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Exhibit
10.1
OPTION
AGREEMENT
THIS OPTION AGREEMENT (this
“ Agreement ”) is made and entered into as of
September 14, 2007 by and among Meeting Street Investments
LLC, a Delaware limited liability company (together with its
successors and permitted assigns, “ MS LLC ”)
and Radian Guaranty, Inc., a Pennsylvania corporation (together
with its successors and permitted assigns, “ Radian
”).
WHEREAS, the principals of MS
LLC each owns an indirect Interest in Sherman Financial Group LLC,
a Delaware limited liability company (“ Sherman
Financial ”) and may each desire to increase their direct
or indirect equity interests in Sherman Financial; and
WHEREAS, as part of the 2007
Transactions and concomitantly with the sale by Radian of 300,000
Preferred Units and 1,672,547 Class A Common Units (as such
Preferred Units and Class A Common Units exist before giving
effect to the Recapitalization) to Sherman Capital, L.L.C., a
Delaware limited liability company and an affiliate of MS LLC
(“ Sherman Capital ”), Radian is willing to sell
to MS LLC and MS LLC is willing to purchase from Radian, an option
to purchase all of Radian’s remaining Interest in Sherman
Financial.
NOW, THEREFORE, in
consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties hereto agree as
follows:
Section 1. Grant of
Call Option .
(a) Radian hereby grants to
MS LLC an irrevocable option (the “ Call Option
”), on the terms set forth in Section 2 below, to
require Radian to sell to MS LLC on the Call Settlement Date a
number of Common Units in Sherman Financial corresponding to the
Call Option Amount in consideration of the payment by MS LLC to
Radian of the Call Settlement Price.
(b) The Call Option shall
expire immediately following the exercise thereof or, if
unexercised, shall expire as of the close of business on the date
that is 365 days after the Effective Date or, if such date is not a
Business Day, as of the close of business of the following Business
Day.
(c) Definitions . For
purposes of this Agreement, the following terms shall have the
following meaning:
“ Business Day
” means any day other than (a) Saturday or Sunday or
(b) a day on which commercial banks in New York, New York, are
authorized or required by applicable Law or executive order to
close.
“ Call Exercise
Date ” has the meaning set forth in
Section 2.
“ Call Exercise
Period ” means the period beginning on the Effective Date
and ending on the date that is 365 days after the Effective Date
or, if such date is not a Business Day, the following Business
Day.
“ Call Option
Amount ” means, as of any date of determination during
the Call Exercise Period, the aggregate percentage of
Radian’s ownership in Sherman Financial (or, if applicable,
of any of Radian’s successors or permitted
assigns).
“ Call Settlement
Date ” has the meaning set forth in
Section 2.
“ Call Settlement
Price ” means an amount equal to the Call Option Amount
as of the Call Settlement Date multiplied by $1.5 billion
and reduced by an amount equal to fifty (50) percent of all
distributions made by Sherman Financial with respect to the Call
Option Amount from and including the Effective Date to and
including the Call Settlement Date.
“ Effective Date
” has the meaning set forth in Section 3.
“ Governmental
Entity ” means any foreign, federal, state or local
government and any agency or instrumentality thereof, including,
without limitation, any court or regulatory body.
“ Law ”
means any statute, law, ordinance, regulation, rule, code, order,
rule of common law or judgment enacted, promulgated, issued,
enforced or entered by any Governmental Entity.
“ Party ”
or “ Parties ” means the Persons party to this
Agreement who appear on the signature page to this
Agreement.
“ Radian ”
has the meaning set forth in the introductory paragraph to this
Agreement.
“
Recapitalization ” has the meaning set forth in the
Sherman Securities Purchase Agreement.
“
Representatives ” means, with respect to any Party,
such Party’s agents, representatives (including its
employees, attorneys and consultants, financial or otherwise) and
affiliates.
“ Sherman
Financial ” has the meaning set forth in the first
recital to this Agreement.
“ Sherman Financial
LLC Agreement ” means the Fifth Amended and Restated
Limited Liability Company Agreement of Sherman Financial, effective
as of September 1, 2007.
All other capitalized terms
used herein without definition shall have the respective meanings
ascribed to them in the Sherman Financial LLC Agreement.
As used in this Agreement,
unless the context otherwise requires, words in the singular
include the plural and words in the plural include the singular. A
reference to any Party to this Agreement or any other agreement or
document shall include such Party’s successors and permitted
assigns. A reference to any agreement or order shall include any
amendment of such agreement or order from time to time in
accordance with the terms herewith and therewith. A reference to
any legislation, to any provision of any
2
legislation or to any regulation issued
thereunder shall include any amendment to, and any modification or
re-enactment thereof, any legislative provision or regulation
substituted therefor and all regulations issued thereunder or
pursuant thereto. The headings contained in this Agreement are for
convenience and reference only and do not form a part of this
Agreement. Section references in this Agreement refer to sections
of this Agreement unless otherwise specified.
Section 2. Exercise
of Call Option .
(i) MS LLC shall have the
right, but not the obligation, to exercise its Call Option on any
Business Day during the Call Exercise Period (such date of
exercise, the “ Call Exercise Date ”), by giving
written notice to Radian indicating that it will purchase the
Common Units in Sherman Financial corresponding to the Call Option
Amount pursuant to its Call Option, on a date no sooner than five
(5) Business Days and no later than ten (10) Business
Days after the Call Exercise Date (such purchase date, the “
Call Settlement Date ”).
(ii) Unless otherwise agreed
by the Parties, MS LLC shall make payment on the Call Settlement
Date of the Call Settlement Price in immediately available funds to
the account specified in writing by Radian to MS LLC. On the Call
Settlement Date, Radian will deliver the Common Units in Sherman
Financial corresponding to the Call Option Amount to MS LLC, free
and clear of all Liens, other than such Liens as may arise under
the Sherman Financial LLC Agreement.
Section 3.
Effectiveness .
This Agreement shall become
effective on the date on which the transactions contemplated by the
Sherman Securities Purchase Agreement are consummated (such date,
the “ Effective Date ”).
Section 4.
Representations of Radian . As a material inducement to MS
LLC to enter into this Agreement and consummate the transactions
contemplated hereby, Radian hereby represents and warrants to MS
LLC as follows:
(i) Organization .
Radian is a corporation validly existing and in good standing (or
its equivalent) under the laws of the State of its
incorporation.
(ii) Equity Interests and
Related Matters . There are no statutory or contractual
preemptive rights or rights of first refusal or Liens or other
similar restrictions with respect to the grant of the Call Option
or the purchase and sale of Common Units in Sherman Financial
pursuant to the Call Option (other than those contained in the
Sherman Financial LLC Agreement). Except for the Sherman Financial
LLC Agreement, there are no agreements or understandings between
Radian and any other persons with respect to the voting or transfer
of Radian’s Interest in Sherman Financial or with respect to
any other aspect of Sherman Financial’s
governance.
(iii) Authorization .
The execution, delivery and performance of this Agreement and all
of the other agreements executed in connection with this Agreement
to which such Radian is a party and the grant of the Call Option
hereunder and the sale of the Common Units in Sherman Financial
hereunder by Radian have been duly authorized Radian.
This
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