The old Toad installed DB2 clients are not eligible to become default clients. You will need to ensure a true default DB2 client exists on your machine. If you have a default DB2, it should be listed in the registry at the registry key like: HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\IBM\DB2\InstalledCopies
Please make sure the default DB2 is v9.7.6 or greater as that is what Toad requires.