13. Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed by all, of the
parties hereto.
14. Headings. The headings in this Agreement are for reference only, and shall not
affect in any way the meaning or interpretation of this Agreement.
15. Interpretation. The parties acknowledge and agree that they may pursue judicial
remedies at law or equity in the event of a dispute with respect to the interpretation or
construction of this Agreement. Whenever the words “include,” “includes” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without limitation.” The
phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to the date set forth in the first paragraph
of this Agreement. The words “hereof,” “herein,” “hereby” and other words of similar import refer
to this Agreement as a whole unless otherwise indicated. Whenever the singular is used herein, the
same shall include the plural, and whenever the plural is used herein, the same shall include the
singular, where appropriate.
16. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so
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broad as to be unenforceable, that provision shall be interpreted to be only so broad as is
enforceable.
17. No Prejudice. This Agreement has been jointly prepared by the parties hereto and
the terms hereof shall not be construed in favor of or against any party on account of its
participation in such preparation.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| STANDARD MANAGEMENT CORPORATION |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Chairman, Chief Executive Officer and President |
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| CAPITAL ASSURANCE CORPORATION |
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| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxxx | |||
| Title: | General Counsel and Secretary | |||
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