EXCHANGE AGREEMENT BY AND AMONG TRIAD GUARANTY INC. COLLATERAL INVESTMENT CORP. AND THE SHAREHOLDERS OF COLLATERAL INVESTMENT CORP. LISTED ON THE SIGNATURE PAGES HERETO Dated as of May 18, 2005
EXHIBIT 10.30
BY AND AMONG
COLLATERAL INVESTMENT CORP.
AND
THE SHAREHOLDERS OF COLLATERAL INVESTMENT CORP.
LISTED ON THE SIGNATURE PAGES HERETO
LISTED ON THE SIGNATURE PAGES HERETO
Dated as of May 18, 2005
THIS EXCHANGE AGREEMENT is made as of the 18th day of May, 2005, by and among Triad Guaranty
Inc., a Delaware corporation (“Triad”), Collateral Investment Corp., a Delaware corporation
(“CIC”), and the shareholders of CIC listed on the signature pages hereto (collectively,
the “Principal CIC Shareholders”).
W I T N E S S E T H:
A. The assets of CIC include 2,573,551 shares (the “Old Triad Shares”) of Triad Common
Stock (as hereinafter defined) and certain other assets. The Principal CIC Shareholders own in
excess of 51% of the issued and outstanding shares of voting common stock, and own in excess of 37%
of the issued and outstanding shares of non-voting common stock, of CIC.
B. CIC and the Principal CIC Shareholders have proposed that Triad and CIC effect a
transaction whereby CIC will transfer to Triad the Old Triad Shares and Triad will transfer to CIC
2,528,514 shares of Triad Common Stock (the “New Triad Shares”) in accordance with
Section 2.4(A) (the “Transaction”). Immediately prior to the consummation of this
Transaction, CIC will transfer and sell to Collateral Mortgage Ltd. (“CML”) substantially
all of its assets, other than the Old Triad Shares, and transfer to CML or otherwise satisfy all
indebtedness and other contractual obligations of CIC (the “CML Transaction”). Immediately
following consummation of the CML Transaction and this Transaction, CIC intends to distribute all
of the New Triad Shares and any remaining distributable assets of CIC to the CIC Shareholders (as
herein defined) pursuant to a plan of complete liquidation of CIC (the “Liquidation”).
Contemporaneous with the consummation of this Transaction and as a condition to Triad entering into
this Agreement, CIC, the Principal CIC Shareholders and Triad are entering into a Share Transfer
Restriction Agreement, which provides for certain restrictions on the transfer of the New Triad
Shares by the CIC Shareholders, and an Escrow Agreement, which provides for the escrow of certain
of the New Triad Shares.
C. Triad and CIC have determined that this Transaction is advisable and in the best interests
of Triad and CIC, respectively, and their respective shareholders.
D. Triad, CIC and the Principal CIC Shareholders desire to consummate this Transaction upon
the terms and subject to the conditions set forth in this Agreement.
E. CIC and the Principal CIC Shareholders intend that this Transaction and the Liquidation
shall constitute a reorganization within the meaning of Section 368(a)(1)(C) and Section
368(a)(2)(G) of the United States Internal Revenue Code of 1986, as amended (the “Code”),
and this Exchange Agreement shall constitute a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties,
covenants and agreements herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. The following terms shall have the following meanings for the
purposes of this Agreement:
“Affiliate” shall mean, with respect to any specified Person, (i) any other Person which,
directly or indirectly, owns or controls, is under common ownership or control with, or is owned or
controlled by, such specified Person, (ii) any other Person which is a director, officer or
partner, or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any
class of equity securities, of the specified Person or a Person described in clause (i) of this
paragraph, (iii) another Person of which the specified Person is a director, officer or partner or
is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities, (iv) another Person in which the specified Person has a substantial beneficial
interest or as to which the specified Person serves as trustee or in a similar capacity or (v) any
relative or spouse of the specified Person or any of the foregoing Persons, any relative of such
spouse or any spouse of any such relative. For purposes of this Agreement, Triad shall not be
deemed an Affiliate of CIC or any Principal CIC Shareholder.
“Agreement” shall mean this Exchange Agreement, including all exhibits and schedules hereto,
as it may be amended from time to time in accordance with its terms.
“Business Day” shall mean any day of the year other than (1) any Saturday or Sunday or (ii)
any other day on which banks located in Winston-Salem, North Carolina are authorized or required to
be closed for business.
“CIC” shall have the meaning set forth in the preamble hereto.
“CIC Common Stock” shall have the meaning set forth in Section 3.3.
“CIC Consolidated Financial Statements” shall have the meaning set forth in Section
3.9.
“CIC Disclosure Schedule” shall mean the schedule delivered by CIC to Triad concurrently with
the execution of this Agreement.
“CIC Escrow Certificates” shall have the meaning set forth in Section 2.4(B).
“CIC Material Adverse Effect” shall mean with respect to CIC, any event, change, occurrence,
development, circumstance or effect that is or would reasonably be expected to be materially
adverse to (i) the assets, properties or condition (financial or otherwise) of CIC, or (ii) the
ability of such party to consummate the transactions contemplated by this Agreement,
provided, however, that the liquidation of CIC following the completion of the
Transaction shall be deemed not to have or result in a CIC Material Adverse Effect.
“CIC Representative” shall have the meaning set forth in Section 9.13.
“CIC Requisite Vote” shall have the meaning set forth in Section 3.4.
“CIC Securities” shall have the meaning set forth in Section 3.3.
“CIC Shareholders” shall mean the holders of the outstanding CIC Common Stock.
“CIC Shareholder Escrow Certificate” shall have the meaning set forth in Section
2.6(D).
”CIC Shareholder Meeting” shall have the meaning set forth in Section 3.4.
“Closing” shall have the meaning set forth in Section 6.1.
“Closing Date” means the actual date on which the Closing occurs.
“CML Transaction” shall have the meaning set forth in the recitals hereto.
“Code” shall have the meaning set forth in the recitals hereto.
“Environmental Law” shall have the meaning set forth in Section 3.11.
“Escrow Agent” shall mean AmSouth Bank, an Alabama banking corporation.
“Escrow Agreement” shall mean the Escrow Agreement, dated as of the Closing Date, among Triad,
CIC, the Principal CIC Shareholders and the Escrow Agent in the form attached hereto as Exhibit A.
“Escrow Liquidation Notice” shall have the meaning set forth in Section 2.6(D).
“Escrow Shares” shall have the meaning set forth in Section 2.4(B).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Governmental Authority” shall have the meaning set forth in Section 3.6.
“HSR Act” shall have the meaning set forth in Section 3.6.
“Indemnified Person” shall mean the Person or Persons entitled to, or claiming a right to,
indemnification under Article VIII.
“Indemnifying Person” shall mean the Person or Persons claimed by the Indemnified Person to be
obligated to provide indemnification under Article VIII.
“Indemnifying CIC Shareholders” shall mean Xxxxxxx X. Xxxxxxx, III and Xxxxxxx X. Xxxxxxx, Xx.
“IRS” shall mean the United States Internal Revenue Service.
“Law” shall have the meaning set forth in Section 3.7.
“Liability” shall mean any past, present or future liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute, fixed, contingent or otherwise, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due),
including any liability or obligation for Taxes.
“Lien” shall mean any lien, Liability, mortgage, charge, restriction, pledge, security
interest, option, lease, sublease or right of any third party, other than any restriction arising
under federal or state securities laws.
“Liquidation” shall have the meaning set forth in the recitals hereto.
“Liquidation Notice” shall have the meaning set forth in Section 2.6(C).
“Loss” or “Losses” shall mean any and all losses, Liabilities, costs, claims, damages,
penalties and expenses (including reasonable attorneys’ fees and expenses and reasonable costs of
investigation and litigation). In the event any of the foregoing are indemnifiable hereunder, the
terms “Loss” and “Losses” shall include any and all reasonable attorneys’ fees and expenses and
reasonable costs of investigation and litigation incurred by the Indemnified Person in enforcing
such indemnity. The amount of any Loss or Losses incurred or suffered by the Indemnified Person
shall be calculated after giving effect to (i) any insurance proceeds received by the Indemnified
Person with respect to such Loss or Losses and (ii) any net Tax benefit or detriment realized by
the Indemnified Person arising from the facts or circumstances giving rise to such Loss or Losses
or arising from indemnification for such Loss or Losses.
“Market Price” shall mean the last quoted sale price for shares of Triad Common Stock on the
Nasdaq National Market on the date hereof.
“New Triad Shares” shall have the meaning set forth in the recitals hereto.
“No-Action Letter” shall have the meaning set forth in Section 5.1(A).
“Old Triad Shares” shall have the meaning set forth in the recitals hereto.
“Person” shall mean any individual, corporation, proprietorship, firm, partnership, limited
partnership, limited liability company, trust, association or other entity.
“Plan of Liquidation” shall have the meaning set forth in Section 2.6(B).
“Principal CIC Shareholders” shall have the meaning set forth in the recitals hereto.
“Registration Statement” shall have the meaning set forth in Section 5.1(B).
“Related Agreements” means the Escrow Agreement, the Share Transfer Restriction Agreement and
any other document or agreement delivered in connection with this Agreement.
“Reorganization” means the Transaction, CML Transaction and Liquidation.
“SEC” shall have the meaning set forth in Section 4.6.
“Securities Act” means the Securities Act of 1933 and the rules and regulations promulgated
thereunder.
“Share Transfer Restriction Agreement” shall mean the Share Transfer Restriction Agreement,
dated as of the Closing Date, among Triad, CIC, the Principal CIC Shareholders and the other
signatories thereto in the form attached hereto as Exhibit B.
“Share Transfer Restriction Agreement Legend” shall mean the legend set forth in Section
2.8(A).
“Subsidiary” shall mean, with respect to any Person, any corporation or other entity, whether
incorporated or unincorporated, of which (i) such Person or any other Subsidiary of such Person is
a general partner or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other entity is, directly or indirectly,
owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and
any one or more of its Subsidiaries.
“Taxes” shall mean all taxes, charges, fees, duties (including customs duties), levies or
other assessments, including income, gross receipts, net proceeds, ad valorem, turnover, real and
personal property (tangible and intangible), sales, use, franchise, excise, goods and services,
value added, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll, environmental, capital stock,
disability, employee’s income withholding, other withholding, unemployment and Social Security
taxes, which are imposed by any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
“Tax Return” shall mean any report, return or other information required to be supplied to a
Governmental Authority in connection with any Taxes.
“Transaction” shall have the meaning set forth in the recitals hereto.
“Triad” shall have the meaning set forth in the preamble hereto.
“Triad Common Stock” shall mean the common stock, par value $.01 per share, of Triad.
“Triad Disclosure Schedule” shall have the meaning set forth in Section 4.4.
“Triad Indemnified Parties” shall mean Triad, each of its Subsidiaries and Affiliates and each
of their respective officers, directors, shareholders, employees, agents and representatives;
provided, that in no event shall CIC or any CIC Shareholder be deemed a Triad Indemnified
Party.
“Triad Material Adverse Effect” shall mean with respect to Triad, any event, change,
occurrence, development, circumstance or effect that is or would reasonably be expected to be
materially adverse to the ability of such party to consummate the transactions contemplated by this
Agreement.
“Triad SEC Reports” shall have the meaning set forth in Section 4.6.
1.2. Interpretation. The headings preceding the text of Articles and Sections
included in this Agreement and the headings to Schedules attached to this Agreement are for
convenience only and shall not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or neuter gender or the singular or
plural form of words herein shall not limit any provision of this Agreement. The use of the terms
“including” or “include” shall in all cases herein mean “including, without limitation” or
“include, without limitation,” respectively. Reference to any Person includes such Person’s
successors and assigns to the extent such successors and assigns are permitted by the terms of any
applicable agreement, and reference to a Person in a particular capacity excludes such Person in
any other capacity or individually. Reference to any agreement (including this Agreement), document
or instrument means such agreement, document or instrument as amended or modified and in effect
from time to time in accordance with the terms thereof and, if applicable, the terms hereof.
Reference to any Law means such Law as amended, modified, codified, replaced or re-enacted, in
whole or in part, including rules, regulations, enforcement procedures and any interpretations
promulgated thereunder. References to Articles, Sections, Subsections, Exhibits or Disclosure
Schedules shall refer to those portions of this Agreement. The use of the terms “hereunder,”
“hereof,” “hereto” and words of similar import shall refer to this Agreement as a whole and not to
any particular Article, Section or clause of or Exhibit or Schedule to this Agreement. No specific
representation, warranty or covenant contained herein shall limit the generality or applicability
of a more general representation, warranty or covenant contained herein. A breach of or inaccuracy
in any representation, warranty or covenant shall not be affected by the fact that any more general
or less general representation, warranty or covenant was not also breached or inaccurate.
ARTICLE II.
THE TRANSACTION AND RELATED MATTERS
2.1. Transfer of Old Triad Shares. Subject to the terms and conditions of this
Agreement, at and as of the Closing, CIC shall sell, assign, transfer and deliver to Triad, free
and clear of all Liens, the Old Triad Shares and Triad shall acquire, and accept the assignment,
transfer and delivery of, the Old Triad Shares.
2.2. Delivery of Old Triad Shares by CIC. At the Closing, CIC shall effect the
transfer of the Old Triad Shares to Triad by delivering to Triad certificates registered in the
name of CIC representing all of the Old Triad Shares, which certificates shall be duly endorsed for
transfer or accompanied by duly executed stock powers.
2.3. No Assumption of Debt. Notwithstanding anything else in this Agreement, neither
Triad nor any of its Affiliates shall assume or otherwise be liable in respect of, or be deemed to
have assumed or otherwise be liable in respect of, any debt, obligation or other Lien of, or claim
against, the Old Triad Shares, CIC or any of its Affiliates or shareholders whatsoever.
2.4. Consideration for Transfer of Old Triad Shares.
A. At the Closing, as aggregate and complete consideration for the transfer of the Old
Triad Shares by CIC to Triad, Triad shall issue to CIC the New Triad Shares.
B. Triad shall effect the delivery of the New Triad Shares to CIC by delivering (i) to
CIC stock certificates registered in the name of CIC representing 2,275,662 of the New Triad
Shares and (ii) to the Escrow Agent, on behalf of CIC, stock certificates registered in the
name of CIC (the “CIC Escrow Certificates”) representing 252,852 of the New Triad
Shares (the “Escrow Shares”), in each case containing the Share Transfer Restriction
Agreement Legend. Contemporaneous with such deliveries, CIC shall deliver to the Escrow
Agent such reasonable number of duly executed stock powers (undated and in blank, with
Medallion guarantee) relating to the Escrow Shares as Triad shall request in order to
satisfy the obligations of CIC and the CIC Shareholders under the Escrow Agreement.
C. The Escrow Shares represented by the CIC Escrow Certificates shall be pledged by CIC
to Triad pursuant to the terms of the Escrow Agreement to serve as security for the
obligations and liabilities of CIC and the Indemnifying CIC Shareholders set forth in
Article VIII. From and after the Liquidation, the Escrow Shares represented by the
CIC Escrow Certificates shall be pledged by each of the CIC Shareholders to Triad pursuant
to the terms of the Escrow Agreement to serve as security for the obligations and
liabilities of CIC and the Indemnifying CIC Shareholders set forth in Article VIII.
The release of the Escrow Shares from escrow shall be governed by the terms of the Escrow
Agreement.
2.5. Payment of Transaction Expenses by CIC. CIC and the Indemnifying CIC Shareholders
jointly and severally agree to reimburse Triad promptly for all of Triad’s reasonable out-of-pocket
costs and reasonable expenses (including securities registration, legal, investment banking,
transfer agent and other necessary advisory or professional fees and expenses of Triad and its
Board of Directors and any committee thereof) paid and to be paid to unrelated third parties, and
documented in summary form by Triad to the reasonable satisfaction of CIC, in connection with this
Agreement and the Related Agreements and the transactions provided for herein and therein. CIC and
the Indemnifying CIC Shareholders jointly and severally agree to pay all of their own expenses in
connection with this Agreement and the Related Agreements and the transactions provided for herein
and therein and to pay all sales, use, stamp, transfer, service, recording and like Taxes, if any,
imposed by any Governmental Authority in connection with the transfer and assignment of the Old
Triad Shares or the New Triad Shares.
2.6. CML Transaction; CIC Liquidation; Escrow Certificates.
A. Prior to the Closing of this Transaction, CIC shall complete the CML Transaction.
B. Within sixty (60) days following the Closing and the consummation of this
Transaction and CIC’s and the Escrow Agent’s receipt of the CIC Escrow Certificates pursuant
to Section 2.4(B), CIC shall transfer and distribute all of its remaining assets,
including the New Triad Shares, to the CIC Shareholders pursuant to
resolutions of the Board of Directors of CIC (the “Plan of Liquidation”)
furnished to Triad.
C. Upon consummation of the Liquidation, CIC shall deliver to Triad (i) a written
notice to Triad confirming that the Liquidation has occurred and setting forth the number of
New Triad Shares (other than the Escrow Shares) that each CIC Shareholder is entitled to
receive in connection with the Liquidation (the “Liquidation Notice”) and (ii)
certificates registered in the name of CIC representing all of the New Triad Shares (other
than the Escrow Shares), which certificates shall be duly endorsed for transfer or
accompanied by duly executed stock powers. As soon as practicable following Triad’s receipt
of the Liquidation Notice and the certificates representing the New Triad Shares (other than
the Escrow Shares) together with confirmation reasonably satisfactory to Triad of each CIC
Shareholder’s agreement to the Share Transfer Restriction Agreement and the Escrow
Agreement, Triad shall deliver to each such CIC Shareholder one or more certificates
registered in the name of each such CIC Shareholder, containing the Share Transfer
Restriction Agreement Legend, representing the number of New Triad Shares (other than the
Escrow Shares) entitled to be received by such CIC Shareholder as designated by CIC pursuant
to the Liquidation Notice.
D. CIC shall effect the distribution of the Escrow Shares to the CIC Shareholders in
the Liquidation by (i) delivering to Triad and the Escrow Agent a written notice confirming
that the Liquidation has occurred and setting forth the number of Escrow Shares that each
CIC Shareholder is entitled to receive in connection with the Liquidation (the “Escrow
Liquidation Notice”) and (ii) delivering to Triad such reasonable number of duly
executed stock powers (undated and in blank, with Medallion guarantee) from each CIC
Shareholder as Triad shall request, which stock powers shall relate to the Escrow Shares to
be received by such CIC Shareholder as designated by CIC pursuant to the Escrow Liquidation
Notice. As soon as practicable following Triad’s receipt of the Escrow Liquidation Notice
and the stock powers from each CIC Shareholder relating to the Escrow Shares, (i) Triad
shall deliver to the Escrow Agent the certificates evidencing the Escrow Shares to which the
CIC Shareholders are entitled as designated by CIC pursuant to the Escrow Liquidation Notice
(each, a “CIC Shareholder Escrow Certificate”), accompanied by each CIC
Shareholder’s duly executed stock powers relating to the Escrow Shares, which certificates
shall replace the CIC Escrow Certificates held by the Escrow Agent in the Escrow Fund (as
defined in the Escrow Agreement) and (ii) Triad and the Escrow Agent shall cause the CIC
Escrow Certificates to be cancelled.
2.7. No Fractional Shares.
A. No certificates representing fractional shares of Triad Common Stock shall be issued
in connection with this Transaction.
B. In lieu of the distribution by CIC to the CIC Shareholders of any fractional New
Triad Shares in connection with the Liquidation, CIC shall specify the manner of
distributing the New Triad Shares to the CIC Shareholders such that each CIC Shareholder
shall receive a whole number of New Triad Shares.
C. In lieu of the deposit by Triad, on behalf of CIC or the CIC Shareholders, as the
case may be, with the Escrow Agent of any fractional New Triad Shares designated as Escrow
Shares in connection with the Escrow Agreement, the number of shares to be so
deposited as Escrow Shares thereunder shall be rounded up to the nearest whole share. The
Escrow Liquidation Notice provided by CIC to Triad and the Escrow Agent upon the
consummation of the Liquidation shall provide for each CIC Shareholder to be entitled to
receive a whole number of Escrow Shares.
2.8. Transfer Legends. For so long as the restrictions described below are applicable
to such shares as determined by Triad in Triad’s reasonable discretion: each certificate of Triad
Common Stock representing New Triad Shares (including the Escrow Shares) shall be stamped or
otherwise imprinted with a Share Transfer Restriction Agreement Legend in substantially the
following form:
“The sale, transfer or other disposition of the shares represented by this certificate prior
to is subject to, and may not be made except in compliance with, the
conditions specified in a Share Transfer Restriction Agreement with Triad Guaranty Inc. (the
“Company”). A copy of the Share Transfer Restriction Agreement is on file and may be
inspected at the principal office of Triad and will be furnished by Triad to the holder
hereof upon request and without charge.”
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CIC
AND THE INDEMNIFYING CIC SHAREHOLDERS
AND THE INDEMNIFYING CIC SHAREHOLDERS
CIC and the Indemnifying CIC Shareholders jointly and severally represent and warrant to Triad
as of the date of this Agreement as follows:
3.1. Organization, Standing and Qualification of Company. CIC is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has
the corporate power to own or lease its properties and to carry on its business as now being
conducted. CIC is duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where the failure to be so qualified
would not individually or in the aggregate have a CIC Material Adverse Effect.
3.2. Company Subsidiaries. As of the Closing, CIC will have no Subsidiaries and,
except for the Old Triad Shares, CIC will have no other direct or indirect equity or similar
interest or other investment in any corporation, partnership, joint venture, limited liability
company or other entity. Any such other interest or other investment shall, as of the Closing, have
been transferred or otherwise disposed of pursuant to the CML Transaction.
3.3. Capital Stock. The authorized capital stock of CIC consists of 7,250 shares of
voting common stock, $0.01 par value, and 72,500 shares of non-voting common stock, $0.01 par
value, of which 6,976.56 shares of voting common stock and 68,257.70 shares of non-voting common
stock (collectively, the “CIC Common Stock”) are issued and outstanding as of the date
hereof. All of the issued and outstanding shares of CIC Common Stock have been validly issued
and are fully paid and non-assessable and free of preemptive rights and all rights of first refusal
or first offer. Section 3.3 of the CIC Disclosure Schedule contains a complete and correct list of
each stockholder of CIC, the corresponding number of shares of CIC Common Stock held by such
stockholder and the address for each stockholder. CIC has no stock option plan or stock option
agreement. Except as set forth above or as reflected in Section 3.3 of the CIC Disclosure
Schedule, there are outstanding (1) no shares of capital stock or other voting securities of CIC,
(2) no securities of CIC convertible into, exercisable or exchangeable for shares of capital stock
or voting securities of CIC, (3) no options, warrants or other rights to acquire from CIC, and no
obligations of CIC to issue, any capital stock, voting securities or securities convertible into,
exercisable or exchangeable for capital stock or voting securities of CIC, and (4) no equity
equivalents, or interests in the ownership or earnings, of CIC or other similar rights (including
stock appreciation rights) (collectively, “CIC Securities”). There are no outstanding
obligations of CIC or any CIC Shareholder to repurchase, redeem or otherwise acquire any CIC
Securities. Except as set forth in Section 3.3 of the CIC Disclosure Schedule, there are no
shareholder agreements, voting trusts or other agreements or understandings to which CIC or any CIC
Shareholder is a party or by which either is bound relating to the voting or disposition of any CIC
Securities. No bonds, debentures, notes or other indebtedness of CIC granted to the holders
thereof the right to vote on any matters on which holders of capital stock of CIC generally may
vote.
3.4. Authorization. The Board of Directors of CIC has (a) adopted resolutions
approving this Agreement, the Related Agreements, the CML Transaction and the Plan of Liquidation
and declaring their advisability and approving the Transaction and all other transactions
contemplated hereby and thereby and (b) authorized the execution and delivery of this Agreement,
the Related Agreements, the documents related to the CML Transaction and the Plan of Liquidation
and has directed by resolution that this Agreement, the CML Transaction and the Plan of Liquidation
be submitted to a vote of the holders of voting CIC Common Stock taken at a meeting called for the
purpose of considering and acting upon this Agreement, the CML Transaction and the Plan of
Liquidation (the “CIC Shareholder Meeting”), and has not withdrawn or modified such
approval or resolutions. CIC has all necessary corporate power and authority to enter into this
Agreement, the Related Agreements, the CML Transaction and the Plan of Liquidation and, subject to
obtaining all required regulatory and stockholder approvals, to consummate the transactions
contemplated hereby and thereby. A vote by the majority of the issued and outstanding shares of
voting CIC Common Stock (the “CIC Requisite Vote”) is the only vote of the holders of any
class or series of capital stock of CIC necessary to adopt this Agreement, the CML Transaction and
the Plan of Liquidation and approve the transactions contemplated hereby and thereby. No other vote
or consent of the stockholders of CIC is required by Law, the certificate of incorporation or
bylaws of CIC or otherwise in order for CIC to adopt this Agreement, the CML Transaction and the
Plan of Liquidation or to approve the transactions contemplated hereby or thereby. Subject to the
CIC Requisite Vote, the execution and delivery of this Agreement, the CML Transaction and the Plan
of Liquidation have been duly authorized by all necessary corporate action on behalf of CIC.
Subject to the CIC Requisite Vote, this Agreement, the CML Transaction and the Plan of Liquidation
have been duly and validly executed and delivered by CIC and constitute the valid and legally
binding obligations of CIC, enforceable against it in accordance with their respective terms,
except to the extent such enforceability is limited by bankruptcy, receivership, insolvency,
reorganization, moratorium or
similar laws affecting or relating to creditors rights generally and subject to general
principles of equity. The Principal CIC Shareholders have all necessary power and authority to
enter into this Agreement and the Related Agreements and, subject to obtaining any required
regulatory approvals, to consummate the transactions contemplated hereby and thereby.
3.5. Certificate of Incorporation and Bylaws. CIC has delivered to Triad true and
complete copies of its certificate of incorporation and bylaws as in effect as of the date hereof.
CIC is not in default under its certificate of incorporation or bylaws or any similar charter
documents.
3.6. Consents and Approvals. Except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the Securities Act, state
securities or blue sky laws and the consents and approvals listed in Section 3.6 of the CIC
Disclosure Schedule, no filing with or notice to, and no permit, authorization, consent or approval
of, any local, state, federal or foreign court, government, governmental department, commission,
instrumentality, board, tribunal, administrative or regulatory body, agency or authority, including
the Internal Revenue Service and other taxing authorities (a “Governmental Authority”), or
any other Person is necessary for the consummation by CIC of this Transaction, the CML Transaction
and the Liquidation. No filing in connection with the Transaction or Liquidation is required of
CIC or any Indemnifying CIC Shareholder pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
3.7. Defaults and Conflicts. Subject to the receipt of all consents and approvals
contemplated by this Agreement, the Related Agreements, including Section 3.6 of the CIC Disclosure
Schedule, neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, including the CML Transaction and the Liquidation, or the
fulfillment of and compliance with the terms and provisions hereof or thereof will: (a) violate any
material judicial, administrative or arbitral order, writ, decree, award, judgment, ordinance,
injunction, decree, law, permit, statute, rule or regulation enacted or promulgated by any
Governmental Authority or arbitrator (“Law”) applicable to CIC; (b) conflict with or result
in any breach of any provision of the respective terms, conditions or provisions of the certificate
of incorporation or bylaws (or similar charter documents) of CIC; (c) conflict with, result in a
material breach of, constitute a default under or accelerate or permit the acceleration of the
performance required by, any indenture or any agreement or other instrument to which CIC is a party
or by which CIC is bound; (d) result in the creation of any material Lien, charge or encumbrance
upon any of the assets of CIC under any such agreement or instrument; or (e) terminate or give any
party thereto the right to terminate any such indenture, agreement or instrument. Except as set
forth in Section 3.7 of the CIC Disclosure Schedule, no consent of any third party to any
indenture, agreement or other instrument to which CIC is a party is required in connection with
this Transaction, the CML Transaction and the Liquidation.
3.8. Title to Old Triad Shares. Except as set forth in Section 3.8 of the CIC
Disclosure Schedule, CIC owns all of the Old Triad Shares beneficially and of record, and has full
power and authority to convey, free and clear of all Liens, the Old Triad Shares. At the Closing,
upon the delivery and transfer by Triad to CIC and the Escrow Agent, as provided in Section
2.4(B), of certificates for the New Triad Shares, CIC will convey to Triad, and Triad will
receive, good, valid and marketable title to the Old Triad Shares, free and clear of all Liens
(other than those
which arise out of actions taken exclusively by Triad). The assignments, endorsements, stock
powers and other instruments of transfer delivered by CIC to Triad at the Closing will be
sufficient to transfer to Triad the entire interest, legal and beneficial, in the Old Triad Shares.
Except for this Agreement, there is no subscription, option, warrant, call, conversion or other
right, commitment or contract of any nature obligating CIC or any CIC Shareholder or any Affiliate
of CIC or any CIC Shareholder to transfer or sell, or cause the transfer or sale of, any Old Triad
Shares. There are no voting agreements, voting trust agreements, proxies or shareholder or similar
agreements relating to the Old Triad Shares.
3.9. CIC Consolidated Financial Statements
A. CIC has made available to Triad true, correct and complete copies of the audited
consolidated balance sheets, audited consolidated income statements, audited consolidated
statements of change in stockholders equity and audited consolidated statements of cash
flows of CIC and its Subsidiaries as of and for the fiscal years ended December 31, 2004 and
2003 (all such financial statements referred to in this paragraph (A), collectively, the
“CIC Consolidated Financial Statements”).
B. The CIC Consolidated Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP and are accurate, complete and present fairly, in all
material respects, the financial condition of CIC and its Subsidiaries on a consolidated
basis as at such dates and the results of operations, changes in stockholder equity and cash
flows of CIC and its Subsidiaries on a consolidated basis for such periods.
C. Since December 31, 2004, there has not been a CIC Material Adverse Effect.
3.10. Undisclosed Liabilities. Neither CIC nor any of its Subsidiaries has any
Liability (and to the knowledge of CIC and the Indemnifying CIC Shareholders, there is no basis for
any present or future charge, complaint, action, suit, proceeding, hearing, investigation, claim,
or demand against any of them giving rise to any Liability), except for (i) Liabilities set forth
in the CIC Consolidated Financial Statements, and (ii) Liabilities which have arisen since December
31, 2004 in the ordinary course of business consistent with past practice (none of which relates to
any breach of contract, breach of warranty, tort, infringement, or violation of Law or arose out of
any charge, complaint, action, suit, proceedings, hearing, investigation, claim, or demand or
could, individually or in the aggregate, reasonably be likely to have a CIC Material Adverse
Effect).
3.11. Environmental Issues. Neither CIC nor any of its Subsidiaries has any
Liabilities or obligations of any nature, whether or not accrued, contingent or otherwise,
including under any federal, state, and local laws, regulations and requirements currently in force
relating to the protection of natural resources, the environment and public and employee health and
safety or pollution or the release of or exposure to hazardous materials (collectively,
“Environmental Laws”).
3.12. Litigation. Except as set forth in Section 3.12 of the CIC Disclosure Schedule,
there is no action, suit, arbitration, mediation, investigation or proceeding pending against or,
to the knowledge of CIC and the Indemnifying CIC Shareholders, threatened against or affecting CIC,
any of its Subsidiaries or the Old Triad Shares, at law or in equity, or before any Governmental
Authority or administrative body or agency or before any arbitrator, including under any
Environmental Laws. Neither CIC nor any of its Subsidiaries is in default with respect to any
order, writ, award, judgment, injunction or decree of any Governmental Authority or arbitrator
applicable to it.
3.13. Compliance with Laws. CIC and each of its Subsidiaries has complied and is
currently in compliance in all material respects with all Laws applicable to their respective
businesses, properties and assets.
3.14. Employee Benefit Plans. Except as set forth in Section 3.14 of the CIC
Disclosure Schedule, CIC and its Subsidiaries have no employee benefit plan, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), nor any
other plan, arrangement and agreement providing employee benefits, that covers current or former
employees of CIC or any Affiliate thereof and is presently maintained by CIC or any Affiliate
thereof or by any trade or business, whether or not incorporated, which together with CIC or any of
its Subsidiaries would be deemed a “single employer” within the meaning of Section 4001 of ERISA.
3.15. Taxes.
A. All Tax Returns required to be filed with the appropriate taxing authorities have
been duly and timely filed or will be filed timely by or on behalf of CIC and each of its
Subsidiaries and all Taxes have been paid or provided for in full, and all such filed Tax
Returns are true, complete and accurate in all material respects;
B. There are no Liens for Taxes upon the assets of CIC or any of its Subsidiaries
except statutory liens for Taxes not yet due;
C. There are no outstanding deficiencies in respect of Taxes asserted or threatened or
assessments of Taxes made or threatened, nor any administrative or judicial proceedings
pending or threatened concerning Taxes, with respect to CIC or any of its Subsidiaries;
D. There are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any Tax Returns required to be filed with respect to CIC or any of
its Subsidiaries;
E. Neither CIC nor any of its Subsidiaries has taken, agreed to take or will take any
action that would prevent this Transaction and the Liquidation from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code; and
F. Neither CIC nor any of its Subsidiaries currently is, has been within the last five
(5) years, or anticipates becoming, a “United States real property holding corporation”
within the meaning of Section 897(c) of the Code.
3.16. Finder and Investment Bankers. Except as set forth in Section 3.16 of the CIC
Disclosure Schedule, CIC has not retained any broker, finder or other agent or incurred any Lien
for any brokerage fees, commissions or finders’ fees with respect to this Transaction.
3.17. Investment Company. Neither CIC nor any of its Subsidiaries is, nor as a result
of the Transaction and/or the CML Transaction will be, an “investment company” as defined under the
Investment Company Act of 1940, as amended.
3.18. Historical Operations. CIC has never conducted any business or operations other
than operating as a holding company with respect to certain Subsidiaries of CIC and holding real
estate assets comprised of mortgage loans and residual securities issued pursuant to the
securitization of real estate assets, all of which operations are reflected in the CIC Financials.
3.19. No Assets/Liabilities. As of the Closing, CIC shall have no assets or
liabilities, except for (i) the Old Triad Shares, (ii) cash and (iii) certain Tax liabilities.
Such cash shall be in an amount sufficient to cover such Tax liabilities.
3.20. No Extraordinary Distributions. Except as set forth in Section 3.20 of the CIC
Disclosure Schedule, within the past three years CIC has made no distributions or dividends to its
shareholders and has not authorized any such distribution or dividend, other than the distribution
of the New Triad Shares to the CIC Shareholders as contemplated by the Plan of Liquidation.
3.21. Reorganization. This Transaction and the Liquidation will qualify as a
reorganization under Section 368(a)(1)(C) and Section 368(a)(2)(G) that is tax-free to CIC and
Triad.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF TRIAD
Triad hereby represents and warrants to CIC and each of the Indemnifying CIC Shareholders as
follows:
4.1. Organization of Triad. Triad is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the requisite corporate power
to own or lease its properties and to carry on its business as now being conducted.
4.2. Capital Stock. The authorized capital stock of Triad consists of 32,000,000
shares of Triad Common Stock, of which approximately 14,684,645 shares are issued and outstanding
as of April 1, 2005 and 1,000,000 shares of preferred stock, par value $.01 per share of which no
shares are issued and outstanding as of the date hereof. The New Triad Shares, when issued and
delivered to CIC as consideration for the Old Triad Shares pursuant to the terms of this Agreement,
will be (i) validly issued and outstanding, fully paid and nonassessable, (ii) free of preemptive
rights and (iii) free and clear of any and all Liens (other than Liens, if any, which arise under
any securities Law or the terms of the Escrow Agreement or the Share Transfer Restriction Agreement
or which arise out of other actions taken by CIC or the Principal CIC Shareholders).
4.3. Authorization. The Board of Directors of Triad (upon the advice of the Special
Committee to the Board of Directors) (a) has adopted resolutions approving this Agreement and the
Related Agreements to which Triad is a party and declaring their advisability and approving the
Transaction and all other transactions contemplated hereby and thereby and (b) has authorized the
execution and delivery of this Agreement and the Related Agreements to which Triad is a party by
Triad. Triad has all necessary corporate power and authority to enter into this Agreement and the
Related Agreements to which Triad is a party and, subject to obtaining all required regulatory
approvals, to consummate the transactions contemplated hereby and thereby. This Agreement and the
Related Agreements to which Triad is a party have been duly executed and delivered by Triad and
constitutes the valid and legally binding obligation of Triad, enforceable against Triad in
accordance with its terms, except to the extent such enforceability is limited by bankruptcy,
receivership, insolvency, reorganization, moratorium or similar laws affecting or relating to
creditors rights generally and subject to general principles of equity.
4.4. Regulatory Consents and Approvals. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other applicable requirements of, the
Securities Act, the Exchange Act, state securities or blue sky laws, and the consents and approvals
listed in Section 4.4 of the schedule delivered by Triad to CIC concurrently with the execution of
this Agreement (the “Triad Disclosure Schedule”), no filing with or notice to, and no
permit, authorization, consent or approval of, a Governmental Authority is necessary for the
consummation by Triad of the transactions contemplated hereby.
4.5. Defaults and Conflicts. Subject to the receipt of all consents and approvals
contemplated by this Agreement or Section 4.4 of the Triad Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the transactions contemplated
hereby or the fulfillment of and compliance with the terms and provisions hereof will: (a) violate
any material Law applicable to Triad; (b) conflict with or result in any breach of any provision of
the respective terms, conditions or provisions of the certificate of incorporation or bylaws of
Triad; (c) conflict with or result in any material breach of any provision of the respective terms,
conditions or provisions of any license, certificate, authorization, or permit of Triad; or (d)
conflict with, result in a material breach of, constitute a default under or accelerate or permit
the acceleration of the performance required by, any indenture or any material agreement or other
instrument to which Triad is a party or by which Triad is bound.
4.6. SEC Reports. Since January 1, 2003, Triad has made all required filings with the
Securities Exchange Commission (the “SEC”) under the Securities Act and the Exchange Act
(“Triad SEC Reports”). As of their respective filing dates, each of the Triad SEC Reports
complied as to form in all material respects with the requirements of the Securities Act and the
Exchange Act, and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.7. Finder and Investment Bankers. Except as set forth in Section 4.7 of the Triad
Disclosure Schedule, neither Triad nor any of its Subsidiaries has retained any broker, finder or
other agent or incurred any liability for any brokerage fees, commissions or finders’ fees with
respect to this Transaction.
4.8. Fairness Opinion. The Special Committee of the Board of Directors of Triad has
received a fairness opinion acceptable to it from Xxxxxxx Xxxxxxx & Co. with respect to the
Transaction.
ARTICLE V.
COVENANTS
5.1. Registration of New Triad Stock; No-Action Letter.
A. Triad agrees to use commercially reasonable efforts to obtain a no-action letter
(the “No-Action Letter”) from the SEC expressing the SEC staff’s position that:
(i) The Reorganization is not a “sale” of securities under Section 2(3) of the
Securities Act, and that Rule 145 of the Securities Act does not apply to the
Reorganization; or confirm that it will not recommend to the Commission any
enforcement action if the Reorganization is effected without registration of the New
Triad Shares under Section 5 of the Securities Act; and
(ii) The CIC stockholders, as well as any transferees (such as trust
beneficiaries) who are entitled to tack such stockholders’ holding periods, may tack
the holding period of CIC for the Old Triad Shares and New Triad Shares when
determining their own holding period under Rule 144(d) and Rule 144(k) of the
Securities Act for the New Triad Shares received by such stockholders in the
Liquidation.
B. If Triad is unable to obtain the No-Action Letter, Triad shall file a registration
statement (the “Registration Statement”) under the Securities Act on the appropriate
form covering Triad’s issuance of the New Triad Shares, CIC’s distribution of the New Triad
Shares to the CIC Shareholders in the Liquidation and/or the resale of the New Triad Shares
by the CIC Shareholders following the Liquidation, as may be applicable, and use
commercially reasonable efforts to cause such Registration Statement to become effective
prior to the Closing Date.
5.2. Implementing Agreement. Subject to the terms and conditions hereof, each party
hereto shall take all action required of it to fulfill its obligations under the terms of this
Agreement and the Related Agreements and shall otherwise use all commercially reasonable efforts,
including meeting with rating agencies to review the effect of the Transaction on Triad, to
facilitate the consummation of the transactions contemplated hereby and thereby. Each party hereto
agrees that he, she or it will take no action that would have the effect of preventing or impairing
the performance by any party hereto of its respective obligations under this Agreement or the
Related Agreements.
5.3. Press Release. Promptly following the execution of this Agreement, Triad shall
issue a press release to announce this Transaction in consultation with, and with the reasonable
approval of, CIC. Neither CIC nor any of the Principal CIC Shareholders shall make any public
announcement regarding this Transaction without obtaining Triad’s prior written consent.
5.4. Tax Matters. Prior to and following the Closing, CIC and the Indemnifying CIC
Shareholders shall use their respective best efforts to ensure that the Transaction is tax-free to
CIC and Triad. Following the Closing, CIC and the Indemnifying CIC Shareholders shall make
available to Triad such records as Triad may request for the preparation of any Tax Returns or
other similar reports or forms required to be filed by Triad and such records as Triad may require
in connection with the defense of any audit, appeal or litigation of any such Tax Return
or other similar report or form, in each case relating to CIC, this Transaction, the Old Triad
Shares. CIC, the Indemnifying CIC Shareholders and Triad shall cooperate with one another in any
such audit, examination, appeal or litigation. CIC, the Indemnifying CIC Shareholders and Triad
agree to file all Tax Returns consistent with this Transaction and the Liquidation qualifying as a
reorganization under Section 368(a)(1)(C) and Section 368(a)(2)(G) of the Code that is tax-free to
CIC and Triad.
5.5. Shareholder Transfer Restriction Agreement and Escrow Agreement. Following the
Closing and prior to the distribution of the New Triad Shares by CIC to the CIC Shareholders in the
Liquidation, CIC shall use commercially reasonable efforts to obtain the signature of each CIC
Shareholder evidencing such CIC Shareholder’s agreement to the terms of the Share Transfer
Restriction Agreement and the Escrow Agreement and shall provide Triad with copies thereof. It
shall be a condition to the obligation of Triad to issue certificates for New Triad Shares to such
CIC Shareholder as contemplated by Sections 2.6(C) and (D) above that it has obtained such
agreement from the CIC Shareholder.
ARTICLE VI.
CLOSING
6.1. Closing. The closing of this Transaction (the “Closing”) shall take place
(i) at the offices of Lord, Bissell & Brook LLP, following satisfaction or waiver of the last
condition to the Closing set forth in Article VII, or (ii) at such other place, time or
date as the parties may mutually determine in writing.
6.2. Deliveries by CIC. At the Closing, in addition to any other documents or
agreements required under this Agreement, CIC and the Principal CIC Shareholders shall deliver to
Triad the following:
A. certificates registered in the name of CIC representing all of the Old Triad Shares,
which certificates shall be duly endorsed for transfer or accompanied by duly executed stock
powers;
B. the Escrow Agreement, duly executed by CIC, each Principal CIC Shareholder and the
Escrow Agent;
C. the Share Transfer Restriction Agreement, duly executed by each Principal CIC
Shareholder and CIC;
D. a certificate of the Secretary of CIC certifying resolutions of the board of
directors and shareholders of CIC approving and authorizing the execution, delivery and
performance of this Agreement and the Related Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby and approving and
adopting the Plan of Liquidation and approving the CML Transaction (together with an
incumbency and signature certificate regarding the officer(s) signing any documents or
agreements on behalf of CIC);
E. the certificate of incorporation of CIC certified by the Secretary of State or
equivalent Person of the State of Delaware, and the by-laws or similar instrument of CIC,
certified by its Secretary;
F. a certificate of good standing of CIC from the State of Delaware;
G. an opinion, dated the Closing Date, of Xxxxxxx, Xxxxxx & Xxxx, P.C., 2400
AmSouth/Xxxxxxx Plaza, 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, counsel to CIC
and the Principal CIC Shareholders, to the effect set forth in Exhibit C attached hereto
(which opinion shall include any certificates of CIC or the Principal CIC Shareholders to be
relied upon in such opinion);
H. documentation reasonably satisfactory to Triad confirming completion of the CML
Transaction;
I. payment to Triad by check or wire transfer covering all costs and expenses required
to be reimbursed by CIC pursuant to Section 2.5 of this Agreement and not previously
paid; provided, that only those costs and expenses set forth in a written notification
received by CIC no later than two (2) Business Days prior to Closing must be paid at
Closing;
J. the compliance certificate described in Section 7.2(C); and
K. such other documents and instruments as may be required by any other provision of
this Agreement, or any other agreement related to this Transaction or as may reasonably be
required to consummate the transactions contemplated by this Agreement.
6.3. Deliveries by Triad.
A. At the Closing, Triad shall deliver to CIC and the Principal CIC Shareholders the
following:
(i) certificates registered in the name of CIC representing all of the New
Triad Shares (other than the Escrow Shares);
(ii) the Escrow Agreement, duly executed by Triad;
(iii) the Share Transfer Restriction Agreement, duly executed by Triad;
(iv) a certificate of the Secretary of Triad certifying resolutions of the
board of directors of Triad approving and authorizing the execution, delivery and
performance of this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby (together with
an incumbency and signature certificate regarding the officer(s) signing any
documents or agreements on behalf of Triad); and
(v) the compliance certificate described in Section 7.3(C).
B. At the Closing, Triad shall deliver to the Escrow Agent certificates registered in
the name of CIC representing the Escrow Shares.
ARTICLE VII.
CONDITIONS TO CLOSING
7.1. Conditions Precedent to Obligations of Each Party. The respective obligations of
each party to consummate the Closing are subject to satisfaction or waiver of the following
conditions on or prior to the Closing Date:
A. No Injunctions or Restraints. No preliminary or permanent injunction or
order shall be in effect that prevents or makes illegal the consummation of the Closing.
B. Consents and Approvals of Governmental Authorities. All consents, approvals,
authorizations, licenses, permits and orders of, and registrations and filings with, and
notices to, any Governmental Authority required in connection with the consummation of this
Transaction, the CML Transaction and the Liquidation shall have been duly obtained, made or
given and shall be in full force and effect at the Closing and all statutory waiting periods
in respect thereof shall have expired.
7.2. Conditions Precedent to Obligation of Triad. The obligation of Triad to
consummate the Closing is subject to satisfaction or waiver by Triad of the following conditions on
or prior to the Closing Date:
A. Representations and Warranties. The representations and warranties of CIC
and the Indemnifying CIC Shareholders set forth in this Agreement shall be true and correct
in all material respects (without giving effect to any limitation as to “materiality” or
“CIC Material Adverse Effect” contained therein) as of the date hereof and as of the Closing
Date (except to the extent any such representation and warranty speaks as of an earlier
date, in which event such representation and warranty shall be true and correct as of such
date).
B. Performance of Obligations by CIC and the Principal CIC Shareholders. All of
the terms, covenants and conditions of this Agreement to be complied with and performed by
CIC and the Principal CIC Shareholders on and/or prior to the Closing Date shall have been
complied with and performed by CIC and the Principal CIC Shareholders in all material
respects.
C. Compliance Certificate. CIC and the Indemnifying CIC Shareholders shall have
delivered to Triad a certificate dated the Closing Date and signed by or on behalf of CIC
and each Indemnifying CIC Shareholder certifying that the conditions specified in
Section 7.2(A) and Section 7.2(B) have been fulfilled.
D. Consents. CIC and the Principal CIC Shareholders shall have received all
consents, authorizations and/or approvals necessary for the consummation of the Transaction,
the CML Transaction and the Liquidation, including those described in Section 3.6 or Section
3.7 of the CIC Disclosure Schedule, no such consent, authorization or approval shall have
been revoked and no such consent, authorization or approval shall impose any condition or
limitation on CIC or the Principal CIC Shareholders that would adversely affect the ability
of CIC and the Principal CIC Shareholders to consummate this Transaction, the CML
Transaction and the Liquidation.
E. No Proceedings. There shall not be pending any action, suit, proceeding or
investigation by any Person that, in the reasonable opinion of Triad’s outside counsel has a
reasonable possibility of an adverse outcome, and which if successful would (i) prohibit
this Transaction, the CML Transaction or the Liquidation and/or (ii) have a CIC Material
Adverse Effect.
F. Registration Rights Agreement. The Registration Agreement dated October 18,
1993 by and among Triad, CIC and CML shall have been amended to the extent necessary to
eliminate the New Triad Shares.
G. Transaction Documents. CIC and each of the Principal CIC Shareholders shall
have executed and delivered each of the Related Agreements.
H. Closing Deliveries. CIC shall have delivered all the items set forth in
Section 6.2.
7.3. Conditions Precedent to Obligations of CIC and the Principal CIC Shareholders.
The obligation of CIC and the Principal CIC Shareholders to consummate the Closing is subject to
satisfaction or waiver by CIC and the Principal CIC Shareholders of the following conditions on or
prior to the Closing Date:
A. Representation and Warranties. The representations and warranties of Triad
set forth in this Agreement shall be true and correct (without giving effect to any
limitation as to “materiality” or “Triad Material Adverse Effect” contained therein) in all
material respects as of the date hereof and as of the Closing Date (except to the extent any
such representation and warranty speaks as of an earlier date, in which event such
representation and warranty shall be true and correct as of such date).
B. Performance of Obligations by Triad. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by Triad on and/or prior to
the Closing Date shall have been complied with and performed by Triad in all material
respects.
C. Compliance Certificate. Triad shall have delivered to CIC a certificate
dated the Closing Date and signed by an officer of Triad certifying that the conditions
specified in Section 7.3(A) and Section 7.3(B) have been fulfilled.
D. No-Action Letter; Registration Statement. Triad shall have obtained the
No-Action Letter or, alternatively, the Registration Statement shall have been declared
effective by the SEC and no stop order shall be in effect.
E. Transaction Documents. Triad shall have executed and delivered this
Agreement and each of the Related Agreements.
F. Closing Deliveries. Triad shall have delivered all the items set forth in
Section 6.3.
ARTICLE VIII.
INDEMNIFICATION
8.1. Survival. All of the representations and warranties, covenants and agreements of
the parties hereto contained herein and in the Related Agreements, other than the Share Transfer
Restriction Agreement, shall survive forever.
8.2. Indemnification by CIC and the Indemnifying CIC Shareholders. CIC and the
Indemnifying CIC Shareholders jointly and severally agree to indemnify each of the Triad
Indemnified Parties against, and agree to hold each of the Triad Indemnified Parties harmless from,
any and all Losses incurred or suffered by any or all of the Triad Indemnified Parties arising out
of or in connection with any of the following:
A. any breach of or any inaccuracy in (or any third party claim involving an alleged
breach of or inaccuracy in) any representation or warranty made by CIC or any Indemnifying
CIC Shareholder in this Agreement or any Related Agreement; provided, however, for the
purpose of identifying breaches of or inaccuracies with respect to representations and
warranties, any materiality or material adverse effect qualifications to such
representations and warranties shall be ignored;
B. any breach (or any third party claim involving an alleged breach) by CIC or any
Principal CIC Shareholder of or failure (or any third party claim involving an alleged
failure) by CIC or any Principal CIC Shareholder to perform any covenant, agreement or
obligation of CIC or any CIC Shareholder in this Agreement or any Related Agreement or
pursuant to the Plan of Liquidation or any agreement relating to the CML Transaction;
C. any Lien of CIC or any of its past, present or future Subsidiaries or Affiliates,
including any Lien that relates to, or that arises out of, any act, omission or event that
occurred or any condition, situation or set of circumstances that existed prior to, on or
following the Closing Date;
D. any act or omission of, or any event, condition, situation or set of circumstances
relating to or involving, CIC or any of its past, present or future Subsidiaries or
Affiliates, or any of their respective officers, directors, shareholders, employees, agents
or representatives in their capacities as such;
E. the Transaction, except to the extent Triad is required to indemnify CIC or the
Indemnifying CIC Shareholders therefor pursuant to Section 8.3;
F. the CML Transaction;
G. without limiting the generality of clauses (C) — (F) above, any Lien for Taxes of,
or attributable to, CIC or any of its past, present or future Subsidiaries or Affiliates,
for taxable periods ending prior to, on or following the Closing Date, including any Taxes
resulting from the consummation of this Transaction or the Liquidation;
H. any audit, examination or investigation of this Transaction or the Liquidation by
any Governmental Authority, including the IRS or any other tax authorities;
I. the bulk sales Laws of any jurisdiction applicable to this Transaction and any Laws
of any jurisdiction imposing liability on Triad for CIC’s Taxes, including the failure to
comply with any such Laws; or
J. any assertion of appraisal or similar rights pursuant to any Law or otherwise by any
of the CIC Shareholders in their capacities as such.
8.3. Indemnification by Triad. Triad agrees to indemnify CIC and the Indemnifying CIC
Shareholders against, and agrees to hold each of them harmless from, any and all Losses incurred or
suffered by any or all of them arising out of or in connection with any of the following:
A. any breach of or any inaccuracy in (or any third party claim involving an alleged
breach of or inaccuracy in) any representation or warranty made by Triad in this Agreement
or any Related Agreement; or
B. any breach (or any third party claim involving an alleged breach) by Triad of or
failure (or any third party claim involving an alleged failure) by Triad to perform any
covenant, agreement or obligation of Triad in this Agreement or any Related Agreement.
8.4. Claims. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement or any Related Agreement, or the commencement of any suit,
action or proceeding, of the type described in Section 8.5 or Section 8.6, the
Indemnified Person shall give notice to the Indemnifying Person of such claim; provided,
that the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person
of its obligations under this Article VIII, except to the extent the Indemnifying Person
shall have been materially prejudiced thereby.
8.5. Notice of Third Party Claims; Assumption of Defense. The Indemnified Person shall
give notice as promptly as is reasonably practicable to the Indemnifying Person of the assertion of
any claim, or the commencement of any suit, action or proceeding, by any Person not a party hereto
(other than by a Governmental Authority with respect to Taxes) in respect of which indemnity may be
sought under this Agreement or any Related Agreement; provided, that
the failure of the Indemnified Person to give notice shall not relieve the Indemnifying Person
of its obligations under this Article VIII, except to the extent the Indemnifying Person
shall have been materially prejudiced thereby. The Indemnifying Person may, at its own expense, (a)
participate in the defense of any such claim, suit, action or proceeding and (b) upon notice to the
Indemnified Person and the Indemnifying Person’s delivering to the Indemnified Person a written
agreement that the Indemnified Person is entitled to indemnification pursuant to Section
8.2 or Section 8.3 for all Losses arising out of such claim, suit, action or proceeding
and that the Indemnifying Person shall be liable for the entire amount of any Loss resulting
therefrom, at any time during the course of any such claim, suit, action or proceeding, assume the
defense thereof, provided, that (i) the Indemnifying Person’s counsel is reasonably
satisfactory to the Indemnified Person and (ii) the Indemnifying Person shall thereafter consult
with the Indemnified Person upon the Indemnified Person’s reasonable request for such consultation
from time to time with respect to such claim, suit, action or proceeding. If the Indemnifying
Person assumes such defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, the Indemnified Person reasonably
determines in its judgment that representation by the Indemnifying Person’s counsel of both the
Indemnifying Person and the Indemnified Person would present such counsel with a conflict of
interest, then such Indemnified Person may employ separate counsel to represent or defend it in any
such claim, action, suit or proceeding and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person chooses to defend or
prosecute any such claim, suit, action, proceeding, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
8.6. Disputes Related to Taxes. The Indemnified Person shall give notice as promptly
as is reasonably practicable to the Indemnifying Person of the assertion of any claim, or the
commencement of any suit, action or proceeding against Triad, by any Governmental Authority with
respect to Taxes for which indemnity may be sought by any Triad Indemnified Party under this
Agreement or any Related Agreement; provided, that the failure of the Triad Indemnified
Party to give notice shall not relieve the Indemnifying Person of its obligations under this
Article VIII except to the extent the Indemnifying Person shall have been materially
prejudiced thereby. The Indemnifying Person may, upon notice to the Triad Indemnified Party
delivered within thirty (30) calendar days after delivery of such notice from the Triad Indemnified
Party, and the Indemnifying Person delivering to the Triad Indemnified Party, within such thirty
(30) calendar days, a written agreement that the Triad Indemnified Party is entitled to
indemnification pursuant to Section 8.2 for all Losses arising out of such claim, suit,
action or proceeding and that the Indemnifying Person shall be liable for the entire amount of any
Loss resulting therefrom, require Triad to contest any such claim, suit, action or proceeding;
provided that (i) the Indemnifying Person shall have furnished to Triad an opinion of
independent tax counsel selected by the Indemnifying Person and approved by Triad to the effect
that substantial authority exists for such contest, (ii) Triad shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the Governmental Authority in
respect of such claim, suit, action or proceeding and may determine, at its sole option, to either
pay the Tax claims and xxx for a refund or contest the claim in any appropriate forum, considering
in good faith such requests as the Indemnifying Person shall make concerning the most appropriate
forum in which to proceed and other related matters, provided that the Indemnifying Person
may,
at its own expense, participate in all such proceedings and provided further
that Triad shall not settle or compromise any such claim, suit, action or proceeding without the
approval of the CIC Representative (acting on behalf of the Indemnifying Person), which approval
shall not be unreasonably withheld, and (iii) if Triad shall determine to pay the Tax claimed and
xxx for a refund, the Indemnifying Person shall advance to Triad all Losses incurred or suffered by
Triad in connection therewith. Nothing contained in this Section 8.6 shall require Triad to
contest a claim which it would otherwise be required to contest if Triad releases the Indemnifying
Person from any liability under Section 8.2 for Losses incurred or suffered in connection
therewith. Whether or not Triad chooses to contest or pay (and xxx for a refund with respect to)
any such claim, suit, action or proceeding, all of the parties hereto shall cooperate and consult
with each other with respect to the resolution of any such claim, suit, action or proceeding.
8.7. Settlement or Compromise. Any settlement or compromise made or caused to be made
by the Indemnified Person or the Indemnifying Person, as the case may be, of any such claim, suit,
action or proceeding of the kind referred to in Section 8.5 or Section 8.6 shall
also be binding upon the Indemnifying Person or the Indemnified Person, as the case may be, in the
same manner as if a final judgment or decree had been entered by a court of competent jurisdiction
in the amount of such settlement or compromise; provided, that no obligation, restriction
or Loss shall be imposed on the Indemnified Person or the Indemnifying Person (other than
obligations arising under this Agreement or any Related Agreement) as a result of such settlement
or compromise without its prior written consent, which consent shall not be unreasonably withheld.
The Indemnified Person will give the Indemnifying Person at least fifteen (15) calendar days’
notice of any proposed settlement or compromise of any claim, suit, action or proceeding referred
to in Section 8.5 that it is defending, during which time the Indemnifying Person may, on
reasonable grounds, reject such proposed settlement or compromise; provided, that from and
after such rejection, the Indemnifying Person shall be obligated to assume the defense of and full
and complete liability and responsibility for such claim, suit, action or proceeding and any and
all Losses in connection therewith. Likewise, the Indemnifying Person will give the Indemnified
Person at least fifteen (15) calendar days’ notice of any proposed settlement or compromise of any
claim, suit, action or proceeding referred to in Section 8.5 that it is defending, during
which time the Indemnified Person may, on reasonable grounds, reject such proposed settlement or
compromise; provided, that from and after such rejection, the Indemnified Person shall
defend the claim at its expense and the Indemnifying Person’s liability shall be limited to the
amount of the proposed settlement or compromise.
8.8. Failure of Indemnifying Person to Act. In the event that the Indemnifying Person
does not elect to assume the defense of any claim, suit, action or proceeding, then any failure of
the Indemnified Person to defend or to participate in the defense of any such claim, suit, action
or proceeding or to cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
8.9. Acknowledgment of No Obligation to Set-Off Against Escrow Fund. CIC and each
Indemnifying CIC Shareholder agrees and acknowledges that (i) it has discussed with counsel and
understands the joint and several nature of the indemnification obligations hereunder, (ii) the
right of indemnification of the Triad Indemnified Parties hereunder is absolute, (iii) the
indemnification obligations of the Indemnifying CIC Shareholders shall not in any manner be limited
to the Escrow Shares or any other assets that may be contained in the
Escrow Fund (as defined in the Escrow Agreement) at any time, and (iv) the Triad Indemnified
Parties are not obligated to seek satisfaction of a claim for indemnification pursuant to this
Agreement or any Related Agreement from the Escrow Fund established pursuant to the Escrow
Agreement prior to seeking satisfaction of such a claim from the Indemnifying CIC Shareholders.
8.10. Treatment of Indemnification Payments. Any amounts payable under Section 8.2
or Section 8.3 shall be treated by Triad and CIC as an adjustment to the acquisition
price for the Old Triad Shares for tax purposes, except as otherwise required by applicable Law. In
the event that such payment is not treated as an adjustment to the purchase price under applicable
Law, the Indemnifying Person shall further pay an amount that reflects liabilities and costs for
Taxes resulting from the receipt or accrual of such payment, as, if and when incurred (including in
a future year).
ARTICLE IX.
MISCELLANEOUS
9.1. Amendment. This Agreement may be amended, modified or supplemented but only in
writing signed by Triad, CIC (if prior to the Liquidation) and the CIC Representative (as defined
below).
9.2. Notices. Any notice, request, instruction or other document to be given hereunder
by a party hereto shall be in writing and shall be deemed to have been received, (i) when delivered
if given in person or by courier or a courier service, (ii) on the date of transmission if sent by
facsimile or other wire transmission (receipt confirmed by return facsimile) or (iii) five (5)
Business Days after being deposited in the U.S. mail, certified or registered mail, postage
prepaid:
A. If to CIC, addressed as follows:
Collateral Investment Corp.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx & Xxxx, P.C.
0000 0xx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
0000 0xx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
B. If to any Principal CIC Shareholder or Indemnifying CIC Shareholder, addressed to
the CIC Representative as follows::
Xxxxxxx X. Xxxxxxx, III
Collateral Mortgage Ltd.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Collateral Mortgage Ltd.
0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx & Xxxx, P.C.
0000 0xx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
0000 0xx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
C. If to Triad, addressed as follows:
Triad Guaranty Inc.
000 X. Xxxxxxxxx Xx.
Xxxxxxx-Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
000 X. Xxxxxxxxx Xx.
Xxxxxxx-Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Lord, Bissell & Brook, LLP
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
9.3. Effect of Investigation. Any due diligence review, audit or other investigation
or inquiry undertaken or performed by or on behalf of Triad shall not limit, qualify, modify or
amend the representations, warranties, covenants or obligations of (including indemnities by) CIC
or any Indemnifying CIC Shareholder made or undertaken pursuant to this Agreement or any Related
Agreement, irrespective of the knowledge and information received (or which should have been
received) therefrom by Triad.
9.4. Payments in Dollars. Except as otherwise provided herein, all payments pursuant
hereto shall be made by electronic wire transfer in United States Dollars in same day or
immediately available funds.
9.5. Waivers. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a further or continuing waiver of any
such condition or breach in other instances or a waiver of any other condition or breach of any
other term, covenant, representation or warranty.
9.6. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature and a facsimile signature shall constitute an
original signature for all purposes.
9.7. Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and legal representatives;
provided, that no assignment of any rights or obligations hereunder shall be made
by CIC or any Principal CIC Shareholder to any Person without the written consent of Triad.
9.8. No Third Party Beneficiaries. This Agreement is solely for the benefit of the
parties hereto and, to the extent provided herein, their respective Affiliates, directors,
officers, employees, agents and representatives, and no provision of this Agreement shall be deemed
to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or
other right.
9.9. Further Assurances. Upon the reasonable request of another party to this
Agreement, each party hereto shall on and after the Closing Date execute and deliver to the
requesting party such other documents, assignments and other instruments as may be required to
effectuate completely the transfer and assignment to Triad of, and to vest fully in Triad title to,
the Old Triad Shares, and to otherwise carry out the purposes of this Agreement.
9.10. Severability. If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the validity, legality or enforceability of the other provisions hereof shall not
be affected thereby, and there shall be deemed substituted for the provision at issue a valid,
legal and enforceable provision as similar as possible to the provision at issue.
9.11. Remedies Cumulative. The remedies provided in this Agreement shall be cumulative
and shall not preclude the assertion or exercise of any other rights or remedies available by Law,
in equity or otherwise.
9.12. Entire Understanding. This Agreement and the Related Agreements set forth the
entire agreement and understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede any and all prior agreements, arrangements and understandings
among the parties relating to the subject matter hereof.
9.13. CIC Representative. Each Principal CIC Shareholder hereby irrevocably authorizes
and appoints Xxxxxxx X. Xxxxxxx, III, as his, hers or its true and lawful attorney and
representative (the “CIC Representative”) with full power and authority to take any and all
actions and execute any and all documents specified in this Agreement as being within the
authority of the CIC Representative. Xxxxxxx X. Xxxxxxx, III, hereby accepts his appointment
as the CIC Representative and agrees to perform all of the duties of the CIC Representative
hereunder. If the CIC Representative shall die or become incapacitated, the Principal CIC
Shareholders shall promptly appoint a successor Person to act as the CIC Representative. Each of
CIC and the Principal CIC Shareholders shall jointly and severally indemnify and hold harmless the
CIC Representative from any and all Losses arising from actions or inaction of the CIC
Representative taken or not taken in his capacity as such.
9.14. Applicable Law. This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
9.15. Acknowledgment of CIC and each Principal CIC Shareholder. CIC and each Principal
CIC Shareholder represents to Triad that he, she or it is knowledgeable and sophisticated as to
business matters, including the subject matter of this Agreement and the Related Agreements, that
CIC and each Principal CIC Shareholder has read this Agreement and the Related Agreements and that
he, she or it understands their respective terms. CIC and each Principal CIC Shareholder
acknowledges that, prior to assenting to the terms of this Agreement, he, she or it has been given
a reasonable time to review it, to consult with counsel of his, her or its choice and to negotiate
at arm’s-length with Triad as to its contents. CIC, each Principal CIC Shareholder and Triad agree
that the language used in this Agreement is the language chosen by the parties to express their
mutual intent, and that no rule of strict construction is to be applied against CIC, any Principal
CIC Shareholder or Triad.
9.16. Termination. This Agreement may be terminated by either Triad or CIC after
December 31, 2005 if the Closing shall not have occurred by such date for any reason; provided that
the terminating party is not in material breach of its representations, warranties, covenants or
agreements under this Agreement in any manner that shall have caused or resulted in the failure of
the Closing to occur on or before such date. In the event of termination of this Agreement by
either Triad or CIC, as provided in this Section 9.16, this Agreement shall forthwith become void
and of no further force and effect without any liability or obligation on the part of Triad, CIC or
the Principal CIC Shareholders; provided, however, that nothing herein shall relieve any party from
any liability for any breach by a party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.
| TRIAD GUARANTY INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: Xxxxxx X. Xxxxxxxx | ||||
| Title: President and CEO | ||||
| COLLATERAL INVESTMENT CORP. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxx, III | |||
| Xxxxxxx X. Xxxxxxx, III | ||||
| Its Chief Executive Officer | ||||
| /s/Xxxxxxx X. Xxxxxxx, Xx. | ||||
| Xxxxxxx X. Xxxxxxx, Xx., individually | ||||
| /s/ Xxxxxxx X. Xxxxxxx, III | ||||
| Xxxxxxx X. Xxxxxxx, III, individually | ||||
| /s/ Xxxxxxx Xxxxx Xxxxxxx | ||||
| Xxxxxxx Xxxxx Xxxxxxx, individually | ||||
| /s/ Xxxxxxx X. Xxxxxxx, III | ||||
| Xxxxxxx X. Xxxxxxx, III, as custodian for | ||||
| Xxxxxxx X. Xxxxxxx, XX under the Alabama Uniform Transfers to Minors Act | ||||
| /s/ Xxxxxxx X. Xxxxxxx, III | ||||
| Xxxxxxx X. Xxxxxxx, III, as custodian for | ||||
| Xxxxxxxxx Xxxxx Xxxxxxx under the Alabama Uniform Transfers to Minors Act | ||||
| /s/ Xxxxxxx X. Xxxxxxx, III | ||||
| Xxxxxxx X. Xxxxxxx, III, as custodian for | ||||
| Xxxxxxx Xxxxx Xxxxxxx under the Alabama Uniform Transfers to Minors Act | ||||
| /s/ Xxxxxxx X. Xxxxxxx | ||||
| Xxxxxxx X. Xxxxxxx, as custodian for Xxxxxxx | ||||
| X. Xxxxxxx, XX under the Alabama Uniform Transfers to Minors Act | ||||
| /s/ Xxxxxxx X. Xxxxxxx | ||||
| Xxxxxxx X. Xxxxxxx, as custodian for Xxxxxxxxx | ||||
| Xxxxx Xxxxxxx under the Alabama Uniform Transfers to Minors Act | ||||
| /s/ Xxxxxxx X. Xxxxxxx | ||||
| Xxxxxxx X. Xxxxxxx, as custodian for Xxxxxxx | ||||
| Xxxxx Xxxxxxx under the Alabama Uniform Transfers to Minors Act | ||||
| The Xxxxxxx X. Xxxxxxx, Xx. Grandchildren’s Trust |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxx, III | |||
| Xxxxxxx X. Xxxxxxx, III | ||||
| Its Co-Trustee | ||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Xxxxxx X. Xxxxxxx | ||||
| Its Co- Trustee | ||||
| By: | /s/ Xxxxxxx X. Xxx | |||
| Xxxxxxx X. Xxx | ||||
| Its Co- Trustee | ||||
| By: | /s/ Xxxx Xxxxxxx-Xxxxxxxxxxx | |||
| Xxxx Xxxxxxx-Xxxxxxxxxxx | ||||
| Its Co- Trustee | ||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Xxxxxx X. Xxxxxxx | ||||
| Its Co- Trustee | ||||
Exhibit A
ESCROW AGREEMENT
BY AND AMONG
COLLATERAL INVESTMENT CORP.
THE SHAREHOLDERS OF COLLATERAL INVESTMENT CORP. LISTED AS “PRINCIPAL CIC SHAREHOLDERS” ON THE
SIGNATURE PAGES HERETO
SIGNATURE PAGES HERETO
THE PERSONS LISTED AS “OTHER CIC SHAREHOLDERS”
ON THE SIGNATURE PAGE HEREIN
AND
AMSOUTH BANK
Dated as of , 2005
ESCROW AGREEMENT
This ESCROW AGREEMENT (this “Agreement”) is made and entered into as of the day
of , 2005, by and among (i) Triad Guaranty Inc., a Delaware corporation
(“Triad”), (ii) Collateral Investment Corp., a Delaware corporation (“CIC”), (iii)
certain principal shareholders of CIC, which shareholders are listed as “Principal CIC
Shareholders” on the signature pages hereto and (iv) each other Person who shall execute this
Agreement, as amended, whether in counterpart, by separate instrument or otherwise (including
through power of attorney) (together with the Principal CIC Shareholders, the “CIC
Shareholders”) and (iv) AmSouth Bank, an Alabama banking corporation (the “Escrow
Agent”).
WITNESSETH:
A. Triad, CIC and the Principal CIC Shareholders are parties to that certain Exchange
Agreement (the “Exchange Agreement”), which contemplates, among other things, the following
transactions: (i) the transfer by CIC of the Old Triad Shares to Triad and the transfer by Triad to
CIC of the New Triad Shares (the “Transaction”); (ii) immediately prior to the consummation
of the Transaction, the transfer and sale by CIC of substantially all of the assets of CIC (other
than the Old Triad Shares) to Collateral Mortgage Ltd. (“CML”), and the transfer to CML, or
other satisfaction, of all the indebtedness and other contractual liabilities of CIC (the “CML
Transaction”); (iii) following the consummation of the CML Transaction and the Transaction, the
distribution by CIC of all of the New Triad Shares and any remaining assets of CIC to the CIC
Shareholders pursuant to a plan of complete liquidation of CIC (the “Liquidation”); and
(iv) the execution and delivery by Triad, CIC, the Principal CIC Shareholders and certain other
Persons of the Share Transfer Restriction Agreement, which provides for certain restrictions on the
transfer of shares of Triad Common Stock.
B. The Exchange Agreement requires Triad, CIC, the Principal CIC Shareholders and the Escrow
Agent to execute and deliver this Agreement at, and as a condition to, the Closing.
C. Section 2.4 of the Exchange Agreement provides for the pledge by CIC to Triad of
252,852 of the New Triad Shares to be received by CIC in the Transaction (the “Original Escrow
Shares”), and, following the Liquidation, the pledge by each CIC Shareholder to Triad of the
Original Escrow Shares, pursuant to the terms of this Agreement, to serve as security for the
obligations and liabilities of CIC and the Indemnifying CIC Shareholders under Article VIII
of the Exchange Agreement.
D. Triad would not be willing to enter into the Exchange Agreement and consummate the
Transaction unless CIC and each CIC Shareholder agreed to the placement of the Escrow Shares (as
hereinafter defined) in the Escrow Fund (as hereinafter defined) in accordance with the terms and
conditions of this Agreement.
E. Triad, CIC and the Principal CIC Shareholders have selected the Escrow Agent to establish
the Escrow Fund and to serve as Escrow Agent upon the terms and subject to the conditions set forth
in this Agreement, which selection was made pursuant to the instructions of CIC and the Principal
CIC Shareholders and with the consent of Triad.
F. The Escrow Agent is willing to establish the Escrow Fund and to serve as Escrow Agent upon
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties,
covenants and agreements herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in the Exchange Agreement. The following terms shall have
the following meanings for purposes of this Agreement:
“Agreement” shall have the meaning set forth in the preamble hereto.
“Anniversary” shall mean an annual anniversary of the Closing Date.
“Claim” shall have the meaning set forth in Section 4.1(a).
“Claim Notice” shall have the meaning set forth in Section 4.1(a).
“CIC Escrow Certificates” shall have the meaning set forth in Section 2.3.
“CIC Liquidation Notice” shall have the meaning set forth in Section 2.4.
“CIC Representative” shall have the meaning set forth in Section 6.13.
“CIC Shareholder Escrow Certificate” shall have the meaning set forth in Section 2.4.
“Escrow Agent” shall have the meaning set forth in the preamble hereto.
“Escrow Fund” shall have the meaning set forth in Section 3.1.
“Escrow Period” shall mean the period from and including the Closing Date to the termination
of this Agreement.
“Escrow Shares” shall have the meaning set forth in Section 2.1.
“Market Value” shall have the meaning set forth in Section 4.1(d).
“Objection Notice” shall have the meaning set forth in Section 4.1(b).
“Original Escrow Shares” shall have the meaning set forth in the recitals hereto.
“Original Holder” shall have the meaning set forth in Section 4.5(a).
2
“Permitted Transferee” shall have the meaning set forth in Section 3.5.
“Tax Dispute” shall have the meaning set forth in Section 4.3.
“Transfer” shall have the meaning set forth in Section 3.5.
1.2 Interpretation. The headings preceding the text of Articles and Sections included
in this Agreement are for convenience only and shall not be deemed part of this Agreement or be
given any effect in interpreting this Agreement. The use of the masculine, feminine or neuter
gender or the singular or plural form of words herein shall not limit any provision of this
Agreement. The use of the terms “including” or “include” shall in all cases herein mean “including,
without limitation” or “include, without limitation,” respectively. Reference to any Person
includes such Person’s successors and assigns to the extent such successors and assigns are
permitted by the terms of any applicable agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually. Reference to any agreement
(including this Agreement), document or instrument means such agreement, document or instrument as
amended or modified and in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof. Reference to any Law means such Law as amended, modified, codified,
replaced or re-enacted, in whole or in part, including rules, regulations, enforcement procedures
and any interpretations promulgated thereunder. References to Articles, Sections or Subsections
shall refer to those portions of this Agreement. The use of the terms “hereunder,” “hereof,”
“hereto” and words of similar import shall refer to this Agreement as a whole and not to
any. particular Article, Section or clause of this Agreement. No specific
representation, warranty or covenant contained herein shall limit the generality or applicability
of a more general representation, warranty or covenant contained herein. A breach of or inaccuracy
in any representation, warranty or covenant shall not be affected by the fact that any more general
or less general representation, warranty or covenant was not also breached or inaccurate. The word
“class” when used by reference to securities or Escrow Shares shall have the meaning as set forth
in Section 12 of the Securities Exchange Act of 1934, as amended, or any similar successor federal
statute or rule or regulations thereunder, all as the same shall be in effect at the time.
ARTICLE II
PLEDGE AND DELIVERY OF ESCROW SHARES
2.1 Pledge and Grant of Security Interest.
(a) As security solely for the obligations and liabilities of CIC and the Indemnifying CIC
Shareholders under Article VIII of the Exchange Agreement, CIC pledges to the Triad
Indemnified Parties, and grants to the Triad Indemnified Parties a continuing security interest in,
the Original Escrow Shares and all shares of capital stock or other securities, whether issued by
Triad or otherwise, issued or paid as dividends or other distributions on or in respect of the
Original Escrow Shares or other shares of capital stock or securities held in the Escrow Fund, or
issued pursuant to any of the events described in Section 3.3; in each case together with
the certificates representing the Original Escrow Shares, shares or securities, and any
subscriptions, warrants, options and other rights, contractual or otherwise, issued on or otherwise
in respect of,
3
the Original Escrow Shares or such other shares of capital stock or other securities described
above, and all proceeds thereof, (collectively, the “Escrow Shares”) now owned or hereafter
acquired by CIC during the Escrow Period.
(b) As security solely for the obligations and liabilities of CIC and the Indemnifying CIC
Shareholders under Article VIII of the Exchange Agreement, each CIC Shareholder that
executes this Agreement pledges to the Triad Indemnified Parties, and grants to the Triad
Indemnified Parties a continuing security interest in, the Escrow Shares now owned or hereafter
acquired by such CIC Shareholder during the Escrow Period.
2.2 Priority and Perfection of Security Interest.
(a) CIC and the Principal CIC Shareholders jointly and severally represent and warrant that
(i) this Agreement creates a valid security interest in favor of the Triad Indemnified Parties in
the Escrow Shares and (ii) the taking of possession by the Escrow Agent of the certificates
representing the Escrow Shares will perfect and establish the first priority of the Triad
Indemnified Parties’ security interest in the Escrow Shares.
(b) Each of the CIC Shareholders that is not a Principal CIC Shareholder severally represents
and warrants that (i) this Agreement creates a valid security interest in favor of the Triad
Indemnified Parties in the Escrow Shares now owned or hereafter acquired by such CIC Shareholder
during the Escrow Period and (ii) the taking of possession by the Escrow Agent of the certificates
representing the Escrow Shares will perfect and establish the first priority of the Triad
Indemnified Parties’ security interest in the Escrow Shares.
(c) The Escrow Agent acknowledges and agrees that the Escrow Agent (i) shall act as the Triad
Indemnified Parties’ bailee and possessory agent with respect to the Escrow Shares for purposes of
perfecting the security interest of the Triad Indemnified Parties in the Escrow Shares and (ii) is
not acting as a “securities intermediary” with respect to the Escrow Shares. The parties hereto
acknowledge and agree that the Escrow Shares held by the Escrow Agent in the Escrow Fund during the
Escrow Period shall be held for the sole benefit of the Triad Indemnified Parties, subject to the
rights and obligations of the parties hereunder, until such Escrow Shares are released and
distributed from the Escrow Fund pursuant to the provisions of this Agreement.
(d) CIC and each CIC Shareholder shall execute and deliver to Triad such financing statements
and other documents and information as Triad may reasonably request in order to perfect and protect
the Triad Indemnified Parties’ security interest in the Escrow Shares created hereby. CIC and each
CIC Shareholder hereby authorize Triad to file any financing statement that (1) indicates the
Escrow Shares as collateral and (ii) contains any other information required by the Uniform
Commercial Code of the jurisdiction in which such financing statement is filed regarding the
sufficiency or filing office acceptance of any financing statement.
2.3 Delivery of CIC Escrow Certificates to Escrow Agent. At the Closing, Triad shall
deliver to the Escrow Agent, on behalf of CIC, certificates registered in the name of CIC (the
“CIC Escrow Certificates”) representing the Original Escrow Shares. Contemporaneous with
the delivery by Triad to the Escrow Agent of the CIC Escrow Certificates, CIC shall deliver to the
Escrow Agent such reasonable number of duly executed stock powers (undated and in blank,
4
with Medallion guarantee) relating to the Original Escrow Shares as Triad shall request. Upon
the Escrow Agent’s receipt of the CIC Escrow Certificates and the duly executed stock powers
relating to the Original Escrow Shares, the Escrow Agent shall execute and deliver to Triad a
customary written acknowledgment of the Escrow Agent’s receipt of such CIC Escrow Certificates and
duly executed stock powers to be held in the Escrow Fund pursuant to the provisions of this
Agreement.
2.4 Liquidation; Replacement of Escrow Certificates. Upon consummation of the
Liquidation, CIC shall effect the distribution of the Original Escrow Shares (and any other Escrow
Shares owned by CIC on the date of the Liquidation) to the CIC Shareholders in the Liquidation by
(i) delivering to Triad and the Escrow Agent a written notice confirming that the Liquidation has
occurred and setting forth the number of Escrow Shares that each CIC Shareholder is entitled to
receive in connection with the Liquidation (the “CIC Liquidation Notice”) and (ii)
delivering to Triad such reasonable number of duly executed stock powers (undated and in blank,
with Medallion guarantee) from each CIC Shareholder as Triad shall request, which stock powers
shall relate to the Escrow Shares to be received by such CIC Shareholder as designated by CIC
pursuant to the CIC Liquidation Notice. As soon as practicable following Triad’s receipt of the CIC
Liquidation Notice and the stock powers from each CIC Shareholder relating to the Escrow Shares,
(i) Triad shall deliver to the Escrow Agent the certificates evidencing the Escrow Shares to which
the CIC Shareholders are entitled as designated by CIC pursuant to the CIC Liquidation Notice
(each, a “CIC Shareholder Escrow Certificate”), accompanied by each CIC Shareholder’s duly
executed stock powers relating to the Escrow Shares, which certificates shall replace the CIC
Escrow Certificates held by the Escrow Agent in the Escrow Fund and (ii) Triad and the Escrow Agent
shall cause the CIC Escrow Certificates to be cancelled. Upon the Escrow Agent’s receipt of the CIC
Shareholder Escrow Certificates, accompanied by each CIC Shareholder’s duly executed stock powers
relating to the Escrow Shares, the Escrow Agent shall execute and deliver to Triad a customary
written acknowledgment of the Escrow Agent’s receipt of such CIC Shareholder Escrow Certificates
and duly executed stock powers to be held in the Escrow Fund pursuant to the provisions of this
Agreement.
2.5 Delivery of Additional Escrow Shares. In the event any Escrow Shares are
delivered to CIC or to any CIC Shareholder rather than to the Escrow Agent during the Escrow
Period, CIC or such CIC Shareholder, as the case may be, shall immediately take all actions
necessary to have such Escrow Shares transferred to the Escrow Agent for deposit in the Escrow Fund
and to otherwise perfect and protect the security interest of the Triad Indemnified Parties in such
Escrow Shares. If such Escrow Shares are certificated shares, CIC or such CIC Shareholder, as the
case may be, shall immediately deliver the certificates representing such Escrow Shares to the
Escrow Agent, accompanied by duly executed stock powers relating to such certificates.
2.6 Delivery of Additional Stock Powers. CIC or the CIC Shareholders, as the case may
be, shall take all reasonable actions necessary to ensure that duly executed stock powers (undated
and in blank, with Medallion guarantee) relating to all certificates representing Escrow Shares
(including any new or replacement certificates issued at any time during the Escrow Period) have
been delivered to, and are held by, the Escrow Agent at all times during the Escrow Period. Without
limiting the generality of the preceding sentence, (i) upon the receipt of a written request from
the Escrow Agent or Triad at any time during the Escrow Period, CIC or the CIC
5
Shareholders, as the case may be, shall immediately deliver to the Escrow Agent duly executed
stock powers (undated and in blank, with Medallion guarantee) relating to any and all certificates
representing Escrow Shares registered or to be registered in the name of CIC or such CIC
Shareholder, as the case may be, and (ii) with respect to any CIC Shareholder that is a trust, in
the event that there is any change in the Person(s) serving as trustee(s) of such CIC Shareholder
during the Escrow Period, such CIC Shareholder shall immediately provide written notice to Triad
and the Escrow Agent describing such change and shall immediately deliver to the Escrow Agent duly
executed stock powers (undated and in blank, with Medallion guarantee) signed by all of the
trustees of such CIC Shareholder after such change, which stock powers shall relate to all
certificates representing Escrow Shares held in the Escrow Fund at such time.
ARTICLE III
ESTABLISHMENT OF ESCROW FUND; SPECIAL PROVISIONS RELATED TO ESCROW SHARES
3.1 Escrow Fund. The Escrow Agent shall establish an escrow account (the “Escrow
Fund”) and shall hold the Escrow Shares in the Escrow Fund and distribute the Escrow Shares
from the Escrow Fund pursuant to the provisions of this Agreement.
3.2 Dividends and Distributions. CIC or the CIC Shareholders, as the case may be,
shall have the right to receive and retain any and all dividends and distributions paid on or in
respect of the Escrow Shares, other than dividends or distributions constituting Escrow Shares. In
the event that the Escrow Agent receives any dividend or distribution on or in respect of the
Escrow Shares which does not constitute Escrow Shares, the Escrow Agent agrees to promptly take all
necessary actions to have such dividend or distribution transferred to CIC or to the CIC
Shareholders, as the case may be.
3.3 Stock Splits and Dividends. If there is any increase or decrease in the number of
issued and outstanding Escrow Shares following the Closing Date resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase or decrease in the
number of issued and outstanding Escrow Shares effected without receipt of consideration by Triad
or the issuer thereof, as applicable, the shares resulting from such subdivision or consolidation
or issued as such dividend or otherwise shall be Escrow Shares and shall be added to the Escrow
Fund and be subject to all of the provisions of this Agreement to the same extent as were the
shares as to which such subdivision or consolidation occurred or the shares with respect to which
such dividend was distributed or such other increase or decrease occurred.
3.4 Voting Rights. CIC or the CIC Shareholders, as the case may be, shall have the
right to exercise any and all voting rights with respect to the Escrow Shares.
3.5 No Transfers of Escrow Shares. Notwithstanding anything to the contrary contained
in this Agreement or any Related Agreement, except as set forth in this Section 3.5,
neither CIC nor any CIC Shareholder shall grant any security interest in, or sell, transfer,
convey, grant, encumber, pledge, hypothecate, gift, donate, bequest, devise or otherwise dispose
of, whether directly or indirectly, whether or not for value any of the Escrow Shares, during the
Escrow Period (a “Transfer”). Notwithstanding the foregoing sentence, Transfers by any CIC
6
Shareholder to (i) its immediate family members; (ii) trusts established by such CIC
Shareholder for the benefit of its immediate family members; (iii) its Affiliates; (iv) charitable
organizations and other non-profit entities (each a “Permitted Transferee”), shall be
permitted under the terms of this Agreement without further consent from Triad or the Escrow Agent,
so long as the Permitted Transferee agrees in writing to be bound by the terms of this Agreement.
3.6 Books and Records. The Escrow Agent shall maintain a ledger setting forth all
Escrow Shares deposited in the Escrow Fund.
3.7 Taxes. CIC and the CIC Shareholders shall be responsible for filing all necessary
Tax Returns, and shall pay any Taxes, on or with respect to the Escrow Shares or the Escrow Fund,
including any Taxes related to income on or with respect to the Escrow Shares or the Escrow Fund.
ARTICLE IV
DISTRIBUTION OF ESCROW SHARES
The Escrow Agent shall not make any distribution of Escrow Shares from the Escrow Fund except
as provided in this Article IV.
4.1 Distribution from Escrow Fund for Indemnification Claims.
(a) Whenever any Triad Indemnified Party desires to make a claim against the Escrow Fund in
order to fully or partially satisfy a claim for indemnification under Article VIII of the
Exchange Agreement (a “Claim”), Triad shall provide written notice of such Claim to a CIC
Representative and the Escrow Agent (together, in the case of the Escrow Agent, with evidence that
such notice was provided to a CIC Representative in accordance with Section 8.4 of the Exchange
Agreement), which notice (a “Claim Notice”) shall specify the facts alleged to constitute
the basis for the Claim, the identity of the Person making such Claim and the dollar amount of the
Claim that is sought to be satisfied by a distribution from the Escrow Fund.
(b) If by the close of business on the thirtieth day after such Claim Notice is so received by
the Escrow Agent, a CIC Representative has not provided a written notice to the Escrow Agent and
Triad of a CIC Representative’s objection to the distribution of Escrow Shares from the Escrow Fund
to satisfy the dollar amount claimed by Triad in such Claim Notice (an “Objection Notice”),
on the next Business Day (or on such later date as may be specified by Triad), the Escrow Agent
shall distribute to Triad or to Triad’s designee(s) from the Escrow Fund (i) the fewest whole
number of Escrow Shares having an aggregate Market Value (as hereinafter defined) of not less than
the dollar amount claimed in such Claim Notice, which shares shall be distributed in the manner
contemplated by Section 4.4 or (ii) if the aggregate Market Value of all Escrow Shares held
in the Escrow Fund is less than the dollar amount claimed by Triad in such Claim Notice, all of the
Escrow Shares held in the Escrow Fund.
(c) If a CIC Representative provides an Objection Notice to the Escrow Agent in the manner
contemplated by Section 4.1(b) and the objection stated in such Objection Notice is to less
than the full dollar amount claimed in such Claim Notice, on the next Business Day following the
Escrow Agent’s receipt of such Objection Notice (or on such later date as may be
7
specified by Triad), the Escrow Agent shall distribute to Triad or to Triad’s designee(s) from
the Escrow Fund (i) the fewest whole number of Escrow Shares having an aggregate Market Value of
not less than the undisputed portion of the dollar amount claimed in such Claim Notice, which
shares shall be distributed in the manner contemplated by Section 4.4, or (ii) if the
aggregate Market Value of all Escrow Shares held in the Escrow Fund is less than the undisputed
portion of the dollar amount claimed by Triad in such Claim Notice, all of the Escrow Shares then
held in the Escrow Fund. The Escrow Agent shall not distribute to Triad or to Triad’s designee(s)
any Escrow Shares from the Escrow Fund in satisfaction of any disputed portion of the dollar amount
claimed in such Claim Notice except in accordance with the following sentence. Upon (x) joint
written instructions signed by both Triad and a CIC Representative and delivered to the Escrow
Agent directing the distribution of the fewest whole number of Escrow Shares having an aggregate
Market Value of not less than a specified dollar amount, the Escrow Agent shall so distribute such
number of Escrow Shares, or (y) a final, non-appealable judgment or order by a xxxxx xxxxx xx [xxx
Xxxxxx xx Xxxx, Xxxxxxxx or by the United States District Court for the Northern District of
Illinois] entitling one or more Triad Indemnified Parties to indemnification under Article
VIII of the Exchange Agreement, the Escrow Agent shall distribute the fewest whole number of
Escrow Shares having an aggregate Market Value of not less than the dollar amount to which such
Triad Indemnified Parties are entitled pursuant to such judgment or order.
(d) For purposes of this Agreement, the “Market Value” of a share of securities
constituting Escrow Shares shall mean, (i) with respect to a share of Triad Common Stock, the last
quoted sales price on the Nasdaq National Market for shares of Triad Common Stock on the trading
day immediately prior to the date on which such Market Value is determined, and (ii) with respect
to any share of securities constituting Escrow Shares other than Triad Common Stock, the closing
per share sale price for such shares of securities for the trading day immediately prior to the
date on which such Market Value is determined, as reported on the composite transactions for the
primary national securities exchange or inter-dealer quotation system maintained by a registered
securities association upon which such securities are listed. In the event that the Market Value of
a share of securities constituting Escrow Shares is not determinable under the foregoing methods,
the Market Value of such shares of securities shall be calculated using any reasonable method
selected by the Escrow Agent in its discretion.
4.2 Distributions Upon Certain Events. In the event of either the liquidation or
dissolution of the issuer of any class of Escrow Shares, in each such case the Escrow Agent shall
release and distribute all of the shares of such class of Escrow Shares or Triad Common Stock, as
the case may be, held in the Escrow Fund to (i) CIC, if a CIC Liquidation Notice has not been
received by the Escrow Agent, or (ii) the CIC Shareholders in whose names such Escrow Shares are
registered, if a CIC Liquidation Notice has been received by the Escrow Agent, in each case
together with all stock powers relating thereto.
4.3 Final Distribution. Unless this Agreement is terminated earlier in accordance
with Section 6.1, all Escrow Shares shall be released and distributed from the Escrow Fund
on the later of (i) 36 months following the date of the filing of the final CIC federal income tax
return and (ii) the fourth Anniversary to (a) CIC, if a CIC Liquidation Notice has not been
received by the Escrow Agent, or (b) the CIC Shareholders in whose names such Escrow Shares are
registered, if a CIC Liquidation Notice has been received by the Escrow Agent, in each case
together with all stock powers relating thereto, provided, however, if on such date
there is
8
pending one or more Claims for which a Claim Notice has been received by the Escrow Agent, the
Escrow Agent shall retain (w) the fewest whole number of Escrow Shares held in the Escrow Fund
having an aggregate Market Value of not less than 150% of the aggregate amount of all such Claims,
which shares (together with all stock powers relating thereto) shall be retained in the manner
contemplated by Section 4.4 or (x) if the aggregate Market Value of all Escrow Shares held
in the Escrow Fund is less than 150% of the aggregate amount of all such Claims, all of the Escrow
Shares (together with all stock powers relating thereto) then held in the Escrow Fund, in each case
until final resolution of each such Claim pursuant to the provisions of this Agreement, at which
time, subject to the second proviso of this Section 4.3, all remaining Escrow Shares held
in the Escrow Fund shall be distributed in accordance with such final resolution, and provided
further that if on such date Triad has previously received notice of any Lien (as defined in
the Exchange Agreement), or alleged Lien, for Taxes of, or attributable to, CIC or any of its past,
present or future Subsidiaries (as defined in the Exchange Agreement) or Affiliates (as defined in
the Exchange Agreement) for taxable periods ending prior to, on or following the Closing Date,
including any Taxes resulting from the consummation of the Transaction, the CML Transaction or the
Liquidation, or of any audit, examination or investigation of the Transaction, the CML Transaction
or the Liquidation by any Governmental Authority, including the Internal Revenue Service or any
other tax authorities (a “Tax Dispute”), and Triad has provided written notice to the
Escrow Agent of such Tax Dispute, the Escrow Agent shall also retain (y) the fewest whole number of
Escrow Shares in the Escrow Fund having an aggregate Market Value of not less than 150% of the
aggregate amount of Taxes involved in all such Tax Disputes, which shares (together with all stock
powers relating thereto) shall be retained in the manner contemplated by Section 4.4 or (z)
if the aggregate Market Value of all Escrow Shares held in the Escrow Fund (excluding Escrow Shares
retained pursuant to the first proviso of this Section 4.3) is less than 150% of the
aggregate amount of Taxes involved in all such Tax Disputes, all of the Escrow Shares (together
with all stock powers relating thereto) then held in the Escrow Fund, in each case until Triad and
a CIC Representative provide a joint written notice to the Escrow Agent as to the final resolution
of each such Tax Dispute, at which time, subject to the first proviso of this Section 4.3,
all remaining Escrow Shares held in the Escrow Fund shall be distributed in accordance with such
final resolution.
4.4 Order of Distribution. All distributions of Escrow Shares by the Escrow Agent in
satisfaction of claims made against the Escrow Fund by a Triad Indemnified Party (i) shall first be
made in shares of Triad Common Stock held in the Escrow Fund, unless and until all shares of Triad
Common Stock have been distributed from the Escrow Fund, in which case all such distributions shall
thereafter be made in any other securities constituting Escrow Shares held in the Escrow Fund and
(ii) may be made using any certificates representing Escrow Shares held in the Escrow Fund and may
be made in Escrow Shares registered in the name of the CIC Shareholders (if a CIC Liquidation
Notice has been received by the Escrow Agent) or in the name of CIC (if a CIC Liquidation Notice
has not been received by the Escrow Agent), provided that any such distributions of Escrow
Shares registered in the name of the CIC Shareholders shall be made on a pro rata basis (except for
any adjustments required to eliminate the issuance of fractional shares, which adjustments shall be
made in any reasonable manner determined by the Escrow Agent) according to the number of Escrow
Shares registered or to be registered in the name of each CIC Shareholder. In the event that any
Escrow Shares are required to be retained in the Escrow Fund after the later of (i) 36 months
following the date of the filing of the final CIC federal income tax return and (ii) the fourth
Anniversary pursuant to Section 4.3, the Escrow
9
Agent (i) shall satisfy such requirement by first retaining the fewest whole number of shares
of Triad Common Stock held in the Escrow Fund having a Market Value of not less than the aggregate
amount required to be retained and, to the extent the number of shares of Triad Common Stock held
in the Escrow Fund is insufficient to satisfy such requirement, the fewest whole number of any
other securities constituting Escrow Shares held in the Escrow Fund necessary to satisfy such
requirement and (ii) may retain any certificates representing Escrow Shares held in the Escrow Fund
and may retain Escrow Shares registered in the names of the CIC Shareholders (if a CIC Liquidation
Notice has been received by the Escrow Agent) or in the name of CIC (if a CIC Liquidation Notice
has not been received by the Escrow Agent), provided that such Escrow Shares shall be
retained on a pro rata basis (except for any adjustments required to eliminate the issuance of
fractional shares, which adjustments shall be made in any reasonable manner determined by the
Escrow Agent) according to the number of Escrow Shares registered or to be registered in the name
of each CIC Shareholder.
4.5 Procedures for Distribution.
(a) In connection with any distribution of Escrow Shares evidenced by certificates to Triad or
to Triad’s designee(s), as the case may be, the Escrow Agent shall deliver to Triad (i) one or more
certificates representing the Escrow Shares required to be distributed pursuant to the provisions
of this Agreement, along with duly executed stock powers relating to such certificates, and (ii)
instructions that such certificates be cancelled in exchange for new certificates to be registered
in the name of, and delivered to, Triad or Triad’s designee(s), as the case may be. The Escrow
Agent’s sole duty with respect to the distribution of Escrow Shares hereunder, in the event that
such certificates for such shares do not represent the proper number of shares to be distributed,
shall be to deliver the certificates and duly executed stock powers relating to such certificates
to Triad, and to give proper instructions to Triad for the registration and delivery of such
shares. In the event that some but not all of the Escrow Shares represented by the certificates
delivered to Triad by the Escrow Agent are required to be distributed to Triad or to Triad’s
designee(s) and the remainder of the Escrow Shares represented by such certificates are to be
returned to the Escrow Fund, the Escrow Agent shall (i) direct Triad to register the number of
shares required to be distributed to Triad or to Triad’s designee(s), as the case may be, in the
name of, and to deliver one or more certificates representing such shares to, Triad or Triad’s
designee(s), as the case may be, (ii) upon the Escrow Agent’s receipt of new duly executed stock
powers from the Original Holder (as hereinafter defined), if the Escrow Agent deems such stock
powers necessary pursuant to clause (iii) below of this Section 4.5(a), direct Triad to
re-register the remainder of the Escrow Shares represented by such certificate or certificates in
the name of the Person(s) in the name of which such shares were registered immediately prior to
such distribution (the “Original Holder”) and to return such certificate or certificates to
the Escrow Agent and (iii) if the Escrow Agent reasonably determines that it does not then hold in
the Escrow Fund a sufficient number of stock powers relating to the returned certificates, provide
a written notice to the Original Holder requesting such Original Holder to deliver to the Escrow
Agent such number of new duly executed stock powers related to such returned certificates as the
Escrow Agent shall request. Upon receipt of any such written notice from the Escrow Agent, the
Original Holder shall immediately deliver the requested duly executed stock powers to the Escrow
Agent. The Escrow Agent shall have no responsibility or liability for any mistake, failure or delay
by Triad in registering or delivering any shares in the manner described in this Section
4.5(a).
10
(b) In connection with any distribution of Escrow Shares evidenced by certificates to CIC or
the CIC Shareholders, as the case may be, the Escrow Agent shall deliver certificates representing
the Escrow Shares required to be distributed pursuant to the provisions of this Agreement to (i)
CIC, if a CIC Liquidation Notice has not been received by the Escrow Agent or (ii) the CIC
Shareholders in whose names such Escrow Shares are registered, if a CIC Liquidation Notice has been
received by the Escrow Agent.
4.6 Commercially Reasonable Distribution Procedures. CIC and each CIC Shareholder
agrees and acknowledges that the procedures for the distribution of Escrow Shares from the Escrow
Fund described in this Article IV constitute a commercially reasonable disposition of the
Escrow Shares.
ARTICLE V
ESCROW AGENT
5.1 Duties. The duties and responsibilities of the Escrow Agent shall be limited to
those expressly set forth herein. No implied duties or discretionary powers may be imputed to the
Escrow Agent by the provisions of this Agreement or otherwise, other than the duty of the Escrow
Agent to use reasonable care with respect to the custody and preservation of the Escrow Shares in
its possession as contemplated by Section 9-207 of the [Escrow Agent jurisdiction] Uniform
Commercial Code.
5.2 No Additional Liability. The Escrow Agent shall not be personally liable for any
act taken or omitted hereunder if taken or omitted by it in good faith and in the exercise of its
own best judgment and shall also be fully protected in relying upon any written notice, demand,
certificate or document which it in good faith believes to be genuine.
5.3 Assumed Validity of Documents. The Escrow Agent shall not be responsible for the
sufficiency, form, execution, validity or genuineness of any documents or securities deposited or
delivered hereunder, or for any signature, endorsement or any lack of endorsement thereon, or for
the accuracy of any description therein, or for the identity, authority or rights of the Person or
Persons executing or delivering or purporting to execute or deliver any such document or
endorsement.
5.4 Fees and Expenses. The Escrow Agent shall be paid the fee described in
Exhibit A hereto for its services and shall be reimbursed for its reasonable expenses
incurred in connection with the ordinary administration of the Escrow Fund. CIC and the CIC
Shareholders jointly and severally agree to pay all such reasonable fees and expenses of the Escrow
Agent. All fee invoices should be billed directly to a CIC Representative at the address set forth
in Section 6.5(iii). The Escrow Agent shall have, and is hereby granted, a prior lien upon
the Escrow Shares with respect to its unpaid fees and nonreimbursed expenses to which it is
expressly entitled hereunder and unsatisfied claims for indemnification to which it is expressly
entitled hereunder; provided, however, that such lien shall only apply to Escrow
Shares to which CIC or the CIC Shareholders have a right to receive distribution pursuant to
Article IV and shall not apply to Escrow Shares held in the Escrow Fund during the Escrow
Period for possible distribution to Triad or another Triad Indemnified Party. The Escrow Agent
shall be entitled and
11
is hereby granted the right to set off and deduct any unpaid fees and nonreimbursed expenses
to which it is expressly entitled hereunder or unsatisfied claims for indemnification to which it
is expressly entitled hereunder from the Escrow Shares on which it has a lien as described in the
foregoing sentence.
5.5 Indemnification. CIC and the Principal CIC Shareholders jointly and severally
agree to indemnify the Escrow Agent against, and agree to hold the Escrow Agent harmless from, any
and all losses, liabilities and expenses (including reasonable attorneys’ fees and expenses)
incurred by the Escrow Agent and arising out of or in connection with the performance of its
obligations pursuant to the provisions of this Agreement, except for any and all losses,
liabilities or expenses incurred as a result of the negligence, bad faith or willful misconduct of
the Escrow Agent. The obligations under this Section 5.5 shall survive the resignation or
removal of the Escrow Agent and the termination of this Agreement.
5.6 Resignation or Removal of the Escrow Agent. The Escrow Agent may resign at any
time by giving thirty (30) calendar days’ prior written notice of resignation to Triad and a CIC
Representative. Triad and a CIC Representative may at any time remove the Escrow Agent upon thirty
(30) calendar days’ joint prior written notice of removal to the Escrow Agent. Within thirty (30)
calendar days after giving such notice of resignation or receiving such notice of removal, the
Escrow Agent shall promptly transfer the Escrow Shares and any documentation related thereto to a
successor escrow agent designated in writing by Triad and a CIC Representative (which designation
Triad and a CIC Representative hereby agree to cooperate in promptly making), and the Escrow Agent
shall thereupon be discharged from all obligations under this Agreement and shall have no further
duties or responsibilities in connection herewith. If Triad and a CIC Representative have failed to
appoint a successor prior to the expiration of thirty (30) calendar days following receipt of the
notice of resignation or removal, the Escrow Agent may appoint a successor (provided that such
successor is a bank or trust company with combined capital and surplus of at least $500,000,000) or
may petition any court of competent jurisdiction for the appointment of a successor escrow agent or
for other appropriate relief, and any such resulting appointment shall be binding upon all of the
parties hereto.
5.7 Disputes. In the event that (i) the Escrow Agent shall receive instructions with
respect to the Escrow Shares which are in conflict with other instructions received by it or any
provision of this Agreement or (ii) the Escrow Agent shall be uncertain as to its rights or duties
hereunder, the Escrow Agent shall be permitted to interplead all of the assets held hereunder into
a court of competent jurisdiction, and thereafter be fully relieved from any and all liability or
obligation with respect to such interpleaded assets.
5.8 Advice of Counsel; Litigation. The Escrow Agent shall have the right, but not the
obligation, to consult with counsel of choice and shall not be liable for action taken or omitted
to be taken by the Escrow Agent in good faith in accordance with the advice of such counsel. If the
Escrow Agent becomes involved in litigation on account of this Agreement, it shall have the right
to retain counsel and shall have a first lien on the Escrow Shares over which CIC or the CIC
Shareholders have a right to receive distribution pursuant to Article IV for any and all of
its reasonable and documented costs, attorneys’ fees, charges, disbursements, and expenses in
connection with such litigation; and shall be entitled to reimburse itself therefor from such
Escrow Shares over which CIC or the CIC Shareholders have a right to receive distribution
12
pursuant to Article IV, and if it shall be unable to reimburse itself from such Escrow
Shares over which CIC or the CIC Shareholders have a right to receive distribution pursuant to
Article IV, CIC and the CIC Shareholders jointly and severally agree to pay to the Escrow
Agent on demand its reasonable and documented costs, attorneys’ fees, charges, disbursements, and
expenses in connection with such litigation; provided, however, that the Escrow
Agent shall have no such rights if such litigation alleges and the court finally determines that
the Escrow Agent violated the standard of care set forth in this Article V.
5.9 Successor Escrow Agent. Any banking association or corporation into which the
Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall
be a party, or any banking association or corporation to which all or substantially all of the
corporate trust business of the Escrow Agent shall be transferred, shall succeed to all of the
Escrow Agent’s rights, obligations and immunities hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
5.10 Statements. The Escrow Agent shall send statements to Triad and a CIC
Representative on a quarterly basis reflecting activity in the Escrow Fund for the preceding
quarter.
5.11 Court Orders; Judgments or Decrees. In the event that the Escrow Shares shall be
attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or
enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any
court order affecting the Escrow Shares, the Escrow Agent is hereby expressly authorized, in its
sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which
it is advised by legal counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or
decree it shall not be liable to any of the parties hereto or to any other person, firm or
corporation, by reason of such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.
ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement shall terminate and be of no further force and effect
(i) with respect to any particular class of Escrow Shares, upon the liquidation or dissolution of
the issuer of such class of Escrow Shares, (ii) upon the date that all Escrow Shares have been
distributed from the Escrow Fund pursuant to the provisions of this Agreement or (iii) upon the
later of (a) 36 months following the date of the filing of the final CIC federal income tax return
and (b) the fourth Anniversary, unless one or more Claim Notices and/or Tax Disputes have not been
finally resolved by such date, in which case this Agreement shall terminate upon the final
resolution of such pending Claim Notices and Tax Disputes and the distribution of all of the Escrow
Shares held in the Escrow Fund pursuant to the provisions of this Agreement.
13
6.2 No Obligation to Set-Off Against Escrow Fund. CIC and each Indemnifying CIC
Shareholder agrees and acknowledges that (i) the indemnification obligations of CIC and the
Indemnifying CIC Shareholders under Article VIII of the Exchange Agreement shall not in any
manner be limited to the Escrow Shares that may be contained in the Escrow Fund at any time and
(ii) the Triad Indemnified Parties are not obligated to seek satisfaction of a claim for
indemnification under the Exchange Agreement from the Escrow Fund prior to seeking satisfaction of
such a claim from CIC or the Indemnifying CIC Shareholders; provided, however, that
in the event of a distribution of some or all of the Escrow Shares to Triad or its designee(s)
under the terms of this Agreement, Triad agrees and acknowledges that it shall be deemed to have
been paid an amount equal to the Market Value of such distributed Escrow Shares by CIC and the
Indemnifying CIC Shareholders pursuant to the terms of Article VIII of the Exchange
Agreement.
6.3 Implementing Agreement. Subject to the terms and conditions hereof, each party
hereto shall take all action required of it to fulfill its obligations under the terms of this
Agreement and shall otherwise use all commercially reasonable efforts to facilitate the
consummation of the transactions contemplated hereby. Each party hereto agrees that he, she or it
will take no action that would have the effect of preventing or impairing the performance by any
party hereto of its respective obligations under this Agreement.
6.4 Amendment. This Agreement may be amended, modified or supplemented but only in
writing signed by Triad and a CIC Representative (as defined below), provided that if a CIC
Liquidation Notice has been received by Triad and the Escrow Agent as contemplated by Section
2.4, the written consent of a CIC Representative shall not be required, and provided
further that if any such amendment or waiver would have the effect of increasing the Escrow
Agent’s obligations or duties under this Agreement, the written consent of the Escrow Agent to such
amendment, modification or waiver shall also be required.
6.5 Notices. Any notice, request, instruction or other document to be given hereunder
by a party hereto shall be in writing and shall be deemed to have been received, (a) when delivered
if given in person or by courier or a courier service, (b) on the date of transmission if sent by
facsimile or other wire transmission (receipt confirmed by return facsimile) or (c) five (5)
Business Days after being deposited in the U.S. mail, certified or registered mail, postage
prepaid:
| (i) | If to CIC, addressed as follows: |
| Collateral Investment Corp. | ||
| c/o Collateral Mortgage | ||
| 0000 Xxxxxxxxx Xxxx. | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxxx X. Xxxxxxx | ||
| Facsimile No.: (000) 000-0000 | ||
| with copies to: | ||
| Collateral Investment Corp. |
14
| c/o Collateral Mortgage | ||
| 0000 Xxxxxxxxx Xxxx. | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxx X. Xxxxx | ||
| Facsimile No.: (000) 000-0000 | ||
| and | ||
| Xxxxxxx, Xxxxxx & Xxxx, P.C. | ||
| 0000 0xx Xxxxxx Xxxxx | ||
| Xxxxx 0000 | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxxx X. Xxxxxx | ||
| Facsimile No.: (000) 000-0000 |
| (ii) | If to any CIC Shareholder, addressed to a CIC Representative as follows: |
| Collateral Investment Corp. | ||
| c/o Collateral Mortgage | ||
| 0000 Xxxxxxxxx Xxxx. | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxxx X. Xxxxxxx | ||
| Facsimile No.: (000) 000-0000 | ||
| with copies to: | ||
| Collateral Investment Corp. | ||
| c/o Collateral Mortgage | ||
| 0000 Xxxxxxxxx Xxxx. | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxx X. Xxxxx | ||
| Facsimile No.: (000) 000-0000 | ||
| and | ||
| Xxxxxxx, Xxxxxx & Xxxx, P.C. | ||
| 0000 0xx Xxxxxx Xxxxx | ||
| Xxxxx 0000 | ||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||
| Attention: Xxxxxxx X. Xxxxxx | ||
| Facsimile No.: (000) 000-0000 |
| (iii) | If to Triad, addressed as follows: |
| A. | Triad Guaranty Inc. | |||
| B. | 000 X. Xxxxxxxxx Xx. |
15
| X. | Xxxxxxx-Xxxxx, XX 00000 | |||
| D. | Attention: Xxxx X. Xxxx, Esq. | |||
| E. | Facsimile: (000) 000-0000 | |||
| F. | ||||
| G. | with a copy to: | |||
| H. | ||||
| I. | Lord, Bissell & Brook, LLP | |||
| J. | 000 Xxxxx XxXxxxx Xxxxxx | |||
| X. | Xxxxxxx, Xxxxxxxx 00000 | |||
| L. | Attention: Xxxx X. Xxxxxxx | |||
| M. | Facsimile: (000) 000-0000 | |||
| (iv) | If to the Escrow Agent, addressed as follows: | |||
| Attention: | ||||
| Facsimile No.: |
or to such other individual or address as a party hereto may designate for itself by notice
given as herein provided.
6.6 Waivers. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a further or continuing waiver of any
such condition or breach in other instances or a waiver of any other condition or breach of any
other term, covenant, representation or warranty.
6.7 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature and a facsimile signature shall constitute an
original signature for all purposes.
6.8 Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and legal representatives;
provided, that (i) the Escrow Agent shall not be permitted to assign any rights or
obligations hereunder, by operation of law or otherwise, except as provided in Section 5.6,
(ii) no assignment of any rights or obligations hereunder shall be made by CIC or any CIC
Shareholder to any Person without the prior written consent of Triad, (iii) no assignment of any
rights or obligations hereunder shall be made by Triad to any Person, other than to an Affiliate
(as defined in the Exchange Agreement) of Triad, without the prior written consent of a CIC
Representative and (iv) no assignment of the interests of any of the parties hereto shall be
binding upon the Escrow Agent unless and until
16
written notice of such assignment shall be provided to the Escrow Agent at the address set
forth in Section 6.5(v).
6.9 Third Party Beneficiaries. This Agreement is intended solely for the benefit of
the parties hereto and, to the extent provided herein, the Triad Indemnified Parties, and no
provision of this Agreement shall be deemed to confer upon other third parties any remedy, claim,
liability, reimbursement, cause of action or other right.
6.10 Severability. If any provision of this Agreement shall be held invalid, illegal
or unenforceable, the validity, legality or enforceability of the other provisions hereof shall not
be affected thereby, and there shall be deemed substituted for the provision at issue a valid,
legal and enforceable provision as similar as possible to the provision at issue.
6.11 Remedies Cumulative. The remedies provided in this Agreement shall be cumulative
and shall not preclude the assertion or exercise of any other rights or remedies available by Law,
in equity or otherwise.
6.12 Entire Understanding. This Agreement, the Exchange Agreement and the Share
Transfer Restriction Agreement set forth the entire agreement and understanding of the parties
hereto with respect to the transactions contemplated hereby and supersede any and all prior
agreements, arrangements and understandings among the parties relating to the subject matter
hereof.
6.13 CIC Representative. CIC and each CIC Shareholder hereby irrevocably authorizes
and appoints each of Xxxxxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx, III and any one of them as
his, her or its true and lawful attorney and representative (the “CIC Representatives”)
with full power and authority to individually take any and all actions and execute any and all
documents specified in this Agreement as being within the authority of a CIC Representative.
Xxxxxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx III hereby accept their appointments as the CIC
Representatives and agree to perform all of the duties of a CIC Representative hereunder. If all
CIC Representatives shall die or become incapacitated, the Principal CIC Shareholders shall
promptly appoint a successor Person to act as CIC Representative. Each of CIC and the Principal CIC
Shareholders shall jointly and severally indemnify and hold harmless the CIC Representatives from
any and all Losses arising from action or inaction of the CIC Representatives taken or not taken in
his capacity as such. In addition to the actions permitted of a CIC Representative elsewhere in
this Agreement, each CIC Representative and any one of them is specifically authorized to execute
the stock powers in blank referred to in Section 2.6(D) of the Exchange Agreement.
6.14 Applicable Law. This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
6.15 Acknowledgment of CIC and each CIC Shareholder. CIC and each CIC Shareholder
represents to Triad that he, she or it is knowledgeable and sophisticated as to business matters,
including the subject matter of this Agreement, that CIC and each CIC Shareholder has read this
Agreement and the Exchange Agreement and that he, she or it
17
understands their respective terms. CIC and each CIC Shareholder acknowledges that, prior to
assenting to the terms of this Agreement, he, she or it has been given a reasonable time to review
it, to consult with counsel of his, her or its choice and to negotiate at arm’s-length with Triad
as to its contents. CIC, each CIC Shareholder and Triad agree that the language used in this
Agreement is the language chosen by the parties to express their mutual intent, and that no rule of
strict construction is to be applied against CIC, any CIC Shareholder or Triad.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.
| TRIAD GUARANTY INC. | ||||
By: |
||||
| Name: | ||||
| Title: | ||||
| COLLATERAL INVESTMENT CORP. | ||||
By: |
||||
| Name: | ||||
| Title: | ||||
| AmSouth Bank, as Escrow Agent | ||||
By: |
||||
| Name: | ||||
| Title: | ||||
| THE PRINCIPAL CIC SHAREHOLDERS: | ||||
| [Principal CIC Shareholder] | ||||
| [Principal CIC Shareholder] | ||||
| [Principal CIC Shareholder] | ||||
18
| OTHER CIC SHAREHOLDERS | ||||
Name: |
||||
Name: |
||||
Name: |
||||
19
EXHIBIT A ESCROW AGENT FEE SCHEDULE
Acceptance Fee:
|
$ | 0.00 | ||||
Annual Fee:
|
$ | 0.00 |
The Acceptance Fee and the Annual Fee are billed in advance and payable prior to that year’s
service. The Annual Fee for the first year of this Agreement will be billed to a CIC Representative
following the Closing. These fees cover a full year, or any part thereof, and thus are not prorated
in the year of termination.
Any reasonable out-of-pocket expenses, or extraordinary fees or expenses of the Escrow Agent such
as attorney fees or messenger costs related to this Agreement, are additional and are not included
in the above schedule.
| The X. X. Xxxxxxx, Xx. 2002 CIC Grantor | ||||
| Retained Annuity Trust | ||||
| By: | /s/ Xxxxxxx X Xxxxxxx, III | |||
| Name: Xxxxxxx X. Xxxxxxx, III | ||||
| Its Trustee | ||||
20
Exhibit B
SHARE TRANSFER RESTRICTION AGREEMENT
BY AND AMONG
COLLATERAL INVESTMENT CORP.
THE SHAREHOLDERS OF COLLATERAL INVESTMENT CORP. LISTED AS
“PRINCIPAL CIC SHAREHOLDERS” ON THE SIGNATURE PAGES HERETO
“PRINCIPAL CIC SHAREHOLDERS” ON THE SIGNATURE PAGES HERETO
THE PERSONS LISTED AS “OTHER CIC SHAREHOLDERS”
ON THE SIGNATURE PAGE HEREIN
ON THE SIGNATURE PAGE HEREIN
DATED OF , 2005
21
SHARE TRANSFER RESTRICTION AGREEMENT
This SHARE TRANSFER RESTRICTION AGREEMENT (this “Agreement”) is made and entered into
as of the day of , 2005, among (i) Triad Guaranty Inc., a Delaware corporation
(“Triad”); (ii) Collateral Investment Corp., a Delaware corporation (“CIC”); (iii)
certain principal shareholders of CIC, which shareholders are listed as “Principal CIC
Shareholders” on the signature pages hereto and (iv) each other Person who shall execute this
Agreement, as amended, whether in counterpart, by separate instrument or otherwise (including
through power of attorney) (together with the Principal CIC Shareholders, the “CIC
Shareholders”).
WITNESSETH:
A. Triad, CIC and the Principal CIC Shareholders are parties to that certain Exchange
Agreement which provides for, among other things, the following transactions: (i) the transfer by
CIC to Triad of the Old Triad Shares and the transfer by Triad to CIC of the New Triad Shares (the
“Transaction”); (ii) prior to the consummation of the Transaction, the transfer and sale by
CIC of substantially all of the assets of CIC (other than the Old Triad Shares) to Collateral
Mortgage Ltd. (“CML”), and the transfer to CML, or other satisfaction, of all the
indebtedness and other contractual liabilities of CIC (the “CML Transaction”); (iii)
following the consummation of the CML Transaction and the Transaction, the distribution by CIC of
all of the New Triad Shares and any remaining assets of CIC to the CIC Shareholders pursuant to a
plan of liquidation of CIC (the “Liquidation”) and (iv) the execution and delivery by
Triad, CIC and the Principal CIC Shareholders of the Escrow Agreement.
B. In connection with the Liquidation, each CIC Shareholder is expected to receive New Triad
Shares as contemplated by Section 3.4.
C. The Exchange Agreement requires the Principal CIC Shareholders and Triad to execute and
deliver this Agreement at, and as a condition to, the Closing.
D. Triad would not be willing to enter into the Exchange Agreement and consummate the
Transaction unless CIC and each CIC Shareholder agreed to restrict the Transfer (as hereinafter
defined) of the New Triad Shares in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties,
covenants and agreements herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Unless otherwise defined herein, capitalized terms used in this
Agreement shall have the meaning set forth in the Exchange Agreement. The following terms shall
have the following meanings for the purposes of this Agreement:
“Agreement” shall have the meaning set forth in the preamble hereto.
“Anniversary” shall mean an annual anniversary of the Closing Date.
“Approved Company Transaction” shall mean a tender or exchange offer with a party not an
Affiliate of Triad, which is approved by a majority of the Board of Directors of Triad and pursuant
to which all shareholders of Triad have the opportunity to Transfer their Triad Common Stock as
part of such transaction on the same terms.
“Bank” shall mean (i) a bank (as defined in section (3)(a)(2) of the Securities Act), (ii) a
savings and loan association described in section 3(a)(5)(A) of the Securities Act, whether acting
in its individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to section 15
of the Exchange Act or (iv) an insurance company (as defined in section 2(13) of the Securities
Act).
“Beneficially Owned” shall have the meaning provided pursuant to Rule 13d-3 promulgated
pursuant to the Securities Exchange Act of 1934.
“CIC Shareholders” shall have the meaning set forth in the preamble hereto.
“Contract” shall mean any contract, arrangement, commitment, understanding, lease, sales
order, purchase order, agreement, warranty, indenture, mortgage, note, bond, right, warrant or
instrument, whether written or verbal.
“Escrow Agent” shall mean .
“Escrow Fund” shall have the meaning assigned to such term in the Escrow Agreement.
“Permitted Transfer” shall mean (i) the sale of Restricted Shares by a CIC Shareholder in one
or more “brokers transactions” (as defined in Rule 144(g) promulgated under the Securities Act of
1933) that, in the aggregate over any consecutive three (3) month period, do not exceed 10,000
Restricted Shares Beneficially Owned by said CIC Shareholder; or (ii) Transfers by a CIC
Shareholder to (A) its immediate family members; (B) trusts established by such CIC Shareholder for
the benefit of its immediate family members; (C) its Affiliates; (D) charitable organizations and
other non-profit entities, so long as the transferees described in (A) through (D) above agree in
writing to be bound by the terms of this Agreement.
“Restricted Shares” shall mean (i) the New Triad Shares (including the Escrow Shares) and (ii)
all shares of capital stock or other securities, whether issued by Triad or otherwise,
2
issued or paid as dividends or other distributions on or in respect of New Triad Shares or
other shares of capital stock or securities otherwise constituting Restricted Shares.
“Rule 144” shall mean Rule 144 as promulgated by the SEC under the Securities Act, as such
rule may be amended from time to time, or any similar successor rule that may be promulgated by the
SEC.
“Share Transfer Restriction Agreement Legend” shall have the meaning assigned in Section
4.1.
“Transfer” shall mean (i) when used as a noun, any sale, transfer, conveyance, grant
(including a grant of a security interest), encumbrance, pledge, hypothecation, gift, donation,
bequest, devise or other disposition, whether direct or indirect, whether or not for value, and
shall include any disposition of the economic or other risks of ownership of Restricted Shares or
(ii) when used as a verb, making or effecting any of the foregoing.
1.2 Interpretation. The headings preceding the text of Articles and Sections included
in this Agreement and the headings to Schedules attached to this Agreement are for convenience only
and shall not be deemed part of this Agreement or be given any effect in interpreting this
Agreement. The use of the masculine, feminine or neuter gender or the singular or plural form of
words herein shall not limit any provision of this Agreement. The use of the terms “including” or
“include” shall in all cases herein mean “including, without limitation” or “include, without
limitation,” respectively. Reference to any Person includes such Person’s successors and assigns to
the extent such successors and assigns are permitted by the terms of any applicable agreement, and
reference to a Person in a particular capacity excludes such Person in any other capacity or
individually. Reference to any agreement (including this Agreement), document or instrument means
such agreement, document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof. Reference to any Law means
such Law as amended, modified, codified, replaced or re-enacted, in whole or in part, including
rules, regulations, enforcement procedures and any interpretations promulgated thereunder.
References to Articles, Sections, Subsections or Schedules shall refer to those portions of this
Agreement. The use of the terms “hereunder,” “hereof,” “hereto” and words of similar import shall
refer to this Agreement as a whole and not to any particular Article, Section or clause of or
Exhibit or Schedule to this Agreement. No specific representation, warranty or covenant contained
herein shall limit the generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any representation, warranty or covenant
shall not be affected by the fact that any more general or less general representation, warranty or
covenant was not also breached or inaccurate. The word “class” when used by reference to securities
or Restricted Shares shall have the meaning as set forth in Section 12 of the Exchange Act.
ARTICLE II
RESTRICTIONS ON TRANSFERS OF THE RESTRICTED SHARES
In addition to complying with Rule 144, if applicable, and all other Transfer restrictions and
other requirements under any other Law, in each case if and to the extent applicable, each
3
CIC Shareholder shall comply with the following restrictions on Transfers of Restricted Shares
following the Closing (and any failure to comply therewith shall result in such Transfer being null
and void):
2.1 Escrow Shares. Notwithstanding anything to the contrary contained in this
Agreement or any Related Agreement, except as permitted under Section 3.5 of the Escrow Agreement,
no CIC Shareholder may Transfer any Restricted Shares constituting Escrow Shares unless and until
such shares have been released from the Escrow Fund and distributed to such CIC Shareholder by the
Escrow Agent pursuant to the terms of the Escrow Agreement.
2.2 Initial 90-Day Lock-Up. During the ninety day period from and after the Closing
Date, no CIC Shareholder shall Transfer any Restricted Shares Beneficially Owned by such CIC
Shareholder other than in an Approved Company Transaction;
2.3 Primary Restriction Period. During the period from and after ninety days
following the Closing Date and ending on the first Anniversary for each CIC Shareholder that is not
also a Principal CIC Shareholder, and ending on the fourth Anniversary for each Principal CIC
Shareholder, except for Permitted Transfers or an Approved Company Transaction, no CIC Shareholder
shall Transfer any Restricted Shares Beneficially Owned by such CIC Shareholder.
2.4 Termination of Transfer Restraints. After the first Anniversary, each CIC
Shareholder that is not also a Principal CIC Shareholder may Transfer any or all of the Restricted
Shares (other than Escrow Shares) and after the fourth Anniversary each Principal CIC Shareholder
may Transfer any or all of the Restricted Shares (other than Escrow Shares).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CIC SHAREHOLDERS
As of the date of execution of this Agreement, each CIC Shareholder severally represents and
warrants to Triad as set forth below. The information disclosed on any Schedule attached hereto
shall be deemed to relate solely to the section of this Article III to which such Schedule
relates and shall not be deemed to relate to any other sections to which such disclosures may apply
unless such disclosure is cross-referenced in the Schedule(s) relating to such other section(s),
and only to the extent that the applicable information or risk is described.
3.1 Due Organization. If such CIC Shareholder is not a natural person, such CIC
Shareholder is an entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization.
3.2 Due Authorization. If such CIC Shareholder is not a natural person, such CIC
Shareholder has full power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. If such CIC Shareholder is a natural person, such
CIC Shareholder has the legal capacity, power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. If such CIC Shareholder is a
trust or a custodianship, the trustee of such trust or the custodian of such custodianship, as the
case may be, has the legal capacity, power and authority, on behalf of such trust or custodianship,
as the case may be, to execute, deliver and perform this Agreement and to
4
consummate the transactions contemplated hereby. Such CIC Shareholder has taken all action
required by Law, such CIC Shareholder’s organizational or governing documents (if applicable), or
otherwise to authorize the execution, delivery and performance of this Agreement and the
consummation by such CIC Shareholder of the transactions contemplated hereby. Such CIC Shareholder
has duly and validly executed and delivered this Agreement. This Agreement constitutes legal, valid
and binding obligations of such CIC Shareholder, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect that affect the enforcement of creditors’ rights generally
and by equitable limitations on the availability of specific remedies.
3.3 Consents and Approvals; Authority.
(a) Except as described in Schedule 3.3(a), no consent, authorization or approval of, filing
or registration with, waiver of any right of first refusal or first offer from, or cooperation
from, any Governmental Authority or any other Person is necessary in connection with the execution,
delivery and performance by such CIC Shareholder of this Agreement or the consummation by such CIC
Shareholder of the transactions contemplated hereby.
(b) The execution, delivery and performance by such CIC Shareholder, of this
Agreement and the consummation by such CIC Shareholder of the transactions contemplated hereby, do
not and will not (i) violate any Law applicable to or binding on such CIC Shareholder, or any of
such CIC Shareholder’s assets or properties; (ii) violate or conflict with, result in a breach or
termination of, constitute a default or give any third party any additional right (including a
termination right) under, permit cancellation of, result in the creation of any Lien upon any of
the assets or properties of such CIC Shareholder under, or result in or constitute a circumstance
which, with or without notice or lapse of time or both, would constitute any of the foregoing
under, any Contract to which such CIC Shareholder is a party or by which such CIC Shareholder or
any of such CIC Shareholder’s assets or properties are bound; (iii) permit the acceleration of the
maturity of any indebtedness of such CIC Shareholder or indebtedness secured by any of such CIC
Shareholder’s assets or properties; or (iv) violate or conflict with any provision of the
certificate of incorporation, bylaws or similar organizational instruments of such CIC Shareholder.
3.4 Ownership of Triad Common Stock. Such CIC Shareholder has previously provided to
Triad a schedule that sets forth (i) the name, address and taxpayer identification number of each
CIC Shareholder, and (ii) the number of New Triad Shares (including the number of Escrow Shares)
expected to be received by each CIC Shareholder in connection with the Liquidation.
ARTICLE IV
LEGENDS
4.1 Legends. For so long as the restrictions hereunder are applicable to such shares
as determined by Triad in Triad’s reasonable discretion, in addition to any legend required by the
Exchange Agreement, all certificates representing New Triad Shares shall be stamped or
5
otherwise imprinted with a legend (the “Share Transfer Restriction Agreement Legend”)
in substantially the following form:
“The sale, transfer or other disposition of the shares represented by this
certificate prior to is subject to, and may not be made except in
compliance with, the conditions specified in a Share Transfer Restriction Agreement
with Triad Guaranty Inc. (the “Company”). A copy of the Share Transfer Restriction
Agreement is on file and may be inspected at the principal office of the Company and
will be furnished by the Company to the holder hereof upon request and without
charge.”
4.2 Removal of Legends.
(a) Upon receipt by Triad of satisfactory written evidence (which evidence shall include, at
Triad’s reasonable request, an opinion of counsel reasonably acceptable to Triad, in form and
substance reasonably acceptable to Triad) that a CIC Shareholder has Transferred or is Transferring
Restricted Shares in accordance with the requirements of this Agreement and otherwise in compliance
with the Securities Act and all applicable state securities laws, along with the certificate or
certificates representing the Restricted Shares Transferred or to be Transferred, Triad shall
promptly instruct its transfer agent to register the number of shares Transferred or to be
Transferred in the name of the transferee or to the selling broker in “street name” and to deliver
one or more new certificates representing such Transferred shares to the CIC Shareholder or to the
CIC Shareholder’s designee(s), provided that Triad shall have no obligation to provide such
instructions to its transfer agent unless such Transfer was made or is being made in compliance
with all of the provisions of this Agreement.
(b) At any time following the first Anniversary (with respect to a CIC Shareholder that is not
also a Principal CIC Shareholder) or the fourth Anniversary (with respect to a Principal CIC
Shareholder), as applicable, upon receipt by Triad from such CIC Shareholder of one or more
certificates representing Restricted Shares, Triad shall promptly instruct its transfer agent to
(i) cancel such returned certificate or certificates and (ii) deliver one or more new certificates
representing such Restricted Shares to such CIC Shareholder or to such CIC Shareholder’s designee,
which new certificate or certificates shall not contain the Share Transfer Restriction Agreement
Legend.
4.3 Later Delivery of Certificates. In the event that any additional shares of Triad
Common Stock or other shares of capital stock or securities shall become Restricted Shares at any
time following the Closing, upon the request of Triad, the holder of such Restricted Shares shall
promptly deliver the certificates for such New Triad Shares to Triad for the sole purpose of
permitting Triad to stamp or otherwise imprint the Share Transfer Restriction Agreement Legend
thereon. Triad shall promptly return such certificates to such holder after Triad has so stamped or
imprinted such certificates.
4.4 Uncertificated Shares. To the extent any Restricted Shares are not evidenced by
certificates, the books and records of Triad or the applicable issuer (including those maintained
by the registrar or transfer agent of such class of Restricted Shares) shall contain appropriate
6
notation indicating that such shares are subject to, and the Transfer thereof is subject to,
and may not be made except in compliance with, all of the provisions of this Agreement.
4.5 No Limitation of Indemnification Obligations. Nothing in this Article IV
shall limit or otherwise affect the indemnification obligations of the CIC Shareholders set forth
in Article VIII of the Exchange Agreement or the obligation of any CIC Shareholder to
comply with all of the provisions of this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Termination In Certain Events. The provisions of this Agreement shall terminate
and be of no further force and effect upon the fifth Anniversary.
5.2 Implementing, Agreement. Subject to the terms and conditions hereof, each party
hereto shall take all action required of it to fulfill its obligations under the terms of this
Agreement and shall otherwise use all commercially reasonable efforts to facilitate the
consummation of the transactions contemplated hereby. Each party hereto agrees that he, she or it
will take no action that would have the effect of preventing or impairing the performance by any
party hereto of its respective obligations under this Agreement.
5.3 Amendment. This Agreement may be amended, modified or supplemented but only with
the written consent of Triad and the CIC Shareholders Beneficially Owning a majority of the
Restricted Shares.
5.4 Notices. Any notice, request, instruction or other document to be given hereunder
by a party hereto shall be in writing and shall be deemed to have been received, (a) when delivered
if given in person or by courier or a courier service, (b) on the date of transmission if sent by
facsimile or other wire transmission (receipt confirmed by return facsimile) or (c) five (5)
Business Days after being deposited in the U.S. mail, certified or registered mail, postage
prepaid:
(a) If to any CIC Shareholder, addressed to the address listed for such CIC Shareholder on the
schedule for such CIC Shareholder referred to in Section 3.4, with a copy to:
| Collateral Investment Corp. | ||||
| c/o Collateral Mortgage | ||||
| 0000 Xxxxxxxxx Xxxx. | ||||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||||
| Attention: | Xxxxxxx X. Xxxxxxx | |||
| Facsimile No.: | (000) 000-0000 | |||
| with copies to: | ||||
| Collateral Investment Corp. | ||||
| c/o Collateral Mortgage | ||||
| 0000 Xxxxxxxxx Xxxx. | ||||
| Xxxxxxxxxx, Xxxxxxx 00000 |
7
| Attention | : Xxxxxx X. Xxxxx | |||
| Facsimile No.: | (000) 000-0000 | |||
| and | ||||
| Xxxxxxx, Xxxxxx & Xxxx, P.C. | ||||
| 0000 0xx Xxxxxx Xxxxx | ||||
| Xxxxx 0000 | ||||
| Xxxxxxxxxx, Xxxxxxx 00000 | ||||
| Attention: | Xxxxxxx X. Xxxxxx | |||
| Facsimile No.: | (000) 000-0000 |
| (b) | If to Triad, addressed as follows: | |||
| N. | Triad Guaranty Inc. | |||
| O. | 000 X. Xxxxxxxxx Xx. | |||
| X. | Xxxxxxx-Xxxxx, XX 00000 | |||
Q.
|
Attention: | Xxxx X. Xxxx, Esq. | ||
R.
|
Facsimile: | (000) 000-0000 | ||
| S. | ||||
T.
|
with a copy to: | |||
| U. | ||||
| V. | Lord, Bissell & Brook, LLP | |||
| W. | 000 Xxxxx XxXxxxx Xxxxxx | |||
| X. | Xxxxxxx, Xxxxxxxx 00000 | |||
Y.
|
Attention: | Xxxx X. Xxxxxxx | ||
Z.
|
Facsimile: | (000) 000-0000 | ||
or to such other individual or address as a party hereto may designate for itself by notice given
as herein provided.
5.5 Waivers. The failure of a party hereto at any time or times to require performance
of any provision hereof shall in no manner affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one
or more instances shall be deemed to be a further or continuing waiver of any such condition or
breach in other instances or a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
5.6 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature and a facsimile signature shall constitute an
original signature for all purposes.
5.7 Successors And Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall be binding upon and inure to the benefit of the parties hereto
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and their respective successors, assigns, heirs and legal representatives. Additionally the
parties hereto agree that, to the extent Triad is not the issuer of a particular class of
securities or Restricted Shares subject to this Agreement, Triad shall have the right to assign to
the issuer of such class of securities or Restricted Shares Triad’s rights and obligations under
this Agreement with respect to such class of securities or Restricted Shares and any such
assignment will not operate as a termination or limitation of Triad’s rights and obligations under
this Agreement with respect to any other class of securities or Restricted Shares. Triad shall
remain liable for any of its obligations under this Agreement that are assigned in accordance with
this Section 5.7.
5.8 Severability. If any provision of this Agreement shall be held invalid, illegal or
unenforceable, the validity, legality or enforceability of the other provisions hereof shall not be
affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal
and enforceable provision as similar as possible to the provision at issue.
5.9 Remedies. The remedies provided in this Agreement shall be cumulative and shall
not preclude the assertion or exercise of any other rights or remedies available by Law, in equity
or otherwise. Each of the parties hereto hereby acknowledges and agrees that the other parties
would be damaged irreparably in the event that any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached. Each of the parties
hereto hereby agrees that the other parties shall be entitled to an injunction or injunctions to
prevent breaches (or threatened breaches) of the provisions of this Agreement and to enforce
specific performance of the provisions of this Agreement in addition to any other remedies provided
in this Agreement and any other rights or remedies available by Law, in equity or otherwise.
5.10 Entire Understanding. This Agreement, the Exchange Agreement and the Escrow
Agreement sets forth the entire agreement and understanding of the parties hereto with respect to
the transactions contemplated hereby and supersede any and all prior agreements, arrangements and
understandings among the parties relating to the subject matter hereof.
5.11 Applicable Law. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without giving effect to the principles
of conflicts of law thereof.
[Signatures on Following Page]
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.
| TRIAD GUARANTY INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| COLLATERAL INVESTMENT CORP. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| THE PRINCIPAL CIC SHAREHOLDERS: | ||||
| [Principal CIC Shareholder] | ||||
| [Principal CIC Shareholder] | ||||
| [Principal CIC Shareholder] | ||||
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Exhibit C
OPINIONS (Note — The following opinions will be subject to customary assumptions and
qualifications.)
1. Collateral Investment Corp. (“CIC” or the “Company”) is incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
2. The Company has all necessary corporate power and authority, and all necessary shareholder
approval, to execute and deliver, and to perform its obligations under, the Exchange Agreement, the
Related Agreements (defined in the Exchange Agreement as the Escrow Agreement, the Share Transfer
Restriction Agreement and any other document or agreement delivered in connection with the Exchange
Agreement), the CML Transaction (as defined in the Exchange Agreement) and the Liquidation (as
defined in the Exchange Agreement).
3. The Company owns all of the Old Triad Shares (as defined in the Exchange Agreement) beneficially
and of record,1 and has full power and authority to convey, and the Exchange Agreement
(including the deliveries required thereby) is sufficient to convey, the Old Triad Shares, and upon
delivery of the Old Triad Shares in exchange for the New Triad Shares pursuant to the Exchange
Agreement, Triad will be a “protected purchaser” of such Old Triad Shares within the meaning of
Section 8-303 of the UCC if it has no notice of any adverse claim with respect to such shares
within the meaning of Section 8-105 of the UCC, and no action based on an adverse claim to such Old
Triad Shares may be asserted against Triad if Triad has no notice of such adverse claim within the
meaning of Section 8-105 of the UCC.
4. No consent, approval, authorization or order of or filing, registration or qualification with
any court or governmental agency or body is required in connection with (i) the execution and
delivery by the Company of the Exchange Agreement and Related Agreements, (ii) the consummation of
the transactions provided for in the Exchange Agreement and the Related Agreements, except such as
may be required under the blue sky or securities laws of any jurisdiction and such other approvals
as have already been obtained or made, and (iii) the consummation of the Liquidation, except for
any filings required to be made with the Delaware Secretary of State in connection with the
dissolution of the Company.
5. The Exchange Agreement and Related Agreements have been duly authorized, executed and delivered
by the Company and are valid, legal and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to
or affecting the enforcement of creditor’s rights generally and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity or at law). The
Liquidation has been duly authorized by the Company.
6. The execution and delivery of the Exchange Agreement and Related Agreements by the Company and
the consummation by the Company of the transactions contemplated by the
| 1 | This opinion will require reliance on information provided by the Company’s transfer agent. |
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Exchange Agreement and Related Agreements and the Liquidation will not result in any violation of
the Certificate or bylaws of the Company or the charter or bylaws of any Company Subsidiary. The
assignments, endorsements, stock powers and other instruments of transfer delivered by CIC to Triad
at the Closing will be sufficient to transfer to Triad the entire interest, legal and beneficial,
in the Old Triad Shares. Except for the Exchange Agreement, there is no subscription, option,
warrant, call, conversion or other right, commitment or contract of any nature obligating CIC or
any CIC Shareholder or any Affiliate of CIC (as defined in the Exchange Agreement) or any CIC
Shareholder to transfer or sell, or cause the transfer or sale of, any Old Triad Shares. There are
no voting agreements, voting trust agreements, proxies or shareholder or similar agreements
relating to the Old Triad Shares.
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