Termination Agreement
This Termination Agreement (the "Termination Agreement") is
entered
into effective as of April 13, 2007, by and among Texas Capital
Bank, N.A., a
national banking association ("Seller"), and Transnational
Financial Network,
Inc., a California corporation ("Buyer"), Clifton Cassidy, Eugene
John Barham
III, Patrick X. McGowan, Paula Alexandra Gambs, Jimmie Schellinger
and Victoria
S. Castaneda, each an individual resident of Texas and, as of the
date hereof,
an employee of Seller (collectively, the "Employees"), and
Bracewell & Giuliani
LLP, a Texas limited liability partnership, as the escrow agent
(the "Escrow
Agent").
Recitals
WHEREAS, Buyer and Seller have entered into that certain Asset
Purchase and Sale Agreement (the "Purchase Agreement"), dated as
of
September 30, 2006 and amended on October 18, 2006, pursuant to
which
Buyer agreed to purchase from Seller substantially all of the
assets of
Seller's residential mortgage lending business (the
"Business").
Capitalized terms used but not otherwise defined herein shall have
the
meanings assigned to them by the Purchase Agreement.
Whereas, prior to entering into the Purchase Agreement, Buyer
and Seller entered into a Loan Purchase Agreement, dated as of
September 28, 2006 (the "Correspondent Agreement") pertaining to
the
sale of mortgage loans from Seller to Buyer pending the
effectiveness
of the Purchase Agreement.
Whereas, in connection with the Purchase Agreement, Buyer and
Seller have entered into a Services Agreement, dated as of
September
30, 2006 (the "Services Agreement"), and a Stock Put and Call
Agreement
entered into as of December 5, 2006 (the "Stock Put and Call
Agreement").
Whereas, also in connection with the Purchase Agreement, Buyer
and Seller entered into an Escrow Agreement, dated as of December
5,
2006 (the "Escrow Agreement"), with Bracewell & Giuliani LLP as
the
Escrow Agent and the Employees.
Whereas, Buyer and Seller have determined that it is not in
the best interests of either party to proceed further with the
transaction contemplated by the Purchase Agreement, and the parties
now
desire to terminate their respective obligations under the
Purchase
Agreement and the Escrow Agreement and to unwind as much of the
transactions that have occurred under the Purchase Agreement as
is
practicable under the circumstances.
Now, therefore, in consideration of the above recitals and other
good
and valuable consideration, the receipt and sufficiency of which is
hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
1. Termination of Obligations under the Purchase Agreement. Buyer
and Seller
hereby agree that the Purchase Agreement was terminated effective
as of March
31, 2007, and that the parties' respective obligations under the
Purchase
Agreement will be modified consistent with the provisions of this
Section 1:
a. Buyer hereby waives all rights to receive any further Assets of
the Business
from Seller under the Purchase Agreement, will transfer to Seller
ownership of
the assets which Seller transferred to Buyer effective as of
September 30, 2006,
and will execute and deliver a Bill of Sale with respect to such
assets in the
form of Exhibit A hereto. Following Buyer's satisfaction of all
payment
obligations under Section 7 hereof, upon the request of Buyer,
Seller will sell
to Buyer the assets described in the Bill of Sale for a reasonable
price
mutually agreeable to Buyer and Seller.
b. Seller, for itself and the Employees, hereby waives all rights
to receive the
Initial Earn-Out Shares and the Remaining Earn-Out Shares under
Section II of
the Purchase Agreement and agrees that Buyer will not be required
to deliver to
Seller any additional shares of Buyer Common Stock.
c. Buyer hereby assigns to Seller, and Seller hereby assumes, all
rights and
obligations under the contracts and equipment leases set forth in
Schedule 1
hereto.
d. Buyer hereby agrees that, except as otherwise may be provided
herein, Seller
will have no further obligations under the covenants of Seller set
forth in
Section V of the Purchase Agreement.
e. Seller hereby agrees that, except as otherwise may be provided
herein, Buyer
will have no further obligations under the covenants of Buyer set
forth in
Section VI of the Purchase Agreement.
f.
Buyer and Seller hereby agree that the Closing described in
Section
VII of the Purchase Agreement will not occur.
g. Seller will be entitled to retain the shares of Buyer Common
Stock delivered
to Seller by Buyer under Section II(A)(1)(a) of the Purchase
Agreement; provided
that, upon Buyer's satisfaction of its payment obligations under
Section 7
hereof, and in accordance with such Section 7, Seller will tender
the shares of
Buyer Common Stock to Buyer without and for no consideration.
h. For a period of two (2) years from the date of this Termination
Agreement,
Seller shall refrain from interfering with the employment
arrangements between
the Buyer and any of Buyer's affiliates and subsidiaries and their
respective
employees and will not in any way solicit, recruit, hire, assist
others in
recruiting or hiring, or discuss employment arrangements with any
employees of
the Buyer, or any of Buyer's affiliates and subsidiaries. Nothing
in this
Section 1(h) shall prevent Seller from hiring or retaining as an
employee any
employee of the Business who is not as of the date hereof or does
not become at
any point hereafter an employee of Buyer.
<PAGE>
i. Under the terms of the Purchase Agreement, the Employees
received shares of
Buyer Common Stock as shown on Schedule 2 hereto (collectively, the
"Employee
Shares"). Employees hereby agree to return the Employee Shares to
Buyer, without
and for no consideration, and will tender the certificates
representing the
Employee Shares to Buyer concurrent with the Employees' execution
and delivery
of this Termination Agreement. Concurrent with Buyer's receipt of
the Employee
Shares from the Employees, Buyer shall execute and deliver to the
Employees the
receipt attached hereto as Exhibit B. With respect to the
Employees' return of
the Employee Shares, because the Employees received no financial
benefit from
their ownership of the Employee Shares, Buyer and Seller agree and
intend that
the Employees should not have to incur or suffer from any tax
impact with
respect to their temporary ownership of such shares of Buyer Common
Stock.
2. Balance of Payment Obligations under the Services Agreement.
Buyer and Seller
acknowledge that the Services Agreement was terminated on March 31,
2007 and
agree that, as of the date hereof, Buyer owes to Seller
approximately $350,000
for services rendered by Seller to Buyer through the termination of
the Services
Agreement. In consideration and settlement of Buyer's payment
obligations to
Seller under the Services Agreement, concurrent with the execution
and delivery
of this Termination Agreement, Buyer will execute and deliver the
promissory
note described in Section 7 hereof and attached hereto as Exhibit C
and will
make all required payments thereunder.
3. Property Held under the Escrow Agreement. Buyer and Seller
hereby direct the
Escrow Agent to release all properties held by the Escrow Agent to
the Buyer
concurrent with the execution of this Termination Agreement.
Employees hereby
acknowledge and agree to the release of the properties held by the
Escrow Agent
to Buyer. Buyer, Seller, Escrow Agent and Employees hereby agree
that the Escrow
Agreement will be terminated effective upon the Escrow Agent's
release of the
properties held by the Escrow Agent to the Buyer.
4. Stock Put and Call Agreement. Notwithstanding any general or
specific
releases granted by Buyer and Seller in favor of one another in
this Termination
Agreement, Buyer and Seller agree that the Stock Put and Call
Agreement will
remain in full force and effect, in accordance with its terms, so
long as Seller
or any of its subsidiaries or affiliates is the beneficial owner of
at least a
share of Buyer Common Stock.
5.
Correspondent
Agreement. Buyer and
Seller hereby
acknowledge and
agree that the
Correspondent
Agreement was
terminated effective
as of
October 1, 2006 by virtue of the parties' entering into the
Purchase Agreement.
6.
Loans.
a. Loans originated by Seller and purchased by Buyer. Under Section
I(A)(5) of
the Purchase Agreement, during the period from October 1, 2006 to
March 30,
2007, Buyer acquired from Seller a number of Mortgage Loans
originated by Seller
which Mortgage Loans are listed on Schedule 3 hereto. With respect
to the
Mortgage Loans listed on Schedule 3 hereto, notwithstanding any
other agreement
between Buyer and Seller to the contrary, Buyer hereby agrees that
Seller will
have no obligation to repurchase from Buyer, indemnify Buyer for or
reimburse
Buyer for any costs or expenses associated with any such Mortgage
Loans.
<PAGE>
Any
loans purchased from Seller by Buyer under Section 6(b) hereof
after the date of
this Termination Agreement shall be deemed to be included on
Schedule 3 and
subject to the terms of this Section 6(a).
b. Loans originated by Seller and agreed to be purchased by Buyer.
Schedule 4
hereto contains a list of Mortgage Loans which Buyer agreed to
purchase from
Seller under Section I(A)(5) of the Purchase Agreement, and for
which Buyer has
taken possession of the loan files or for which the delivery of
such files is
pending, but has not yet purchased from Buyer or paid Buyer the
agreed upon
purchase price therefor. With respect to the loans on Schedule 4
for which Buyer
has taken delivery of the loan files, Buyer, on a best efforts
basis, will sell
these loans to third-party investors within a period of two (2)
weeks from the
date of this Termination Agreement. If Buyer is able to line-up
purchasers for
such loans, Buyer shall acquire such loans from Seller for the
purchase price
set forth in the applicable lock commitment. If Buyer is not able
to find
purchasers for such loans within the agreed upon time frame, Buyer
shall return
all such loan files to Seller, and Seller will retain all rights
and obligations
with respect to such loans. With respect to the loans on Schedule 4
for which
Buyer has not taken delivery of the loan files, Seller will retain
all rights
and obligations with respect to such loans.
c. Loans committed to be made by Seller and agreed to be purchased
by Buyer.
Schedule 5 hereto contains a list of Mortgage Loans for which
commitment letters
have been issued and which Buyer agreed to purchase from Seller
under Section
I(A)(5) of the Purchase Agreement, but which have not yet been
closed and funded
by Seller. With respect the loans on Schedule 5, Seller hereby
agrees to honor
its commitment to fund these loans and relieves and releases Buyer
from its
obligation to purchase these loans from Seller following the
funding and closing
thereof. Seller retains all rights to sell the loans on Schedule 5
to
third-party investors following the funding and closing thereof.
Buyer hereby
assigns to Seller any and all rights under any agreements entered
into by Buyer
with third-party investors pertaining to the sale of the loans on
Schedule 5 by
Buyer to any such third-party investors.
d. Loans originated by Seller and purchased by investors other than
Buyer. With
respect to mortgage loans originated by Seller in the ordinary
course of
operating the Business consistent with the Purchase Agreement and
the Services
Agreement during the period from October 1, 2006 to March 30, 2007,
which loans
were sold by Seller to third-party investors and for which Buyer
received a
beneficial, economic interest under the Services Agreement, Seller
shall be
responsible for satisfying payment and other obligations pursuant
to
indemnification or repurchase requests received from the
third-party investors
who acquired such loans.
e.
Treatment of
Specific Loans. Schedule 6 hereto describes the
agreement of Buyer
and Seller with respect to loans specifically
identified therein.
f. Buyer's failure to comply with its obligations under this
Section 6 shall
constitute a default under the Note and under this Termination
Agreement.
7.
<PAGE>
Payment under Note; Return of Shares of Buyer Common Stock.
----------------------------------------------------------
a. As payment in full of all amounts owing to Seller by Buyer under
the Services
Agreement, Buyer will execute and deliver and will make payments to
Seller in
accordance with the terms of the promissory note in the original
principal
amount of $340,000 attached hereto as Exhibit C (the "Note").
b. On the date hereof, Seller is the beneficial owner of 1,133,645
shares of
Buyer Common Stock. In accordance with the provisions of this
Section 7(b),
without and for no consideration, promptly following the receipt of
each payment
made as required under the terms of the Note, Seller will execute
and deliver to
Buyer stock powers pertaining to the return to Buyer of shares of
Buyer Common
Stock owned by Seller as follows:
i. Concurrent with the execution and delivery of this Termination
Agreement,
Seller will execute and deliver to Buyer stock powers in favor of
Buyer
pertaining to the transfer by Seller of 362,776 of the shares of
Buyer Common
Stock held by Seller. Seller will retain the certificate
representing Seller's
shares of Buyer Common Stock until such time as Seller receives
from Buyer
evidence that Buyer is prepared to issue three replacement stock
certificates to
Seller in the amounts of 226,729 shares, 272,075 shares and 272,075
shares of
Buyer Common Stock.
ii. Following the receipt of the full payment of Installment #2
under the Note,
Seller will execute and deliver to Buyer stock powers in favor of
Buyer and the
stock certificate pertaining to the transfer by Seller of 226,729
of the shares
of Buyer Common Stock held by Seller.
iii. Following the receipt of the full payment of Installment #3
under the Note,
Seller will execute and deliver to Buyer stock powers in favor of
Buyer and the
stock certificate pertaining to the transfer by Seller of 272,075
of the shares
of Buyer Common Stock held by Seller.
iv. Following the receipt of the full payment of Installment #4
under the Note,
Seller will execute and deliver to Buyer stock powers in favor of
Buyer and
deliver the share certificate representing the transfer by Seller
of the
remaining 272,075 of the shares of Buyer Common Stock held by
Seller. Concurrent
with the delivery of these shares, Buyer and Seller will execute
and deliver an
agreement by which the Stock Put and Call Agreement will be
terminated.
c. In the event that Buyer fails to make timely payment of any
amount due to
Seller under the Note, Seller's obligations under this Section 7
immediately and
irrevocably will cease, and Seller's release under Section 8(b)
hereof shall not
become effective.
8.
Releases.
a. For and in consideration of the release from Seller set forth in
Section 8(b)
hereto, the receipt and sufficiency of which are hereby
acknowledged, on behalf
o
