-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, D4cGJ+ksTEzWM1hJLF+uFbc5mqFfCKVdIbRB0yW3C6r5YvwnV+KJzyN2EyH5o/CE JUrAbI7kWDOZkv37Lhx6Rw== 0000060150-95-000008.txt : 19950518 0000060150-95-000008.hdr.sgml : 19950518 ACCESSION NUMBER: 0000060150-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950214 DATE AS OF CHANGE: 19950222 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOMAS FINANCIAL CORP CENTRAL INDEX KEY: 0000060150 STANDARD INDUSTRIAL CLASSIFICATION: 6162 IRS NUMBER: 751043392 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06868 FILM NUMBER: 95511151 BUSINESS ADDRESS: STREET 1: 1600 VICEROY DR 8TH FLOOR CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2148794000 MAIL ADDRESS: STREET 1: 1600 VICEROY DR STREET 2: 8TH FLOOR CITY: DALLAS STATE: TX ZIP: 75235 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS & NETTLETON FINANCIAL CORP DATE OF NAME CHANGE: 19881030 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - - ----- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - - ----- SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-6868 LOMAS FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1043392 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 Viceroy Drive Dallas, Texas 75235 (Address of principal executive offices) (Zip Code) (214) 879-4000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the issuer's classes of common stock as of February 10, 1994: Common Stock, $1 par value-- 20,099,531 shares. FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1994 LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES INDEX Page No. -------- PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) Consolidated Balance Sheet -- December 31, 1994 and June 30, 1993 3 Statement of Consolidated Operations -- Quarter and Six Months Ended December 31, 1994 and 1993 4 Statement of Consolidated Cash Flows -- Six Months Ended December 31, 1994 and 1993 5 Notes to Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations 11 Liquidity and Capital Resources 15 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands) December 31, 1994 June 30, 1994 ----------------- ------------- (Unaudited) (Note) Assets Cash and cash equivalents $ 13,587 $ 7,206 First mortgage loans held for sale 326,623 257,534 Investments 237,455 117,452 Receivables 104,041 84,155 Foreclosed real estate 5,998 8,934 ---------- ---------- 674,117 468,075 Less allowance for losses (29,578) (12,262) ---------- ---------- 644,539 455,813 Purchased future mortgage servicing income rights--net 370,978 382,009 Fixed assets--net 85,435 89,154 Prepaid expenses and other assets 26,668 30,133 Net assets of discontinued operations 84,191 113,258 ---------- ---------- $1,225,398 $1,077,573 ========== ========== Escrow, agency and fiduciary funds--see contra $ 508,602 $ 603,163 ========== ========== Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued expenses $ 60,618 $ 71,862 Notes payable 557,877 341,047 Term notes payable 379,415 383,311 Senior convertible notes payable 139,918 139,918 ---------- ---------- 1,137,828 936,138 ---------- ---------- Stockholders' Equity: Common stock--20,146 and 20,100 shares issued and outstanding, respectively 20,146 20,100 Other paid-in capital 309,577 309,429 Retained earnings (deficit) (242,153) (188,094) ---------- ---------- 87,570 141,435 ---------- ---------- $1,225,398 $1,077,573 ========== ========== Liability for escrow, agency and fiduciary funds--see contra $ 508,602 $ 603,163 ========== ========== Note: The balance sheet at June 30, 1994 as presented is derived from the audited financial statements at that date. See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED OPERATIONS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands, except per share amounts) Quarter Ended Six Months Ended December 31 December 31 ------------------- ------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Revenues Mortgage servicing $ 34,371 $ 37,704 $ 67,285 $ 75,535 Commissions and fees 8,280 7,597 16,411 14,175 Interest 4,957 9,709 10,725 17,509 Investment 5,277 4,592 8,943 13,133 Gain on sales 411 5,188 3,590 12,008 Management fees -- affiliates -- 100 -- 2,952 Other -- affiliates -- -- -- 5,028 Other 4,055 871 4,518 5,485 -------- -------- -------- -------- 57,351 65,761 111,472 145,825 -------- -------- -------- -------- Expenses Interest 18,888 21,412 37,254 41,585 Personnel 15,399 19,720 30,605 39,797 Depreciation and amortization 15,662 49,875 31,864 118,440 Other operating 11,940 9,922 21,737 19,327 Provision for losses 29,171 7,335 31,071 8,877 -------- -------- -------- -------- 91,060 108,264 152,531 228,026 -------- -------- -------- -------- Loss from continuing operations (33,709) (42,503) (41,059) (82,201) Loss from discontinued operations (7,500) (5,635) (13,000) (15,504) -------- -------- -------- -------- Net loss $(41,209) $(48,138) $(54,059) $(97,705) ======== ======== ======== ======== Earnings (loss) per share: Loss from continuing operations $(1.67) $(2.11) $(2.04) $(4.08) Net loss $(2.04) $(2.39) $(2.68) $(4.85) Average number of shares 20,154 20,132 20,144 20,129 Note: Reclassifications have been made to December 31, 1993 financial statements for comparative purposes. See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands) Six Months Ended December 31 ------------------- 1994 1993 -------- -------- Operating activities: Loss from continuing operations $(41,059) $(82,201) Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: Depreciation and amortization 31,864 118,440 Provision for losses 31,071 8,877 -------- -------- Cash provided by operations before working capital changes 21,876 45,116 Net change in first mortgage loans held for sale (67,210) (129,796) Net change in sundry receivables, payables, and other assets (43,127) (30,458) -------- -------- Net cash used by operating activities (88,461) (115,138) -------- -------- Investing activities: Purchases of investments (136,438) (9,335) Maturities/sales of investments 14,470 54,213 Purchases of loans from pools (6,081) (10,056) Sales of foreclosed real estate 5,824 10,087 Net purchases of fixed assets (869) (12,300) Purchases of future mortgage servicing income rights (28,427) (59,209) Sales of future mortgage servicing income rights 17,020 327 -------- -------- Net cash used by investing activities (134,501) (26,273) -------- -------- Financing activities: Net borrowings of notes payable 216,830 132,063 Term debt repayments (3,896) (4,666) -------- -------- Net cash provided by financing activities 212,934 127,397 -------- -------- Net decrease in cash and cash equivalents (10,028) (14,014) Net cash provided (used) by discontinued operations 16,409 (10,650) Cash and cash equivalents at beginning of period 7,206 34,368 -------- -------- Cash and cash equivalents at end of period $ 13,587 $ 9,704 ======== ======== See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES December 31, 1994 NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements of Lomas Financial Corporation ("LFC") and its subsidiaries (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information or footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation at December 31, 1994 have been included. Operating results for the six months ended December 31, 1994 are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K of the Company for the fiscal year ended June 30, 1994. NOTE B -- EARNINGS (LOSS) PER SHARE Primary earnings (loss) per share data for the quarter and six months ended December 31, 1994 and 1993 is computed using the weighted average number of shares of common and, when dilutive, common stock equivalents outstanding during the period. Common stock equivalents include units and shares granted under the Lomas Financial Corporation 1991 Long Term Incentive Plan for Nonemployee Directors, the 1991 Stock Incentive Program and the 1993 Intermediate and Long Term Incentive Plan. Common stock equivalents also include the assumed exercise of dilutive stock options. Fully diluted per share data is computed on the same basis as primary, but it also assumes (if dilutive) the conversion of senior convertible notes with the related adjustments for interest and federal income tax expenses. For the quarter and six months ended December 31, 1994 and 1993, the fully diluted per share data is antidilutive. NOTE C -- REVERSE INTEREST RATE SWAPS The Company, through its wholly-owned subsidiary, Lomas Mortgage USA, Inc. ("Lomas Mortgage"), enters into interest rate swap agreements as a means of managing its exposure to changes in interest rates. Interest rate swaps that reduce the exposure of the Company, as a whole, to changes in interest rates are designated as hedges of the Company's fixed rate debt and treated as hedges of the debt. Swap agreements that do not reduce the Company's exposure to changes in interest rates are not considered to be hedges. The interest differential to be paid or received on swap agreements that are treated as hedges is accrued over the life of the agreements as an adjustment to the interest expense of the related debt. Gains or losses on early termination of interest rate swap agreements designated as hedges, and losses where the fixed rate debt associated with the swap is reduced below the notional amount of the swap, are recognized over the remaining term of the swap agreement. Interest rate swaps that are not considered hedges are marked to market with the unrealized gain or loss, together with the accrued interest differential, treated as a gain or loss on such swaps. Under the terms of the swap agreements in existence at December 31, 1994, the Company receives an annual fixed rate of interest and pays a floating rate of interest based on the 30-day average A1/P1 commercial paper rate. The Company has not entered into any additional interest rate swap agreements since October 1993. The swap agreements contain certain default and termination provisions whereby the counterparty can terminate the agreements prior to their maturity, including a provision which permits the counterparty to terminate, if, in its reasonable business judgment, there has been a material adverse change in the business, assets, operations or financial condition of Lomas Mortgage since April 1, 1994. The terms of the swaps also provide that the counterparty, under certain circumstances, can demand collateral from the Company to protect against mark-to-market exposure attributable to the agreements. During fiscal 1994, as a result of increases in interest rates, the Company, at the request of the counterparty, pledged servicing rights related to approximately $4.8 billion of mortgage loans as collateral. During the six months ended December 31, 1994, the Company pledged additional servicing rights related to approximately $2.0 billion of mortgage loans. At December 31, 1994 interest rate swaps in the aggregate notional amount of $800 million were outstanding, all of which were designated as hedges. The Company's notes payable, investment credit lines and certain of the warehouse debt totaling $800 million were hedged by the interest rate swaps. The Company receives an average fixed interest rate of 4.765 percent on these swaps. The floating interest rate, which the Company pays, at December 31, 1994 was 6.060 percent. During the quarter and six months ended December 31, 1994, the Company incurred interest expense (income) of $486,000 and $(268,000), respectively, from the swaps. In the same periods of fiscal 1994, the swap income reduced the Company's interest expense by $3.6 million and $8.4 million, respectively. Since its inception in July 1992 and through December 31, 1994, the interest rate swap program has generated net cash of $41.3 million, including cash related deferred gains of $9.9 million which currently is being amortized as an offset to future net interest expense at a rate of $3.3 million a year. At the beginning of the second quarter of fiscal 1995, the amount of fixed rate debt dropped below the notional amount of the swaps ($800 million), the Company recorded a pro rata loss of approximately $7.4 million which is included in provision for losses. The fixed rate debt increased over the notional amount of the swaps during the quarter and the entire $800 million amount of swaps is accounted for as a hedge at December 31, 1994. The liability resulting from pro rata loss is being amortized over the remaining life of the swaps. Based on the current interest rates and the current credit worthiness of the counterparty, if the swap agreements had been terminated as of December 31, 1994, Lomas Mortgage would have incurred a liability (net of $9.9 million cash related deferred gains) of approximately $75.1 million. However, the Company does not intend to terminate these swaps until their maturity in October 1998, and assuming the A1/P1 commercial paper interest rate remains at 6.1 percent for the next four years, the cash to be paid by the Company as interest on the swaps to maturity of the swaps would be $40.9 million and the discounted present value would be approximately $35.0 million. NOTE D -- PURCHASED FUTURE MORTGAGE SERVICING INCOME RIGHTS ("PMSRs") Since April 1993 the Company had been using a simulation methodology to estimate the future prepayments of the Company's servicing portfolio. Effective July 1, 1994, the Company changed its estimates of prepayment speeds from this simulation methodology to using published Constant Prepayment Rates ("CPRs"). This change in estimate did not have a material adverse effect on the financial statements of the Company as of July 1, 1994 or for the six months ended December 31, 1994. PMSRs at December 31, 1994, consisted of the following (in thousands): Cost of PMSRs $ 552,044 Capitalized excess servicing fees 3,031 --------- 555,075 Less: Accumulated amortization (184,097) --------- $ 370,978 ========= Changes in PMSRs were as follows (in thousands): Beginning balance at July 1, 1994 $ 382,009 Additions 29,105 Sales and writeoffs (12,276) Amortization (27,860) --------- Ending balance at December 31, 1994 $ 370,978 ========= NOTE E -- PROVISIONS FOR LOSSES Reserves were established at December 31, 1994 in the amount of $37.1 million, of which $29.6 million relates to continuing operations, as follows: -- provisions to cover certain mortgage servicing related receivables and other assets (approximately $3.0 million noncash charge); -- reduction in the carrying values of Company-owned buildings and land (approximately $3.5 million noncash charge); -- mortgage banking commitments and other contingencies (approximately $5.7 million noncash charge); -- pro rata swap loss recognition (approximately $7.4 million noncash charge); and -- provisions related to the Company's discontinued operations, ST Lending, Inc. and Lomas Information Systems, Inc. (approximately $7.5 million noncash charge). NOTE F -- REDUCTION IN FORCE AND RESTRUCTURING In January 1995 the Company began an additional reduction in personnel. The Company intends to reduce its staff by approximately 200 employees by June 30, 1995, of which 102 were terminated in January 1995 with an annual savings of approximately $2.6 million. The involuntary terminations will result in a provision in the third quarter of fiscal 1995 because the current accounting standards require the loss to be recorded as a third quarter of fiscal 1995 transaction as the plan was approved in January 1995. Restructuring plans announced in fiscal 1994 (the "1994 Plans") resulted in total charges of $15.6 million for continuing operations. Under the 1994 Plans, approximately 400 employees were terminated and termination benefits totaling $9.0 million were paid. In addition, $4.6 million of writedowns of assets were also charged to those reserves. These 1994 Plans were substantially completed by December 31, 1994. NOTE G -- DISCONTINUED OPERATIONS Discontinued operations include the Company's short term lending operations and information systems operations ("LIS"). On December 16, 1994, the Company completed the sale of substantially all of the assets of LIS to a subsidiary of an insurance company. As consideration for the sale, the Company received $2.5 million in cash; an $8.0 million note due five years after closing and accruing interest at a rate per annum of 8 percent payable at maturity, which note can be adjusted based on the future financial performance of the purchaser; and a contingent interest equal to 35 percent of the purchaser's adjusted gross revenues in excess of $55 million per year generated during the seven years ending December 31, 2001. The calculation of the present value of the estimated discounted cash flow considerations from this transaction is approximately $40 million using a discount factor of 20 percent. The Company does not retain operational or management control of the successor entity. The Company also recorded a $500,000 additional loss on the sale in the December 1994 quarter, or a total loss of $2.0 million in the six months ended December 31, 1994 and $33.5 million provision at June 30, 1994. The Company believes that during the period involved, it will recover its remaining investment, however, there is no assurance that the projected revenues used in the calculation of the remaining investment will be achieved. The Company will apply all subsequent receipts related to the transaction to reduce its remaining book basis. After full recovery of the remaining basis, all subsequent revenues will be recorded as income as they are received. The following table presents a summary of LIS' revenues, expenses and net operating results during the quarter and six months ended December 31, 1994 and 1993 (in thousands): Quarter Ended Six Months Ended December 31 December 31 ---------------- ------------------ 1994 1993 1994 1993 ------- ------- -------- -------- Revenues $ 7,251 $ 9,362 $ 16,050 $ 18,226 Expenses 13,797 14,997 27,889 29,730 ------- ------- -------- -------- Loss prior to reserve application (6,546) (5,635) (11,839) (11,504) Reserve application 6,546 -- 11,839 -- ------- ------- -------- -------- Net loss $ -- $(5,635) $ -- $(11,504) ======= ======= ======== ======== The Company's discontinued short term lending operations include ST Lending, Inc. ("STL"), Lomas Management, Inc. ("LMI"), which manages the assets of STL, and certain other real estate operations. During the three years ended June 30, 1994 and six months ended December 31, 1994 the Company provided reserves totaling $43.9 million to cover projected operating losses through June 30, 1996 and losses to be realized on the sales of properties. For the quarter and six months ended December 31, 1994 and 1993, losses of $7.8 million, $3.7 million, $9.3 million and $5.5 million respectively, were charged to the reserves. During the quarter ended September 30, 1994, STL closed a sale of 12 of its properties and generated cash of approximately $31.1 million. STL made principal payments of $62.0 million on its secured notes during the six months ended December 31, 1994 and the notes were paid in full. Net assets of discontinued short term lending operations at December 31, 1994 were as follows (in thousands): Assets: Mortgage notes receivable and foreclosed real estate, net of allowance for losses of $15,942 $43,459 Cash and cash equivalents 12,131 Other assets 1,532 -------- 57,122 Less: Accounts payable and accrued expenses (1,402) Future operating loss reserves (3,235) -------- $52,485 The yield on STL's earning loans (totaling $5.6 million at December 31, 1994) was approximately 9.80 percent and on its cash (invested primarily in high-grade commercial paper) was approximately 5.27 percent. NOTE H -- TRANSACTION WITH AFFILIATE In November 1994 the Company, through Lomas Mortgage, repurchased 85 percent of a mortgage servicing portfolio with an unpaid principal balance of $522 million from its affiliate, Lomas Mortgage Partnership (the "Partnership"), for $10.8 million. The transaction resulted in a gain of $3.7 million for the Partnership. This mortgage servicing portfolio was originally sold to the Partnership in January 1994 at a loss of approximately $1.3 million. Since Lomas Mortgage owns one-third of the Partnership, one-third of the net gain realized from these transactions of approximately $800,000 was deferred and is being amortized over approximately nine years through adjusting the carrying value of the PMSRs related to that portfolio. NOTE I -- CONTINGENT LIABILITIES On September 17, 1990 plaintiffs purporting to represent a class of single-family mortgagors having escrow deposits computed by Lomas Mortgage within the past ten years filed a class-action complaint in the Circuit Court of Cook County, Illinois. The complaint alleged that Lomas Mortgage was in breach of mortgage contracts and was assessing excessive and unlawful escrow deposits against the plaintiffs. In addition, the complaint asked for punitive damages. On October 4, 1990 this lawsuit was removed to the United States District Court for the Northern District of Illinois. Similar actions for damages, fees and other relief were filed in California and Minnesota state courts and class-action counterclaims were filed in two pending Illinois foreclosure actions. The state court actions were removed to federal court and transferred to the Northern District of Illinois. The state court counterclaims are stayed. On December 6, 1994, the United States District Court for the Northern District of Illinois entered an order finally approving a settlement of this action and dismissing, with prejudice, all claims that were or could have been brought by the class. The Minnesota action was also dismissed under that order. The settlement and dismissal also resolves similar claims raised in the California action and moots the class-action counterclaims filed in the Illinois foreclosure actions. Pursuant to the terms of the settlement, Lomas Mortgage has agreed to follow certain escrow servicing procedures that result in lower escrow balances for certain of its mortgagors and has already refunded the surplus escrow balance to its mortgagors that resulted from the implementation of the procedure. Lomas Mortgage has also agreed to implement certain special servicing procedures for its mortgagors whose mortgages are written on older conventional mortgage forms. In addition to these escrow servicing procedures, Lomas Mortgage has agreed to provide, once the settlement is finally approved and the case dismissed, a one-time rebate to its eligible present and former mortgagors. The total rebate is currently estimated to be less than $600,000. Finally, Lomas Mortgage has agreed to reimburse class counsel for their reasonable attorneys' fees and costs. The estimated rebate and attorney's fees have been provided for by Lomas Mortgage. The Company is also involved in a number of other lawsuits considered to be in the normal course of business. In management's opinion, the resolution of these other disputes will not have a material adverse effect on the financial position of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company's continuing operations, after establishing provisions of $29.6 million, resulted in net losses for the quarter and six months ended December 31, 1994 of $33.7 million and $41.1 million, respectively, compared to net losses of $42.5 million and $82.2 million for the quarter and six months ended December 31, 1993, respectively. Discontinued operations incurred losses of $7.5 million and $13.0 million in the quarter and six months ended December 31, 1994, respectively, compared to losses of $5.6 million and $15.5 million for the same periods in fiscal 1994. The operating results of the Company during the quarter and six months ended December 31, 1994 and 1993 were as follows (in millions): Quarter Ended Six Months Ended December 31 December 31 ----------------- ---------------- 1993 1992 1993 1992 ------ ------ ------ ------ Operating Income (Loss) Mortgage banking $(28.7) $(36.0) $(29.6) $(75.9) Other 2.6 (0.9) 1.9 4.6 ------ ------ ------ ------ (26.1) (36.9) (27.7) (71.3) Corporate Expenses General and administrative (2.1) (2.2) (4.3) (4.3) Provision for losses (1.9) (0.1) (1.9) (0.1) Corporate interest (3.6) (3.3) (7.2) (6.5) ------ ------ ------ ------ Loss from continuing operations (33.7) (42.5) (41.1) (82.2) Loss from discontinued operations (7.5) (5.6) (13.0) (15.5) ------ ------ ------ ------ Net loss $(41.2) $(48.1) $(54.1) $(97.7) ====== ====== ====== ====== Provision for Losses Reserves were established at December 31, 1994 in the amount of $37.1 million, of which approximately $27.1 million is noncash, as follows: -- provisions to cover certain mortgage servicing related receivables and other assets; -- reduction in the carrying values of Company-owned buildings and land; -- mortgage banking commitments and other contingencies; -- pro rata swap loss recognition; and -- provision related to the Company's discontinued operations, ST Lending, Inc. and Lomas Information Systems, Inc. Reduction in Force and Restructuring In January 1995 the Company began an additional reduction in personnel. The Company intends to reduce its staff by approximately 200 employees by June 30, 1995, of which 102 were terminated in January 1995 with an annual savings of approximately $2.6 million. The involuntary terminations will result in a provision in the third quarter of fiscal 1995 because the current accounting standards require the loss to be recorded as a third quarter of fiscal 1995 transaction as the plan was approved in January 1995. Restructuring plans announced in fiscal 1994 (the "1994 Plans") resulted in total charges of $15.6 million for continuing operations. Under the 1994 Plans, approximately 400 employees were terminated and termination benefits totaling $9.0 million were paid. In addition, $4.6 million of writedowns of assets were also charged to those reserves. These 1994 Plans were substantially completed by December 31, 1994. Mortgage Banking Mortgage banking divisions revenues, expenses, and contributions/loss from continuing operations for the quarter and six months ended December 31, 1994 and 1993 were derived from the following sources (in millions):
Quarter Ended December 31 Six Months Ended December 31 --------------------------------- --------------------------------- 1994 1993 1994 1993 --------------- --------------- --------------- --------------- Loan administration Primary servicing $ 31.7 $ 35.0 $ 62.2 $ 69.1 Master servicing 3.1 3.2 5.7 6.7 Expenses (13.7) (16.2) (27.0) (33.3) Amortization (including $30 million and $80 million impairment provisions in the 1993 periods, respectively) (13.5) $ 7.6 (48.6) $(26.6) (27.7) $ 13.2 (115.2) $(72.7) ------ ------ ------ ------ Insurance Agency 2.2 2.1 4.9 4.1 Mortgage plans 1.5 1.5 2.9 2.5 Expenses (1.5) 2.2 (1.2) 2.4 (2.9) 4.9 (2.3) 4.3 ------ ------ ------ ------ Banking (including warehousing and investment income and interest expense) Revenues 8.9 11.8 16.7 24.3 Expenses (15.6) (6.7) (18.1) (6.3) (30.5) (13.8) (34.9) (10.6) ------ ------ ------ ------ Portfolio production Revenues 3.9 12.0 10.6 24.5 Expenses (4.5) (0.6) (8.1) 3.9 (9.7) 0.9 (15.1) 9.4 ------ ------ ------ ------ Field services Revenues 3.0 3.8 5.9 7.5 Expenses (3.1) (0.1) (3.5) 0.3 (6.1) (0.2) (6.8) 0.7 ------ ------ ------ ------ Fund and asset management Revenues -- 0.4 -- 8.3 Expenses -- -- -- 0.4 -- -- (2.1) 6.2 ------ ------ ------ ------ General and administrative expense (3.4) (5.0) (6.9) (8.1) ------ ------ ------ ------ Provision for losses (27.7) (5.1) (27.7) (5.1) ------ ------ ------ ------ Operating loss $(28.7) $(36.0) $(29.6) $(75.9) ====== ====== ====== ======
The loan administration unit generated operating income of $13.2 million in the six months ended December 31, 1994 compared to income of $7.3 million before an $80 million provision for PMSR impairment in the same period in fiscal 1994. For the quarter ended December 31, 1994, income was $7.6 million, compared to income of $3.4 million before the $30 million PMSR impairment for the quarter ended December 31, 1993. The improved operating results reflected principally a significant decline in the Company's servicing portfolio runoff rate from an annualized 41.5 percent in the six months ended December 31, 1993 to an annualized rate of 13.8 percent in the same period of 1994. As a consequence of this fundamental improvement, portfolio amortization charges (before a $80 million PMSR impairment) declined from $35.2 million in the December 1993 six months to $27.7 million in the December 1994 six months. For the December quarters, such amortization declined from $18.6 million (before a $30 million PMSR impairment) in the 1993 quarter to $13.5 million in the 1994 quarter. The increase in net income in the fiscal 1995 periods is also attributable to cost reductions. Loan administration related expenses decreased from $16.2 million and $33.3 million in the quarter and six months ended December 31, 1993 to $13.7 million and $27.0 million in the same periods in fiscal 1995, respectively. Related revenues decreased from $38.1 million and $75.8 million in the quarter and six months ended December 31, 1993 to $34.8 million and $67.9 million in the same periods in 1994, respectively. The decrease in revenues is principally due to a decrease in the division's combined primary and master servicing portfolios from $42.6 billion at December 31, 1993 to $41.3 billion at December 31, 1994. The following is an analysis of servicing fee income for the quarter and six months ended December 31, 1994 and 1993 (in thousands): Quarter Ended Six Months Ended December 31 December 31 ----------------- ------------------ 1994 1993 1994 1993 ------- ------- ------- ------- Servicing fee income: Primary servicing portfolio $29,206 $33,232 $57,659 $66,205 Subservicing portfolio 2,038 1,336 3,925 2,677 Master servicing portfolio 3,127 3,136 5,701 6,653 -------- -------- ------- ------- 34,371 37,704 67,285 75,535 Other servicing related income 524 430 636 287 -------- -------- ------- ------- Total $34,895 $38,134 $67,921 $75,822 ======== ======== ======= ======= The following table sets forth certain information regarding the Company's servicing portfolio (dollars in millions): December 31, 1994 June 30, 1994 ------------------ ------------- Portfolio principal balances: Primary servicing portfolio $27,769 $28,455 Subservicing portfolio 5,430 5,535 ------- ------- 33,199 33,990 Master servicing portfolio 8,132 8,445 ------- ------- $41,331 $42,435 ======= ======= Portfolio loan count: Primary servicing portfolio 484,780 495,524 Subservicing portfolio 66,206 70,007 ------- ------- 550,986 565,531 Master servicing portfolio 134,674 136,609 ------- ------- 685,660 702,140 ======= ======= Weighted average interest rate 8.4% 8.3% The banking unit of the mortgage banking division recorded net expenses of $6.7 million and $13.8 million in the quarter and six months ended December 31, 1994, respectively, which were $400,000 and $3.2 million higher than the $6.3 million and $10.6 million net expenses reported for the quarter and six months ended December 31, 1993, respectively. Banking revenues decreased by $2.9 million and $7.6 million in the quarter and six months ended December 31, 1994, respectively. The decrease is attributable primarily to the fact that the principal amount of the first mortgage loans held in warehouse pending delivery to permanent investors was substantially lower in the 1994 period than in the 1993 period. In addition, banking revenues for the six months ended December 31, 1993 included a $2.3 million interest rate swap termination fee which was not treated as a hedge. Banking expenses decreased by $2.5 million and $4.4 million in the quarter and six months ended December 31, 1994, respectively. Paid-in-full ("PIF") interest, which is incurred when loans securing payment of mortgage-backed securities in the Company's primary servicing portfolio are prepaid prior to the end of a given month, totaled $1.2 million and $2.5 million in the quarter and six months ended December 31, 1994, respectively, and were $6.5 million and $12.4 million, respectively, in the 1993 periods. See NOTE C -- REVERSE INTEREST RATE SWAPS on page 6. The portfolio production unit recorded $600,000 loss and $900,000 income in the quarter and six months ended December 31, 1994, respectively, compared to income of $3.9 million and $9.4 million in the quarter and six months ended December 31, 1993. Portfolio production through flow acquisitions was $1.3 billion and $3.2 billion in the quarter and six months ended December 31, 1994, respectively, compared to $3.6 billion and $6.3 billion in the same periods of fiscal 1994. The production volume in fiscal 1995 was affected by higher interest rates. Portfolio production revenues for the quarter and six months ended December 31, 1994 and 1993 included $300,000, $3.6 million, and $5.8 million and $11.7 million respectively, of gains from sale of first mortgage loans and related servicing income rights. Fund and asset management operation was discontinued and transferred to Capstead Mortgage Corporation during fiscal 1994 when Capstead became self-administered at September 30, 1993. Accordingly, the unit, which contributed $6.2 million of income in the six months ended December 31, 1993, contributed nothing in the 1994 period. Interest Rate Fluctuations and Market Factors Lower long term interest rates normally increase new mortgage loan production volume, which in turn increases fee income and the net interest spread as a result of the higher average volume of mortgages held for sale. Lower long term rates also increase prepayment speeds of mortgages on which PMSRs are currently held, which lowers yields realized on the Company's investment in PMSRs. Increased prepayment speeds also accelerate PIF interest expense owed to certain investors. PIF interest is the partial monthly interest in the month of payoff that is not payable by the mortgagor, but is receivable by the mortgage security holder. Higher long term interest rates normally decrease the general volume of new mortgage originations, decreasing the volume of mortgages held for sale. These conditions result in reduced fee income and reduced net interest income. However, the Company's average net yield as a percentage of the balance held may increase if short term rates do not change by a corresponding degree. Higher long term rates also decrease the prepayment speed of mortgages on which PMSRs are currently held, which in turn normally would increase the yield on and value of the Company's investment in PMSRs. Decreased prepayment speeds also will decrease PIF interest expense due to loans which payoff. The value of the Company's loan servicing portfolio may be adversely affected if mortgage interest rates decline and loan prepayments increase. Periods of accelerated prepayments may result in future declines of income generated from the Company's loan servicing portfolio. Conversely, if mortgage interest rates increase, the value of the Company's loan servicing portfolio may be positively affected. Lower short term interest rates increase the Company's net interest spread on mortgages held for sale and higher short term interest rates decrease the net yield on mortgages held for sale unless there is a corresponding increase in long term interest rates. Other The Company's other operations during the quarter and six months ended December 31, 1994 generated income of $2.6 million and $1.9 million, respectively, compared to a loss of $900,000 and income of $4.6 million, respectively, in the 1993 periods. During the quarter and six months ended December 31, 1994 and 1993, the other operating results included losses of $700,000, $900,000 and $2.1 million and $1.5 million, respectively, from the Company's image processing operations. During the quarter and six months ended December 31, 1994, the Company recorded a gain of $2.8 million from settlement of certain contractual provisions related to the Company's 1991 sale of ELLCO Leasing Corporation. Similar settlement of certain other contractual provisions related to the ELLCO sale resulted in a gain of $3.9 million in the six months ended December 31, 1993. Discontinued Operations On December 16, 1994, the Company completed the sale of substantially all of the assets of LIS to a subsidiary of an insurance company. For more information, see NOTE G -- DISCONTINUED OPERATIONS on page 8. During the quarter and six months ended December 31, 1994, the Company provided reserves totaling $7.0 million and $12.5 million, respectively, for the discontinued short term lending operations. These reserves are to cover projected operating losses through June 30, 1995 and estimated losses to be realized on the sales of properties. For the quarter and six months ended December 31, 1994 and 1993, losses of $7.8 million, $3.7 million and $9.3 million and $5.5 million, respectively, were charged to these reserves. Liquidity and Capital Resources The capital and credit resources of the Company at December 31, 1993 included (in millions): Short term debt (self-liquidating) of Lomas Mortgage: --Secured by first mortgage loans pending delivery to permanent investors $ 317.0 --Secured by high quality short term investments 205.4 --Borrowings under working capital line of credit 25.0 --Other short term debt 10.5 -------- 557.9 -------- Term debt of Lomas Mortgage: --Notes due in 1997 150.0 --Notes due in 2002 190.0 --Other 39.4 -------- 379.4 -------- Convertible notes of LFC due in 2003 139.9 Stockholders' equity 87.6 -------- $1,164.8 ======== Short term debt was $557.9 million at December 31, 1994, including $205.4 million principal amount borrowed under investment lines of credit and $317.0 million principal amount of warehouse debt and repurchase agreement borrowings secured by single-family mortgage loans pending delivery to permanent investors. Investment lines of credit were secured by high quality short term investments purchased with the proceeds of such lines of credit. The short term notes payable and repurchase agreements are secured by single- family mortgage loans which, at that date, were committed for sale to institutional investors. Such short term notes (and therefore the related warehouse indebtedness) normally are self-liquidating and require no supplemental liquidity support from LFC or any of its subsidiaries. Commercial paper and bank certificates of deposit of non-affiliated commercial banks are funded with proceeds from, and are pledged as collateral for, investment lines of credit. The commercial paper and bank certificates of deposit have fixed rates of interest and generally mature within 31 days, at which time the investment lines of credit are paid down. As a result, all short term indebtedness except short term working capital debt is self- liquidating and none of it constitutes any burden on operating cash flow. Lomas Mortgage had outstanding at December 31, 1994 interest rate swaps in the aggregate notional amount of $800 million, all of which were designated as hedges. For more information on the interest rate swaps, see NOTE C -- REVERSE INTEREST RATE SWAPS on page 6. Semi-annual interest payments in the amount of $17.1 million on Lomas Mortgage's senior notes and $6.3 million on LFC's senior convertible notes are due in April 1995. In addition, a final payment in the amount of $37.9 million along with accrued interest related to a mortgage note on the Company's headquarters is due in March 1996 and Lomas Mortgage's $150 million senior notes are due on October 1, 1997. The Company is required to make annual deposits of $10 million beginning October 31, 1997 to a sinking fund for the redemption of LFC's senior convertible notes. Coverage for the term notes payable of Lomas Mortgage is provided by cash internally generated by that subsidiary. Lomas Mortgage's operations during the six months ended December 31, 1994, after paying interest on its short term debt, generated $49.5 million in cash available for (i) payment of interest on the subsidiary's $379.4 million term debt, (ii) investment in portfolio maintenance and growth, (iii) intercompany advances or payment of dividends to LFC (subject to restricted payment limitations described below), and (iv) addition to Lomas Mortgage's working capital. Under the terms of the warehouse agreement, servicing payment agreement and working capital line of credit that contains the most restrictive covenants, Lomas Mortgage is restricted from making dividend payments to LFC if, after giving effect thereto, the aggregate amount of such payments should exceed the sum of (i) $25 million ($10 million after December 31, 1994) (less any intercompany advances); plus (ii) 50 percent of Lomas Mortgage's accumulated consolidated income before tax since October 1, 1992; or reduced by 100 percent of consolidated loss before income taxes; plus (iii) (a) before November 30, 1993, the fair value of the aggregate net proceeds received by Lomas Mortgage from the issuance or sale after October 1, 1992 of its capital stock (b) after November 30, 1993, the aggregate net cash proceeds received from the issuance or sale by Lomas Mortgage of its capital stock and warrants, options and rights to purchase its capital stock. The minimum net worth requirement, as defined, under these covenants was reduced effective December 31, 1994 to $150 million. Lomas Mortgage's net worth as defined at December 31, 1994 was $172.3 million. Also effective December 31, 1994, the covenant related to debt-to-equity ratios was amended and the $25 million intercompany advances to LFC was reduced to $10.0 million. The Company was in compliance with all covenants in these agreements as changed effective December 31, 1994. At December 31, 1994, under these agreements, Lomas Mortgage could transfer as intercompany advances to LFC approximately $7.0 million. Coverage for interest payments on LFC's $140 million of convertible notes due 2003 and general corporate expenses have been and in the future are expected to be provided by (a) LFC's current cash resources, (b) dividends (if available) and intercompany advances from Lomas Mortgage, (c) cash dividends and interest income from other investments, (d) advances or dividends from STL, and (e) periodic liquidations of other assets. On September 30, 1994 STL completed the sale of 12 of its remaining properties for approximately $31.1 million. The proceeds of the sale along with STL's existing cash enabled payment (on October 31, 1994) in full of STL's remaining secured debt of $19.0 million and made available approximately $28.9 million of incremental liquidity to the Company's consolidated operations. Also, because of the completion of the sale of LIS, LFC will not be required in the future to fund LIS' cash losses. As of December 31, 1994, the Company's failure to meet certain ratio requirements contained in the covenants of the Company's $140 million senior convertible note indenture and Lomas Mortgage's $340 million note indenture, while not events of default, limit the Company's ability to issue additional term debt. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On September 17, 1990 plaintiffs purporting to represent a class of single-family mortgagors having escrow deposits computed by Lomas Mortgage within the past ten years filed a class-action complaint in the Circuit Court of Cook County, Illinois. The complaint alleged that Lomas Mortgage was in breach of mortgage contracts and was assessing excessive and unlawful escrow deposits against the plaintiffs. In addition, the complaint asked for punitive damages. On October 4, 1990 this lawsuit was removed to the United States District Court for the Northern District of Illinois. Similar actions for damages, fees and other relief were filed in California and Minnesota state courts and class-action counterclaims were filed in two pending Illinois foreclosure actions. The state court actions were removed to federal court and transferred to the Northern District of Illinois. The state court counterclaims are stayed. On December 6, 1994, the United States District Court for the Northern District of Illinois entered an order finally approving a settlement of this action and dismissing, with prejudice, all claims that were or could have been brought by the class. The Minnesota action was also dismissed under that order. The settlement and dismissal also resolves similar claims raised in the California action and moots the class-action counterclaims filed in the Illinois foreclosure actions. Pursuant to the terms of the settlement, Lomas Mortgage has agreed to follow certain escrow servicing procedures that result in lower escrow balances for certain of its mortgagors and has already refunded the surplus escrow balance to its mortgagors that resulted from the implementation of the procedure. Lomas Mortgage has also agreed to implement certain special servicing procedures for its mortgagors whose mortgages are written on older conventional mortgage forms. In addition to these escrow servicing procedures, Lomas Mortgage has agreed to provide, once the settlement is finally approved and the case dismissed, a one-time rebate to its eligible present and former mortgagors. The total rebate is currently estimated to be less than $600,000. Finally, Lomas Mortgage has agreed to reimburse class counsel for their reasonable attorneys' fees and costs. The estimated rebate and attorney's fees have been provided for by Lomas Mortgage. The Company is also involved in a number of other lawsuits considered to be in the normal course of business. In management's opinion, the resolution of these other disputes will not have a material adverse effect on the financial position of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit Number ------- 10.1 Fourth Amendment to Restated Loan and Security Agreement dated as of February 28, 1994 among Lomas Mortgage USA, Inc. ("LMUSA"), the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 10.2 Eighth Amendment to Restated Loan and Security Agreement dated as of November 29, 1994 among LMUSA, the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 10.3 Whole Loan Financing Facility dated May 16, 1994 (the "Whole Loan Financing Facility") between LMUSA and DLJ Mortgage Capital, Inc. ("DLJ"). 10.4 Promissory Note dated as of May 16, 1994 executed by LMUSA for the benefit of DLJ in the principal amount of $600,000,000 (the "Promissory Note"). 10.5 Whole Loan Financing Program Tri-Party Custody Agreement dated as of May 16, 1994 between LMUSA, as Customer, DLJ and Bank One, Texas N.A., as Custodian (the "Tri-Party Custody Agreement"). 10.6 Pledge Agreement dated as of May 16, 1994 by and between DLJ and LMUSA. 10.7 Commitment Letter dated May 18, 1994 between LMUSA and DLJ relating to the Whole Loan Financing Facility, the Promissory Note, the Pledge Agreement and the Tri-Party Custody Agreement (the "Commitment Letter"). 10.8 Amendment to the Commitment Letter dated February 8, 1995 and effective as of December 31, 1994. 10.9 Amendment No. 2 to Amended and Restated Pledge Agreement dated as of July 15, 1994 between LMUSA, as Pledgor, and Lehman Brothers Special, Inc., as Pledgee. 10.10 Amendment to Agreement dated as of September 23, 1994 between the registrant and entities and individuals listed therein as the Cold Spring Group. 10.11 Agreement dated September 30, 1994 among the registrant, General Electric Capital Corporation and ELLCO Leasing Corporation relating to the termination of the General Escrow and the General Escrow Agreement described therein. 10.12 Asset Purchase Agreement dated as of December 16, 1994 by and between Lomas Information Systems, Inc., as Seller, Residential Information Services Limited Partnership, as Buyer, the registrant, LMUSA and Residential Services Corporation of America. 10.13 Employment Agreement dated as of December 1, 1994 by and between the registrant and Eric D. Booth. 10.14 Employment Agreement dated as of December 1, 1994 by and between the registrant and Robert R. Denton. 10.15 Lomas Financial Corporation 1993 Intermediate and Long Term Incentive Plan Phantom Stock Agreement dated as of December 12, 1994 between the registrant and Eric D. Booth. 10.16 Lomas Financial Corporation 1993 Intermediate and Long Term Incentive Plan Phantom Stock Agreement dated as of December 12, 1994 between the registrant and Robert R. Denton. 10.17 Consulting Agreement dated as of August 2, 1994 by and between the registrant and Jess Hay. 10.18 Consulting Agreement dated as of November 1, 1994 by and between the registrant and Gary White. 10.19 Consulting Agreement dated as of November 1, 1994 by and between the registrant and Ramona Taylor. 10.20 Ninth Amendment to Restated Loan and Security Agreement dated February 13, 1995 and effective as of December 31, 1994 among LMUSA, the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 11 Computation of Earnings (Loss) Per Share. 27 Financial Data Schedule. (b) Reports on Form 8-K: Form 8-K dated December 13, 1994 reporting the appointment of Eric D. Booth as the registrant's President and Chief Executive Officer and his election to the registrant's Board of Directors. No financial statements were filed. Form 8-K dated December 19, 1994 reporting the completion of the sale of substantially all of the assets of Lomas Information Systems, Inc. to a subsidiary of an insurance company. No financial statements were filed. Form 8-K dated January 24, 1995 reporting change of independent auditors. No financial statements were filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOMAS FINANCIAL CORPORATION Date: February 14, 1995 By: /s/ERIC D. BOOTH -------------------------- Eric D. Booth President, Chief Executive Officer and Director Date: February 14, 1995 By: /s/GARY WHITE -------------------------- Gary White Senior Vice President and Controller LOMAS FINANCIAL CORPORATION INDEX TO EXHIBITS Sequentially Exhibit Numbered No. Page - - ------- ------------ 10.1 Fourth Amendment to Restated Loan and Security 23 Agreement dated as of February 28, 1994 among Lomas Mortgage USA, Inc. ("LMUSA"), the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 10.2 Eighth Amendment to Restated Loan and Security 32 Agreement dated as of November 29, 1994 among LMUSA, the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 10.3 Whole Loan Financing Facility dated May 16, 1994 42 (the "Whole Loan Financing Facility") between LMUSA and DLJ Mortgage Capital, Inc. ("DLJ"). 10.4 Promissory Note dated as of May 16, 1994 executed 49 by LMUSA for the benefit of DLJ in the principal amount of $600,000,000 (the "Promissory Note"). 10.5 Whole Loan Financing Program Tri-Party Custody 53 Agreement dated as of May 16, 1994 between LMUSA, as Customer, DLJ and Bank One, Texas N.A., as Custodian (the "Tri-Party Custody Agreement"). 10.6 Pledge Agreement dated as of May 16, 1994 by and 82 between DLJ and LMUSA. 10.7 Commitment Letter dated May 18, 1994 between LMUSA 100 and DLJ relating to the Whole Loan Financing Facility, the Promissory Note, the Pledge Agreement and the Tri-Party Custody Agreement (the "Commitment Letter"). 10.8 Amendment to the Commitment Letter dated 106 February 8, 1995 and effective as of December 31, 1994. 10.9 Amendment No. 2 to Amended and Restated Pledge 107 Agreement dated as of July 15, 1994 between LMUSA, as Pledgor, and Lehman Brothers Special, Inc., as Pledgee. 10.10 Amendment to Agreement dated as of September 23, 109 1994 between the registrant and entities and individuals listed therein as the Cold Spring Group. 10.11 Agreement dated September 30, 1994 among the 112 registrant, General Electric Capital Corporation and ELLCO Leasing Corporation relating to the termination of the General Escrow and the General Escrow Agreement described therein. 10.12 Asset Purchase Agreement dated as of December 16, 117 1994 by and between Lomas Information Systems, Inc., as Seller, Residential Information Services Limited Partnership, as Buyer, the registrant, LMUSA and Residential Services Corporation of America. 10.13 Employment Agreement dated as of December 1, 1994 165 by and between the registrant and Eric D. Booth. 10.14 Employment Agreement dated as of December 1, 1994 180 by and between the registrant and Robert R. Denton. 10.15 Lomas Financial Corporation 1993 Intermediate and 195 Long Term Incentive Plan Phantom Stock Agreement dated as of December 12, 1994 between the registrant and Eric D. Booth. 10.16 Lomas Financial Corporation 1993 Intermediate and 198 Long Term Incentive Plan Phantom Stock Agreement dated as of December 12, 1994 between the registrant and Robert R. Denton. 10.17 Consulting Agreement dated as of August 2, 1994 by 201 and between the registrant and Jess Hay. 10.18 Consulting Agreement dated as of November 1, 1994 210 by and between the registrant and Gary White. 10.19 Consulting Agreement dated as of November 1, 1994 218 by and between the registrant and Ramona Taylor. 10.20 Ninth Amendment to Restated Loan and Security 226 Agreement dated February 13, 1995 and effective as of December 31, 1994 among LMUSA, the bank signatories thereto, Bank One, Texas, N.A., as Administrative Agent, and Texas Commerce Bank National Association, as Syndication Agent. 11 Computation of Earnings (Loss) Per Share. 230 27 Financial Data Schedule. EX-10.1 2 EXHIBIT 10.1 FOURTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into as of February 28, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as Administrative Agent (in that capacity "Administrative Agent"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with Administrative Agent "Agents"). The Company, Lenders, and Agents have entered into the Restated Loan and Security Agreement dated as of July 8, 1993 (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement"), providing for loans to the Company on a revolving basis. The Company has requested an amendment to the Loan Agreement in order to approve the addition of certain "Investors" under the Loan Agreement. Accordingly, for adequate and sufficient consideration, the parties agree as follows: 1. Certain Definitions. Unless otherwise specified in this amendment (a) all terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) all references to "Sections" and "Schedules" are references to the Loan Agreement's sections and schedules. 2. Amendment. Schedule 1.1(b) is entirely amended in the form of -- and all references in the Loan Papers to it shall be to -- the attached Second Amended 1.1(b) 3. Conditions Precedent. The foregoing is not effective unless (a) Agents have received counterparts of this amendment executed by the Company, by Agents, and at least by Determining Lenders and (b) all of the representations and warranties -- in this amendment and in all other Loan Papers are true and correct as of -- as if made on -- the date of this amendment. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the other Loan Papers. Except as expressly modified and superseded by this amendment, the terms and provisions of the other Loan Papers are ratified and confirmed and continue in full force and effect. The Company, Determining Lenders, and Agents agree that the Loan Papers, as amended by this amendment, continue to be legal, valid, binding, and enforceable in accordance with their respective terms. The Company ratifies and confirms that all Liens granted to Agents, on behalf of Lenders, were intended to, do, and continue to secure the full payment and performance of the Obligations. The Company shall perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents as either Agent or any Lender may reasonably request in order to perfect and protect such Liens and preserve and protect the rights of Agents and Lenders in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Lenders and Agents that (a) this amendment and the other Loan Papers to be delivered under this amendment have been duly authorized, executed, and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and those other Loan Papers (c) this amendment and those other Loan Papers are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery, and performance by the Company of this amendment and those other Loan Papers do not require the consent of any other Person and do not and will not constitute a violation of any Laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties in the Loan Agreement, as amended by this amendment, and each other Loan Paper are true and correct in all material respects on and as of the date of this amendment as though made as of the date of this amendment, and (f) as of the date of this amendment, no Default or Potential Default exists. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment. Because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if included in this amendment verbatim. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts must be construed together to constitute one and the same document. 8. Parties Bound. This amendment binds and inures to the Company, Agents, each Lender, and (subject to Section 10.10) their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] EXECUTED as of the date first stated. Lomas Mortgage USA, Inc. LOMAS MORTGAGE USA, INC., 1600 Viceroy Drive as the Company Dallas, Texas 75235 Attn: Robert E. Byerley, Jr., Executive Vice President & Treasurer Telecopy: 214/879-7018 By /S/ROBERT E. BYERLEY, JR. ------------------------------- Robert E. Byerley, Jr., Executive Vice President and Treasurer Third Floor, 1717 Main Street BANK ONE, TEXAS, N.A., Mortgage Finance Group as Administrative Agent Dallas, Texas 75201 and a Lender Attn: Kathleen C. Stewart, Vice President Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART ------------------------------- Kathleen C. Stewart, Vice President Texas Commerce Bank National TEXAS COMMERCE BANK NATIONAL Association ASSOCIATION, as Syndication Agent 717 Travis Street and a Lender Houston, Texas 77002 Attn: Robert A. Salcetti, Senior Vice President Telecopy: 713/216-2082 By /S/ROBERT A. SALCETTI ------------------------------- Robert A. Salcetti, Senior Vice President First Bank Place FIRST BANK NATIONAL ASSOCIATION, 601 2nd Ave. S. as a Lender 2nd Floor MPFP0801 Minneapolis, MN 55402-4302 Attn: Kathlyn Slater, Vice President Telecopy: 612/973-0826 By /S/KATHLYN SLATER ------------------------------- Kathlyn Slater, Vice President 8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B., Dallas, Texas 75255 as a Lender Attn: James E. Robertson, Vice President Telecopy: 214/360-1660 By /S/JAMES E. ROBERTSON ------------------------------- James E. Robertson, Vice President 280 Park Avenue, 23 West BANKERS TRUST COMPANY, as a Lender New York, New York 10017 Attn: Matthew C. Bernstein Vice President Telecopy: 212/454-3821 By /S/MATTHEW C. BERNSTEIN ------------------------------- Matthew C. Bernstein, Vice President 313 Carondelet HIBERNIA NATIONAL BANK, as a Lender Suite 1400 New Orleans, Louisiana 70130 Attn: Michael Tennyson, Vice President Telecopy: 504/584-2042 By /S/MICHAEL TENNYSON ------------------------------- Michael Tennyson, Vice President 6222 Wilshire Blvd. BANK HAPOALIM, B.M., Los Angeles, CA 90048 LOS ANGELES BRANCH, as a Lender Attn: Robert Pollak, Vice President Telecopy: 213/937-1439 By ------------------------------- Robert Pollak, Vice President By ------------------------------- Name ------------------------------ Title ----------------------------- 75 Wall Street DRESDNER BANK, AG, NEW YORK BRANCH, New York, NY 10005-2889 as a Lender Attn: Charles H. Hill, Vice President Telecopy: 212/574-0129 By /S/CHARLES H. HILL ------------------------------- Name Charles H. Hill ------------------------------- Title Vice President ----------------------------- By /S/R. MATTHEW SCHERER ------------------------------- Name R. Matthew Scherer ------------------------------- Title Vice President ----------------------------- 100 Federal St. 01-32-041 THE FIRST NATIONAL BANK OF BOSTON, Boston, MA 02110 as a Lender Attn: Corinne M. Barrett, Vice President Telecopy: (617) 434-7108 By /S/CORINNE M. BARRETT ------------------------------- Corinne M. Barrett, Vice President One Marine Midland Center, MARINE MIDLAND BANK, N.A., 15th Floor as a Lender Buffalo, New York 14203 Attn: William F. Dentinger Vice President Telecopy: 716/841-2707 By /S/WILLIAM F. DENTINGER ------------------------------- William F. Dentinger, Vice President 66th Floor, NATIONSBANK OF TEXAS, N.A., NationsBank Plaza as a Lender 901 Main Street Dallas, Texas 75202 Attn: Beth S. Sorensen, Vice President Telecopy: 214/508-0604 By /S/BETH S. SORENSEN ------------------------------- Beth S. Sorensen, Vice President 380 Madison Avenue BANK OF SCOTLAND, as a Lender New York, New York 10017 Attn: Catherine Oniffrey, Vice President Telecopy: 713/651-9714 By /S/CATHERINE ONIFFREY ------------------------------- Catherine Oniffrey, Vice President 1601 Elm Street, 2nd Floor COMERICA BANK - TEXAS, as a Lender Dallas, Texas 75201 Attn: W. James Meintjes, Banking Officer Telecopy: 214/979-8344 By /S/W. JAMES MEINTJES ------------------------------- W. James Meintjes, Banking Officer 1230 Peachtree St. NE, COMMERZBANK AKTIENGESELLSCHAFT, Suite 3500 ATLANTA AGENCY, as a Lender Atlanta, Georgia 30309 Attn: Harry P. Yergey, Vice President Telecopy: 404/888-6539 By ------------------------------- Andreas Bremer, Senior Vice President By ------------------------------- Harry P. Yergey, Vice President 499 Thornall Street MIDLANTIC NATIONAL BANK, as a Lender Edson, New Jersey 08837 Attn: Glenn Hedde, Vice President Telecopy: 908/321-2094 By /S/GLENN HEDDE ------------------------------- Glenn Hedde, Vice President 7485 New Horizon Way THE PRUDENTIAL HOME MORTGAGE Frederick, Maryland 21701 COMPANY, INC., as a Lender Attn: Russell R. Anderson, Vice President Telecopy: 301/696-7405 By /S/RUSSELL R. ANDERSON ------------------------------- Russell R. Anderson, Vice President 640 Fifth Avenue, 15th Floor BANK OF IRELAND GRAND CAYMAN BRANCH, New York, New York 10019 as a Lender Attn: Roger Burns, Vice President Telecopy: 212/586-7752 By /S/ROGER BURNS ------------------------------- Roger Burns, Vice President 15 S. 20th St., 15th Floor COMPASS BANK, as a Lender Birmingham, Alabama 35233 Attn: John D. West, Mortgage Banking Officer Telecopy: 205/715-7994 By /S/JOHN D. WEST ------------------------------- John D. West, Mortgage Banking Officer 1 Mercantile Center MERCANTILE BANK OF ST. LOUIS NATIONAL 7th & Washington ASSOCIATION, as a Lender St. Louis, Missouri 63101 Attn: Michael P. Lane, Assistant Vice President Telecopy: 314/425-2162 By /S/MICHAEL P. LANE ------------------------------- Michael P. Lane, Assistant Vice President 7700 Wisconsin Avenue SIGNET BANK/MARYLAND, as a Lender Suite 400 Bethesda, Maryland 20814 Attn: David H. Olson, Vice President Telecopy: 301/652-1174 By /S/DAVID H. OLSON ------------------------------- David H. Olson, Vice President 231 South LaSalle Street CONTINENTAL BANK N.A., as a Lender Chicago, Illinois 60697 Attn: Mary Jo Hoch, Vice President Telecopy: 312/987-5833 By /S/MARY JO HOCH ------------------------------- Mary Jo Hoch, Vice President SECOND AMENDED SCHEDULE 1.1(b) INVESTORS I. Bond Programs Program Trustee ------- ------- Bexar County Housing Finance Corp., Series 1990 Ameritrust Texas, N.A. Brevard County Housing Finance Authority, Series 1991C Sun Bank, N.A. East Texas Housing Finance Corp., Series 1992A Ameritrust Texas, N.A. Harris County Housing Finance Corporation, Series 1991 Texas Commerce Bank, N.A. Housing Finance Authority of Manatee County, FL; Series 1991A NationsBank Trust Co. (FL), N.A. Housing Finance Authority of Palm Beach County, FL; Series 1992A NationsBank Trust Co. (FL), N.A. New Orleans Home Mortgage Authority, Series 1991A First National Bank of Commerce Travis County Housing Finance Corp., Series 1991, A&B Ameritrust Texas, N.A. Orange County Housing Finance Authority, Series 1992 A & B Sun Bank, N.A. Housing Finance Authority of Pinellas County, Series 1991 B NationsBank Trust Co. (FL), N.A. Central Texas Housing Finance Corp., Series 1991 NCNB Texas National Bank Ft. Worth Escambia County Housing Finance Authority, Series 1992 NationsBank Trust Co. (FL) Northeast Texas Housing Finance Corp., Series 1991 NCNB Texas National Bank Ft. Worth Texas Dept. of Housing & Community Affairs; No.45 Team Bank, Ft. Worth Texas Dept. of Housing & Community Affairs Bond Program No. 44, Series 1991 Team Bank, Ft. Worth II. Pension Funds California Public Employees Retirement System III. Investment Banks Donaldson, Lufkin & Jenrette Securities Corp. Goldman, Sachs & Company Paine Webber, Inc. Rauscher Pierce Refsnes, Inc. Salomon Brothers, Inc. The First Boston Corporation Shearson/Lehman Brothers, Inc. Smith Barney Harris Hupham & Company, Inc. IV. Other Veterans Land Board of the State of Texas Prudential Securities Realty Funding Corporation Guaranty Federal Bank, F.S.B. Capstead Mortgage Corporation Citibank, N.A. Citicorp Securities, Inc. Norwest Funding, Inc. The Prudential Home Mortgage, Inc. Residential Funding Corporation EX-10.2 3 EXHIBIT 10.2 EIGHTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into as of November 29, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as Administrative Agent (in that capacity "Administrative Agent"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with Administrative Agent, "Agents"). The Company, Lenders, and Agents have entered into the Restated Loan and Security Agreement (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement") dated as of July 8, 1993, providing for loans to the Company on a revolving basis. The Company has requested amendments to the Loan Agreement in order to extend the Termination Date, update certain provisions to further confirm that Syndication Agent no longer has a swing commitment, modify certain financial covenants, and change several addresses. Accordingly, for adequate and sufficient consideration, the parties agree as follows: 1. Certain Definitions. Unless otherwise specified in this amendment (a) all terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) all references to "Sections" and "Schedules" are references to the Loan Agreement's sections and schedules. 2. Amendments. (a) The following definition in Section 1.1 is entirely amended as follows: "Termination Date" means the earlier of (a) November 28, 1995, and (b) the date that all Lenders' commitments to lend terminate or are cancelled under this agreement. (b) Section 2.2(c) is entirely amended as follows: (c) Swing Borrowings. The following procedures apply to Swing Borrowings: (i) The Company may request a Swing Borrowing by giving to Administrative Agent a Notice of Borrowing for it, which is irrevocable and binding on the Company and must be received by Administrative Agent by at least 11:30 a.m. on the Business Day the Borrowing is requested to be made. (ii) Administrative Agent shall then elect in its sole discretion whether to loan any of that Swing Borrowing. If Administrative Agent elects to not fund the Swing Borrowing, it shall so notify the Company in writing by facsimile transmission confirmed by telephone by 1:00 p.m. on the date that Swing Borrowing is requested to be made. To the extent that any portion of a requested Swing Borrowing is not funded, (a) the Notice of Borrowing for that Swing Borrowing shall be deemed to be a Notice of Borrowing for a Ratable Borrowing in the amount of that portion, (b) Administrative Agent shall use its best efforts to promptly -- but at least by 2:00 p.m. on that day -- give a copy of the Notice of Borrowing to each Lender, marked by Administrative Agent to indicate that portion of the requested Swing Borrowing that was not made, and (c) each Lender shall make reasonable efforts to pay its Commitment Percentage of that Borrowing to Administrative Agent's principal office in Dallas, Texas, in immediately available funds by 3:00 p.m. on that day but in any event each Lender will comply with Section 2.2(b) with respect to that portion. (iii) If Administrative Agent elects to loan that Swing Borrowing, then Administrative Agent shall deposit the funds into the Note Payment Account by 3:00 p.m. on the date the Borrowing is requested to be made. (c) Section 2.9(a) is entirely amended as follows: 2.9 Participations Between Lenders. (a) Each Lender irrevocably and unconditionally agrees to purchase and agrees to pay Administrative Agent for, and Administrative Agent irrevocably and unconditionally agrees to sell to that Lender, a ratable participation in the Principal Debt of Swing Borrowings outstanding from time to time; provided that each Lender's purchase of a participation in the Principal Debt of any Swing Borrowing shall be limited so as to exclude that portion of the Principal Debt of that Swing Borrowing that would cause the Principal Debt owed to that Lender to exceed that Lender's Commitment. Upon demand by Administrative Agent, each Lender shall pay to Administrative Agent in immediately available funds, by 2:00 p.m. on the day that the demand is made -- if demand is given before 12:00 noon on any Business Day, or, if made at any other time, on the next Business Day following the date of demand -- that Lender's Commitment Percentage of the Principal Debt of Swing Borrowings outstanding at such time, together with interest at the Federal-Funds Rate (minus 1.25% per annum) from (and including) the day when its payment was due to (but excluding) the Business Day that payment is made prior to 2:00 p.m. or, if made after 2:00 p.m. on any Business Day, the next Business Day following the date of payment. (i) Prior to the time that a Lender pays for its participation in the Principal Debt of Swing Borrowings under clause (a) above, and until that Lender makes the required payment (A) Administrative Agent is deemed to continue to have outstanding a Swing Borrowing in the amount of that Lender's unpaid principal participation obligation for all purposes of this agreement other than those provisions requiring the other Lenders to purchase a participation in that Swing Borrowing, (B) all interest accruing on Swing Borrowings before the funding date of any participation is payable solely to Administrative Agent for its own account, and (C) payments received by Administrative Agent of the Principal Debt of that part of the Swing Borrowing purchased by that Lender shall be retained by Administrative Agent for its own account, shall not constitute trust funds of that Lender held by Administrative Agent, and shall be deemed to proportionately reduce that amount payable by that Lender under clause (a) above. The Company shall make each payment of all or any part of any Swing Borrowing to Administrative Agent for the ratable benefit of Administrative Agent and those Lenders who have funded their participations in Swing Borrowings under clause (a) above. Even after the time that a Lender pays for its participation in the Principal Debt of Swing Borrowings, all subsequent payments of interest that had accrued prior to the time that Lender pays for its participation are paid for the benefit of Administrative Agent. However, Administrative Agent agrees to refund to any Lender late-payment interest it actually paid, if any, under clause (a) above at such time that Administrative Agent actually receives interest from the Company for the same period on the same portion of the Swing Borrowings. (d) Section 7.2(b) is entirely amended as follows: Total Liabilities in excess of 700% of the Company's Consolidated Net Worth; or (e) Section 7.2(c) is entirely amended as follows: Total Liabilities in excess of 900% of Consolidated Adjusted Tangible Net Worth. (f) For purposes of Section 10.4, the addresses and telecopy numbers for the Company and each Agent, respectively, are amended as reflected on the signature pages to this amendment. (g) Exhibit E-2 is amended in its entirety -- and all references in the Loan Papers to it are changed to -- the attached Amended Exhibit E-2. (h) Schedule 2 to Exhibit F is amended in its entirety -- and all references in the Loan Papers to it are changed to -- the attached Amended Schedule 2 to Exhibit F. 3. Conditions Precedent. The foregoing is not effective unless (a) Agents receive counterparts of this amendment executed by the Company, by Agents, and all Lenders and (b) Bank receives an officers' certificate executed by Borrower's Secretary or Assistant Secretary, certifying to (i) the resolutions adopted by its directors authorizing the transactions contemplated by this amendment, (ii) incumbency of officers, and (iii) changes in its corporate charter and bylaws since September 14, 1994, if any, (c) all of the representations and warranties -- in this amendment and in all other Loan Papers are true and correct as of -- as if made on -- the date of this amendment. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the other Loan Papers. Except as expressly modified and superseded by this amendment, the terms and provisions of the other Loan Papers are ratified and confirmed and continue in full force and effect. The Company, all Lenders, and Agents agree that the Loan Papers, as amended by this amendment, continue to be legal, valid, binding, and enforceable in accordance with their respective terms. The Company ratifies and confirms that all Liens granted to Agents, on behalf of Lenders, were intended to, do, and continue to secure the full payment and performance of the Obligations. The Company shall perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents as either Agent or any Lender may reasonably request in order to perfect and protect such Liens and preserve and protect the rights of Agents and Lenders in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Lenders and Agents that (a) this amendment and the other Loan Papers to be delivered under this amendment have been duly authorized, executed, and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and those other Loan Papers (c) this amendment and those other Loan Papers are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery, and performance by the Company of this amendment and those other Loan Papers do not require the consent of any other Person and do not and will not constitute a violation of any Laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties in the Loan Agreement, as amended by this amendment, and each other Loan Paper are true and correct in all material respects on and as of the date of this amendment as though made as of the date of this amendment, and (f) as of the date of this amendment, no Default or Potential Default exists. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment. Because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if included in this amendment verbatim. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts must be construed together to constitute one and the same document. 8. Parties Bound. This amendment binds and inures to the Company, Agents, each Lender, and (subject to Section 10.10) their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOW. EXECUTED as of the date first stated above. 1600 Viceroy Dr., 8th Floor LOMAS MORTGAGE USA, INC., as the Company Dallas, Texas 75235 Attn: Robert E. Byerley, Jr., Executive Vice President and Treasurer Telecopy: 214/879-7018 By /S/ROBERT E. BYERLEY, JR. -------------------------------------- Robert E. Byerley, Jr., Executive Vice President and Treasurer Mortgage Finance Group BANK ONE, TEXAS, N.A., 1717 Main Street, 4th Floor as Administrative Agent and a Lender Dallas, Texas 75201 Attn: Kathleen C. Stewart, Vice President Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART ------------------------------------ Kathleen C. Stewart, Vice President 717 Travis Street - 7-TCB-S56 TEXAS COMMERCE BANK NATIONAL Houston, Texas 77002 ASSOCIATION, as Syndication Agent Attn: Carlotta M. Hudler, and a Lender Vice President Telecopy: 713/216-2082 By /S/CARLOTTA M. HUDLER ------------------------------------ Carlotta M. Hudler, Vice President First Bank Place, 2nd Floor MPFP0801 FIRST BANK NATIONAL ASSOCIATION, 601 Second Avenue South as a Lender Minneapolis, Minnesota 55402-4302 Attn: Kathlyn K. Slater, Vice President Telecopy: 612/973-0826 By /S/KATHLYN K. SLATER ------------------------------------ Kathlyn K. Slater, Vice President 8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B., Dallas, Texas 75255 as a Lender Attn: Abbie Y. Tidmore, Vice President Telecopy: 214/360-1660 By /S/ABBIE Y. TIDMORE ------------------------------------ Abbie Y. Tidmore, Vice President AMENDED EXHIBIT E-2 Aggregate Collateral Value Determination TO: Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association FROM: Bank One, Texas, N.A. AS OF DATE: ------------------------------ DATE PREPARED: ------------------------------ I. COLLATERAL VALUE OF ELIGIBLE COLLATERAL A. Mortgage Collateral(1) 1. Aggregate principal amount $ ------- Less: Aggregate principal amount ($ ) of Mortgage Collateral that ------- is not Eligible Collateral 2. Aggregate principal amount of Mortgage Collateral that is Eligible Collateral $ ======== 3. 95% of item 2 above $ ======== 4. 95% of Market Value of total Mortgage Collateral that is Eligible Collateral $ -------- 5. Lesser of items 3 and 4 $ ======== B. Cash 1. Cash deposited in the Note Payment Account representing proceeds for the sale of Collateral $ ======== - - -------------------- (1) With respect to Non-Conforming Loans (excluding any Mortgage Loans included in the CALPERS Program), (a) the aggregate Collateral Value attributed to Non-Conforming Loans may not exceed 20% of the total Commitments, (b) the aggregate Collateral Value attributed to Non- Conforming Loans in excess of $600,000 each may not exceed 5% of the total Commitments, and (c) the Collateral Value attributed to a single Non-Conforming Loan may not exceed $750,000. C. Treasury Bills 1. Cost of Treasury Bills pledged to secure the Obligations $ ------- 2. Par value of Treasury Bills pledged to secure the Obligations $ ------- 3. Market Value of Treasury Bills pledged to secure the Obligations $ ------- 4. Lesser of items 1, 2 & 3 $ ======== D. Other Collateral 1. ---------------------- $ ------- 2. ---------------------- $ ------- 3. Total Collateral other than Mortgage Collateral, Cash and Treasury Bills that qualifies as Eligible Collateral $ ======== TOTAL COLLATERAL VALUE OF ELIGIBLE COLLATERAL: $ ======== II. PRINCIPAL DEBT OUTSTANDING - RATABLE BORROWINGS A. Aggregate outstanding Ratable Borrowings funded by Bank One, Texas, N.A. $ ------- B. Aggregate outstanding Ratable Borrowings funded by Texas Commerce Bank National Association $ ------- C. Aggregate outstanding Ratable Borrowings funded by First Bank National Association $ ------- D. Aggregate outstanding Ratable Borrowings funded by Guaranty Federal Bank $ ------- E. Total outstanding Ratable Borrowings $ ------- III. PRINCIPAL DEBT OUTSTANDING - SWING BORROWINGS A. Aggregate outstanding Swing Borrowings funded by Bank One, Texas, N.A. $ ------- B. Total Outstanding Swing Borrowings $ ------- C. (1) Swing Commitment $ ------- (2) Aggregate outstanding Swing Borrowings (Line B above) $ ------- (3) Line (1) minus Line (2) $ ------- IV. WET BORROWINGS A. (1) Wet Sublimit $ ------- (2) Portion of Ratable Borrowings representing Wet Borrowings $ ------- (3) Portion of Swing Borrowings representing Wet Borrowings $ ------- (4) Total of Line (2) and Line (3) $ ------- (5) Line (1) minus Line (4) $ ------- V. COLLATERAL SURPLUS (DEFICIT) A. (1) Total Collateral Value of Eligible Collateral $ ------- (2) Total Commitments $ ------- (3) Principal Debt $ ------- (4) The lesser of Line (1) and Line (2) minus Line (3) $ ------- Collateral Surplus (Deficit) $ ------- BANK ONE, TEXAS, N.A. By -------------------------- Name ------------------------- Title ------------------------ AMENDED SCHEDULE 2 TO EXHIBIT F Collateral Document Transmittal Letter Wet Borrowings Bank One, Texas, N.A. Mortgage Finance Collateral Operations 1900 Pacific St., 6th Floor Dallas, Texas 75201 Attn: Gloria Sadler Re: Delivery of Collateral Documents Pursuant to the terms of that certain Restated Loan and Security Agreement (as renewed, extended, amended, or restated, the "Loan Agreement") dated as of July 8, 1993, between Lomas Mortgage USA, Inc., (the "Company"), certain Lenders (the "Lenders"), Bank One, Texas, N.A., as administrative agent (in that capacity, "Administrative Agent"), and Texas Commerce Bank National Association, as syndication agent (in that capacity, "Syndication Agent," and with Administrative Agent, "Agents"), attached is a description of each Mortgage Loan (including the loan number, borrower name, original mortgage amount, outstanding principal balance, interest rate, type of loan, date of loan, and funding amount) and the other documents required to be delivered to you under the Loan Agreement. The Company agrees to deliver the described documents to Administrative Agent within five Business Days of this letter and hereby grants to Administrative Agent, for the benefit of the Lenders, a first-priority lien in the described documents pursuant to the Loan Agreement. EX-10.3 4 EXHIBIT 10.3 WHOLE LOAN FINANCING FACILITY CONFORMING AND NONCONFORMING MORTGAGE LOANS Dated: May 16, 1994 Lomas Mortgage USA, Inc. 1600 Viceroy Drive Dallas, Texas 75235 Gentlemen: DLJ Mortgage Capital, Inc. ("DLJ") is pleased to advise you of the availability of a whole loan financing facility (the "Facility") secured by mortgage loans on the terms set forth in this letter. Capitalized terms not defined herein shall have the respective meanings given such terms in the Pledge Agreement, dated the date hereof, between you and DLJ (the "Pledge Agreement"). 1. The Advances. DLJ agrees to consider from time to time your requests that DLJ make advances (each, an "Advance", and, collectively, the "Advances") to you in an aggregate principal amount outstanding at any one time not to exceed the amount of the Promissory Note (the "Maximum Credit"). Unless otherwise agreed in writing, this Facility is not a commitment to lend, but rather this Facility sets forth the procedures to be used in connection with periodic requests for Advances. You hereby acknowledge that DLJ is under no obligation to agree to make, or to make, any Advance pursuant to this Facility. All Advances made by DLJ hereunder shall be evidenced by the promissory note duly executed by you (the "Promissory Note"). Although the Promissory Note shall be dated the date of issue, interest in respect thereof shall be payable only for the periods during which the Advances evidenced thereby are outstanding, and although the stated amount of the Promissory Note shall be equal to the Maximum Credit, the Promissory Note shall be enforceable only to the extent of the unpaid aggregate principal amount of the Advances then outstanding, plus accrued and unpaid interest thereon, plus any other amounts due thereunder. Subject to the limit of the Maximum Credit, you may borrow, repay pursuant to Section 3 hereof and reborrow pursuant to Section 2 hereof. 2. Making the Advances. (a) Prior to 10:00 A.M. (New York City time) on the Business Day you desire to borrow funds from DLJ under this Facility, you shall notify DLJ by telephone, facsimile or letter that you wish to borrow money on a specified date, in a specified principal amount and for a specified term. (b) Upon receipt of your request for an Advance, DLJ may make an offer to you specifying the terms for such Advance, including the interest rate per annum (the "Quoted Rate") to be paid by you in respect of such Advance. You shall immediately notify DLJ as to whether or not you elect to borrow such an Advance. Each such election by you shall be evidenced by a notice (each, a "Notice of Borrowing") substantially in the form attached hereto, with the blanks appropriately completed and duly executed. On the date of such Advance, as so agreed by you and DLJ, DLJ will make its Advance to you upon the satisfaction of the conditions precedent to such Advance set forth in Section 6 hereof. Promptly thereafter, DLJ will send to you a written confirmation of such Advance (each, a "Confirmation"), and your acceptance of the related proceeds shall constitute your agreement to the terms of such Confirmation. Such Confirmation may be termed a "Repo Confirmation", but for purposes hereof the term "Repo", when used in any such Confirmation, shall be deemed to mean "Advance." 3. Payment of Principal and Interest. You shall repay, and shall pay interest on, the principal amount of each Advance in accordance with the terms of this Facility, the Promissory Note and the Notice of Borrowing, it being understood that upon each disbursement of funds as set forth in Section 2 above you shall have effected a borrowing from DLJ hereunder and shall be indebted to DLJ for the principal amount thereof, plus interest thereon, in accordance with the terms of this Facility, the Promissory Note and the Notice of Borrowing. 4. Procedures for Payments. You shall repay the principal amount of each Advance made to you, and the interest thereon, not later than 5:00 P.M. (New York City time) on the maturity date (the "Maturity Date") specified in the related Notice of Borrowing in United States Dollars and in same day funds. 5. Representations, Warranties and Covenants. You hereby represent, warrant and covenant as follows: (a) You are a corporation duly organized, validly existing and in good standing under the laws of your jurisdiction of incorporation and your principal place of business. (b) You are an approved seller/servicer or issuer in good standing with each Agency to which Agency Mortgage Loans will be submitted. (c) Your execution, delivery and performance of the Program Documents are within your charter and corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) your charter or bylaws or (ii) any rule, regulation or other law or contractual restriction binding on or affecting you or your property. (d) Other than the necessary filings with the Agencies regarding the Collateral (to the extent that the Collateral includes Agency Mortgage Loans), no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for your due execution, delivery and performance of the Program Documents. (e) The Program Documents are your legal, valid and binding obligations, enforceable against you in accordance with their respective terms, except as limited by bankruptcy, insolvency or other such laws now or hereafter in effect affecting the enforcement of creditor's rights and by the application of equitable principles. (f) The available balance sheets, statements of income and changes in financial condition of you and your subsidiaries as of your most recently completed fiscal year and quarter, fairly present your financial condition and results of operations for the period then ended and are in accordance with generally accepted accounting principles consistently applied, and copies of such statements, together with the most recent opinion with respect to such statements of an independent public accounting firm, have been provided to DLJ, and since such date there has been no material adverse change in such financial condition, operations or business prospects. (g) There is no pending or, to our knowledge, threatened action or proceeding affecting you or any of your subsidiaries before any court, governmental agency or arbitrator, that may materially and adversely affect the financial condition, operations or business prospects of you or any of your subsidiaries. (h) Unless otherwise agreed, at any time any Advance is made or shall be outstanding, the Collateral Value of the items of Collateral related to such Advance shall be at least 102% of the Advance then outstanding; provided, however, that with respect to Nonagency Mortgage Loans (i) to the extent that a Purchase Commitment is in effect, the Collateral Value shall be at least 105% of the principal amount of the Advance then outstanding and (ii) to the extent that a Purchase Commitment is not in effect, the Collateral Value shall be at least 110% of the principal amount of the Advance then outstanding. Notwithstanding the foregoing, DLJ and you may agree upon such other percentage for purposes of determining Collateral Value for any particular Advance. To the extent that a deficiency in Collateral Value exists, you shall promptly cure any such deficiency by delivering cash, securities or other additional Collateral acceptable to DLJ. (i) You are duly licensed, qualified and in good standing in every state in which you transact business, except in states, if any, where a failure to be in good standing would not have a material adverse effect on your business or operations. (j) The Program Documents are not entered into in contemplation of insolvency or with any intent to hinder, delay or defraud any of your creditors. 6. Conditions Precedent. (a) Initial Advance. As conditions precedent to the making of the initial Advance, DLJ shall have received on or before the day of such Advance the following, in form and substance satisfactory to DLJ and duly executed by you: (i) The Program Documents; (ii) Evidence that all other actions necessary or, in the opinion of DLJ, desirable to perfect and protect the security interests and liens created by the Pledge Agreement have been taken, including without limitation duly executed Uniform Commercial Code financing statements on Form UCC-1 with respect to the Collateral; (iii) A certified copy of your corporate resolution approving the Program Documents and borrowings thereunder (either specifically or by general resolution approving borrowings of the type described in the Program Documents), and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Documents; (iv) A certificate of your Corporate Secretary or an Assistant Secretary certifying the names, true signatures and titles of your officers duly authorized to request Advances and sign the Program Documents and the other documents to be delivered thereunder; and (v) A favorable opinion of your counsel, which may be internal counsel, as to such matters as DLJ may reasonably request. (b) Each Advance. As conditions precedent to making each Advance, DLJ shall have received on or before the day of such Advance the following, in form and substance satisfactory to DLJ and duly executed: (i) A Notice of Borrowing, the related Collateral Receipt and, if any item of Collateral securing such Advance is a Wet Mortgage Loan, the related Wet Closing Notice, each of which must bear the same number; (ii) If the Collateral is subject to a security interest or lien immediately prior to the Advance, a letter from the holder of such security interest or lien releasing the Collateral from such security interest or lien upon receipt of a stated sum that is less than or equal to the related Advance; (iii) If the Collateral consists of Agency Mortgage Loans submitted to Custodian in accordance with Section 3, 4 or 5 of the Custody Agreement, either (A) an assignment by you to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") of the related Purchase Commitment, in form and substance acceptable to DLJ in its sole discretion, or (B) evidence that you have instructed the relevant Agency to pay the purchase price for such Agency Mortgage Loans under the related Purchase Commitment directly to DLJ or its designee, unless otherwise agreed by DLJ; (iv) If the Collateral consists of Nonagency Mortgage Loans, and if applicable, evidence that such Nonagency Mortgage Loans are covered by pool insurance and a pool insurance certificate (not a commitment to insure) issued by a Pool Insurer, in form and substance and for such amounts acceptable to DLJ in its sole discretion, unless otherwise agreed by DLJ; and (v) Such other documents as DLJ may reasonably request. 7. DLJ Entitled to Rely. In making any Advance or taking any other action pursuant to the Program Documents, DLJ may conclusively rely upon, and shall incur no liability to you in acting upon, any request or other communication that DLJ believes to have been given or made by a person authorized to borrow on your behalf, whether or not such person is listed on the certificate delivered pursuant to Section 6(a)(iv). 8. Termination. This Facility shall remain in effect until such time as it is terminated by either DLJ or you giving written notice of termination hereof to the other, but no such termination shall affect your obligations with respect to any Advances outstanding at the time of such termination or shall be effective with respect to any Advances made prior to DLJ's receipt of notice thereof. Your obligation to indemnify DLJ pursuant to this Facility shall survive the termination hereof. 9. Assignment; Amendments, Etc. The Program Documents are not assignable by you. The Program Documents are assignable by DLJ in whole or in part. In connection with any such prospective assignment by DLJ, DLJ may distribute to any such prospective assignee any of the Program Documents and any document or other information delivered to DLJ pursuant thereto. No amendment or waiver of any provision of this Facility or the Promissory Note, nor any consent to any departure by you therefrom, shall in any event be effective unless the same shall be in writing and signed by DLJ, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The Program Documents supersede all previous letters of intent and other agreements between the parties that deal with the same subject matter. 10. Indemnity. You shall indemnify and hold DLJ harmless for all reasonable losses, costs, expenses and liabilities which DLJ may sustain (i) if any repayment of the principal amount of any Advance, together with interest thereon, is not made on the Maturity Date thereof or (ii) in connection with the protection of DLJ's rights under or the enforcement of the Program Documents or any other instrument or document delivered in connection therewith. 11. Notices. All written communications hereunder shall be mailed, telecopied or delivered at the respective addresses as listed in the Custody Agreement or at such other address as shall be designated by a party in a written notice to the other party. All such notices and communications shall be effective when delivered to the party to which such notice is to be given. 12. Governing Law; Consent to Jurisdiction. This letter shall be construed in accordance with, and governed by, the law of the State of New York, without giving effect to the conflict of law principles thereof. You waive trial by jury. You hereby irrevocably consent to the non-exclusive jurisdiction of any court of the State of New York, or in the United States District Court for the Southern District of New York, arising out of or relating to the Program Documents in any action or proceeding. You hereby submit to, and waive any objection you may have to personal jurisdiction and venue, in the courts of the State of New York and the United States District Court for the Southern District of New York, over any disputes arising out of or relating to the Program Documents. If the terms of this letter are satisfactory to you, please indicate your agreement and acceptance thereof by signing this letter and returning it to us, whereupon this letter shall become an agreement between us as of the date of this letter. Very truly yours, DLJ MORTGAGE CAPITAL, INC. By: /S/ROD ENNICO ------------------------------ Name: Rod Ennico ------------------------------ Title: Senior Vice President ---------------------------- Agreed and Accepted: LOMAS MORTGAGE USA, INC. By: /S/PAUL D. FLETCHER ------------------------------ Name: Paul D. Fletcher ------------------------------ Title: Senior Vice President ---------------------------- NOTICE OF BORROWING NO. DLJ Mortgage Capital, Inc. 140 Broadway, 26th Floor New York, New York 10005-1285 Attention: Whole Loan Financing Program Facsimile (212) 504-8125 RE: Agency/Nonagency Identification/Pool # ----------- -------------- Security Rate % Maturity: ------ --------- Pursuant to the Whole Loan Financing Facility, dated May 16, 1994, between you and the undersigned (as amended from time to time, the "Facility"), the undersigned hereby gives notice of its election to borrow from you an Advance and, in connection therewith, sets forth below the following information (each capitalized term used herein shall have the meaning specified therefor in the Facility): 1. The aggregate unpaid principal of the Mortgage Loans is $ . ----------------------- 2. The principal amount of this Advance is $ . ----------------------- 3. The Quoted Rate for this Advance is % per annum. -------- 4. The beginning Business Day of this Advance is , 199. ------------------ 5. The Maturity Date of this Advance is , 199. ------------------ 6. The Collateral Value of the items of Collateral shall be %. ---------------------- 7. If applicable, the aggregate principal amount of the Mortgage Loans that are secured by second or third liens on the related mortgaged property is $-------------------, which represents ------% of the Mortgage Loans. The undersigned hereby certifies that the following statements are true and correct on the date hereof and shall be true and correct on the date of the Advance requested herein, before and after giving effect thereto: (a) each of the representations and warranties contained in the Facility and the Pledge Agreement are true and correct in all material respects, (b) no Default or Event of Default (as such terms are defined in the Pledge Agreement) has occurred and is continuing, (c) if applicable, the undersigned has, coincident or prior to this Notice of Borrowing, delivered and validly assigned genuine and enforceable Purchase Commitments to DLJSC for Agency Mortgage Loans or an Agency Security or to DLJ for Nonagency Mortgage Loans, each in an aggregate amount equal to the Face Value of the Pool, and (d) Customer has satisfied all of the conditions precedent in Section 6(b) of the Facility. The Advance made pursuant hereto shall be made in connection with the items of Collateral described in the Collateral Receipt No. --------------, dated - - -------------------, 199--- and, if applicable, the Wet Closing Notice of even number and date therewith. Lomas Mortgage USA, Inc., as Customer By: ------------------------------ Name: ----------------------------- Title: ---------------------------- Date: , 199 ------------------------- ----- EX-10.4 5 EXHIBIT 10.4 COPY PROMISSORY NOTE $600,000,000 Dated: May 16, 1994 New York, New York FOR VALUE RECEIVED, the undersigned, Lomas Mortgage USA, Inc. ("Customer"), HEREBY PROMISES TO PAY to the order of DLJ Mortgage Capital, Inc. ("DLJ"), for the benefit of DLJ and the holders from time to time of interests herein, in lawful money of the United States of America, the lesser of (i) six hundred million dollars ($600,000,000) and (ii) the aggregate unpaid principal amount of all Advances made by DLJ to Customer pursuant to the Whole Loan Financing Facility, dated the date hereof (as amended from time to time, the "Facility"), between DLJ and Customer, on the respective Maturity Date for each such Advance, together with interest on each such Advance outstanding, from and including the date on which such Advance is made until the principal amount of such Advance is paid in full on such Maturity Date (and, as to any overdue principal and accrued interest thereon, on demand), at an interest rate per annum with respect to such Advance equal to the Quoted Rate applicable to such Advance. Each Advance under this promissory note (the "Promissory Note") shall be made pursuant to an executed Notice of Borrowing. 1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Whole Loan Financing Facility ("Facility") or the Pledge Agreement ("Pledge Agreement") executed by Customer and dated the date hereof. 2. Late Payments. Customer shall pay interest on any overdue principal of each Advance and (to the extent permitted by applicable law) accrued interest thereon, payable daily at a fluctuating interest rate per annum equal to 2% above the rate of interest per annum quoted as the prime rate in The Wall Street Journal (the "Default Rate"), each change in such Default Rate to take effect simultaneously with any change in such prime rate. 3. Whole Loan Financing Facility. This Promissory Note is the Promissory Note referred to in the Facility and is entitled to the benefit thereof and shall be subject to the provisions thereof and of the Pledge Agreement. This Promissory Note is secured pursuant to the Pledge Agreement. 4. No Prepayment. Customer shall have no right to prepay any principal amount of any Advance without the prior written consent of DLJ. 5. Payments and Computations. Customer shall make each payment hereunder not later than 5:00 P.M. (New York City time) on the day when due to DLJ pursuant to DLJ's instructions in same day funds. All computations of interest shall be made by DLJ on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Any payment to be made hereunder on a day other than a Business Day shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. 6. Events of Default. If any of the following events (each, an "Event of Default") shall occur and be continuing: (a) Customer shall fail to pay when due any principal of, interest on or other amount due and payable under this Promissory Note attributable to any Advance made hereunder, which failure is not cured within 1 Business Day; or (b) Customer shall fail to perform or observe any other term, covenant or agreement contained in the Program Documents on its part to be performed or observed when required, or within any applicable grace period; or (c) any representation or warranty made by Customer (or any of its officers) in the Program Documents or in any document delivered in connection therewith shall prove to have been incorrect in any material respect when made; or (d) Customer shall fail to pay any of its indebtedness for borrowed money in excess of $1,000,000 or any interest or premium thereon when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other default under any agreement or instrument relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or if any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (e) a custodian, receiver, conservator, liquidator, trustee, sequestrator or similar official for Customer, or of any of its property, is appointed or takes possession of such property; or Customer generally fails to pay its debts as they become due; or Customer is adjudicated bankrupt or insolvent; or an order for relief is entered under the Federal Bankruptcy Code, any successor or similar applicable statute, or any administrative insolvency scheme, against Customer; or any of its property is sequestered by court or administrative order; or a petition is filed against Customer under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or subsequently in effect; or (f) Customer files a voluntary petition in bankruptcy or seeks relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction whether now or subsequently in effect; or consents to the filing of any petition against it under any such law; or consents to the appointment of or taking possession by a custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official for Customer, or of all or any part of its property; or makes an assignment for the benefit of its creditors; or (g) any judgment or order for the payment of money in excess of $1,000,000 shall be rendered against Customer and shall remain undischarged, unvacated, unbonded or unstayed for a period of 30 days; or (h) any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of Customer, or shall have taken any action to displace the management of Customer or to curtail its authority in the conduct of the business of Customer, or any Agency takes any action to remove, limit or restrict the approval of Customer as an issuer, lender or a seller/servicer of mortgage loans; or (i) Customer shall default under, or fail to perform as requested under, or shall otherwise breach the terms of any instrument, agreement or contract between it and DLJ or any of DLJ's affiliates, which default is not cured within any applicable grace periods; or (j) any material adverse change occurs in the financial condition, operations, business prospects or corporate structure of Customer; then, and in any such event, DLJ may (i) by notice to Customer, declare this Promissory Note and all Advances made hereunder, the outstanding principal of and all interest accrued thereon and all other amounts payable under the Program Documents to be immediately due and payable, whereupon this Promissory Note and all such Advances, interest and other amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Customer, and (ii) exercise or cause to be exercised all rights and remedies of DLJ as secured party under the Pledge Agreement; provided, that upon occurrence of any Event of Default described in paragraphs (e) and (f) above, the outstanding principal of and accrued interest on this Promissory Note and all other amounts payable under the Program Documents shall immediately and automatically become due and payable without presentment, demand, protest or notice of any kind. 7. Amendments, Etc. No amendment or waiver of any provision of this Promissory Note, nor any consent to any departure by Customer therefrom, shall be effective unless the same shall be in writing and signed by DLJ, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. 8. Notices. All written communications hereunder shall be mailed, telecopied or delivered at the respective addresses as listed in the Custody Agreement or at such other address as shall be designated by Customer or DLJ in a written notice to the other. All such notices and communications shall be effective when delivered to the party to which such notice is to be given. 9. No Waiver, Remedies. No failure on the part of DLJ to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any other remedies provided in equity or at law. 10. Binding Effect; Governing Law; Venue. This Promissory Note shall be binding upon Customer and its successors and assigns, and shall inure to the benefit of DLJ and its successors and assigns. Customer may not assign its obligations under this Promissory Note without the prior written consent of DLJ. DLJ may assign, by bookkeeping entry on DLJ's records or otherwise, all or any part of, or any interest in, DLJ's rights and benefits hereunder, including, without limitation, its right to payments of principal and interest with respect to a particular Advance. To the extent of such assignment, such assignee shall have the same rights and benefits against Customer as it would have had if it were DLJ hereunder; provided, however, that nothing contained herein shall preclude DLJ from continuing to exercise all of its rights hereunder for the benefit of any such assignee of DLJ, and Customer shall continue to take directions solely from DLJ unless otherwise notified by DLJ in writing. This Promissory Note shall be construed in accordance with, and governed by, the laws of the State of New York, without giving effect to the conflict of law principles thereof. Customer waives trial by jury. Customer hereby irrevocably consents to the non-exclusive jurisdiction of any court of the State of New York, or in the United States District Court for the Southern District of New York, in any action or proceeding arising out of or relating to this Promissory Note. Customer hereby submits to, and waives any objection it may have to personal jurisdiction and venue in, the courts of the State of New York and the United States District Court for the Southern District of New York, over any disputes arising out of or relating to this Promissory Note. IN WITNESS WHEREOF, Customer has caused this Promissory Note to be executed by its officer thereunto duly authorized, as of the date first above written. Lomas Mortgage USA, Inc., as Customer By: /S/PAUL D. FLETCHER ----------------------------------- Name: Paul D. Fletcher ---------------------------------- Title: Senior Vice President --------------------------------- EX-10.5 6 EXHIBIT 10.5 WHOLE LOAN FINANCING PROGRAM TRI-PARTY CUSTODY AGREEMENT AMONG LOMAS MORTGAGE USA, INC. ("Customer") and DLJ MORTGAGE CAPITAL, INC. ("DLJ") and BANK ONE, TEXAS, N.A. ("Custodian") DATED: May 16, 1994 This TRI-PARTY CUSTODY AGREEMENT ("Agreement") is made and entered into as of the date written on the cover hereof, among Customer, Custodian and DLJ, for itself and its successors and assigns. PRELIMINARY STATEMENT DLJ may, from time to time, make advances (each, an "Advance") to Customer with respect to the mortgage loans related to this agreement, and DLJ may, from time to time, assign all or part of its interests therein to one or more investors. Customer has granted or shall hereafter grant to DLJ and its successors and assigns a security interest in and lien on certain collateral (the "Collateral") as security for the performance of the obligations of Customer in connection with Advances. DLJ has also agreed to lend funds to Customer to allow Customer to originate or acquire mortgage loans secured by enforceable first lien mortgages on real properties, which loans made by DLJ to Customer will be disbursed by a bank or a title company or its designated agent (collectively or individually, a "Title Company"). Customer intends, from time to time, to deliver certain items of Collateral to Custodian, and Custodian is willing to hold such Collateral in custody as bailee of and as agent for DLJ and its successors and assigns, in order to perfect the security interest in and lien on such Collateral of DLJ, its successors and assigns. Certain items of Collateral constitute mortgage loans ("Agency Mortgage Loans") intended either to secure or underlie securities or certificates issued or guaranteed by the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"; GNMA, FNMA and FHLMC, each, an "Agency") or to be purchased for cash by an Agency, and certain items of Collateral constitute mortgage loans ("Nonagency Mortgage Loans") intended to be purchased for cash by a purchaser listed on Schedule I hereto ("Nonagency Purchaser"), as such schedule may be amended from time to time. NOW, THEREFORE, the parties to this Agreement hereby agree as follows: 1. Appointment of Custodian. DLJ hereby appoints Custodian, and Custodian hereby accepts its appointment, to act as the bailee of and agent for DLJ, and its successors and assigns, for the purpose of taking custody of such Collateral and the proceeds thereof or substitutions therefor. With respect to each Agency Mortgage Loan, Custodian's appointment as DLJ's bailee and agent shall terminate upon the issuance by an Agency of a security that is backed in whole or in part by such Agency Mortgage Loan, upon settlement of purchase of such Agency Mortgage Loan by an Agency or upon notice from DLJ. With respect to each Nonagency Mortgage Loan, Custodian's appointment as DLJ's bailee and agent shall terminate upon settlement of purchase of such Nonagency Mortgage Loan by a Nonagency Purchaser or upon notice from DLJ. 2. Deposit of Collateral. Customer shall deposit with Custodian, and Custodian agrees to hold in pledge as bailee of and as agent for DLJ, and its successors and assigns, such Collateral that may, from time to time, be so deposited hereunder. Custodian shall maintain such Collateral so deposited in separate records and files. 3. GNMA Required Documents. For each mortgage loan intended to be included in a GNMA pool, Customer shall deposit with Custodian the following required documents (the "GNMA Required Documents"), and/or all such other documents as GNMA or DLJ may require from time to time for the issuance of the related GNMA securities, duly authorized and completed: (a) the original note, endorsed "Pay to the order of ---------------, without recourse", unless otherwise specified by GNMA: (b) an assignment of mortgage with assignee in blank but otherwise in recordable form, but not recorded, and all interim assignments if any, unless otherwise specified by GNMA; (c) a Collateral Receipt, substantially in the form attached hereto ("Collateral Receipt"); (d) a completed Warehouse Lender's Release Letter, substantially in the form attached hereto ("Warehouse Lender's Release Letter"); (e) a Schedule of Subscribers and GNMA Contractual Agreement on Form HUD- 11705 listing Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, 26 Floor, New York, New York 10005, taxpayer number 13-2741729 or its designee, as the only subscriber and as the sole person who is authorized to take delivery of the related GNMA security; (f) a Schedule of Pooled Mortgages on Form HUD-11706; (g) a Release of Security Interest on Form HUD-11711A, with the authorized signature of the person signing for DLJ or Custodian on behalf of DLJ, in blank; (h) a Certification and Agreement Regarding Security Interest on Form HUD- 11711B; and (i) a Summary of Guaranty Agreement on Form HUD-11716 (level payment), HUD- 1746 (GPM or GEM) or HUD-1733 (serial notes) as appropriate. 4. FNMA Required Documents. For each mortgage loan intended to be included in a FNMA pool, Customer shall deposit with Custodian the following required documents (the "FNMA Required Documents"), and/or all such other documents as FNMA or DLJ may require from time to time for the issuance of the related FNMA securities or the purchase by FNMA of such mortgage loans, duly authorized and completed: (a) the original note endorsed "Pay to the order of ----------------, without recourse", unless otherwise specified by FNMA; (b) an assignment of mortgage with assignee in blank but otherwise in recordable form, but not recorded, and all interim assignments if any, unless otherwise specified by FNMA; (c) a Collateral Receipt; (d) a completed Warehouse Lender's Release Letter; (e) a Security Release Certification on Form 2004, with the authorized signature of the person signing for DLJ, or Custodian on behalf of DLJ, in blank; (f) a Schedule of Mortgages on Form 2005 (fixed rate), Form 2025 (ARMs, GEMs and VRMs) or other appropriate form; and (g) either a Delivery Schedule on Form 2014 listing Donaldson, Lufkin & Jenrette Securities Corporation or its designee as the only subscriber and as the sole person to which the related FNMA securities shall be delivered or, if the mortgage loans are to be purchased by FNMA, either (i) a Loan Schedule (Form 1068 or 1069) listing DLJ's (or Custodian's for the benefit of DLJ) Payee Code, or (ii) a bailee letter for execution by the Custodian substantially in the form attached hereto (the "Bailee Letter"). 5. FHLMC Required Documents. For each mortgage loan intended to be included in a FHLMC pool, Customer shall deposit with Custodian the following required documents (the "FHLMC Required Documents"), and/or all such other documents as FHLMC or DLJ may require from time to time for either the issuance of the related FHLMC securities or the purchase by FHLMC of such mortgage loans, duly authorized and completed: (a) the original note endorsed "Pay to the order of ----------------, without recourse", unless otherwise specified by FHLMC; (b) an assignment of mortgage with assignee in blank but otherwise in recordable form but not recorded, and all interim assignments if any, unless otherwise specified by FHLMC; (c) a Collateral Receipt; (d) a completed Warehouse Lender's Release Letter; (e) a Mortgage Loan Submission Schedule on Form 11 (fixed rate), Mortgage Submission Voucher on Form 13SF (ARM, GPM), or other appropriate form; (f) a Contract Delivery Summary on Form 381; (g) a Warehouse Lender Release of Security Interest on Form 996 listing either (i) Donaldson, Lufkin & Jenrette Securities Corporation or its designee as the only subscriber and as the sole person to which the related FHLMC securities shall be delivered, or (ii) wire transfer instructions listing either DLJ or Custodian's Settlement Account as the recipient of such funds wired, with the authorized signature of the person signing on behalf of DLJ in blank; and (h) either (i) a Security Settlement Information and Delivery Authorization on Form 939 listing Donaldson, Lufkin & Jenrette Securities Corporation or its designee as the only subscriber and as the sole person to which the related FHLMC securities shall be delivered; (ii) a Wire Transfer Authorization for Cash Warehouse Delivery on Form 987 listing either DLJ or Custodian's Settlement Account as the recipient of such funds wired; or (iii) a Bailee Letter for execution by Custodian. 6. Interim Required Documents. For each (i) Agency Mortgage Loan for which Customer has not yet selected the applicable Agency to which the mortgage loan will be submitted, or (ii) Nonagency Mortgage Loan, Customer shall deposit with Custodian the following required documents (the "Interim Required Documents"), and/or all such other documents as GNMA, FNMA, FHLMC or DLJ may require from time to time for the issuance of the related Agency securities, the purchase by an Agency of such mortgage loans, or the purchase by a Nonagency Purchaser of the related Nonagency Mortgage Loans, as the case may be, duly authorized and completed: (a) the original note endorsed "Pay to the order of -----------------, without recourse"; (b) an assignment of mortgage with assignee in blank but otherwise in recordable form, but not recorded, and all interim assignments, if any; (c) a Collateral Receipt; (d) if applicable, a completed Warehouse Lender's Release Letter; and (e) a schedule of mortgage loans in a form acceptable to DLJ and Custodian. 7. Refinancing Required Documents. For each mortgage loan intended to be financed or refinanced by Customer through funds provided by DLJ directly to a Title Company, Customer shall deposit, or cause to be deposited, with Custodian the following required documents (the "Refi Required Documents"), and/or all such other documents as DLJ may require from time to time for the purchase of such mortgage loans by an Agency or the issuance of the related Agency securities, duly authorized and completed: (a) the original note endorsed "Pay to the order of -------- without recourse"; (b) an assignment of mortgage with assignee in blank but otherwise in recordable form, but not recorded, and all interim assignments, if any; (c) a Collateral Receipt; (d) a schedule of mortgage loans in a form acceptable to DLJ and Custodian, the aggregate unpaid principal balance of which equals the aggregate unpaid principal balance stated on the Collateral Receipt; and (e) an escrow letter executed by a Title Company substantially in the form attached hereto ("Escrow Letter"). 8. Establishment of the DDA and the Settlement Accounts. For each mortgage loan intended to be financed by Customer through funds provided by DLJ directly to a Title Company, DLJ, Customer and Custodian agree as follows: (a) Custodian shall establish and maintain a demand deposit account (the "DDA Account") for and on behalf of DLJ entitled "Lomas Mortgage USA, Inc., Account # 0100165026 Re: Bank One, Texas Tri-Party Custody Agreement, dated May 16, 1994." All Advances by DLJ shall be deposited in the DDA Account. All related fees and expenses for such DDA Account shall be borne by Customer. Upon request, Custodian shall provide the Title Company, Customer or DLJ with the federal wire reference number for a particular payment. (b) Custodian shall establish and maintain a demand deposit account (the "Settlement Account") for and on behalf of DLJ entitled "Lomas Mortgage USA, Inc., Account #0100165059 Re: Bank One, Texas Tri-Party Custody Agreement, dated May 16, 1994." All proceeds from the sale of designated mortgage loans to such Agency or to a Nonagency Purchaser will either be sent directly to DLJ or to the Settlement Account. Funds in the Settlement Account may be withdrawn only upon the instructions of DLJ in accordance with this Agreement. All related fees and expenses for such Settlement Account shall be borne by Customer. Customer shall provide Custodian and DLJ with notice of funds anticipated to be received by Custodian and DLJ respectively. (c) Unless otherwise agreed, with respect to the DDA Account, Customer will enter disbursement instructions through Custodian's ECDA Wire System and Custodian will release such wire instructions and immediately disburse such funds provided (i) sufficient funds exists in the DDA Account, (ii) such instructions do not include Customer as payee, (iii) Custodian has received an executed Escrow Letter from such payee, if applicable, and (iv) if a conflict exists between the instructions of DLJ and the instructions of Customer, Custodian shall follow DLJ's instructions. (d) Unless otherwise agreed, with respect to the Settlement Account, Customer will submit to Custodian and DLJ a position and settlement report as separately agreed to by the parties hereto (the "P&S Report"), and Custodian will immediately disburse such funds in the Settlement Account as directed in the P&S Report provided (i) sufficient funds exist in the Settlement Account, and (ii) DLJ has authorized such wire instructions. Notwithstanding the foregoing sentence, if a conflict exists between the instructions of DLJ and the instructions of Customer, Custodian shall follow DLJ's instructions. 9. Certification of Documentation. (a) Custodian, upon receipt of all of the GNMA, FNMA, FHLMC, Interim or Refi Required Documents, as the case may be (collectively, the "Required Documents"), shall review such Required Documents in accordance with the review and certification guidelines established by GNMA, FNMA, FHLMC or DLJ (as separately agreed to by DLJ and Custodian), as the case may be, for their respective pool to verify whether all are complete, whether each such document purporting to be an original appears on its face to be so, and whether each such document purporting to be a certified photocopy or conformed copy appears on its face to be a true copy of its original. Subject to the provisions set forth in the third sentence of Section 9(b) with respect to Wet Mortgage Loans, Custodian shall notify Customer and DLJ of any documents that are missing, incomplete on their face or patently inconsistent. Customer shall promptly deposit such missing documents with Custodian or complete or correct the documents. When the Required Documents have been received in full and correct form, Custodian will: (a) promptly deliver a signed Collateral Receipt and Warehouse Lender's Release Letter to DLJ; (b) upon the request of Customer, promptly deliver the Required Documents referred to in Section 3, 4 or 5 (other than such Required Documents referred to in Sections 3(a), (b), (c) and (d), 4(a), (b), (c) and (d), and 5(b), (c) and (d) hereof, unless otherwise required by GNMA, FNMA or FHLMC) to GNMA, FNMA or FHLMC, as the case may be; and (c) upon request of DLJ, deliver copies of the Required Documents to DLJ. In making such verification, Custodian may rely conclusively on the portion of the Collateral Receipt completed by Customer, the Required Documents and the documents constituting Custodian's mortgage file, and Custodian shall have no obligation to independently verify the correctness of Customer's certification on such Collateral Receipt or the effectiveness, sufficiency, validity, enforceability, collectibility, recordability or adequacy of such portion of the Collateral Receipt completed by Customer, Required Documents and the documents constituting the Custodian's mortgage file. (b) Customer may pledge, as part of the Collateral securing an Advance, a mortgage loan on or prior to the date of such Advance and for which all of the related Required Documents have not been deposited with Custodian on or prior to the date of such Advance (a "Wet Mortgage Loan"). In connection with any such pledge of a Wet Mortgage Loan, Customer, not later than 12:00 noon New York City time on the Business Day of the related Advance, shall deposit with Custodian a fully completed schedule of Mortgage Loans for such Wet Mortgage Loans, substantially in the form as separately agreed to by the parties hereto (a "Wet Closing Notice"). The Wet Closing Notice shall constitute a Required Document, and the deposit of the Wet Closing Notice shall be deemed to satisfy the requirement for the deposit of the documents set forth in Section 7(a) and (b) solely for purposes of the execution of the Collateral Receipt as of the date thereof. Notwithstanding the foregoing, Customer shall deposit with Custodian the documents set forth in Section 7(a) and (b) for such Wet Mortgage Loan within five (5) Business Days after the date of the related Custodial Receipt. For purposes of this Agreement, "Business Day" shall mean any day other than a Saturday, Sunday or a public or bank holiday in New York City or Dallas. If Customer does not deposit such documents with Custodian within such five (5) day period, Custodian shall promptly notify DLJ. Upon deposit of such documents with Custodian, Custodian shall review such documents in accordance with the standards set forth in Section 9(a), shall promptly notify DLJ if such documents do not comply with the requirements thereof and shall indicate on its records that Custodian maintains possession of such documents for DLJ hereunder. Customer hereby represents, warrants and covenants to DLJ and Custodian that Customer and any person or entity acting on behalf of Customer that has possession of any of the documents set forth in Section 7(a) or (b), as applicable, for such Wet Mortgage Loan prior to the deposit thereof with Custodian will hold such documents in trust for DLJ. 10. Further Obligations of Custodian. Custodian shall promptly notify DLJ if (i) Customer fails to pay any amount due to Custodian under this Agreement or otherwise, and such failure results in Custodian's accelerating the payment of any amount owed to Custodian by Customer, or (ii) Custodian has actual knowledge that any mortgage, pledge, lien, security interest or other charge or encumbrance (other than for the benefit of DLJ, its affiliates or its successors and assigns) has been placed on any account maintained by Customer with Custodian or on the Required Documents or that GNMA, FNMA or FHLMC has rejected any Required Document. Custodian shall use reasonable care and due diligence in the performance of its duties hereunder, shall hold the Required Documents in its fire rated storage vault or fire rated filing cabinet under its exclusive custody and control, in accordance with customary standards for such custody, and shall maintain a fidelity bond plus document hazard insurance as customarily maintained by commercial banks in a sufficient amount to cover any and all transactions contemplated by this Agreement. Custodian hereby represents and warrants to DLJ that Custodian is not controlled by, under common control with or otherwise affiliated with Customer, and covenants and agrees with DLJ that prior to any such affiliation in the future, Custodian shall promptly notify DLJ. Custodian hereby represents and warrants to DLJ that this Agreement has been duly authorized, executed and delivered by Custodian and constitutes the legal, valid and binding obligation of Custodian, enforceable in accordance with its terms. Custodian hereby agrees to recognize any security interest or lien granted to Donaldson, Lufkin & Jenrette Securities Corporation. If Customer desires to sell mortgage loans directly to an Agency, Custodian, if instructed by Customer, shall complete the endorsements and forward such related Required Documents as instructed by Customer to effect such sale to the respective Agency, together with a duly executed and completed Bailee Letter; provided, however, that any Required Documents that are unacceptable to the Agency shall be returned directly to Custodian and held by Custodian for DLJ in accordance with this Agreement. 11. Release of Required Documents. (a) Customer may from time to time request DLJ and Custodian in writing to permit the temporary withdrawal of certain Required Documents for the purpose of correction of errors therein or for permanent withdrawal. Custodian may permit the withdrawal of up to two (2) mortgage loans per pool at any given time for the purpose of correcting such mortgage loans, without the written consent of DLJ. If more than two (2) mortgage loans for a particular pool have been and remain released for correction, any additional request for release in conjunction with such pool will require the consent of DLJ. Any request for release by Customer shall be in the form of the Request and Receipt attached hereto. Custodian shall execute an acknowledgment of release of such Required Documents, shall return one original to Customer, shall forward one original to DLJ, and shall retain one original. Promptly upon completion of such correction and with respect to any Required Document that is a mortgage note, in any event within twenty- one (21) days, Customer shall return such Required Documents to Custodian. (b) Upon the request of Customer, Custodian may deliver the documents referred to in Sections 6(a), (b) and (e) above, to a Nonagency Purchaser so long as such Interim Required Documents are accompanied by a Bailee Letter addressed to such Nonagency Purchaser. Custodian shall make a reasonable effort to require such Nonagency Purchaser to execute such Bailee Letter and return it to Custodian. 12. Right to Inspect. Custodian shall permit (i) inspection at all reasonable times during regular business hours by DLJ (or by its auditors when requested by DLJ) of the Required Documents and the records of Custodian relating to this Agreement and (ii) DLJ (or its auditors when requested by DLJ) to make copies of the Required Documents and the records of Custodian relating to this Agreement. 13. Delivery of Required Documents to DLJ. Custodian shall promptly deliver to DLJ or its designee any or all Required Documents and other items of Collateral in Custodian's custody upon DLJ's written request. DLJ shall provide Customer with a copy of any such notice delivered to Custodian. Written instructions as to the method of shipment and shipper(s) Custodian is directed to utilize in connection with the transmission of Required Documents in the performance of Custodian's duties hereunder shall be delivered by DLJ to Custodian prior to any shipment of Required Documents pursuant to the request of DLJ hereunder. DLJ will arrange for the provision of such services at its sole cost and expense (or, at Custodian's option, reimburse Custodian for all costs and expenses incurred by Custodian consistent with such instructions) and will maintain such insurance against loss or damage to the required Documents as Customer deems appropriate. 14. Custodian Fees. It is understood that Custodian, or its successor, will charge such fees for its services under this Agreement as are set forth in a separate agreement between Custodian and Customer, the payment of which, together with Custodian's expenses in connection herewith, shall be solely the obligation of Customer. 15. Termination. Custodian may terminate its obligations under this Agreement upon thirty (30) days prior written notice to Customer and DLJ. In the event of such termination, Customer shall appoint a successor custodian, subject to approval by DLJ, and Custodian shall promptly transfer to the successor custodian, as directed, all Required Documents and other items of Collateral being held by Custodian under this Agreement. If, however, a successor custodian is not appointed by Customer or DLJ within sixty (60) days, all duties and obligations of Custodian shall cease and terminate. Custodian's sole responsibility thereafter shall be to safely maintain all of the Custodian's mortgage files and to deliver the same to a successor custodian; provided, however, if Customer and DLJ have not appointed a successor custodian within thirty (30) days after the expiration of the aforementioned sixty (60) day period, Custodian shall deliver such documents to DLJ. 16. Representations by Customer. Customer hereby represents and warrants to DLJ and Custodian that: (a) Any payee from the DDA Account is an entity that is engaged in escrow activities or is a Title Company as a normal course of its business; (b) Any and all funds advanced from the DDA Account pursuant to Customer's request in accordance with Section 8(a) shall be deemed to be an Advance to Customer; (c) The DDA Account shall be used only to wire funds to (i) Title Companies or other mortgage originators or their warehouse lenders for the purpose of funding or purchasing the related mortgage loan, (ii) Customer's other warehouse lenders, (iii) Customer's operating account for the purpose of reimbursing Customer for funds expended in funding or purchasing the related mortgage loan prior to the date of the Advance, or (iv) to wire funds to DLJ; (d) No mortgage loan held by Custodian pursuant to this Agreement shall remain deposited with Custodian for more than one hundred and eighty (180) consecutive days; and (e) Except for the funds advanced by DLJ to a Title Company as provided herein, all other documents and requirements to create an enforceable first lien mortgage on the related real property have been completed and duly executed. 17. Notices. All written communications hereunder shall be mailed, telecopied or delivered to each party at its address as indicated on the signature page hereof or at such other address as shall be designated by such party in a written notice to the other parties. All notices and communications shall be effective when delivered. 18. Concerning the Custodian. Custodian shall not be liable for any action or omission to act hereunder, except for its own gross negligence or willful misconduct. In no event shall Custodian have any responsibility to ascertain or take action with respect to the Required Documents or other items of Collateral, except as expressly provided herein. Custodian may act in reliance upon any written communication of Customer and DLJ concerning the delivery of the Required Documents and other items of Collateral pursuant to this Agreement. Custodian does not assume and shall have no responsibility for, and makes no representation as to, monitoring the value of the Required Documents and other items of Collateral. 19. Representations by Custodian. Custodian hereby represents and warrants that it does not have, and will not assert, any security interest, lien, claim or other adverse interest against the Required Documents or any other item of Collateral. However, Custodian makes no representations as to the title thereto, or as to the validity or adequacy of the security afforded thereby or hereby (except as to Custodian's authority to enter into this Agreement and the legality, validity, binding effect and enforceability of this Agreement with respect to Custodian), and Custodian shall incur no liability or responsibility in respect of any such matters. 20. Duties of Custodian. Custodian shall have no duties or responsibilities except those that are specifically set forth herein, and no duties or obligations shall be implied in this Agreement against Custodian. Custodian shall be under no responsibility or duty with respect to the disposition of any Required Documents while such Required Documents are not in its possession. If Custodian shall request instructions from DLJ with respect to any act, action or failure to act in connection with this Agreement, Custodian shall be entitled to refrain from taking such action and continue to refrain from acting unless and until Custodian shall have received written instructions from DLJ without incurring any liability therefor to DLJ, Customer or any other person. If Custodian shall at any time receive conflicting instructions from DLJ and Customer with respect to Custodian's mortgage files and the conflict between such instructions cannot be resolved by reference to the terms of this Agreement, Custodian shall be entitled to rely on the instructions of DLJ. In the absence of bad faith, gross negligence or willful misconduct on the part of Custodian, Custodian may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instruction, certificate, opinion or other document furnished to Custodian, reasonably believed by Custodian to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Agreement. Custodian may rely upon the validity of documents delivered to it, without investigation as to their authenticity or legal effectiveness, and Customer will hold Custodian harmless from any claims that may arise or be asserted against Custodian because of the invalidity of any such documents or their failure to fulfill their intended purpose. Custodian shall not be responsible to DLJ or any other party for recitals, statements or warranties or representations of Customer contained herein, or in any document, or be bound to ascertain or inquire as to the performance or observance of any of the terms of this Agreement or any other agreement on the part of any party, except as may otherwise be specifically set forth herein. No provision of this Agreement shall require Custodian to expend or risk its own funds or otherwise incur financial liability in the performance of its duties under this Agreement if it shall have the reasonable grounds for believing that repayment of such funds or adequate in- demnity is not reasonably assured to it. Custodian may consult with counsel with regard to legal questions arising out of or in connection with this Agreement and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, omitted or suffered by Custodian in good faith in accordance therewith. DLJ hereby authorizes and directs Custodian to sign on behalf of DLJ each of the Required Documents referred to in Sections 3, 4 and 5 hereof. Without limiting the generality of the foregoing, Custodian may rely upon and shall be protected in acting in good faith upon any notice or other communication received by it and which it reasonably believes to be genuine and duly authorized with respect to all matters pertaining to this Agreement and its duties hereunder; provided, however, that nothing set forth in this section shall relieve Custodian of its obligations set forth in Section 9 of this Agreement. 21. Indemnification. Customer agrees to reimburse, indemnify and hold harmless Custodian, its directors, officers, employees or agents from and against any and all liability, loss, cost and expense, including reasonable fees and expenses of counsel arising from or connected with Custodian's execution and performance of this Agreement, including but not limited to the claims of any third parties, including DLJ, except in the case of loss, liability or expense resulting from gross negligence or willful misconduct on the part of Custodian or DLJ. To the extent Custodian is not reimbursed, indemnified or held harmless by Customer, DLJ will reimburse, indemnify and hold harmless Custodian, its directors, officers, employees and agents for liability, loss or expense arising from any action or refraining from action in accordance with instructions given to Custodian by DLJ, and Customer shall reimburse DLJ for any sums so expended by DLJ. The Custodian may enter into a settlement agreement with respect to any matter for which indemnity is granted pursuant to this paragraph. The foregoing indemnification shall survive any termination of this Agreement. 22. Authorizations. The persons whose signatures and titles appear on Schedule II hereof ("Authorized Representatives") are authorized, acting singly, to act for Customer, DLJ or Custodian, as the case may be, under this Agreement. From time to time, each party may supplement or amend the list of Authorized Representatives and specimen signatures by notice to the other parties, but each of the parties shall be entitled to rely conclusively on the then current list until receipt of a superseding list. Custodian may rely, and shall be protected in acting or refraining to act, upon any written instruction, notice, order, request, direction, certificate, opinion or other instrument or document believed by Custodian to be genuine and to have been signed or presented by an Authorized Representative in the case of Customer and DLJ and by the proper party or parties, in all other cases. 23. Amendments, Etc. Except as otherwise expressly provided herein, no amendment or waiver of any provision of this Agreement nor consent to any departure herefrom shall in any event be effective unless the same shall be in writing and signed by all the parties hereto (provided that DLJ may modify the Required Documents set forth in Sections 3, 4, 5, 6 and 7 hereof by giving notice of such modification to Customer and Custodian, which notice is not objected to within one (1) Business Day after being given), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Agreement constitutes the entire agreement and understanding of the parties with respect to those matters and transactions contemplated by this Agreement and supersedes any prior agreement and understandings with respect to those matters and transactions. The provisions of this Agreement set forth the exclusive duties of Custodian and no implied duties shall be read into this Agreement against Custodian. Schedule I hereto may be amended from time to time by agreement between DLJ and Customer with notice to Custodian. 24. Severability. If any provision of this Agreement is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision, and this Agreement shall be enforced to the fullest extent permitted by law. 25. Binding Effect; Governing Law. This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither Customer nor Custodian may assign this Agreement or any of its rights or obligations hereunder, except with the prior written consent of DLJ. DLJ may assign its security interest in or lien on certain items of Collateral held by Custodian hereunder, whereupon DLJ will act for the benefit of such assignee hereunder. This Agreement shall be construed in accordance with, and governed by the law of the State of New York, without giving effect to the conflict of law principles thereof. The parties hereto waive trial by jury. Customer, Custodian, and DLJ each irrevocably consent to the non-exclusive jurisdiction of any court of the State of New York, or in the United States District Court for the Southern District of New York, in any action or proceeding arising out of or relating to this Agreement. The parties hereby submit to, and waive any objection they may have to personal jurisdiction and venue in, the courts of the State of New York and the United States District Court for the Southern District of New York, over any disputes arising out of or relating to this Agreement. IN WITNESS WHEREOF, the parties have signed this Agreement as of the date and year first above written. LOMAS MORTGAGE, USA, INC., as Customer By: /S/PAUL FLETCHER ------------------------------------- Name: Paul Fletcher ----------------------------------- Title: Senior Vice President ---------------------------------- Address: 1600 Viceroy Drive, Dallas, Texas 75235 Attention: Paul Fletcher Telephone: 214-879-7010 Facsimile: 214-879-7018 BANK ONE, TEXAS, N.A., as Custodian By: /S/KATHLEEN C. STEWART ------------------------------------- Name: Kathleen C. Stewart ----------------------------------- Title: Vice President ---------------------------------- Address: 1900 Pacific Street, Dallas, Texas 75201 Mortgage Loan Custody Department Attention: Ms. Gloria Reed, Vice President Telephone: (214) 290-6082 Facsimile: (214) 290-6069 DLJ MORTGAGE CAPITAL, INC. By: /S/ROD ENNICO ------------------------------------- Name: Rod Ennico ----------------------------------- Title: Senior Vice President ---------------------------------- Address: 140 Broadway, 40th Floor, New York, New York 10005-1285 Attention: Money Desk/Whole Loan Financing Program Telephone: (212) 504-8071 (800) 437-5979 Facsimile: (212) 504-8072 SCHEDULE I AUTHORIZED LIST OF NONAGENCY PURCHASERS 1. Advanta Mortgage USA 2. American Residential Mortgage Corp. 3. BancBoston Mortgage Corporation 4. Bear, Stearns, & Company, Inc. 5. California Public Employees Retirement System 6. Capital Holding Corporation 7. Capstead Mortgage Corporation 8. Chemical Mortgage Corp. 9. Citicorp Mortgage, Inc 10. ContiMortgage 11. Countrywide Funding Corporation 12. Countrywide Mortgage Investments, Inc. 13. Delta Funding Corporation 14. DLJ Mortgage Capital, Inc. 15. Farm & Home Savings Association 16. FBS Mortgage Corporation 17. Federal Home Loan Mortgage Corporation 18. Federal National Mortgage Association 19. First Alliance Mortgage Co. 20. Fleet Mortgage Group 21. Ford Motor Credit 22. GE Capital Mortgage Services, Inc. 23. GE Mortgage Insurance Corporation 24. Goldman, Sachs & company 25. Greenwich Capital 26. Guaranty Federal Bank F.S.B. 27. Hamilton Financial Services Corp. 28. Hamilton Financial Corp. 29. Household Financial Services 30. ICI Funding Corporation 31. Imperial Credit Industries, Inc. 32. J. I. Kislak 33. Kidder, Peabody, Inc. 34. Lehman Capital Corporation 35. Lehman Commercial Paper, Inc 36. Long Beach Bank 37. Meridian Capital Markets 38. Merrill Lynch & Company, Inc. 39. Morgan Keegan 40. NationsBank SCHEDULE II AUTHORIZED REPRESENTATIVES CUSTOMER AUTHORIZATIONS: Any of person whose signature and title appears below is authorized, acting singly, to act for Customer under this Agreement: Please refer to attached schedule - - -------------------------------------------------------------------------- Title: ------------------------------------------------------------------- CUSTODIAN AUTHORIZATIONS: Any person whose signature and title appears below is authorized, acting singly, to act for Custodian, or for Custodian as Agent for DLJ, under this Agreement: - - -------------------------------------------------------------------------- Title: ------------------------------------------------------------------- DLJ AUTHORIZATIONS: Any person whose signature and title appears on the attached is authorized, acting singly, to act for DLJ under this Agreement. EXHIBIT A COLLATERAL RECEIPT No. DLJ Mortgage Capital, Inc. CUSTODIAN: Bank One, Texas, N.A. 140 Broadway, 26th Floor Address: 1900 Pacific Street New York, New York 10005-1285 Dallas, Texas 75201 Attn: Clearance Dept/Whole Loan Financing Program Attn: Mortgage Loan Custody Department Facsimile: (212) 504-8125 Facsimile: (214) 290- 6069 RE: Agency/Nonagency ---------- Identification/Pool #---------- Security Rate------% Maturity:--------- Reference is made to the Tri-Party Custody Agreement dated May 16, 1994 (the "Custody Agreement") among Lomas Mortgage USA, Inc. ("Customer"), Bank One, Texas, N.A. ("Custodian") and DLJ Mortgage Capital, Inc. ("DLJ"). Capitalized terms not defined herein have the respective meanings assigned thereto in the Tri-Party Custody Agreement. I. Certification of Customer. In consideration of DLJ making an Advance to finance the securitization or cash purchase period for the mortgage loans having an aggregate face value of $-------------------- and a weighted average interest rate of ------%, as more fully described in Schedule I attached hereto, the undersigned duly authorized officer of Customer represents and warrants that (a) the Required Documents with respect to such mortgage loans have been or are hereby submitted to Custodian pursuant to the Custody Agreement, (b) all other documents related to such mortgage loans (including but not limited to mortgages, insurance policies, loan applications and appraisals) have been or will be created and held by Customer in trust for DLJ, and (c) all documents related to such mortgage loans withdrawn from Custodian shall be held in trust by Customer for DLJ, and Customer will not attempt to pledge, hypothecate or otherwise transfer such mortgage loans to any other party until the Advance to which the mortgage loans are related has been paid in full by Customer. Customer has granted to DLJ a first priority perfected security interest in and lien on such mortgage loans. At the request of DLJ, all such other related documents will be delivered to Custodian, DLJ or its assigns and may be inspected or verified at any time by such parties. - - --- No lien exists with respect to the mortgage loans constituting the mortgage pools described above. - - --- A lien secured by mortgage loans constituting the mortgage pools described above is still in effect with DLJ. - - --- A lien secured by the mortgage loans constituting the mortgage pools described above is currently in effect. A Warehouse Lender's Release Letter has been delivered to Custodian under separate cover. Lomas Mortgage USA, Inc., as Customer By: -------------------------------------- Name: ------------------------------------ Title: ------------------------------------ Date: ------------------------------------ II. Certification of Custodian. Custodian hereby (a) certifies that, as to each mortgage loan listed on Schedule I hereto, it has reviewed the documents delivered to it by Customer, it has received all Required Documents, the Required Documents conform to the requirements of Section 9 of the Custody Agreement and it will continue to hold the Required Documents as bailee of and agent for DLJ and its successors and assigns pursuant to the Custody Agreement until the related Agency (or Nonagency) Security has been issued by the respective entity, and (b) represents and warrants that it is an approved custodian in good standing for the Agency to which such mortgage loans will be submitted. BANK ONE, TEXAS, N.A., as Custodian By:--------------------------------- Name:------------------------------- Title: ----------------------------- Date: ------------------------------ EXHIBIT B WAREHOUSE LENDER'S RELEASE LETTER Date: , 199-- DLJ Mortgage Capital, Inc. 140 Broadway, 26th Floor New York, New York 10005-1285 Attn: Clearance Department/Whole Loan Financing Program Facsimile: (212) 504-8125 RE: Customer: Lomas Mortgage USA, Inc. RE: Agency/Nonagency----------- Identification/Pool #---------- Security Rate------% Maturity:--------- The undersigned (the "Warehouse Lender") hereby releases all right, interest or claim of any kind with respect to the mortgage loans constituting the mortgage pool referenced above, as may be further described in the attached schedule, such release to be effective automatically without any further action by any party, upon payment for the account of Customer of $----------- - - -------------- in immediately available funds to account number #----------- at (specify Bank) for the account of --------------------------. Very truly yours, , as Warehouse Lender - - ---------------------------------------- By: ----------------------------------- Name: -------------------------------- Title: -------------------------------- Telephone: ----------------------------- copy to: , as Customer - - ---------------------------------------- Address: ------------------------------- Attention: ---------------------------- Note: The above dollar amount should be EQUAL TO or LESS THAN the amount being funded. If no lien exists, this form must still be sent - Customer should put a slash through the form, indicated "NOT APPLICABLE" and sign. EXHIBIT C BAILEE LETTER Date: -------------, 199-- Purchaser: ----------------------------- Address: ------------------------------ Attention: ---------------------------- Gentlemen: Attached please find those mortgage loans listed separately on the attached schedule (the "Mortgage Loans"), which Mortgage Loans are owned by Lomas Mortgage USA, Inc. ("Borrower") and are being delivered to you for purchase. The Mortgage Loans comprise a portion of the Collateral (as such term is defined in the hereinafter defined Custody Agreement) under the Tri-Party Custody Agreement ("Custody Agreement"), dated as of May 16, 1994, as it may hereafter be amended, by and among Borrower, Bank One, Texas, N.A. as Custodian ("Custodian"), and DLJ Mortgage Capital, Inc., as Lender ("DLJ"). Each of the Mortgage Loans is subject to a security interest in favor of DLJ, which security interest shall be automatically released upon DLJ's receipt of the full amount of the purchase price of such Mortgage Loan (as set forth on the schedule attached hereto) by wire transfer to the following account maintained with DLJ: Bank One, Texas, N.A./ ABA#111000614, For Further Credit to DLJ Mortgage Capital, Inc. Reference: Whole Loan Financing Program/ (Customer Name) Pending your purchase of each Mortgage Loan and until payment therefor is received by DLJ, the aforesaid security interest therein will remain in full force and effect, and you shall hold possession of such Collateral and the documentation evidencing same as custodian, agent and bailee for and on behalf of Custodian for DLJ. In the event any Mortgage Loan is unacceptable for purchase, return the rejected item directly to the undersigned at the address set forth below. In no event shall any Mortgage Loan be returned or sales proceeds remitted to the Borrower. The Mortgage Loan must be so returned or sales proceeds remitted in full no later than forty five (45) days from the date hereof. If you are unable to comply with the above instructions, please so advise the undersigned immediately. NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR COLLATERAL AGENT ON BEHALF OF THE LENDER ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE UNDERSIGNED AT THE FOLLOWING ADDRESS: 1900 PACIFIC STREET, DALLAS, TEXAS 75201 ATTN: GLORIA REED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT. Address: Sincerely, Acknowledged and Agreed: BANK ONE, TEXAS, N.A. ---------------------------------- as Custodian for DLJ, its successors as Purchaser and assigns By: By: ------------------------------ ------------------------------ Name: Name: ---------------------------- --------------------------- Title: Title: ---------------------------- ---------------------------- EXHIBIT D ADDENDUM TO ESCROW INSTRUCTIONS Dated: , 199-- -------------- Escrow #: --------------------------------------- Borrower: --------------------------------------- The funds to be used for closing this transaction may be provided via wire transfer from Bank One, Texas, N.A.. You are to hold the closing funds in trust for Bank One, Texas, N.A. until such time as the funds are disbursed in accordance with the escrow instructions. If the loan is not funded within three (3) Business Days of receipt of the funds, you are to return such funds via federal funds wire to Bank One, Texas, N.A. as follows: Bank One, Texas, N.A., ABA #111000614 for further credit to Account # ---------- Reference: Gloria Reed/Bank One/Lomas Mortgage USA, Inc. Between the time the funds are received and the loan is funded you are to accept instructions regarding the use of the funds that are in conflict with the escrow instructions only in writing from Bank One, Texas, N.A.. This Addendum to Escrow Instructions shall be irrevocable and can only be modified with the express approval of Bank One, Texas, N.A.. Agreed and Acknowledged: Title Company: --------------------------------------- By: --------------------------------------------------- Escrow Officer EXHIBIT E REQUEST AND RECEIPT To: Bank One, Texas, N.A. Request # ------------------- Re: Tri-Party Custody Agreement, among DLJ Mortgage Capital, Inc. ("DLJ"), Lomas Mortgage USA, Inc. ("Lomas") and Bank One, Texas, N.A. ("Custodian"), dated May 16, 1994 (the "Agreement"). In connection with the Mortgage Loans held by Custodian for DLJ, Lomas hereby requests and acknowledges receipt of the Required Documents for the Mortgage Loan described below, for the reason indicated. Custodian, DLJ and Lomas shall, by signature below, acknowledge such action as appropriate and Lomas certifies that it has sent a copy of this Request and Receipt to the other parties. Mortgagor's Name, Address and Zip Code: ------------------------------------ Mortgage Loan Number: Original Principal Amount: $ ------------------- ------- Reason for Requesting Documents (circle one): 1. Mortgage Loan paid in full 2. Mortgage Loan being permanently withdrawn from the Collateral (Lomas hereby certifies that the Advance related to such Mortgage Loan has been repaid in full) 3. Mortgage Loan liquidated by -------------------------------------- (Lomas hereby certifies that the Advance related to such Mortgage Loan has been repaid in full) 4. Mortgage Loan in Foreclosure 5. Document correction (explain) ----------------------------------- 6. Other (explain) ------------------------------------------------- If item 1, 2, 3, or 4 is circled, Custodian shall release to Lomas any and all documents in its possession relating to the specified Mortgage Loan. If item 5 or 6 is circled, Custodian shall release the specified documents to Lomas and Lomas acknowledges (a) such documents are being held by Custodian in pledge on behalf of and as agent for DLJ pursuant to the Agreement and are subject to a security interest in favor of DLJ, and (b) that it agrees to hold such documents as custodian, agent and bailee for and on behalf of Custodian for DLJ. DLJ Mortgage Capital, Inc. - - --------------------------------------- (required if item 1, 2, 3, or 6 is circled) By: By: ----------------------------------- ------------------------------- Name: Name: -------------------------------- ----------------------------- Title: Title: ------------------------------- ---------------------------- Date: Date: ------------------------------- ---------------------------- Acknowledgment that documents have been returned to Custodian: By: Date: , 199-- -------------------------------- -------------------- Name: Title: ------------------------------ ----------------------------- Acknowledgment that documents have been released to Lomas: By: Date: , 199-- -------------------------------- --------------------- Name: Title: ------------------------------ ---------------------------- EXHIBIT F DLJ'S REVIEW AND CERTIFICATION GUIDELINES 1. Custodian shall verify whether all original notes: (a) are endorsed "Pay to the order of without recourse"; --------------- (b) are complete on their face; and (c) appear on their face to be an original. 2. Custodian shall verify whether all assignments of mortgage are assigned in blank but not recorded, and include all interim assignments; 3. Custodian shall verify whether all Warehouse Lender's Release Letters are complete; 4. Custodian shall verify that the schedule of mortgage loans is in a form acceptable to DLJ and Custodian; 5. Custodian shall verify that for each mortgage loan listed on the schedule of mortgage loans: (a) there is an original note; (b) there is an assignment of mortgage assigned in blank together with all interim assignments; and (c) the unpaid principal balance listed on the schedule of mortgage loans does not exceed the face value of the mortgage note submitted with respect to such loan. 6. Custodian shall verify that, for loans intended to be sold to FNMA, a Loan Schedule (Form 1068 or 1069) listing: (a) DLJ's Payee Code that represents the following wire instructions Chemical NYC/DLJ Mortgage Capital, Inc. A/C# 066214351 ABA 021000128 Reference: DLJ Whole Loan Finance/Lomas; or (b) Custodian's Payee Code that represents the following wire instructions Bank One, Texas ABA 111000614 for further credit to A/C# (Settlement Account) Reference: DLJ Whole Loan Finance/Lomas. 7. Custodian shall verify that for loans intended to be sold to FHLMC: (a) a Wire Transfer Authorization for Cash Warehouse Delivery on Form 987 listing either DLJ or Custodian's wire instructions as per below; and (b) a Warehouse Lender Release of Security Interest on Form 996, listing either of the following wire instructions: Chemical NYC/DLJ Mortgage Capital, Inc. A/C# 066214351 ABA 021000128 Reference: DLJ Whole Loan Finance/Lomas; or Bank One, Texas ABA 111000614 for further credit to A/C# (Settlement Account) Reference: DLJ Whole Loan Finance/Lomas. EXHIBIT G PROCEDURES - DLJ FINANCING PROGRAM (all time references are Dallas time) DAY ONE LOMAS: 1. Transmits to Custodian a "Mortgage Loan Schedule" detail in compatible format 2. Sends collateral package and original Mortgage Loan Schedule via local courier to Custodian 3. Enters wire instructions through Custodian's ECDA system for same day disbursements from DDA Account to Title Companies or as permitted in this Agreement in suspended release mode 4. Faxes morning P&S Report and Collateral Receipt to Custodian by 12 PM 5. Faxes Notice of Borrowing to DLJ by 11 AM 6. Faxes afternoon P&S Report to Custodian by 2 PM CUSTODIAN: 1. Receives collateral packages, verifies Lomas' transmission, and notifies Lomas of non receipt of package by 11 AM 2. Reviews Required Documents in the collateral package by 12 PM provided volume of loans does not exceed 100 (if over 100, but less than 200, by 1 PM) 3. Ensures Mortgage Loan Schedule and Outstanding Collateral Listing reports agree with morning P&S Report 4. Faxes Collateral Receipt to DLJ and immediately follows with (a) a telephone call and (b) sends original to DLJ via overnight courier service on a weekly basis 5. Before 2 PM, releases suspended wires from ECDA DDA Account using special test keys to Title Companies (thereby immediately wires funds) 6. Before 2 PM, receives afternoon P&S Report from Lomas. Verifies/updates Collateral Account 7. Upon approval from DLJ, wires funds to Lomas and/or DLJ as appropriate. DLJ: 1. Inputs DDA Account trade ticket for same day settlement (only if P&S Report and Collateral Receipt signed by Custodian) 2. Upon receiving Collateral Receipt, promptly wires funds to Custodian DDA account and, if necessary, indicates Fed Reference number 3. Inputs Settlement Account trade ticket for same day settlement (only if P&S Report and Collateral Receipt signed by Custodian) LOMAS: 1. Forms Agency loan pools and delivers required forms to Custodian 2. Faxes P&S and "Paid Loan Detail" Reports to Custodian CUSTODIAN: 1. Delivers required files/Agency forms to Agency (to include Release of Security Interest and Bailee Letter, if appropriate) 2. Receives funds from Agency and deposits into Settlement Account; wires funds to Lomas and DLJ as indicated on the afternoon P&S Report. 3. Reviews Paid Loan Detail and updates Collateral Account. Upon request, issues Outstanding Collateral Listing to DLJ and Lomas. SAMPLE FLOW OF FUNDS 1. Custodian submits Collateral Receipt to DLJ 2. DLJ wires Custodian DDA Account funds 3. Custodian disburses funds to Title Companies 4. Custodian receives funds from Agency in Settlement Account 5. Lomas notifies DLJ and Custodian of incoming money via P&S Report 8. DLJ authorizes wiring of funds from Settlement Account 9. Custodian disburses funds to DLJ and Lomas as appropriate. REPORTS TO BE ISSUED BY CUSTODIAN WEEKLY (or on demand) 1. Collateral Listing of all loans outstanding at close of business each Thursday 2. Paid Loan Report at close of business each Thursday 3. Shipped and Not Paid Report over 15, 30 and 45 days at close of business each Thursday 4. Mark to Market Report at close of business each Thursday OUTSTANDING COLLATERAL LISTING REPORT No. Date ----------------------------- ------------------------ 1. Aggregate Loan Value as of last Collateral Receipt: $ -------------- 2. Add: Loan Value of additional Collateral delivered: $ ------------- 3. Less: Loan Value of Collateral Paid: $ -------------- 4. ADJUSTMENT re: $ -------------- 5. Closing Aggregate Loan Value as of the date hereof: $ -------------- Approved this day of , 199 ------ -------------------------- --- BANK ONE, TEXAS, N.A., as Collateral Agent By: --------------------------------------- Name: ------------------------------------ Title: ----------------------------------- WITHDRAWAL OF COLLATERAL PROCEDURES Lomas and Custodian will adhere to the following procedures with respect to the withdrawal of Required Documents: 1. A Request and Receipt form will be prepared by Lomas and signed by an authorized officer of the Lomas and submitted to Custodian. 2. Custodian will review the Request and Receipt and ensure that not more than 2 Mortgage Documents in aggregate are being, or have been, withdrawn. If 2 or less Mortgage Documents are being requested or have been withdrawn, Custodian shall acknowledge such release on the Request and Receipt form and maintain a log of each Request and Receipt form indicating the sequential number, date issued, Mortgage Loan number, Obligor, note amount and date Documents returned. If 2 or more Mortgage Documents are being requested or have been withdrawn, or if the Mortgage Documents are being permanently withdrawn, Custodian shall only release Mortgage Documents with the express written approval of DLJ. 3. Upon return of the Mortgage Documents to the Custodian, the Request and Receipt form will be surrendered to the Custodian for cancellation. 4. Custodian will maintain all original Request and Receipt forms in a vault, drawer or other depository of a type which is suitable and customary for such documents controlled solely by Custodian with the forms filed in numerical order. Acknowledged and Agreed: LOMAS MORTGAGE USA, Inc.: By: -------------------- ------------------------- CUSTODIAN: BANK ONE, TEXAS, N.A. By: -------------------- ------------------------- DLJ MORTGAGE CAPITAL, INC: By: -------------------- ------------------------- ATTACHMENT I TO SCHEDULE I DLJ MORTGAGE CAPITAL INC. "DLJ" AUTHORIZATIONS Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for DLJ under this Agreement. Roddy R. Ennico, Senior Vice President /S/RODDY R. ENNICO --------------------------- Robin Beck, Vice President /S/ROBIN BECK --------------------------- Patrick M. McGrath, Assistant Vice President /S/PATRICK M. MCGRATH --------------------------- John Dwyer, Senior Vice President /S/JOHN DWYER --------------------------- Chris Campbell, Vice President /S/CHRIS CAMPBELL --------------------------- Donald O'Toole, Assistant Vice President /S/DONALD O'TOOLE --------------------------- ATTACHMENT II TO SCHEDULE I Bank One, Texas, N.A. (as Custodian) Authorizations Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Bank One, Texas, N.A. as Custodian, under the Agreement: Kathleen C. Stewart, Vice President /S/KATHLEEN C. STEWART --------------------------------- Gloria Reed, Vice President /S/GLORIA REED --------------------------------- D'Ann Robinson, Assistant Vice President /S/D'ANN ROBINSON --------------------------------- Bill Hudson, Banking Officer /S/BILL HUDSON --------------------------------- Linda Hurt, Supervisor - Banking Officer /S/LINDA HURT --------------------------------- Bank One, Texas, N.A. (as Custodian) Notices Please send all Notices to the following: Gloria Reed Vice President Bank One, Texas, N.A. 1900 Pacific Avenue Dallas, TX 75201 (214) 290-6082 (214) 290-6069 EX-10.6 7 EXHIBIT 10.6 PLEDGE AGREEMENT Dated: May 16, 1994 This PLEDGE AGREEMENT ("Pledge Agreement") is made by and between DLJ Mortgage Capital, Inc. ("DLJ"), on behalf of itself and holders from time to time of interests in the Promissory Note, and Lomas Mortgage USA, Inc. ("Customer"). PRELIMINARY STATEMENT Customer and DLJ have entered into a Whole Loan Financing Facility, dated the date hereof (as amended from time to time, the "Facility"), pursuant to which DLJ may make certain Advances (as defined below) to Customer. Customer has agreed to secure its Obligations (as defined below) by granting a security interest in the Collateral (as defined below) pursuant to the terms hereof. The parties hereto have agreed that certain items of Collateral are to be deposited with and retained by Custodian (as defined below), acting as bailee of and agent for DLJ and its affiliates, successors and assigns. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. DEFINITIONS. The following terms have the meanings indicated when used herein: "Advance" means an Advance as defined in the Facility. "Agency" means any of the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). "Agency Mortgage Loan" means a mortgage loan described in a Collateral Receipt and eligible and intended to secure or underlie Agency Securities or eligible for purchase by an Agency. "Agency Securities" means securities or certificates issued or guaranteed by GNMA, FNMA or FHLMC. "Business Day" means any day other than a Saturday, Sunday or a public or bank holiday in New York City or Dallas. "CALPERS" mean the California Public Employees Retirement System. "Collateral" shall have the meaning assigned to it in Section 2.1 hereof. "Collateral Receipt" means a document duly executed by Customer and Custodian with respect to each delivery of Mortgage Loans and containing a schedule of all Mortgage Loans submitted therewith, in the form attached as Exhibit A to the Custody Agreement. "Collateral Value" means the Market Value of an item of Collateral; provided, however, that (i) if the principal of and/or interest on any item of Collateral remains due and unpaid for more than sixty (60) days and is not covered by a Purchase Commitment by CALPERS, such item of Collateral shall have a Collateral Value of zero and (ii) for any item of Collateral that constitutes Wet Mortgage Loan, if Customer fails to deliver to Custodian the documents required to be delivered under the related Custody Agreement within five (5) Business Days of the date of the related Advance, such Wet Mortgage Loan shall have a Collateral Value of zero. "Custodian" means each entity acting as bailee of and agent for DLJ with respect to any item of Collateral. "Custody Agreement" means each Tri-Party Custody Agreement, as amended from time to time, among Customer, DLJ and a Custodian, with respect to any Collateral delivered in conjunction with this Pledge Agreement. "Default" means any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Default Rate" means the Default Rate as defined in the Promissory Note. "DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation "Event of Default" means an Event of Default as defined in the Promissory Note. "FHA/VA Commitment" means a commitment issued by the Federal Housing Administration (the "FHA") or the Department of Veterans Affairs (the "VA") to insure or guarantee a Mortgage Loan. "Good Delivery" shall have the meaning ascribed to such term in the PSA Guide in connection with the standard requirements for the delivery and settlement of an Agency Security. "Market Value" means the Takeout Price under the related Purchase Commitment which has been assigned by Customer to DLJ and of which DLJ has accepted such assignment, or, if no such Purchase Commitment exists with respect to such Collateral, the lesser of the unpaid principal amount of an item of Collateral or the market bid price obtainable for an item of Collateral, as determined on a reasonable basis by DLJ. "Mortgage Loan" means an Agency Mortgage Loan or a Nonagency Mortgage Loan. "Nonagency Purchaser" means any bona fide purchaser acceptable to DLJ in its sole discretion. "Nonagency Mortgage Loan" means a mortgage loan described in a Collateral Receipt intended to be purchased for cash by a Nonagency Purchaser. "Notice of Borrowing" means a Notice of Borrowing as defined in the Facility. "Obligations" means (a) all indebtedness, obligations and liabilities (including without limitation, guarantees and other contingent liabilities) of Customer to DLJ, its affiliates or Custodian arising under, or in connection with, the Program Documents or any other related document, whether now existing or hereafter arising, including without limitation each Advance made or to be made; (b) any and all sums paid by DLJ or on behalf of DLJ in order to preserve the Collateral or its security interest therein and lien thereon; (c) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of Customer referred to in clause (a) after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by DLJ of its rights under the Program Documents, together with reasonable attorneys' fees and disbursements and court costs; and (d) all indemnity obligations of Customer to DLJ or Custodian pursuant to the Program Documents. "Pool Insurer" means the General Electric Mortgage Insurance Corporation, PMI Mortgage Insurance Company, United Guaranty Insurance Company or any other pool insurer acceptable to DLJ in its sole discretion. "Program Documents" means the Facility, this Pledge Agreement, the Promissory Note, each Custody Agreement, each Notice of Borrowing and each Collateral Receipt. "Promissory Note" means the Promissory Note, dated the date hereof, executed by Customer, as amended from time to time. "PSA Guide" The Uniform Practices for the Clearance and Settlement of Mortgage-Backed Securities and Other Related Securities, published (and periodically updated as supplemented) by the Public Securities Association ("PSA"). "Purchase Commitment" means an obligation of (i) a bona fide purchaser to purchase an Agency Security, (ii) an Agency to purchase Agency Mortgage Loans or (iii) a Nonagency Purchaser to purchase Nonagency Mortgage Loans, in each case at a specific price on a specific date. "Required Documents" means Required Documents as defined in the Custody Agreement. "Second Mortgage" means the mortgage that is the second lien (as customarily referred to in the industry) on the real property securing the related mortgage note. "Servicing Records" means all servicing records, including but not limited to any and all servicing agreements, subservicing agreements, custodial agreements, files, documents, records, data bases, customer lists, computer software, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other data and records relating to or evidencing the servicing of the Mortgage Loans described in each Collateral Receipt. "Takeout Price": As to each Purchase Commitment, the purchase price (expressed as a percentage of par) set forth therein. "Third Mortgage" means the mortgage that is the third lien (as customarily referred to in the industry) on the real property securing the related mortgage note. "Wet Closing Notice" shall have the meaning assigned to it in the respective Custody Agreement or, if not defined therein, shall be inapplicable for purposes of the related Advance under the Program Documents. "Wet Mortgage Loan" shall have the meaning assigned to it in the respective Custody Agreement or, if not defined therein, shall be inapplicable for purposes of the related Advance under the Program Documents. 2. SECURITY INTEREST. 2.1 Grant of Security Interest to DLJ. In consideration for the making of each respective Advance and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Customer does hereby convey, transfer, mortgage, hypothecate, pledge, grant and assign to DLJ and its successors and assigns, as security for the payment of the Obligations, a first priority perfected security interest in and lien on all of Customer's right, title and interest in, under and to the following properties, estates, rights and privileges, whether now existing or hereafter acquired (collectively, the "Collateral"): (a) All Mortgage Loans described in a Collateral Receipt or a Wet Closing Notice, all payments of principal and interest thereon and all related items constituting the complete file for each such Mortgage Loan (including, without limitation, mortgage notes, mortgages, title insurance policies, primary mortgage insurance policies, guarantees, applications, appraisals, surveys and all other documents evidencing or relating to the Mortgage Loan), wherever located and whether now or hereafter held in whole or in part by a Custodian, DLJ, Customer or otherwise; (b) All FHA/VA Commitments and Purchase Commitments related to the Mortgage Loans that are described in, and all other documents required to be submitted in connection with, a Collateral Receipt, wherever located and whether now or hereafter held in whole or in part by a Custodian, DLJ, Customer or otherwise; (c) All Agency Securities related to the Mortgage Loans that are described in a Collateral Receipt, wherever located and whether now or hereafter held in whole or in part by a Custodian, DLJ, DLJSC, Customer or otherwise; (d) All securities or cash on deposit with, or received by, DLJ or Custodian for the account of Customer in connection with this transaction or in respect of such Mortgage Loans or Agency Securities, or representing proceeds of Collateral; (e) All tangible and intangible personal property of whatever kind, including all payments with respect thereto and all proceeds thereof, that relates to such Mortgage Loans, Agency Securities, FHA/VA Commitments or Purchase Commitments, wherever located and whether now or hereafter held in whole or in part by a Custodian, DLJ, Customer or otherwise; (f) All property held for the account of Customer by any affiliate of DLJ; (g) All rights, powers and privileges of Customer related to the servicing of the Mortgage Loans, including all Servicing Records; and (h) All proceeds of any of the foregoing. 2.2 Grant of Subordinated Security Interests. To induce DLJ and its affiliate Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") to accept assignment of Purchase Commitments for Agency Securities related to the Mortgage Loans, Customer does hereby convey, transfer, mortgage, hypothecate, pledge, grant and assign to DLJ and DLJSC as security for Customer's performance under such Purchase Commitments, a security interest in, and lien on, the Collateral that is solely subordinate to, and junior to, the liens set forth in Section 2.1 hereof. 2.3 Release of Collateral. Upon the full satisfaction of all outstanding principal, accrued interest on, and all other Obligations owing with respect to any Advance, or otherwise as provided in the Custody Agreement, and so long as no Default or Event of Default has occurred and is continuing, but subject to the rights of any holder of a lien on the items of Collateral of which DLJ has notice, DLJ shall, and shall direct Custodian to, release the Collateral related to such Advance. Subject to the provisions of this Section 2.3, on the Maturity Date of each Advance, if requested by Customer, DLJ will deliver against payment any related Agency Securities being held by it as security for such Advance, and apply the net proceeds received from such sale to the repayment of such Advance. 3. REPRESENTATIONS AND WARRANTIES. Customer, as of the date hereof and as of the date of each Advance, hereby represents and warrants to DLJ as follows: 3.1 Ownership of Collateral; No Encumbrance. Customer is the sole legal and equitable owner and holder of the Collateral, free and clear of all security interests, liens, pledges, participation interests or other encumbrances whatsoever, except (i) the security interests and liens granted hereunder, (ii) if payment hereunder will satisfy any existing security interest, lien or other encumbrance on the Collateral, (iii) with respect to Mortgage Loans that are Second Mortgages, the first lien on the related mortgaged property and (iv) with respect to Mortgage Loans that are Third Mortgages, the first and second liens on the related mortgaged property. All Agency Securities, FHA/VA Commitments and Purchase Commitments have been or will be duly authorized and validly issued, and all Mortgage Loans that are part of the Collateral are duly and validly originated by or conveyed to Customer. All of the items of Collateral (a) comply with all of the requirements of this Pledge Agreement and (b) have been duly and validly pledged or assigned to DLJ in such a manner that DLJ's first priority security interest therein is fully perfected. 3.2 Authority to Pledge Collateral. Customer has, and will continue to have, the full right, power and authority to grant to DLJ a first priority perfected security interest in the Collateral. 3.3 Conformity; Eligibility. (a) All Agency Mortgage Loans, Required Documents applicable thereto and related Purchase Commitments conform to the requirements for submission to the relevant Agency, and Customer has furnished to Custodian all mortgage documents required to be submitted to the relevant Agency or Custodian in connection with the issuance of the Agency Securities or the cash purchase of the Agency Mortgage Loans by the relevant Agency. (b) All Nonagency Mortgage Loans, Required Documents applicable thereto and Purchase Commitments conform to the underwriting requirements of the relevant Nonagency Purchaser and, unless otherwise agreed by DLJ, any relevant Pool Insurer. 3.4 Mortgage Loans. (a) Each Agency Mortgage Loan and, to the extent a Purchase Commitment is in effect with respect thereto, each Nonagency Mortgage Loan meets all of the following requirements as of the date delivered to Custodian, and except for (viii) below, continuously while it is part of the Collateral: (i) It is eligible, and in the form required, for securitization or purchase under the relevant Agency program or by the relevant Nonagency Purchaser. It is a bona fide Mortgage Loan of the type it purports to be, made to one or more borrowers each having substantially the credit standing he or she is represented to have; (ii) It has been fully advanced in the face amount thereof; (iii) It is and will be secured by a valid and enforceable "first lien" (as customarily referred to in the industry), except that (i) with respect to Mortgage Loans that are Second Mortgages, it is and will be secured by a valid and enforceable "second lien" that is not a wraparound mortgage and (ii) with respect to Mortgage Loans that are Third Mortgages, it is and will be secured by a valid and enforceable "third lien" that is not a wraparound mortgage, in each case upon an existing site-built residential real property of the type represented to secure the loan, having substantially the value represented in the appraisal; (iv) The documents related thereto have been duly executed and delivered by the parties thereto; (v) It has been made in compliance with all applicable laws, regulations, rules, directives and orders of all governmental authorities, including all requirements of the Real Estate Settlement Procedures Act and the Federal Truth-In-Lending Act; (vi) The promissory note, mortgage or deed of trust and all other documents related to the Mortgage Loan are and will be valid and enforceable in accordance with their terms, without defense, offset or right of rescission, and they have not been and will not be modified or amended nor any requirements thereof waived; (vii) Any private mortgage insurance with respect to such loan is by a company of recognized standing acceptable to the relevant Agency or the relevant Nonagency Purchaser at the time that such loan was originated and at the time that the respective Advance is made; (viii) No default, nor any event that, with notice or lapse of time or both, would become a default, has occurred and is continuing under any such Mortgage Loan. With respect to Mortgage Loans that are Second Mortgages, no default, nor any event that, with notice or lapse to time or both, would become a default, has occurred and is continuing under the first lien. With respect to Mortgage Loans that are Third Mortgages, no default, nor any event that, with notice or lapse of time or both, would become a default, has occurred and is continuing under the first and second liens; (ix) With respect to each Mortgage Loan that is a Second Mortgage or a Third Mortgage, it was originated and has been serviced in compliance with all applicable federal, state and local laws regarding second and third liens; (x) With respect to each Mortgage Loan that is a Second Mortgage, the Customer has the right to cure any default with respect to the mortgage loan that constitutes the first lien. With respect to each Mortgage Loan that is a Third Mortgage, the Customer has the right to cure any default with respect to the mortgage loans that constitute the first and second liens; (xi) Each Wet Mortgage Loan conforms in all respects to the description thereof set forth on the related Wet Closing Notice, and Customer will perform, and has no reason to believe that it will be unable to perform, its obligation to deliver to Custodian the documents required to be delivered with respect thereto under the related Custody Agreement within five (5) Business Days of the date of the related Advance. (b) Each Nonagency Mortgage Loan, to the extent no Purchase Commitment is in effect with respect thereto, meets all of the representations set forth on Appendix A hereto as of the date delivered to Custodian and continuously while it is a part of the Collateral. 3.5 Compliance with FHA/VA Requirements. Each Mortgage Loan that is designated by Customer as being insured by the FHA or partially guaranteed by the VA has complied and will comply with all laws, rules and regulations with respect to such insurance or guaranty, and such insurance or guaranty is, or will be, in full force and effect. 3.6 Insurance Policies in Effect. Each fire and casualty insurance policy covering each of the premises securing a Mortgage Loan that is a part of the Collateral: (a) Affords and will afford sufficient insurance against fire and such other risks as are usually insured against in the broad form of extended coverage insurance from time to time available, as well as insurance against flood hazards if the same is required by (i) the FHA, the VA or the relevant Agency or (ii) the relevant Nonagency Purchaser; (b) Is a standard policy of insurance for the locale where the premises are located; is in full force and effect; and the amount of the insurance is in the amount of the full insurable value of the premises on a replacement cost basis or the unpaid principal balance of the Mortgage Loan, whichever is less; (c) Names and will name the present owner of the premises as the insured; and (d) Contains a standard mortgagee loss payable clause in favor of the servicer of the loan. 3.7 Purchase Commitments. All Purchase Commitments that are part of the Collateral are valid and enforceable obligations. 4. COVENANTS OF CUSTOMER. 4.1. Defense of Title. Customer warrants and will defend the right, title and interest of DLJ in and to all Collateral against all adverse claims and demands. 4.2. No Amendment or Compromise. Without DLJ's prior consent, Customer and those acting on behalf of Customer shall not amend or modify, or waive any term or condition of, or settle or compromise any claim in respect of, any item of Collateral or any related rights. 4.3. No Assignment. Customer shall not sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to this Pledge Agreement), any of the Collateral or any interest therein, provided that this section shall not prevent any transfer of Collateral in accordance with this Pledge Agreement and the Custody Agreement. 4.4. Servicing of Mortgages. (a) Customer shall service, or cause to be serviced, all Mortgage Loans that are part of the Collateral in accordance with the standard industry practices, employing at least the same procedures and exercising the same care that it customarily employs in servicing Mortgage Loans for its own account, and in accordance with all applicable requirements of the relevant Agency or Pool Insurer that covers any of such Mortgage Loans. Upon the occurrence of a material adverse change in the business of Customer, as determined in good faith by DLJ, Customer shall notify or cause to be notified all servicers servicing Mortgage Loans of DLJ's interest hereunder. Customer shall notify DLJ of the name and address of all servicers. DLJ shall have the right to approve each servicer that is not an Agency-approved servicer and the form of all related servicing agreements. Customer shall hold or cause to be held all escrow funds collected with respect to such Mortgage Loans in trust accounts and shall apply the same for the purposes for which such funds were collected. (b) Upon DLJ's reasonable request, Customer shall provide to DLJ a letter addressed to each servicer of Mortgage Loans (the "Servicer Letters"), in form and substance reasonably satisfactory to DLJ, advising such servicer of DLJ's security interest in the Collateral and such other matters as DLJ may reasonably request. (c) If Customer should discover that, for any reason whatsoever, it or any entity responsible to it by contract for managing or servicing any such Mortgage Loan has failed to perform fully Customer's obligations under the Program Documents or any of the obligations of such entities with respect to the Collateral, and such failure would have a material adverse effect on the Collateral or DLJ's perfection of security interest therein, Customer shall promptly so notify DLJ. 4.5 Preservation of Collateral. Customer shall do all things necessary to preserve the Collateral so that it remains effective security hereunder. Without limiting the foregoing, Customer will, in its dealings with the Collateral, comply with all rules, regulations and other laws of any governmental authority and cause the Collateral to comply with all applicable rules, regulations and other laws. Customer will not allow any default for which it is responsible to occur under any Collateral, and Customer shall fully perform or cause to be performed when due all of its obligations under any Collateral. 4.6. Maintenance of Papers, Records and Files. (a) Customer shall acquire and it or its servicer shall build, maintain and have available a complete file in accordance with industry custom and practice for each Mortgage Loan that is part of the Collateral. Customer or such servicer will maintain all such papers, records and files not in the possession of Custodian in good and complete condition in accordance with industry practices and preserve them against loss. (b) Customer shall collect and maintain or cause to be collected and maintained all papers, records and files relating to the Collateral in accordance with industry custom and practice, including those maintained pursuant to subparagraph (a) above, and all such materials shall be in Custodian's or Customer's possession unless DLJ otherwise approves. Customer will not allow any such papers, records or files that are an original or an only copy to leave its or Custodian's possession, except for individual items removed in connection with servicing a specific Mortgage Loan, in which event Customer will obtain or cause to be obtained a receipt from a financially responsible person for any such paper, record or file. (c) For so long as DLJ has a security interest in or lien on any Collateral, Customer will hold or cause to be held any paper, record or file related to the Collateral in trust for DLJ. Customer shall notify every other party holding any such paper, record or file of the security interests and liens granted hereby. (d) Upon reasonable advance notice from Custodian or DLJ, and during regular business hours, Customer shall make any and all such papers, records or files available to Custodian or DLJ to examine any such papers, records and files, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof. 4.7. Preservation and Perfection of Security Interest. Customer shall execute and deliver such further instruments and shall do and perform all matters and things necessary or expedient to be done or observed for the purpose of effectively treating, perfecting, maintaining and preserving the security interests, liens and other benefits intended to be afforded by this Pledge Agreement. This shall include, upon request of DLJ, the delivery of documents to Custodian, or additional filings and recordations with governmental authorities. 4.8. Stamp. Customer shall, upon request of DLJ, stamp on its records concerning the Collateral or a portion thereof a notation, in form and substance satisfactory to DLJ, of the security interest and lien of DLJ hereunder. 4.9. Additional Rights of DLJ. Upon the occurrence of an Event of Default, DLJ, at its option, shall have the right to do, or to request Custodian to do, any or all of the following, and upon a request therefor by DLJ, Customer agrees to cooperate with DLJ and Custodian, as the case may be, to accomplish such request: (a) DLJ or, at its direction, DLJ's designee may take possession of all original papers, records and files relating to the Collateral. In Custodian's discretion, Custodian shall move such records and files to a location acceptable to and under the control of Custodian. (b) Customer will instruct all persons servicing the Mortgage Loans that are part of the Collateral to take instructions from, make all reports to and make all remittances to, Custodian for the account of Customer. If DLJ so desires, and to the extent permissible under the applicable servicing agreement, Customer will change the servicer for any such Mortgage Loans to a company acceptable to DLJ. (c) Customer shall cause all sums received with respect to the Collateral to be deposited with Custodian. 4.10. DLJ Appointed Attorney-in-Fact. Upon the occurrence of an Event of Default, DLJ is hereby appointed the attorney-in-fact of Customer for the purpose of carrying out the provisions hereof and taking any action and executing any instruments that DLJ may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, DLJ shall have the right and power to receive, endorse and collect all checks made payable to the order of Customer representing any payment on account of the Collateral and to give full discharge for the same. 5. DEFAULT - RIGHTS AND REMEDIES. 5.1. Events of Default; Remedies. (a) Should any Event of Default occur, DLJ, at its option, in addition to its rights and remedies under the Promissory Note, shall have any or all of the following rights and remedies, which may be exercised by DLJ or by Custodian in accordance with the instructions of DLJ: (i) DLJ may cause the disposition of all or any portion of the Collateral to be conducted immediately upon the occurrence of an Event of Default, or upon the expiration of any period of delay or notice required by law. Should DLJ decide to conduct more than one such sale or disposition, DLJ may at its option cause the same to be conducted simultaneously or successively on the same day or upon such different days or at such different times and in such order as DLJ may deem to be in the best interests of the holders of interests in the Promissory Note. Customer waives, to the fullest extent permitted by law, any prejudice resulting to it from any such decision. (ii) DLJ shall have the right to sell the Collateral in one or more lots, at one or more times, at such place or places, at public or private sales and with or without notice of any kind, as DLJ may elect, at such prices and on such terms, as to cash or credit, as DLJ may deem proper, provided that notwithstanding any provision of this Pledge Agreement to the contrary, two (2) Business Days' notice of all sales of all or any portion of the Collateral shall be given to Customer. DLJ shall have the right to become a purchaser at any such sale that is open to the public and to apply all unpaid Obligations toward the purchase price of all or any portion of the Collateral sold to DLJ. If notice is given of public sale, it is agreed that notice shall be satisfactorily given if such notice is published at least once in The Wall Street Journal not less than two (2) Business Days prior to such sale. The foregoing notice provisions shall not preclude DLJ's rights to foreclose upon the Collateral in any other manner permitted under the Uniform Commercial Code as in effect in the applicable jurisdiction; however, a sale of the Collateral in accordance with such notice requirements shall be deemed a disposal of the Collateral in a commercially reasonable manner. DLJ shall have the right to sell the Collateral, or to foreclose, sue upon, or otherwise seek to enforce the same in its own name or in the name of either Custodian or Customer. Subject to the foregoing provisions of this paragraph, if an Event of Default shall have occurred and be continuing, DLJ shall have the right to renew, extend the time of payment of, or otherwise modify, amend, supplement, settle or compromise, in any manner, any obligations for the payment of money included in the Collateral, any security therefor and any other agreements, instruments, claims or choses in action of any kind, that may be included in the Collateral. In view of the nature of the Collateral, the parties agree that liquidation of the Collateral does not require a public sale and that one or more good faith private sales, including such private sales at which DLJ shall have the right to become a purchaser, is a commercially reasonable disposition of the Collateral. (iii) DLJ, or upon its direction Custodian, may take possession of all or any portion of the Collateral that is not already in its or Custodian's possession, and Customer agrees to assemble and make available the Collateral to DLJ at a convenient location. DLJ, acting through Custodian if it so desires, may manage and protect the Collateral, do any acts that DLJ deems proper to protect the Collateral as security hereunder, and sue upon any contract or claim relating to the Collateral and receive any payments due thereon or any damages thereunder, and apply all sums received to the payment of the Obligations in accordance with the same order of priorities as set forth in Section 5.3 hereof. Any such actions of DLJ or Custodian shall not, absent written ratification by DLJ, be deemed to impose upon DLJ or Custodian any of Customer's obligations under any contracts. (iv) DLJ may direct the servicers to take such action with respect to the Collateral as DLJ determines is appropriate. (b) DLJ shall, without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Collateral or any portion thereof, collect the payments due with respect to the Collateral or any portion thereof, and do anything that DLJ or Custodian are authorized hereunder to do. Customer shall pay all costs and expenses incurred by DLJ in connection with the appointment and activities of such receiver. (c) DLJ may enforce its rights and remedies hereunder without prior judicial process or hearing, and Customer hereby expressly waives, to the extent permitted by law, any right Customer might otherwise have to require DLJ to enforce its rights by judicial process. Customer also waives, to the extent permitted by law, any defense Customer might otherwise have to the Obligations arising from use of nonjudicial process, enforcement and sale of all or any portion of the Collateral or from any other election of remedies. Customer recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm's length. (d) Notwithstanding the foregoing, upon the occurrence of any Event of Default described in paragraphs 6(e) and 6(f) of the Promissory Note, DLJ shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Customer. 5.2. Delay not Waiver; Remedies are Cumulative. (a) No failure on the part of DLJ or Custodian to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by DLJ or Custodian of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (b) All remedies of DLJ or Custodian provided for herein are cumulative and in addition to any and all other rights and remedies provided by law, the Program Documents and the other instruments and agreements contemplated hereby and thereby. DLJ may exercise at any time after the occurrence of an Event of Default one or more remedies, as it so desires, and may thereafter at any time and from time to time exercise any other remedy or remedies. 5.3. Application of Proceeds. The proceeds of any sale or disposition of each item of the Collateral pursuant to this Article shall be applied as follows: (a) First, to the payment of the costs and expenses of such sale or disposition, or any other enforcement action pursuant hereto, including reasonable attorney's fees (including the allocated expenses of internal counsel to DLJ and Custodian), and all other expenses incurred in connection therewith, with a reasonable reserve for any liabilities incurred in connection therewith and full repayment with interest of all advances made or incurred in connection therewith; (b) Second, to the payment in full, in such order as DLJ shall determine, of (i) the accrued interest on the Advance secured by the item of Collateral sold or otherwise disposed of, (ii) the outstanding principal on the Advance secured by the item of Collateral sold or otherwise disposed of and (iii) all other Obligations due and owing to the holder of such Advance secured by the item of Collateral sold or otherwise disposed of, whether such holder is DLJ or an assignee of DLJ; (c) Third, to the payment in full, in such order as DLJ shall determine, of (i) the accrued interest on the Promissory Note, (ii) the outstanding principal on the Promissory Note and (iii) all other Obligations; and (d) Finally, to the payment to the person or persons entitled thereto, or as a court of competent jurisdiction directs. If the proceeds of any such sale are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of the Promissory Note, including without limitation all Advances thereunder, and all other Obligations, Customer shall remain liable for any deficiency. 5.4. Reimbursement. All sums expended by DLJ or Custodian in connection with the exercise of any right or remedy provided for herein shall be and remain the obligation of Customer. At the option of DLJ, all such sums may be paid from the Collateral, or may be advanced by DLJ or Custodian, in which event they shall be deemed to have been advanced to Customer and shall be reimbursed by Customer to the party advancing such amount, with interest at the Default Rate until reimbursement is made. During the continuance of an Event of Default, Customer waives, and shall not have, any right to restrict or control the expenditures by DLJ or Custodian from any cash which constitutes Collateral. 5.5. Indemnity. (a) The powers conferred on DLJ or Custodian hereunder are solely for their protection and do not impose any duty on them to exercise any such powers. Following an Event of Default, DLJ and Custodian shall have no duty of care to Customer as to any Collateral or with respect to the taking of any necessary steps to preserve rights against other parties, or any other obligation pertaining to the Collateral. Customer, its successors and assigns, waive all rights whatsoever against DLJ or Custodian for any loss, expense, liability or damage suffered by Customer as a result of actions taken pursuant to this Pledge Agreement, including those arising under any "mortgagee in possession" doctrine or the like. Customer agrees to indemnify and hold harmless DLJ and Custodian, and any contractors hired by them, and their respective officers, agents, attorneys and employees, from each and every obligation, liability, loss, cost, expense, death, injury, or damage resulting from, or arising out of the Program Documents and all other documents related thereto, and all actions taken pursuant thereto (including, without limitation, any such obligation, liability, loss, cost, expense, death, injury or damage resulting from any action taken by DLJ or Custodian pursuant to Section 5 hereof), other than those caused by the gross negligence or willful misconduct of DLJ or Custodian. (b) Without limiting the application of Section 5.5(a), Customer agrees to pay, or reimburse DLJ and Custodian for all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or liens upon or in respect of the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and DLJ's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. 5.6. Survival. The indemnity obligations of Customer contained in this Pledge Agreement shall continue in full force and effect notwithstanding the full payment of the Promissory Note and all of the other Obligations and notwithstanding the discharge thereof. 5.7. Waiver of Redemption and Deficiency Rights. Customer hereby expressly waives, to the fullest extent permitted by law, every statute of limitation, any right of redemption, any moratorium or redemption period, any limitation on a deficiency judgment, any reduction in the proceeds of any Collateral as a result of restrictions upon DLJ or Custodian contained in the Program Documents or any other instrument delivered in connection therewith, and any right that it may have to direct the order in which any of the Collateral shall be disposed of in the event of any disposition pursuant hereto. 6. MISCELLANEOUS. 6.1. Notices. All written communications hereunder shall be mailed, telecopied or delivered at the respective address set forth in the Custody Agreement or at such other address as shall be designated by a party in a written notice to the other parties pursuant to the Custody Agreement. All such notices and communications shall be effective when delivered to the party to which such notice is to be given. 6.2. Costs of Collection. Customer agrees to pay, with interest at the Default Rate, the reasonable out-of-pocket expenses (including estimated allocated costs for internal counsel) and reasonable attorneys' fees incurred by DLJ or Custodian in connection with the administration and enforcement of the Program Documents, the taking of any action, including legal action, required or permitted to be taken by DLJ or Custodian pursuant thereto, or in connection with any refinancing or restructuring in the nature of a "workout". 6.3. Entire Agreement. This Pledge Agreement supersedes and integrates all negotiations, contracts, agreements and understandings between the parties relating thereto, and it, together with the other Program Documents and the other documents delivered pursuant hereto or thereto, contains the entire final agreement of the parties. No prior negotiation, agreement, understanding or prior contract shall have any validity hereafter. 6.4. Amendments, Etc. No amendment or waiver of any provision of this Pledge Agreement nor any consent to any departure herefrom shall in any event be effective unless the same shall be in writing and signed by all the parties hereto, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 6.5. Severability. If any provision of this Pledge Agreement is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision, and this Pledge Agreement shall be enforced to the fullest extent permitted by law. 6.6. Binding Effect; Governing Law. This Pledge Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and assigns. Customer may not assign this Pledge Agreement or any of Customer's rights or obligations hereunder. DLJ may assign, in whole or in part, its rights hereunder, including without limitation its security interest in and lien on those items of Collateral securing a particular Advance, whether in conjunction with an assignment of DLJ's interest, in whole or in part, in the Promissory Note, a particular Advance thereunder or otherwise. Nothing contained herein shall preclude DLJ from continuing to exercise all of its rights hereunder for the benefit of any such assignee of DLJ, and Customer shall continue to take directions solely from DLJ unless otherwise notified by DLJ in writing. This Agreement shall be construed in accordance with, and governed by, the law of the State of New York, without giving effect to the conflict of laws principles thereof. IN WITNESS WHEREOF, this Pledge Agreement has been executed by the parties hereto as of the date first above written. LOMAS MORTGAGE USA, INC., as Customer By: /S/PAUL D. FLETCHER ------------------------------ Name: Paul D. Fletcher ----------------------------- Title: Senior Vice President ---------------------------- DLJ MORTGAGE CAPITAL, INC. By: /S/ROD ENNICO ------------------------------- Name: Rod Ennico ----------------------------- Title: Senior Vice President ---------------------------- APPENDIX A Representations and Warranties Regarding Nonagency Mortgage Loans Without a Purchase Commitment (a) Mortgage Loans as Described. The information set forth in the Collateral Receipt, the related mortgage loan schedule (the "Mortgage Loan Schedule") and the Wet Closing Notice, if any, is complete, true and correct. (b) Payments Current; No Default. All payments required to be made under the terms of the mortgage note have been made and credited. No payment required under the Mortgage Loan has been delinquent at any time since the date the Mortgage Loan was originated. There is no default, breach, violation or event of acceleration existing under the mortgage or the mortgage note and no event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Customer nor its predecessors have waived any default, breach, violation or event of acceleration. (c) No Outstanding Charges. There are no defaults in complying with the terms of the mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents that previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item that remains unpaid and that has been assessed but is not yet due and payable. Customer has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the mortgage note or date of disbursement of the Mortgage Loan proceeds, whichever is greater, to the day that precedes by one month the due date of the first installment of principal and interest. (d) Original Terms Unmodified. The terms of the mortgage note and mortgage have not been impaired, waived, altered or modified in any respect, except by a written instrument that has been recorded, if necessary to protect the interest of DLJ and that has been delivered to DLJ or its designee (including the Custodian). The substance of any such waiver, alteration or modification has been approved by the issuer of any related PMI Policy (as defined below) and the title insurer, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule. No mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the issuer of any related PMI Policy (as defined below) and the title insurer, to the extent required by the policy, and which assumption agreement is included in the mortgage file delivered to DLJ or its designee (including the Custodian) and the terms of which are reflected in the Mortgage Loan Schedule. (e) No Defenses. The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the mortgage note or the mortgage, or the exercise of any right thereunder, render either the mortgage note or the mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. (f) Insurance Policies in Effect. The fire and casualty insurance policy covering the mortgaged property (1) affords and will afford sufficient insurance against fire and such other risks as are usually insured against in the broad form of extended coverage insurance from time to time available, as well as insurance against flood hazards if the mortgaged property is in an area identified by the Federal Emergency Management Agency as having special flood hazards; (2) is a standard policy of insurance for the locale where the mortgaged property is located, is in full force and effect, and the amount of insurance is in the amount of the full insurable value of the mortgaged property on a replacement cost basis or the unpaid balance of the Mortgage Loans, whichever is less; (3) names (and will name) the present owner of the mortgaged property as the insured; and (4) contains a standard mortgagee loss payable clause in favor of Customer. (g) Compliance with Applicable Laws. Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in- lending, real estate settlement procedure, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, and Customer shall maintain in its possession, available for DLJ's inspection, and shall deliver to DLJ upon demand, evidence of compliance with all such requirements. (h) No Satisfaction of Mortgage. The mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the mortgaged property has not been released from the lien of the mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission. (i) Use of Mortgaged Property. No portion of the mortgaged property is used for commercial purposes. (j) Valid First Lien. The mortgage is a valid, existing and enforceable first lien (except with respect to Second Mortgages and Third Mortgages) on the mortgaged property, including all buildings on the mortgaged property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such building, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the mortgage is subject only to: (1) the lien of the current real property taxes and assessments not yet due and payable. (2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to mortgage lending institutions generally and specifically referred to in the lender's title insurance policy delivered to the originator of the Mortgage Loan and (A) referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan or (B) that do not adversely affect the appraised value of the mortgaged property set forth in such appraisal; and (3) other matters to which like properties are commonly subject that do not materially interfere with the benefits of the security intended to be provided by the mortgage or the use, enjoyment, value of marketability of the related mortgaged property. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and Customer has full right to pledge and assign the same to DLJ or its designee (including Custodian). (k) Validity of Mortgage Documents. The mortgage note and the mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All parties to the mortgage note and the mortgage had legal capacity to enter into the Mortgage Loan and to execute and deliver the mortgage note and the mortgage, and the mortgage note and the mortgage have been duly and properly executed by such parties. (l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan have been fully disbursed and there is no requirement of future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the mortgage were paid, and the mortgagor is not entitled to any refund of any amounts paid or due under the mortgage note or mortgage. (m) Doing Business. All parties that have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (1) in compliance with any and all applicable licensing requirements of the laws of the state wherein the mortgaged property is located, and (2) organized under the laws of such state, or (3) qualified to do business in such state, or (4) federal savings and loan associations or national banks having principal offices in such state, or (5) not doing business in such state. (n) LTV; PMI Policy. The original LTV of the Mortgage Loan either was not more than 75% or the excess over 75% is and will be insured as to payment defaults by a policy of primary mortgage guaranty insurance issued by a generally accepted insurance carrier (a "PMI Policy") until the LTV of such Mortgage Loan is reduced to 75%. All provisions of such PMI Policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Any Mortgage Loan subject to a PMI Policy obligates the mortgagor thereunder to maintain the PMI Policy and to pay all premiums and charges in connection therewith. The mortgage interest rate for the Mortgage Loan as set forth on the Mortgage Loan Schedule is net of any such insurance premium. (o) Title Insurance. The Mortgage Loan is covered by either (1) an attorney's opinion of title and abstract of title the form and substance of which is acceptable to mortgage lending institutions making mortgage loans in the area where the mortgaged property is located or (2) an ALTA lender's title insurance policy or other generally acceptable form of policy of insurance, issued by a title insurer and qualified to do business in the jurisdiction where the mortgaged property is located, insuring Customer, its successors and assigns, as to the first priority lien of the mortgage in the amount of 100% of the original principal amount of the Mortgage Loan, subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (j) above and, with respect to adjustable rate Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the mortgage providing for adjustment to the mortgage interest rate and monthly payment. Customer is the sole insured of such lender's title insurance policy, and such lender's title insurance policy is in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender's title insurance policy, and no prior holder of the mortgage, including Customer, has done, by act or omission, anything that would impair the coverage of such lender's title insurance policy. (p) No Mechanics' Liens. There are no mechanics' or similar liens or claims that have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the mortgaged property that are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage, unless title insurance coverage exists with respect to such liens or claims in an amount at least equal to such liens or claims. (q) Location of Improvements; No Encroachments. All improvements that were considered in determining the appraised value of the mortgaged property lay wholly within the boundaries and building restriction lines of the mortgaged property and no improvements on adjoining properties encroach upon the mortgaged property. No improvement located on or being part of the mortgaged property is in violation of any applicable zoning law or regulation. (r) Origination; Payment Terms. The Mortgage Loan was originated by Customer or a savings and loan association, a savings bank, a commercial bank or similar banking institution that is supervised and examined by a Federal or State authority. The originator of the Mortgage Loan is a HUD-approved mortgagee. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. With respect to adjustable rate Mortgage Loans, the mortgage interest rate is adjusted annually on each interest rate adjustment date to equal the index plus the gross margin, rounded up or down to the nearest 1/8%, subject to the mortgage interest rate cap. With respect to fixed rate Mortgage Loans, the mortgage note is payable each month in equal monthly installments of principal and interest. With respect to adjustable rate Mortgage Loans, installments of interest are subject to change due to the adjustments to the mortgage interest rate on each interest rate adjustment date, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty years from commencement of amortization. (s) Deeds of Trust. In the event the mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the mortgage, and no fees or expenses are or will become payable by DLJ to the trustee under the deed of trust, except in connection with a trustee's sale after default by the mortgagor. (t) Acceptable Investment. Customer has no knowledge of any circumstances or conditions with respect to the mortgage, the mortgaged property, the mortgagor or the mortgagor's credit standing that can reasonably be expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan. (u) Due on Sale. The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the mortgaged property is sold or transferred without the prior written consent of the mortgagee thereunder. (v) Buydown Provisions; Graduated Payments or Contingent Interests. With respect to mortgage loans which contain provisions pursuant to which monthly payments are paid or partially paid with funds deposited in any separate account established by Customer, the mortgagor or anyone on behalf of the mortgagor, which may constitute a "buydown" provision, the amount of each assistance payment shall be the sum necessary to make up the difference between the monthly principal and interest payment required by the terms of the note and the reduced monthly payment, as stated in the buydown certification. However, if for any reason the assistance payments from the escrow funds are not made by the escrow agent as contemplated, it shall be the obligation of the mortgagor to make the monthly payments required by the terms of the note. With respect to graduated payment mortgage loans, the scheduled annual payment adjustments are sufficient to cover all interest due and to fully amortize the loan in 15 years. (w) Consolidation of Future Advances. Any future advances made prior to the date such Mortgage Loan was delivered to Custodian have been consolidated with the outstanding principal amount secured by the mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy or an endorsement to the policy insuring the mortgagee's consolidated interest or by other title evidence acceptable to DLJ. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan. (x) Mortgaged Property Undamaged. There is no proceeding pending or threatened for the total or partial condemnation of the mortgaged property. The mortgaged property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the mortgaged property as security for the Mortgage Loan or the use for which the premises were intended. (y) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The origination and collection practices used with respect to the Mortgage Loan have been in all respects in accordance with industry custom and practice, and have been in all respects legal and proper. With respect to escrow deposits and escrow payments, all such payments are in the possession of Customer and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All escrow payments have been collected in full compliance with state and federal law. An escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or escrow payments or other charges or payments due Customer have been capitalized under the Mortgage or the mortgage note. All mortgage interest rate adjustments have been made in strict compliance with state and federal law and the terms of the related mortgage note. Any interest required to be paid pursuant to state and local law has been properly paid and credited. (z) Appraisal. The mortgage file contains an appraisal of the related mortgaged property signed prior to the approval of the Mortgage Loan application by a qualified appraiser, who had no interest, direct or indirect in the mortgaged property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and the appraisal satisfies the requirements of Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated. EX-10.7 8 EXHIBIT 10.7 DONALDSON, LUFKIN & JENRETTE DLJ Mortgage Capital, Inc. -- 140 Broadway, Suite 4000 -- New York, NY 10005-1285 -- (212) 504-8071 May 18, 1994 Lomas Mortgage USA, Inc. 1600 Viceroy Drive Dallas, Texas 75235 Telephone: 214-879-7010 Facsimile: 214-879-7018 Attention: Paul Fletcher This Commitment Letter confirms our agreement between Lomas Mortgage USA ("Lomas") and DLJ Mortgage Capital, Inc. ("DLJ") pursuant to which DLJ shall provide committed financing collateralized by eligible Mortgage Loans or Other Loans in accordance with the terms and conditions hereof and as set forth in the Whole Loan Funding Facility, the Promissory Note, and the Pledge Agreement dated May 16, 1994 and the Tri-Party Custody Agreement(s) executed by Lomas related thereto (collectively, the "Agreements"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Agreements. In the event of a conflict between the terms of this Commitment Letter and the terms of the Agreements, the terms of this Commitment Letter shall control with respect to those purchases of whole mortgage loans or any interests in any whole mortgage loans by DLJ or Advances made by DLJ up to the amount committed below. Amounts purchased by or borrowed from DLJ in excess of that committed herein shall be made in accordance with the Agreements. Subject to the terms and conditions hereof and the Agreements, including the performance by Lomas of its obligations set forth below, DLJ hereby commits to: 1. Provide a revolving credit line for residential Mortgage Loans under the Agreements until May 31, 1995 as follows, after which DLJ shall have no further obligation to purchase or to make Advances under this Commitment Letter, unless amended in writing by the parties hereto: (a) $200 million for Mortgage Loans and Required Documents delivered to Custodian in accordance with Section 3, 4 or 5 of the Custody Agreement and where related Purchase Commitments have been assigned and delivered to DLJSC ("Gestation Transactions"); (b) $200 million for Mortgage Loans, which shall include all other first-lien Mortgage loans, and Required Documents delivered to Custodian in accordance with Section 6 or 7 of the Custody Agreement ("Interim Transactions"); (c) $200 million for Title I second mortgage Mortgage Loans, manufactured housing loans, other second mortgage Mortgage Loans and Required Documents delivered to Custodian in accordance with the Custody Agreement ("Other Transactions"); provided, however, that: (i) the total committed credit line of (a) and (b) above, when combined, shall not exceed $200 million; (ii) no Mortgage Loan shall be in excess of $650,000; (iii) the total of all Advances involving Mortgage Loans not yet delivered, but which shall be delivered, to Custodian in accordance with Section 9(b) of the Custody Agreement ("Wet Transaction"), shall not exceed $50 million; and (iv) Lomas maintains outstanding transactions in an amount such that the monthly average of all Interim Transactions exceeds the monthly average outstanding of all Wet Transactions for each calendar month. 2. Maintain a funding rate as follows: (a) 50 basis points over the offered LIBOR rate of comparable maturity for any Mortgage-Backed Security repurchase agreement transaction ("MBS Repo"); (b) 75 basis points over the offered LIBOR rate of comparable maturity for any Gestation Transaction; (c) 110 basis points over the opening Federal Funds rate of comparable maturity for any Interim Transaction; and (d) 150 basis points over the opening Federal Funds rate of comparable maturity for any Other Transaction. provided, however, that (i) on any calendar quarter end the funding rate shall be as quoted by DLJ in good faith, (ii) DLJ may charge Lomas for any related daylight overdraft charge imposed by Custodian, if any, and (iii) DLJ shall charge Lomas additional basis points as a funding rate (as agreed upon by Lomas and DLJ) for the impact on DLJ's capital of any MBS Repo. The foregoing commitment by DLJ is hereinafter referred to as the "Commitment." 3. DLJ shall maintain a funding rate of 1.625% for any Interim Transaction that has been balance funded by escrow deposits at a financial institution approved by DLJ in its sole discretion, provided that Lomas irrevocably assigns any compensation that may be payable to it by such financial institution to DLJ. Lomas commits to: 1. Pay DLJ a Commitment Fee of $306,000 (15 bp Commitment plus $6,000 Due Diligence review) payable as follows: $31,000 upon execution of this Commitment Letter and $25,000 on the first Business Day of each month, commencing July 1, 1994. 2. With respect to each Advance, provide to DLJ, when such Advance is made and thereafter on a daily mark to market basis collateral consisting of, amongst other items specified in the Agreements, eligible Mortgage Loans equal to: a. For Advances related to MBS Repo Transactions covered by a Purchase Commitment from CALPERS, 101% of each such Advance; b. For Advances related to Gestation Transactions, 102% of each such Advance; c. For Advances related to Wet Transactions and Interim Transactions (other than Title I second mortgage Mortgage Loans, manufactured housing loans, or other second mortgage Mortgage Loans), 102% of each such Advance; d. For Advances related to Wet and Interim Transactions Advances related to Other Transactions, 105% of each such Advance; 3. Provide Purchase Commitment assignments related to the Collateral to DLJ, such Purchase Commitments to adhere to "Good Delivery" guidelines; 4. Commencing with August 1994, pay DLJ by the tenth day of each month or of the month following the expiration or termination of the Commitment, a Non-usage Fee if the average principal balance of all Advances outstanding during the immediately preceding calendar month is less than $100 million. Such Non-usage Fee shall be calculated by multiplying (a) the amount representing the difference between $100 million and the average outstanding principal balance of all Advances for the relevant month by (b) 15 basis points, and dividing such product by 12; 5. Provide evidence to DLJ that Lomas has, and will continue to maintain, insurance coverage for itself and its subsidiaries that encompasses employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities), and computer fraud in an aggregate amount of at least $1,000,000 and shall include DLJ Mortgage Capital, Inc. as a Loss Payee; and 6. Notify DLJ of its intent to borrow under an Advance no later than 11 a.m. (New York time) on the day of such Advance. Notwithstanding the foregoing, Lomas may request DLJ to increase its aggregate credit line up to $400 million. Upon the payment of an additional Commitment Fee of $100,000 per annum (prorated on the number of days remaining until May 31, 1995), and upon 30 days advance notice, DLJ hereby agrees to amend its Commitment by increasing the overall credit line up to $400 million until May 31, 1995. DLJ shall have the right to terminate this Commitment Letter, and DLJ shall no longer be obligated to make Advances under this Commitment and may accelerate the maturity dates of all Advances then outstanding, upon the occurrence of a Commitment Letter Termination Event. Upon such termination, DLJ shall have no obligation to return any fees collected and may utilize any remedy provided in the Agreements. A Commitment Letter Termination Event shall include any one or more of the following: 1. An "Event of Default" shall have occurred under any of the Agreements which shall include a breach by Lomas of any agreement contained in this Commitment Letter (following the expiration of any grace or notice period) including the items set forth under "Required Financial Statements", or there occurs any event set forth under "Litigation", "Consolidation and Merger" or "Financial Requirements", in Annex A attached hereto (following the expiration of any grace or notice period). 2. A "Material Adverse Change" shall have occurred in the business or operations of Lomas which is defined as the occurrence of any of the events or circumstances set forth under "Financial Requirements" in Annex A. 3. There occurs a change in ownership of Lomas, unless (i) the resulting, surviving or transferee entity is a corporation organized under the laws of the United States of America or a political subdivision thereof; (ii) such entity assumes all the obligations of Lomas under this Commitment Letter and Agreements and each outstanding Advance (or has such obligations guaranteed in a manner and by a Guarantor acceptable to DLJ); and (iii) DLJ receives as part of the aforementioned transaction prior assurances or additional credit support from such entity and any Guarantor to the extent that DLJ would not otherwise be satisfied with the financial condition of the surviving entity or Guarantor. "Guarantor" shall mean a guarantor or a party providing a similar obligation satisfactory to DLJ. 4. There occurs a catastrophic event or events resulting in the effective absence of a "repo market" for a period of at least 30 consecutive days respecting mortgage loans and the same results in DLJ not being able to finance any Advance through the repo market with DLJ's traditional repo counterparties. Upon the occurrence of such an event, Lomas shall not be obligated to make any further payments of Commitment Fees or Non- usage Fees. Please acknowledge your agreement to the foregoing by signing and returning the enclosed duplicate of this letter, whereby this Commitment Letter shall become a binding agreement between DLJ and Lomas. DLJ Mortgage Capital, Inc. BY: /S/ROD ENNICO ------------------------------ NAME: Rod Ennico ----------------------------- TITLE: Senior Vice President ---------------------------- AGREED AND ACCEPTED as of the date first above written: Lomas Mortgage USA, Inc. BY: /S/PAUL D. FLETCHER ------------------------------- NAME: Paul D. Fletcher ----------------------------- TITLE: Senior Vice President ---------------------------- ANNEX A 1. Litigation: Any litigation or proceeding affecting Lomas and its subsidiaries that is likely to be adversely determined and which, if adversely determined, could have a material adverse effect on the Collateral or the ability of Lomas to pay and perform on the Obligations. 2. Consolidation and Merger: Lomas consolidates or amalgamates with, or merges into or transfers all or substantially all its assets to another entity and, at the time of such consolidation, amalgamation, merger, or transfer, the resulting, surviving or transferee entity fails to assume all the obligations of Lomas and its subsidiaries under this Commitment Letter and the Agreements by operation of law or pursuant to an agreement satisfactory to DLJ. 3. Financial Requirements: (a) A material adverse change in Lomas' business, operations or financial condition that would materially and adversely affect the ability of Lomas to perform its obligation under this Commitment Letter and the Agreements as determined in good faith by DLJ; (b) GAAP Net Worth is less than $200 million; (c) Lomas, directly or indirectly, engages in any business other than the mortgage banking business other than businesses related to the mortgage banking industry or typically engaged in by participants in such industry; (d) Lomas sells any asset other than in the ordinary course of its business; and (e) Lomas guarantees the debt obligation of any other entity or entities that, in aggregate, exceeds $50 million. 4. Required Financial Statements: (a) Lomas shall deliver to DLJ within 90 days after the last day of its fiscal year, its audited consolidated statements of income and statement of changes in cash flow for such year and balance sheet as of the end of such year in each case presented fairly in accordance with GAAP and the requirements of HUD Handbook IG 4000.3 REV and accompanied, in all cases, by an unqualified report of Ernst & Young or another firm of independent certified public accountants reasonably acceptable to DLJ. (b) Lomas shall deliver to DLJ within 60 days after the last day of each of the first three fiscal quarters in any fiscal year of Lomas, its consolidated statements of income and statement of changes in cash flow for such quarter and balance sheet as of the end of such quarter presented fairly in accordance with GAAP and accompanied by FNMA Form 1002 and FHLMC Form 1055. (c) Lomas shall deliver to DLJ within 30 days after the last day of each calendar month that is not a quarter or year end in any fiscal year of Lomas, (i) its consolidated statement of income for such month and balance sheet as of the end of such month accompanied in each case by a certificate of the chief financial officer or treasurer of Lomas stating that such financial statements are presented fairly in accordance with GAAP and the requirements of HUD Handbook IG 4000.3 REV (subject to routine and year-end audit adjustments) and (ii) an officer's certificate from its chief financial officer or treasurer certifying that there does not exist an event of default in the Agreements or in this Annex. (d) Lomas shall deliver to DLJ as soon as available copies of all proxy statements, financial statements, and reports which Lomas sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements (without exhibits, unless requested by DLJ) under the Securities Act of 1933, as amended, which it files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange. (e) Lomas shall deliver or cause to be delivered to DLJ as soon as the same are available, copies of all regular, periodic and special audit reports conducted by GNMA, FNMA and/or FHLMC with respect to Lomas' operations. EX-10.8 9 EXHIBIT 10.8 February 8, 1995 BY FEDERAL EXPRESS Lomas Mortgage USA, Inc. 1600 Viceroy Drive Dallas, Texas 75235 Attn: Mr. Paul Fletcher Senior Vice President RE: AMENDMENT TO THE COMMITMENT LETTER ("COMMITMENT LETTER") DATED MAY 18, 1994 BETWEEN DLJ MORTGAGE CAPITAL, INC. ("DLJMC") AND LOMAS MORTGAGE USA, INC. ("LOMAS") Dear Mr. Fletcher: Pursuant to your request, we hereby agree, effective as of December 31, 1994, to revise the following terms and conditions of the Commitment Letter: Page 1, Paragraph 1 (iii): The total of all Advances as Wet Transactions is decreased from $50 million to $25 million. Page 3, Paragraph following Paragraph 6: Lomas' option to increase its aggregate credit line up to $400 million upon payment of an additional Commitment Fee and upon 30 days advance notice is no longer available. Annex A, Page 4, Paragraph 3 (b): The minimum GAAP Net Worth requirement is lowered from $200 million to $150 million. All other terms and conditions contained in the Commitment Letter remain unchanged. Please acknowledge your agreement to the foregoing by signing and returning the enclosed duplicate of this letter, whereby this Amendment to the Commitment Letter shall become a binding agreement between Lomas and DLJ. AGREED AND ACCEPTED as of the above date: DLJ MORTGAGE CAPITAL, INC.: LOMAS MORTGAGE USA, INC.: By: /S/VINCENT P. BROWNE By: /S/PAUL D. FLETCHER -------------------------- ---------------------------- Name: Vincent P. Browne Name: Paul D. Fletcher ------------------------ ------------------------- Title: Senior Vice President Title: Senior Vice President ----------------------- ------------------------ EX-10.9 10 EXHIBIT 10.9 AMENDMENT NO. 2 TO AMENDED AND RESTATED PLEDGE AGREEMENT AMENDMENT NO. 2, dated as of July 15, 1994, to the AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of April 7, 1994 (as amended, the "Pledge Agreement"), made by Lomas Mortgage USA, Inc. ("Pledgor") to Lehman Brothers Special Financing Inc. ("Pledgee"). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Pledge Agreement. WHEREAS, Pledgor has entered into the Pledge Agreement with Pledgee and has agreed to pledge and deliver any collateral that Pledgor is required to deliver to secure its obligations under the Agreement or any Swap Transaction pursuant to the terms of the Pledge Agreement; and WHEREAS, Pledgor and Pledgee now wish to amend the Pledge Agreement; NOW, THEREFORE, for due consideration, the receipt and sufficiency of which are hereby acknowledged by Pledgor and Pledgee, the Pledgor and the Pledgee agree that Exhibit A of the Pledge Agreement, and consequently the definitions of "Mortgage Notes" and "Mortgage Servicing Collateral" in the Pledge Agreement, shall be amended by (i) substituting the mortgage notes which are described by Pool Number on Annex I hereto, (ii) upon Pledgor's pledge of the Third Mortgage Servicing Collateral as described in paragraph (ii) of the letter agreement (the "Letter Agreement") dated May 25, 1994 between the Pledgor and the Pledgee, by adding the mortgage notes which are described by pool number on an Annex 2 hereto delivered to Pledgee substantially in the form of Annex 1 hereto, and (iii) upon Pledgor's pledge of additional Acceptable Mortgage Servicing Collateral as described in paragraph (iv) of the Letter Agreement, by adding the mortgage notes which are described by pool number on sequentially numbered Annex (commencing with Annex 3) delivered to Pledgee substantially in the form of Annex 1 hereto. As amended by this Amendment No. 2, the Pledge Agreement is in all respects ratified and confirmed and the Agreement (as supplemented by Confirmations of Swap Transactions and amended by the Letter Agreement) and the Pledge Agreement (as supplemented by Confirmations of Swap Transactions and as amended by that certain Amendment No. 1 and this Amendment No. 2) will form a single agreement between Pledgor and Pledgee. IN WITNESS WHEREOF, Pledgor has caused this Amendment No. 2 to be duly executed and delivered on the day and year first above written. LOMAS MORTGAGE USA, INC. By: /S/JAMES L. CROWSON ---------------------------- James L. Crowson Title: Executive Vice President ------------------------- The unpaid principal balances of the specific mortgage notes relating to the servicing rights pledged under the Amended and Restated Pledge Agreement dated as of April 7, 1994, made by Lomas Mortgage USA, Inc. to Lehman Brothers Special Financing Inc. (as amended by Amendment No. 1 thereto dated as of May 25, 1994 and Amendment No. 2 thereto dated as of July 15, 1994 and filed herewith), change from time to time but aggregate approximately $7,000,000,000 as of December 31, 1994. EX-10.10 11 EXHIBIT 10.10 AMENDMENT TO AGREEMENT AMENDMENT, dated as of September 23, 1994 between Lomas Financial Corporation, a Delaware corporation (the "Company"), and each of the entities and individuals listed under the heading "The Cold Spring Group" on the signature pages hereof (such entities and individuals being referred to collectively herein as the "Cold Spring Group"). RECITALS WHEREAS, the Company and the Cold Spring Group have entered into that certain Agreement, dated as of August 3, 1993 (the "Agreement"); and WHEREAS, the Company and the Cold Spring Group desire to amend the Agreement. In consideration of the mutual agreements and promises made in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties hereto agree as follows: 1. Certain Definitions. Unless otherwise specified herein, all terms used herein have the meanings given thereto in the Agreement, and all references to "Sections" are references to sections of the Agreement. 2. Amendments. Effective as of the date hereof, the Agreement shall be modified and amended as follows: (a) Section 3 of the Agreement is amended to read in its entirety as follows: 3. The Company hereby agrees (i) to file its preliminary proxy statement and other material for the 1993 Meeting with the Securities and Exchange Commission (the "SEC") no later than September 7, 1993, and (ii) to use its best efforts to hold the 1993 Meeting no later than November 30, 1993; provided, however, that the parties hereto recognize and accept that the proxy statement to be filed with the SEC regarding the solicitation of proxies for the 1993 Meeting will be subject to the SEC's review processes and the proxy statement or the 1993 Meeting could also be subject to other SEC action or a court action or other proceeding instituted by a third party, any of which events could result in a delay of the 1993 Meeting beyond November 30, 1993 (in which event the Company will hold the 1993 Meeting as soon as possible thereafter). Except in order to fill vacancies on the Board in a manner consistent with Section 8 of this Agreement, directors of the Company will only be elected at Annual Meetings of stockholders to be held (i) on November 1, 1994 (the "1994 Meeting") (provided, however, that the parties hereto recognize and accept that the proxy statement or the 1994 Meeting could be subject to SEC action or a court action or other proceeding instituted by a third party, any of which events could result in a delay of the 1994 Meeting beyond November 1, 1994 (in which event the Company will hold the 1994 Meeting as soon as possible thereafter)), and (ii) thereafter, no earlier than 12 months from the prior such Annual Meeting. (b) Section 6 of the Agreement is amended to read in its entirety as follows: 6. If the Designees (as defined in Section 8 hereof) and any of their successors pursuant to Section 8 continue to serve on the Board pursuant to this Agreement at the time of the 1994 Meeting, then, at the 1994 Meeting, (i) the total number of directors serving on the Board shall be decreased from seventeen (17) to ten (10), (ii) the following persons selected by the Cold Spring Group shall be nominated as directors of the Company: Mark M. Feldman, Robert LeBuhn, Reid Nagle and Paul S. Wolansky (the "1994 Meeting Designees"; collectively, the 1993 Meeting Designees and the 1994 Meeting Designees shall be referred to as the "Meeting Designees") or any of their successors pursuant to the provisions of Section 8 of this Agreement, and (iii) each member of the Cold Spring Group shall vote all shares in respect of which it or he has voting power in favor of the Company's other six (6) nominees for director. 3. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement are ratified and confirmed and shall continue in full force and effect. The Company and the Cold Spring Group agree that the Agreement, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with its terms. 4. Reference to the Agreement. The Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such agreements, documents and instruments to the Agreement shall mean a reference to the Agreement as amended hereby. 5. Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof. IN WITNESS WHEREOF, this Amendment has been duly executed by each of the parties hereto through their respective authorized representatives, as of the day and year first above written. LOMAS FINANCIAL CORPORATION By: /S/JESS HAY ------------------------------------ Name: Jess Hay Title: Chairman and Chief Executive Officer THE COLD SPRING GROUP: COLD SPRING ASSOCIATES, L.P. By: Cold Spring Management, Inc. General Partner By: /S/MARK M. FELDMAN -------------------------------- Name: Mark M. Feldman Title: President GREEN POND ASSOCIATES, L.P. By: Green Pond Management, Inc. General Partner By: /S/MARK M. FELDMAN -------------------------------- Name: Mark M. Feldman Title: President RIVER ROAD INTERNATIONAL, L.P. By: River Road Capital Management General Partner By: /S/S. DONALD SUSSMAN -------------------------------- S. Donald Sussman, General Partner By: River Road Partners General Partner By: /S/S. DONALD SUSSMAN -------------------------------- S. Donald Sussman, General Partner PALOMA SECURITIES, L.P. By: /S/ROBERT JONES ------------------------------------ Robert Jones, General Partner By: Paloma Partners Management Company, General Partner By: /S/S. DONALD SUSSMAN -------------------------------- S. Donald Sussman, President S. DONALD SUSSMAN /S/S. DONALD SUSSMAN -------------------------------- MARK M. FELDMAN /S/MARK M. FELDMAN -------------------------------- PAUL WOLANSKY /S/PAUL WOLANSKY -------------------------------- EX-10.11 12 EXHIBIT 10.11 September 30, 1994 Mr. J. Gordon Smith Manager of Finance General Electric Capital Corporation Treasurer ELLCO Leasing Corporation 44 Old Ridgeberry Road Danbury, CT 06810 Dear Mr. Smith: The Stock Purchase Agreement between General Electric Capital Corporation ("GECC") and Lomas Financial Corporation and certain affiliates ("Lomas") dated April 30, 1990 (the "Stock Purchase Agreement"), which agreement related to the sale of all the stock of ELLCO Leasing Corporation ("ELLCO") to GECC, provided for (i) a Tax Escrow Agreement (the "Tax Escrow Agreement") (the Tax Escrow Agreement being executed simultaneously with the Stock Purchase Agreement), that provided for the escrow of $10 million (the "Tax Escrow") for the purpose of ensuring liquidity in four identified tax classes for related indemnifications of GECC under the Stock Purchase Agreement with regard to certain potential liabilities as set out in Section 5.4(c) of the Stock Purchase Agreement (together with other pre-closing tax liabilities as defined in Section 1.25 of the Stock Purchase Agreement, herein referred to as the "Taxes"), and (ii) a General Escrow Agreement (the "General Escrow Agreement") (the General Escrow Agreement being executed simultaneously with the Stock Purchase Agreement and the Tax Escrow Agreement), that provided for the escrow of $10 million (the "General Escrow") for the purpose of ensuring liquidity for indemnifications of GECC under the Stock Purchase Agreement with regard to certain potential liabilities as described in the Stock Purchase Agreement. By letter agreement dated September 30, 1993 from James L. Crowson to J. Gordon Smith related to the Tax Escrow, Lomas, GECC, and ELLCO agreed to terminate the Tax Escrow and established the terms under which such termination would occur (the "Tax Escrow Letter"). Lomas, GECC, and ELLCO have now determined that it is to their mutual benefit to terminate the General Escrow and the General Escrow Agreement as soon as practicable. Accordingly, GECC, Lomas, and ELLCO each hereby agree to terminate the General Escrow and the General Escrow Agreement pursuant to the following terms: Mr. J. Gordon Smith September 30, 1994 Page 2 1. On or before October 14, 1994, Lomas will receive $9.25 million to be released from the General Escrow and GECC will receive the remaining $.75 million to be released from the General Escrow. Lomas and GECC will each cooperate fully with the other and shall execute and deliver to the Escrow Agent (as defined in the General Escrow Agreement) by October 11, 1994, the notice as contemplated by Section 1.6 of the General Escrow Agreement in substantially the form of Exhibit A hereto (or such other form as the parties hereto may mutually agree to which complies with the General Escrow Agreement) and any and all such other documents as may be required or reasonably requested by the Escrow Agent to effectuate the disbursement of funds as set forth herein so that the funds shall be released and delivered to the parties not later than October 14, 1994. Following the release of the General Escrow, the General Escrow Agreement shall be terminated. 2. In connection with the release of the General Escrow and the termination of the Escrow Agreement as agreed to in Item l above, GECC, Lomas, and ELLCO agree as follows: (a) The Tax Escrow Letter remains in full force and effect according to its terms except as specifically modified by this letter. (b) Except as specifically modified by this letter and the Tax Escrow Letter the indemnities by Lomas of GECC and ELLCO of certain liabilities as set out in the Stock Purchase Agreement remain in full force and effect in accordance with their terms. (c) With regard to claims for Damages (as defined in the Stock Purchase Agreement) related to Taxes (if any) that may be made under the Stock Purchase Agreement after giving effect to the releases contained in the Tax Escrow Letter and notwithstanding anything to the contrary set forth in the Stock Purchase Agreement, none of GECC, ELLCO, or any of their respective directors, officers, employees, and agents shall be entitled to indemnification for Damages related to Taxes unless and until the aggregate of all claims for damages related to Taxes shall exceed $200,000 (the "Tax Indemnity Basket"), and Lomas and the Lomas Subsidiaries (as defined in the Stock Purchase Agreement), jointly and severally, shall indemnify GECC and each of its directors, officers, employees and agents, ELLCO and each of its directors, officers, employees and agents only to the extent such Damages exceed, in the aggregate, the Tax Indemnity Basket. Mr. J. Gordon Smith September 30, 1994 Page 3 If this letter satisfactorily sets forth the agreement among GECC, ELLCO, and Lomas regarding the matters set forth herein, please sign below in the spaces provided. Very truly yours, LOMAS FINANCIAL CORPORATION By: /S/JAMES L. CROWSON -------------------------- Name: James L. Crowson Title: Executive Vice President AGREED: GENERAL ELECTRIC CAPITAL CORPORATION By: /S/J. GORDON SMITH ------------------------------- Name: J. Gordon Smith Title: Manager of Finance ELLCO LEASING CORPORATION By: /S/J. GORDON SMITH ------------------------------- Name: J. Gordon Smith Title: Treasurer EXHIBIT "A" October 11, 1994 (By telecopy Number 212/613-7788) Mr. Bob Stanislaro Trust Officer Manufacturers Hanover Trust Company 450 West 33rd Street New York, New York 10001 Attention: Escrow Administration 15th Floor Re: General Escrow Agreement dated April 30, 1990 (the "Escrow Agreement") by and among General Electric Capital Corporation ("GECC"), Lomas Financial Corporation ("LFC") and Manufacturers Hanover Trust Company, as escrow agent ("Agent") Gentlemen: In accordance with Section 1.6 of the Escrow Agreement, the Agent shall disburse to GECC and LFC on or before October 14, 1994, the respective portions of $10,000,000 presently being held in escrow as set forth below to the accounts of GECC and LFC as indicated: To GECC: $750,000 Wiring instructions: Bankers Trust Company One Bankers Trust Plaza, 20th Floor New York, NY 10015, Attn: Doris Adams ABA No.: 021-001-033 GE Capital Corporation/Commercial Equipment Financing, Acct No.: 50202962 Mr. Bob Stanislaro October 11, 1994 Page 2 To LFC: $9,250,000 Wiring instructions: Bank One, Texas, N.A. Dallas, Texas ABA: 111000614 Lomas Financial Corporation Operating Acct. 95298856 In accordance with Section 2.6 of the Escrow Agreement, the Agent shall be indemnified and held harmless by each of GECC and LFC from and against any and all expenses or loss suffered by the Agent in connection with this Notice, the actions to be taken by the Agent contemplated in this Notice, or otherwise as stated in such Section 2.6 of the Escrow Agreement. GECC and LFC each agree to deliver or cause to be delivered such further documents and instruments and shall do and cause to be done such further acts as the Agent shall reasonably request to carry out the provisions and purposes of this Notice or otherwise pursuant to Section 4 of the Escrow Agreement. Immediately following the disposition of all of the amounts held in escrow as set forth above, the Escrow Agreement shall be terminated in accordance with Section 5.1 of the Escrow Agreement. Very truly yours, General Electric Capital Corporation By: /S/J. GORDON SMITH ------------------------------ Name: J. Gordon Smith Title: Manager of Finance Address: 44 Old Ridgeberry Road Danbury, CT 06810 Telephone: 203/796-1997 Lomas Financial Corporation By: /S/JAMES L. CROWSON ------------------------------ Name: James L. Crowson Title: Executive Vice President Address: 1600 Viceroy Drive Dallas, TX 75235 Telephone: 214/879-5522 EX-10.12 13 EXHIBIT 10.12 =========================================================================== =========================================================================== ASSET PURCHASE AGREEMENT dated as of December 16, 1994 between Residential Information Services Limited Partnership, as Buyer and Lomas Information Systems, Inc., as Seller and Residential Services Corporation of America Lomas Financial Corporation Lomas Mortgage USA, Inc. for certain purposes provided herein =========================================================================== =========================================================================== TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 PURCHASE AND SALE Section 2.01. Purchase and Sale. . . . . . . . . . . . . . . . . . 11 Section 2.02. Excluded Assets. . . . . . . . . . . . . . . . . . . 12 Section 2.03. Assumption of Liabilities. . . . . . . . . . . . . . 12 Section 2.04. Excluded Liabilities . . . . . . . . . . . . . . . . 13 Section 2.05. Limitation on Assignment of Purchased Assets . . . . 14 Section 2.06. Purchase Price; Filing of IRS Form 8594. . . . . . . 15 Section 2.07. Closing . . . . . . . . . . . . . . . . . . . . . . 16 Section 2.08. Prorations; Receivables and Payables . . . . . . . . 16 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND LFC Section 3.01. Corporate Existence and Power. . . . . . . . . . . . 17 Section 3.02. Corporate Authorization. . . . . . . . . . . . . . . 17 Section 3.03. Governmental Authorization . . . . . . . . . . . . . 18 Section 3.04. Non-Contravention. . . . . . . . . . . . . . . . . . 18 Section 3.05. Financial Statements . . . . . . . . . . . . . . . . 18 Section 3.06. Absence of Certain Changes . . . . . . . . . . . . . 18 Section 3.07. Non-IPR Properties . . . . . . . . . . . . . . . . . 19 Section 3.08. Litigation . . . . . . . . . . . . . . . . . . . . . 19 Section 3.09. Assumed Contracts. . . . . . . . . . . . . . . . . . 19 Section 3.10. Compliance with Laws and Court Orders. . . . . . . . 20 Section 3.11. Intellectual Property. . . . . . . . . . . . . . . . 20 Section 3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.13. Finders' Fees. . . . . . . . . . . . . . . . . . . . 22 Section 3.14. Licenses and Permits. . . . . . . . . . . . . . . . 22 Section 3.15. Certain Interests. . . . . . . . . . . . . . . . . . 22 Section 3.16. No Insolvency. . . . . . . . . . . . . . . . . . . . 22 Section 3.17. Ability to Conduct Business. . . . . . . . . . . . . 22 Section 3.18. Known Intended Expansion by Customers. . . . . . . . 22 Section 3.19. Enforceability and Fair Consideration. . . . . . . . 23 Section 3.20. Effect of Investigation. . . . . . . . . . . . . . . 23 ARTICLE 3.1 REPRESENTATIONS AND WARRANTIES OF LFC AND LOMAS MORTGAGE Section 3.1.01. Corporate Existence and Power. . . . . . . . . . . 23 Section 3.1.02. Corporate Authorization. . . . . . . . . . . . . . 23 Section 3.1.03. Governmental Authorization . . . . . . . . . . . . 24 Section 3.1.04. Non-Contravention. . . . . . . . . . . . . . . . . 24 Section 3.1.05. Compliance with Laws and Court Orders. . . . . . . 24 Section 3.1.06. No Insolvency. . . . . . . . . . . . . . . . . . . 24 ARTICLE 3.2 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO ANCILLARY AGREEMENTS Section 3.2.01. Corporate Authorization. . . . . . . . . . . . . . 24 Section 3.2.02. Governmental Authorization . . . . . . . . . . . . 25 Section 3.2.03. Non-Contravention. . . . . . . . . . . . . . . . . 25 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF RSCA AND BUYER Section 4.01. Organization and Existence . . . . . . . . . . . . . 25 Section 4.02. Authorization . . . . . . . . . . . . . . . . . . . 25 Section 4.03. Governmental Authorization . . . . . . . . . . . . . 26 Section 4.04. Non-Contravention. . . . . . . . . . . . . . . . . . 26 Section 4.05. Finders' Fees. . . . . . . . . . . . . . . . . . . . 26 Section 4.06. Financing. . . . . . . . . . . . . . . . . . . . . . 26 Section 4.07. Litigation . . . . . . . . . . . . . . . . . . . . . 26 Section 4.08. No Insolvency. . . . . . . . . . . . . . . . . . . . 26 ARTICLE 5 COVENANTS OF SELLER AND LFC Section 5.01. Confidential Information and Noncompetition. . . . . 27 Section 5.02. Cooperation Concerning Assumed Contracts . . . . . . 28 Section 5.03. Restrictions on Distributions. . . . . . . . . . . . 28 ARTICLE 6 COVENANTS OF BUYER AND RSCA Section 6.01. Confidentiality. . . . . . . . . . . . . . . . . . . 29 Section 6.02. RSCA Agreement to Convert. . . . . . . . . . . . . . 30 ARTICLE 7 COVENANTS OF BOTH PARTIES Section 7.01. Reasonable Efforts; Further Assurances . . . . . . . 30 Section 7.02. Certain Filings. . . . . . . . . . . . . . . . . . . 31 Section 7.03. Public Announcements . . . . . . . . . . . . . . . . 31 Section 7.04. Trademarks, Tradenames . . . . . . . . . . . . . . . 31 ARTICLE 8 TAX MATTERS Section 8.01. Tax Schedules. . . . . . . . . . . . . . . . . . . . 32 Section 8.02. Transfer Taxes . . . . . . . . . . . . . . . . . . . 32 Section 8.03. Cooperation on Tax Matters . . . . . . . . . . . . . 33 ARTICLE 9 EMPLOYMENT MATTERS Section 9.01. Employees and Offers of Employment . . . . . . . . . 33 Section 9.02. Excluded Liabilities Related to Employment . . . . . 33 Section 9.03. WARN Notices, Requirements . . . . . . . . . . . . . 34 Section 9.04. Covenants Relating to Seller's Employees . . . . . . 34 ARTICLE 10 CONDITIONS TO CLOSING Section 10.01. Conditions to the Obligations of Each Party . . . . 35 Section 10.02. Conditions to Obligation of Buyer . . . . . . . . . 35 Section 10.03. Conditions to Obligation of Seller. . . . . . . . . 36 ARTICLE 11 SURVIVAL; INDEMNIFICATION Section 11.01. Survival. . . . . . . . . . . . . . . . . . . . . . 37 Section 11.02. Indemnification . . . . . . . . . . . . . . . . . . 38 Section 11.03. Notice and Settlement of Claims . . . . . . . . . . 40 Section 11.04. Certain Indemnities With Respect to the Arrangements . . . . . . . . . . . . . . . . . . 42 Section 11.05. Payment; Interest on Late Payments. . . . . . . . . 42 Section 11.06. No Waiver or Discharge; Subordination . . . . . . . 43 Section 11.07. Overall Limitations on Indemnification Obligations. 43 Section 11.08. Disputes. . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 12 TERMINATION Section 12.01. Grounds for Termination . . . . . . . . . . . . . . 47 Section 12.02. Effect of Termination . . . . . . . . . . . . . . . 47 ARTICLE 13 MISCELLANEOUS Section 13.01. No Warranties to Continue Business; Absence of Other Duties. . . . . . . . . . . . . . . . . . . 47 Section 13.02. Notices . . . . . . . . . . . . . . . . . . . . . . 48 Section 13.03. Amendments and Waivers. . . . . . . . . . . . . . . 51 Section 13.04. Expenses. . . . . . . . . . . . . . . . . . . . . . 51 Section 13.05. Successors and Assigns. . . . . . . . . . . . . . . 51 Section 13.06. Governing Law . . . . . . . . . . . . . . . . . . . 51 Section 13.07. Counterparts, Effectiveness . . . . . . . . . . . . 51 Section 13.08. Entire Agreement. . . . . . . . . . . . . . . . . . 51 Section 13.09. Captions. . . . . . . . . . . . . . . . . . . . . . 52 EXHIBITS Exhibit A - Form of Lease Agreement Exhibit B - Form of Management Data Processing Services Agreement Exhibit C - Form of Telecommunications Services Agreement Exhibit D - Form of Service Bureau Agreement Exhibit E - Form of Trademark Assignment Exhibit F - Form of Copyright Assignment Exhibit G - Form of Promissory Note Exhibit H - Form of Guaranty Exhibit I - Form of Adjustable Earn-Out Certificate Exhibit J - Form of Assignment and Assumption Agreement Exhibit K - Form of Legal Opinion of Davis Polk and Wardwell Exhibit L - Form of Legal Opinion of Hughes and Luce Exhibit M - Form of Senior Officer Certificate - Trust Indentures Exhibit N - Form of Senior Officer Certificate - Enforceability Exhibit O - Form of Assignment - MSS and Certain Assets Exhibit P - Form of Opinion of Louis Gregory, Esq. Exhibit Q - Form of Opinion of Brownstein Zeidman & Lore A Professional Corporation Exhibit R - Form of Opinion of Porter & Hedges, L.L.P. Exhibit S - Form of Opinion of Jeffrey P. Marston, Esq. SCHEDULES Schedule 1.01 A Third Party Rights Relating to EXCELIS Conduit Mortgage System Schedule 1.01 B Third Party Rights Relating to EXCELIS Loan Production System Schedule 1.01 C Third Party Rights Relating to EXCELIS Mortgage Loan Servicing System Schedule 1.01 D Third Party Rights Relating to EXCELIS Master Servicing System Schedule 1.01 E Third Party Rights Relating to EXCELIS Secondary Marketing System Schedule 1.01 F Certain Non-Proprietary IPR Necessary to Excelis Schedule 1.01 G Service Change Schedule Schedule 1.01 H List of Assumed Contracts Schedule 2.01 List of Included Assets Schedule 2.02 List of Excluded Assets Schedule 2.05 List of Group 1 and Group 2 Contracts Schedule 3.01 List of Jurisdictions in Which Qualified to do Business Schedule 3.03 List of Governmental Approvals Schedule 3.04 List of Required Direct Consents Schedule 3.06 List of Changes Schedule 3.07(a) List of Limitations in Title of Non-IPR Property Schedule 3.07(b) List of Non-IPR Leasehold Property Schedule 3.08 List of Litigation Schedule 3.09(a) List of Defaults on Contracts Schedule 3.09(b) List of Missing Material Contracts Schedule 3.11(d) List of Claims or Infringement of Any Intellectual Property Right Schedule 3.11(e) Indemnification Demands Schedule 3.11(f) Limitations of Title to Intellectual Property Rights Schedule 3.11(g) Exceptions to Exclusive Right to Commercial Exploitation Schedule 3.14 List of Government Permits Schedule 3.15 List of Certain Interests Schedule 3.18 List of Known Intended Expansion Schedule 3.1.03 List of Governmental Approvals Schedule 3.1.04 List of Required Indirect Consents Schedule 3.2.02 List of Certain Other Governmental Approvals Schedule 3.2.03 List of Certain Other Required Indirect Consents Schedule 4.07 List of Litigation Schedule 7.04 List of Seller Tradenames (not being assigned) Schedule 8.01 List of Taxing Jurisdictions ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT dated as of December 16, 1994, by and between Lomas Information Systems, Inc., a Nevada corporation ("Seller"), Residential Information Services Limited Partnership, a Delaware limited partnership ("Buyer"), Lomas Financial Corporation, a Delaware corporation ("LFC"), Lomas Mortgage USA, Inc., a Connecticut corporation ("Lomas Mortgage"), and Residential Services Corporation of America, a Delaware corporation ("RSCA"). W I T N E S S E T H: WHEREAS, Seller conducts a business which provides (i) information management services and systems for the mortgage banking industry, including: services (on both a service bureau and licensing basis) for loan production, secondary marketing, conduit management, master servicing and mortgage loan servicing; (ii) corporate management information systems; (iii) computer utility outsourcing; (iv) voice and data communications services; and (v) a broad range of information systems-related consulting services (clauses (i) and (iii) collectively, the "Business"); and WHEREAS, Buyer desires to purchase substantially all of the assets of the Business from Seller, and Seller desires to sell substantially all of the assets of the Business to Buyer, upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, LFC is the sole stockholder of all of the shares of issued and outstanding common stock of both Seller and Lomas Mortgage; and WHEREAS, Lomas Mortgage contracts for data processing services through a service bureau arrangement with Seller with respect to Lomas Mortgage's servicing of mortgage loans and management information services from Seller; and WHEREAS, LFC and Lomas Mortgage receive certain voice and data communications services from Seller, and Seller will retain the assets with which such voice and data services are provided; and WHEREAS, Lomas Mortgage desires to continue receiving such data processing and management information services, and Buyer desires to receive voice and data communication services, for a limited transition period after Buyer purchases substantially all of the assets of the Business; and WHEREAS, Buyer desires certain undertakings, assurances and indemnities from LFC and Lomas Mortgage as a condition to its purchase of substantially all of the assets of the Business, its assumption of certain liabilities of Seller and its offer of employment to substantially all of Seller's employees; and WHEREAS, LFC and Lomas Mortgage acknowledge and agree that they will receive substantial financial benefit, whether directly or indirectly, by virtue of the sale of substantially all of the assets of the Business, the assumption of certain liabilities of Seller by Buyer and the employment, by Buyer, of substantially all of Seller's employees; and WHEREAS, as an incentive for and inducement to Buyer to enter into the transactions described in this Agreement, acknowledging and agreeing that Buyer is relying thereupon as a material condition to the consummation of the transactions provided by this Agreement and the Ancillary Agreements, LFC and Lomas Mortgage are willing to assume those undertakings, and make or give such assurances and indemnities as expressly provided herein. NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "1934 Act" means the Securities Exchange Act of 1934, as amended. "Affiliate" means, with respect to any person, any other Person directly or indirectly controlling, controlled by, or under common control with such other person. "After-Tax Basis" means (i) increasing or "grossing up" the amount of any Loss for which any Buyer or Seller Indemnified Party is indemnified under Article 11 such that, after the indemnified party subtracts all federal, state and local income taxes (or franchise tax if such tax is computed or assessed with reference to income or net income) with respect to the inclusion of such payment in the indemnified party's gross income (it being understood for this purpose that the Indemnified Party will include any such payment in income only following a final determination by the relevant Taxing Authority, which the Indemnified Party has contested in good faith, that such inclusion is required), as grossed up, the net amount then remaining shall be equal to the amount of the Loss for which the indemnified party is entitled to be indemnified under Article 11, and (ii) decreasing the amount of such Loss to reflect the hypothetical Tax benefits with respect to such Loss (for example, any deduction available in respect of the Loss) to the Indemnified Party, determined herein. In making any such calculations, the Indemnified Party shall be deemed to be taxable at the highest marginal federal, state and local income tax (or franchise tax if such franchise tax is computed or assessed with reference to income or net income) rates then in effect without regard to its then actual overall effective rate of income taxation or actual tax liability, taking into account, however, the deductibility of any state or local or foreign income (or franchise) taxes payable with respect to such indemnification payment for federal income tax purposes. Seller acknowledges that Buyer is a partnership and that, for federal income tax purposes and state income tax purposes in certain states, a partnership is not a taxable entity and partners are taxed directly on their ratable shares of partnership net income. In lieu of making calculations on an "After-Tax Basis" with respect to each partner's separate tax circumstances, the parties hereto agree that calculations of the increased or decreased amount due on an "After-Tax Basis" shall be made, solely for the purposes of the calculation of After-Tax Basis with respect to any Loss, as if Buyer were a single corporate entity taxable as a corporation and subject only to United States federal, New Jersey state and Newark city Tax. In determining After-Tax Basis, any amount paid pursuant to Article 11 shall be treated as an adjustment to the Purchase Price of the Purchased Assets pursuant to Section 11.02(h) hereof. "Agreement" means this Agreement and all Exhibits and Schedules hereto as the same may from time to time be amended or supplemented by one or more instruments executed by all parties hereto. "Ancillary Agreements" means (i) the Management Data Processing Services Agreement, (ii) the Service Bureau Agreement, (iii) the Lease Agreement, (iv) the Telecommunications Services Agreement, (v) the Copyright Assignment, (vi) the Trademark Assignment and (vii) the Assignment and Assumption Agreement. "Arrangements" means the service bureau contracts or other arrangements between (i) Seller and PNC Mortgage Corporation, as successor in interest to Sears Mortgage Corporation, and (ii) Seller and Huntington Mortgage Corporation or its Affiliate. "Assignment and Assumption Agreement" means that certain Assignment and Assumption Agreement between Buyer and Seller in the form of Exhibit J hereto. "Assumed Contracts" means those contracts or agreements listed on Schedule 1.01H attached hereto, and includes those nontransferable contracts with respect to which the arrangements described in Section 2.05 hereof are made. "Balance Sheet" means the unaudited balance sheet of Seller as of September 30, 1994, prepared in accordance with generally accepted accounting principles consistently applied. "Balance Sheet Date" means September 30, 1994. "Benefit Arrangement" means any employment, collective bargaining, severance or similar contract or arrangement whether or not written, or any plan, policy, fund, program or contract or arrangement (whether or not written) providing for compensation (other than salary in the ordinary course), bonus, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, sick leave, vacation benefits, insurance coverage (including any self-insured or self-funded arrangements), health, medical or welfare benefits, disability benefits, worker's compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, deferred compensation, health, disability, medical or life insurance or other benefits, whether provided by insurance, funded or unfunded, self-insured, self-funded or any other arrangements) that (i) is not an Employee Plan, (ii) is entered into, maintained, administered or contributed to, as the case may be, by Seller or any of its Affiliates (or independent agents on behalf of Seller or its Affiliates) and (iii) covers any of Seller's past or present employees. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Maryland or Texas are authorized or required to be closed. "Buyer Indemnifying Party" means any one or more of Buyer or RSCA required (as applicable) to indemnify any Seller Indemnified Party pursuant to Article 11 hereof. "Closing Date" means the date of the Closing which shall be deemed to occur on December 16, 1994. "CMS" means all of the Intellectual Property Rights, including but not limited to Computer Programming Code and Documentation, and any programming or documentation (including programming in the form of built-in "workbenches," programming tools, and higher-level (or "proprietary") languages, used or required for the development, maintenance and implementation of the Computer Programming Code and/or Documentation) that comprises the full functionality (as of the date hereof) of the EXCELIS Conduit Management System. "Code" means the Internal Revenue Code of 1986, as amended (or any corresponding provisions of succeeding law). "Computer Programming Code" means (i) computer programming code in high level programming languages, including all comments and procedural code (e.g., job control language statements), plus all related development documents (e.g., flow charts, schematics, statements of principles of operations, end-user manuals, architectural standards, and any other specifications that are used to create or that comprise the computer programming code), and (ii) computer programming code in machine-readable form generated by compilation of computer programming code and contained in a medium that permits it to be loaded into and operated on computer equipment compatible with the Excelis Systems, in each case as it relates to the Excelis Systems. "Copyright Assignment" means that certain Copyright Assignment from Seller to Buyer in the form of Exhibit F hereto. "Default Rate" means that rate of interest per annum, compounded annually, equal to the prime rate of interest as published from time to time in the money rates column in The Wall Street Journal, plus three percentage points. The Default Rate shall be adjusted as of the first Business Day of every calendar quarter. "Documentation" means the user manuals and other written materials as the same may be updated or revised through the Closing Date that relate to particular Computer Programming Code, including materials utilized for design (e.g., logic manuals, flow charts, and principles of operation) of such Computer Programming Code and machine readable text or graphic files subject to display or printout relating to such Computer Programming Code. "Employee Plan" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or contributed to by Seller or any of its Affiliates and (iii) covers any of Seller's past or present employees. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and governmental restrictions, currently in effect, relating to human health, the environment or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including without limitation ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "Environmental Liabilities" means any and all liabilities of or relating to the Seller (including any entity which is, in whole or in part, a predecessor of the Seller), whether contingent or fixed, actual or potential, which (i) arise under or relate to matters covered by Environmental Laws and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "ERISA Affiliate" of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code. "Excelis Systems" means MLS, MSS, LPS, SMS and CMS. "Functional Specifications" means the most current published specifications for the Excelis Systems as set forth in the Documentation. "Group" means any affiliated, consolidated, combined or unitary group of Persons, for Tax purposes, of which Seller is a member and with which Seller files any Return. "Hazardous Substance" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Individual Account Plan" means the Lomas 401(k) Savings Plan. "Intellectual Property Right" means any trademark, service mark, trade name, service name, brand name, brand mark, invention, patent, trade secret, know-how, process, copyright (including any registration or application for registration of any of the foregoing), or any other similar type of proprietary intellectual property right. Intellectual Property Rights shall not include the right to use the names "Lomas" or "Lomas and Nettleton." "Interest Rate" means that rate of interest per annum, compounded annually, equal to the prime rate of interest as published from time to time in the money rates column in The Wall Street Journal. The Interest Rate shall be adjusted as of the first Business Day of every calendar quarter. "Knowledge" means, for any Person, the actual knowledge of such person after due inquiry by such Person. "Lease Agreement" means that certain Lease Agreement between Buyer and Lomas Mortgage, in substantially the form of Exhibit A hereto. "LFC Trust Indenture" means that certain Indenture dated as of November 1, 1991, by and between LFC and Texas Commerce Bank National Association, as Trustee, relating to the issuance by LFC of $140,000,000 in 9% Convertible Notes due 2003, as the same may have been amended through the date hereof. "Lien" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, purchase option or other adverse claim of any kind in respect of such properly or asset. Without limitation of the foregoing, for the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a seller, vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset. "Lomas Mortgage Trust Indenture" means that certain Indenture dated as of October 1, 1992 by and between Lomas Mortgage and Bankers Trust Company, as Trustee, relating to the issuance by Lomas Mortgage of $150,000,000 in 9 3/4% Senior Notes due October 1, 1997 and $190,000,000 in 10 1/4% Senior Notes due October 1, 2002, as the same may have been amended through the date hereof. "Loss" means any and all out-of-pocket damage, loss, liability, cost, expense, assessment, settlement, judgment, penalty or fine, and includes without limitation reasonable expenses of investigation and reasonable attorneys', accountants' and consultants' fees and expenses in connection with any claim, action, suit or proceeding; provided, however, that Loss shall not include any amount for lost business, profit or revenue opportunities. For purposes of establishing whether any matter is indemnifiable pursuant to Article 11 hereof and the amount of any Loss, the accuracy of the representations and warranties made in this Agreement or in any certificate or other writing delivered pursuant hereto or in accordance herewith shall be determined without giving effect to the qualifications to such representations and warranties concerning "materiality" or "Material Adverse Effect." "LPS" means all of the Intellectual Property Rights, including but not limited to Computer Programming Code and Documentation, and any programming or documentation (including programming in the form of built-in "workbenches," programming tools, and higher-level (or "proprietary") languages, used or required for the development, maintenance and implementation of the Computer Programming Code and/or Documentation) that comprise the full functionality (as of the date hereof) of the EXCELIS Loan Production System. "Management Data Processing Services Agreement" means that certain Management Data Processing Services Agreement between Buyer and Lomas Administrative Services, Inc. in the form of Exhibit B attached hereto. "Material Adverse Effect" means a material adverse effect on the business, assets, financial condition or result of operations of the Business taken as a whole. "MLS" means all of the Intellectual Property Rights, including but not limited to Computer Programming Code and Documentation, and any programming or documentation (including programming in the form of built-in "workbenches," programming tools, and higher-level (or "proprietary") languages, used or required for the development, maintenance and implementation of the Computer Programming Code and/or Documentation) that comprise the full functionality (as of the date hereof) of the EXCELIS Mortgage Loan Servicing System. "MSS" means all of the Intellectual Property Rights, including but not limited to Computer Programming Code and Documentation, and any programming or documentation (including programming in the form of built-in "workbenches," programming tools, and higher-level (or "proprietary") languages, used or required for the development, maintenance and implementation of the Computer Programming Code and/or Documentation) that comprise the full functionality (as of the date hereof) of the EXCELIS Master Servicing System. "Multiemployer Plan" means each Employee Plan that is a multiemployer plan, as defined in Section 3(37) or Section 4001(a)(3) of ERISA. "Non-IPR Property" means any and all properties or assets of Seller, other than Intellectual Property Rights, used principally or held principally for use in the Business. "Non-Proprietary IPR" means (i) any and all Intellectual Property Rights detailed or described in each of Schedules 1.01A (relating to CMS), 1.01B (relating to LPS), 1.01C (relating to MLS), 1.01D (relating to MSS) and 1.01E (relating to SMS), and (ii) any and all other Intellectual Property Rights that Seller leases, licenses or in which Seller otherwise has nonexclusive or limited ownership or use rights but which are necessary to implement, achieve or exploit the full functionality (as of the date hereof) of the Excelis Systems, described on Schedule 1.01F hereto. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means the Lomas Financial Group Pension Plan. "Person" means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Pre-Closing Tax Period" means any Tax period (or portion thereof) ending on or before the close of business on the Closing Date. "Proprietary IPR" means any and all Intellectual Property Rights constituting the Excelis Systems, other than those detailed or described in each of Schedules 1.01A, 1.01B, 1.01C, 1.01D, 1.01E and 1.01F. "Return" means any Tax return, statement, report and form (including estimated tax or information returns and reports) required to be filed with any Taxing Authority by or on behalf of Seller, either separately or as a member of a Group. "Securities Act" means the Securities Act of 1933, as amended. "Seller Indemnifying Party" means any one or more of Seller, LFC or Lomas Mortgage required (as applicable) to indemnify any Buyer Indemnified Party pursuant to Article 11 hereof. "Senior Officer" of any entity means an officer of such entity with a title of Senior Vice President or higher or a director of such entity. "Service Bureau Agreement" means that certain Service Bureau Agreement between Buyer and Lomas Mortgage, in substantially the form of Exhibit C hereto. "SMS" means all of the Intellectual Property Rights, including but not limited to Computer Programming Code and Documentation, and any programming or documentation (including programming in the form of built-in "workbenches," programming tools, and higher-level (or "proprietary") languages, used or required for the development, maintenance and implementation of the Computer Programming Code and/or Documentation) that comprise the full functionality (as of the date hereof) of the EXCELIS Secondary Marketing System. "Tax" or "Taxes" means (i) any net income, alterative or add-on minimum tax, gross income, gross receipts', sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other tax assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Taxing Authority, (ii) liability of the Seller for the payment of any amounts of the type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability of the Seller for payments of such amounts was determined or taken into account with reference to the liability of any other person for any Tax period, and (iii) liability of the Seller for the payment of any amounts as a result of being a party to any Tax Sharing Agreement or with respect to the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnity any other Person. "Tax Asset" means any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction or any other credit or tax attribute which could reduce Taxes (including, without limitation, deductions and credits related to alterative minimum Taxes). "Tax Sharing Agreements" means all existing Tax sharing agreements or arrangements (whether or not written) binding the Seller and any agreements or arrangements which afford any other person the benefit of any Tax Asset of Seller, afford Seller the benefit of any Tax Asset of any other Person, or require or permit the transfer or assignment of income, revenues, receipts, or gains. "Taxing Authority" means any governmental authority, domestic or foreign, responsible for the imposition, assessment, enforcement or collection of any Tax. "Telecommunications Services Agreement" means that certain Telecommunications Services Agreement between Buyer and Lomas Administrative Services, Inc. in the form of Exhibit C attached hereto. "Trademark Assignment" means that certain Trademark Assignment by Seller to Buyer in the form of Exhibit E hereto. "Wages" has the meaning given such term by Section 3401(a) of the Code. "Work In-Progress" means Computer Programming Code and Documentation in development, and other intellectual property developed or being developed by Seller in connection with the Business, including but not limited to the Computer Programming Code and Documentation in development with respect to items listed on Seller's "Service Change Schedule," attached as part of Schedule 1.01G hereto. (b) Each of the following terms is defined in the Section set forth opposite such term: TERM SECTION Adjustable Earn-Out Certificate 2.06 Assumed Liabilities 2.03 Buyer Note 2.06 Buyer Indemnified Parties 11.02 Capped Indemnity Obligations 11.07 Comptroller 8.05 Closing 2.07 Confidential Information 5.04 Conveyance Documents 2.07 Damages 11.02 Demand for Indemnification Payment 11.05 Early Termination Fees 2.02 Excluded Assets 2.02 Excluded Liabilities 2.04 Financial Statements 3.05 Governmental Permits 3.01 Huntington 2.02 Indemnified Party 11.03 Indemnifying Party 11.03 Indemnity Floor 11.07 Non-IPR Leasehold Property 3.07 Notice of Disagreement 11.08 PHMC 6.02 PNC 2.02 Pre-Closing Certificate Taxes 8.02 Purchased Assets 2.01 Purchase Price 2.06 RSCA Guaranty 2.06 Rules 11.08 Seller Indemnified Parties 11.02 Seller Tradenames 7.04 Transfer Taxes 8.02 Unlimited Indemnity Obligations 11.07 WARN 9.04 Wrongful Termination 12.02 ARTICLE 2 PURCHASE AND SALE Section 2.01. Purchase and Sale. Except as otherwise provided in this Agreement, upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell, transfer, assign and deliver, or cause to be sold, transferred, assigned and delivered, to Buyer at Closing, all of Seller's right, title and interest in, to and under the assets and properties of every kind or description, wherever located, personal or mixed, tangible or intangible, owned or otherwise used by Seller principally in the Business or held by Seller principally for use in the Business as the same shall exist on the Closing Date (the "Purchased Assets"), including, without limitation, all right, title and interest of Seller in, to and under: (A) all Non-IPR Property identified on Schedule 2.01 hereto; and (B) all Proprietary IPR, Work-In-Progress and, subject to Section 2.05 hereof, Non-Proprietary IPR, and any and all other Intellectual Property Rights, if any, that Seller leases, licenses or in which Seller otherwise has nonexclusive or limited ownership or use rights which are used principally in the conduct of Seller's Business (such assets or properties described in clauses (A) and (B) including but not limited to): (i) subject to Section 2.08 hereof, all prepaid expenses, including but not limited to ad valorem taxes, leases and rentals, related to the Purchased Assets; (ii) all rights, claims, credits, causes of action or rights of set-off against third parties relating to the Purchased Assets or Assumed Liabilities, including, without limitation, unliquidated rights under manufacturers' and vendors' warranties; (iii) all transferable Governmental Permits used principally or held principally for use in the Business; (iv) all books, records, files and papers, whether in hard copy or computer format, used principally or relating principally to the Business,including, without limitation, engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records, and any information relating to Tax imposed on the Purchased Assets; (v) copyright, trademark or other similar registration certificates issued to Seller in connection with all Proprietary IPR, which shall be separately assigned to Buyer in accordance with those certain forms of Trademark and Copyright Assignments attached hereto as Exhibits E and F hereto; and (vi) all goodwill associated with the Business or the Purchased Assets. Section 2.02. Excluded Assets. (a) Notwithstanding anything else contained herein, Purchased Assets shall not include any of Seller's right, title or interest in, to or under the following assets and properties (the "Excluded Assets"): (i) all cash and cash equivalents on hand in banks; (ii) insurance policies; (iii) except as provided in Section 2.02(b) hereof, accounts receivable attributable to the period prior to the Closing Date whether or not booked by Seller prior to the Closing Date; provided, however, that with respect to any unbooked receivables, Seller provides Buyer with reasonable evidence that the receivable is properly attributable to the period preceding the Closing Date; and (iv) the assets listed on Schedule 2.02. (b) Notwithstanding anything else contained herein, Excluded Assets shall include any and all amounts actually received by Seller on or prior to the Closing Date from PNC Mortgage Corporation ("PNC") and/or Huntington Mortgage Corporation or any of its Affiliates ("Huntington"), as fees or damages paid in connection with the early termination of the Arrangements ("Early Termination Fees"). Purchased Assets shall include, however, the right to any payment of Early Termination Fees actually made by PNC and/or Huntington after the Closing Date (as determined by postmark or other date reflected on the mail or other means of delivery of such payment), as well as all payments related to services rendered by Buyer to PNC and/or Huntington with respect to the Arrangements from and after the Closing Date. Section 2.03. Assumption of Liabilities. Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the Closing Date, to assume all obligations of Seller under the Assumed Contracts, but only to the extent they relate exclusively to performance obligations arising on or after, or accrue or are otherwise properly attributable to the period of time beginning on or after the Closing Date (the "Assumed Liabilities"); OTHER THAN THE ASSUMED LIABILITIES, THE BUYER DOES NOT AND WILL NOT ASSUME OR OTHERWISE BE RESPONSIBLE FOR IN ANY WAY WHATSOEVER ANY OTHER DUTIES, DEBTS, OBLIGATIONS OR LIABILITIES OF, AND/OR PENALTIES, FINES, CLAIMS, JUDGMENTS OR LIENS AGAINST, SELLER OR ITS SHAREHOLDER (OR ANY OF THEIR RESPECTIVE AGENTS, CONTRACTORS, EMPLOYEES, OFFICERS, DIRECTORS, OR AFFILIATES). Buyer will assist Seller and/or LFC or its Affiliates, upon written request therefrom, in obtaining releases of all obligations of Seller and/or LFC or its Affiliates under the Assumed Contracts to the extent they constitute Assumed Liabilities of Buyer, including but not limited to the release of any guarantee by LFC or its Affiliates of Seller's obligations under any Assumed Contract. Section 2.04. Excluded Liabilities. Notwithstanding anything else contained herein, except for those liabilities or obligations expressly identified in the definition of "Assumed Liabilities," the term "Assumed Liabilities" shall not include any or all debts, obligations, claims, liens, contracts, liabilities, judgments, penalties, fines of Seller of any kind, character or description whether known or unknown, accrued, absolute, contingent or otherwise (collectively, all such liabilities or obligations not being assumed herein shall be referred to as the "Excluded Liabilities"), including without limitation the following: (i) any and all liabilities or obligations reflected on the Balance Sheet; (ii) any and all liabilities or obligations of Seller arising or accruing prior to the Closing Date and, except with respect to the Assumed Liabilities, the period on or after the Closing Date; (iii) any and all liabilities or obligations of Seller or any Affiliate of Seller for any and all Taxes; (iv) any and all liabilities or obligations of Seller or any Affiliate of Seller under, pursuant to, in connection with or arising out of any Benefit Arrangement, any Employee Plan, the Pension Plan, the Individual Account Plan, any Multiemployer Plan, or any compliance or noncompliance by Seller or any of Seller's Affiliates with ERISA (including but not limited to any obligation of Seller or its Affiliates under Section 4980(B)(f) of ERISA with respect to continuation of group medical coverage for their employees), any and all liabilities or obligations of Seller or any Affiliate thereof to PBGC, and any liability or obligation of Seller to its Senior Officers or other employees; (v) any and all liabilities or obligations of Seller or any Affiliate of Seller under, pursuant to, in connection with or arising out of WARN, Seller's "Employee Protection Plan" dated May 21, 1993, the classification of Seller's employees as "exempt" employees not required to be paid overtime under the Fair Labor Standards Act and Department of Labor regulations related thereto during any period prior to the Closing Date, any workmen's compensation liability with respect to such period and any and all other labor-related liabilities with respect to Seller's employees, independent contractors or employment practices, terms or conditions prior to the Closing Date; (vi) any and all liabilities or obligations related to or arising from any claim, action, suit, investigation, proceeding, judgment or lien relating to or arising out of the Business or the Purchased Assets that is pending on the Closing Date, including but not limited to all litigation listed on Schedule 3.08, provided, however, that Seller shall have no affirmative obligation to Buyer hereunder to continue to prosecute any litigation listed on Schedule 3.08, provided, further, however, that the absence of any such obligation shall not be construed as an express or implied limitation or restriction on any of Seller's representations or warranties under this Agreement, and, provided, finally, that Seller shall cooperate with Buyer in the continuation of any such litigation by Buyer and be entitled to reimbursement of its reasonable costs and expenses in connection with such cooperation in accordance with Section 7.01(b) hereof); (vii) any and all liabilities or obligations relating solely to an Excluded Asset; (viii) any and all Environmental Liabilities of Seller or any of its Affiliates; (ix) any and all liabilities or obligations of Seller to its shareholders or to any Affiliate of Seller or to the shareholders of any Affiliate; and (x) any and all other liabilities or obligations incurred or otherwise properly attributable to any period prior to the Closing Date, whether contingent, fixed, known or unknown, matured or unmatured, liquidated or unliquidated, whether in contract, tort, imposed by statute, regulation or other law, including but not limited to accounts payable attributable to the period prior to the Closing Date, whether or not booked by Seller by such date. Section 2.05. Limitation on Assignment of Purchased Assets. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or Seller thereunder. Seller and Buyer will use good faith, reasonable efforts (but, except as provided below, without any payment of money by Buyer or Seller) to obtain the consent of the other parties to any such Purchased Asset for the assignment thereof to Buyer as Buyer may request. Buyer and Seller shall each pay one-half of any costs or expenses incurred to effect the transfer from Seller to Buyer of those Purchased Assets described on Schedule 2.05. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, at Buyer's option, Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or sub-leasing to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming Seller's obligations (and indemnifying Seller and its Affiliates for all liabilities thereunder to the extent such liabilities are Assumed Liabilities), any and all rights of Seller against a third party thereto. Seller will promptly pay to Buyer when received all monies received by Seller under any Purchased Asset or any claim or right or any benefit arising thereunder, except to the extent the same represents an Excluded Asset. Section 2.06. Purchase Price; Filing of IRS Form 8594. (a) The purchase price for the Purchased Assets (the "Purchase Price") is: (i) Two Million Five Hundred Thousand Dollars ($2,500,000) in cash; plus (ii) a Promissory Note of Buyer in the original principal amount of Eight Million Dollars ($8,000,000), in substantially the form of Exhibit G hereto (the "Buyer Note") and guaranteed by RSCA pursuant to the guaranty in the form of Exhibit H hereto (the "RSCA Guaranty"); plus (iii) the Adjustable Earn-Out Certificate, in substantially the form of Exhibit I hereto (the "Adjustable Earn-Out Certificate"). Seller expressly acknowledges that, under the Buyer Note and the Adjustable Earn-Out Certificate, it is possible, however likely or unlikely, by virtue of the provisions of that note and certificate relating to the calculation, reduction or offset of amounts otherwise due thereunder, that the amount ultimately payable under the Buyer Note and/or the Adjustable Earn-Out Certificate may be zero. The Purchase Price shall be paid as provided in Section 2.07. (b) Buyer and Seller hereby agree that the fair market value of all tangible property owned by Seller (such as furniture and equipment) and purchased by Buyer pursuant to this Agreement is $1,560,000, or such other amount as the parties shall agree in writing within ten (10) Business Days after the closing, and agree to report such amount as aggregate fair market value of "Class III" assets on Internal Revenue Service Form 8594 for the taxable year in which Closing occurs and to reflect such amount in such form as the amount of the allocation of sales price to such Class. Buyer and Seller further agree to file all Returns (including, without limitation, filing on a timely basis Forms 8594 with its Federal income tax return for the taxable year that includes the date of the Closing and subsequent taxable years in which payments are required to be made under the Buyer Note or Adjustable Earn-Out Certificate hereof) consistent with such valuation and allocation, and maintain such valuation in the course of any tax audit, tax review or tax litigation relating thereto. Neither Seller nor Buyer will assert that the valuation of Seller's tangible property purchased by Buyer as set forth in this Section 2.06(b) was not separately bargained for at arm's length and in good faith. Section 2.07. Closing. Concurrently with the execution of this Agreement (the "Closing"): (a) Buyer shall deliver to Seller: (i) in immediately available funds, the sum of Two Million Five Hundred Thousand Dollars ($2,500,000) by wire transfer of such amount to an account of Seller with a bank in Dallas, Texas designated by Seller, by notice to Buyer; and (ii) the Buyer Note, together with RSCA's Guaranty of the Note; and (iii) the Adjustable Earn-Out Certificate. (b) Seller and Buyer shall enter into an Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit J, and Seller shall deliver to Buyer the Copyright Assignment, the Trademark Assignment (substantially in the form of Exhibits F and E, respectively) and such other bills of sale, endorsements, consents, assignments and other good and sufficient instruments of assignment (the "Conveyance Documents") as the parties and their respective counsel shall deem reasonably necessary or appropriate to vest in Buyer title to the Purchased Assets. Section 2.08. Prorations; Receivables and Payables. (a) All payments under or pursuant to the Assumed Liabilities relating to periods prior to the Closing Date, personal property taxes related to the Purchased Assets relating to periods prior to the Closing Date, whether or not payable after the Closing Date, shall be prorated between Buyer and Seller, as the case may be, on the basis of a 365-day year and the number of days elapsed as of the Closing Date. All prepaid maintenance fees and prepaid expenses related to the Purchased Assets shall be pro rated between the Buyer and Seller based on the portion of the period of time covered by such assets or expenses that has elapsed up to the Closing Date. (b) With respect to any products sold (or services rendered) pursuant to any of the Assumed Contracts, Seller and Buyer shall use their best efforts to arrange for vendors to bill and customers to pay Seller directly for products or services provided through the Closing Date and Buyer directly for products or services provided after the Closing Date. Buyer will deliver to Seller promptly upon receipt any bills or other claims for payment of amounts due relating to Excluded Liabilities (including, for example, the tax assessment for Seller's personal property taxes for 1994). Seller will deliver to Buyer promptly upon receipt any bills or other claims for payment of amounts due constituting Assumed Liabilities. Buyer and Seller will each remit to the other party promptly upon receipt any bills or other demands for payment it receives and any receivables it receives or collects which, by the terms of this Agreement, belong to or are attributable to the other party. (c) Within ninety (90) days following the Closing Date, there shall be an accounting with respect to receivables and payables to determine the amount of any receivables and payables that are attributable to Seller or Buyer as provided by the terms of this Agreement through the Closing Date, with compensating payments made to the respective party who has erroneously been paid or received the receivables or who has erroneously paid payables, and to determine, to the extent then possible, the outstanding payables and receivables remaining attributable to Seller and to Buyer as of the Closing Date. Such accounting shall initially be made by Buyer's accountants, and a detailed statement thereof shall be provided, in writing, within five (5) Business Days following the end of such ninety (90) day period to Seller, accompanied by any payment determined as due from Buyer to Seller as a result of such determination, or with a demand for payment of the amount thereby determined as due from the Seller to Buyer. Within ten (10) Business Days following the receipt of such statement, Seller shall pay the amount declared as due thereunder or, if it disputes any portion thereof, shall notify Buyer, in writing, that it disputes such calculation, accompanied by a detailed statement setting forth the basis for its disputes and its alternative calculations. Resolution of such dispute shall be made in accordance with the procedures set forth in Section 11.08 hereof. Within one hundred and eighty (180) days after the Closing Date, there shall be a final accounting (but not final with respect to receivables and payables pursuant to ongoing arrangements made in accordance with Section 2.05 hereof) with respect to such determination, conducted in the manner provided in this Section 2.08(c). ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND LFC LFC and Seller jointly and severally represent and warrant to Buyer as of the Closing Date that: Section 3.01. Corporate Existence and Power. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals (the "Governmental Permits") required to carry on its operations as now conducted. Seller is duly qualified to do business as a foreign corporation and is in good standing in the State of Texas. Seller has heretofore delivered to Buyer true and complete copies of the articles of incorporation and bylaws of Seller as currently in effect. Schedule 3.01 lists all jurisdictions in which Seller is qualified to do business as a foreign corporation. Section 3.02. Corporate Authorization. The execution, delivery and performance by Seller of this Agreement are within Seller's corporate powers and have been duly authorized by all necessary corporate action on the part of Seller. This Agreement constitutes a valid and binding agreement of Seller. Section 3.03. Governmental Authorization. The execution, delivery and performance by Seller of this Agreement require no material action by or in respect of, or filing with, any governmental body, agency or official other than (i) as set forth in Schedule 3.03 or (ii) such filings or actions the failure to make or take would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.04. Non-Contravention. The execution, delivery and performance by Seller of this Agreement (i) do not and will not violate the articles of incorporation or bylaws of Seller, (ii) assuming compliance with the matters referred to in Section 3.03, will not violate any applicable law, rule, regulation, judgment, injunction, order or decree, or (iii) except as set forth in Schedule 3.04, will not (x) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Seller or to a loss of any benefit relating to the Business to which Seller is entitled under any provision of any agreement, contract or other instrument binding upon Seller or by which any of the Purchased Assets is or may be bound or any Governmental Permit or (y) result in the creation or imposition of any Lien on any Purchased Asset, other than, in the case of (ii) or (iii), for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.05. Financial Statements. The audited balance sheet and the related statements of operations for the years ended June 30, 1992, 1993, and 1994, the unaudited interim balance sheet of Seller as of September 30, 1994, and the related unaudited interim statement of operations for the three months ended September 30, 1994 (collectively, the "Financial Statements"), present fairly, in all material respects, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the financial position of Seller as of the dates thereof and its results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). Section 3.06. Absence of Certain Changes. Since the Balance Sheet Date, except as disclosed on Schedule 3.06, the Business has been conducted in the ordinary course consistent with past practices, and there has not been: (i) any event, occurrence, development or state of circumstance or facts which has or would reasonably be expected to have a Material Adverse Affect; (ii) any creation, assumption or other incurrence of any Lien on any Purchased Asset (other than purchase money security interests) in excess of $50,000 in the aggregate; (iii) any material labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of Seller, which employees were not subject to a collective bargaining agreement at the Balance Sheet Date, or any material lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to any employees of the Seller; (iv) any material damage, destruction or other casualty loss (whether or not covered by insurance) affecting the Business or any Purchased Asset; or (v) any transaction or commitment made, or any contract or agreement entered into, by Seller relating to the Business or its assets (including the acquisition or disposition of any assets) or any relinquishment by Seller of any contract or other right which, in each case, has had or would have a Material Adverse Effect, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement. Section 3.07. Non-IPR Properties. (a) Except as otherwise disclosed on Schedule 3.07(a) hereto, after the Closing and giving effect to the transactions contemplated hereby, Buyer will have good and marketable title to all Non-IPR Property (whether real or personal, tangible or intangible), other than the Excluded Assets, which property and assets Seller purports to own, free and clear of any Liens, except: (i) Liens disclosed on the Schedules hereto: or (ii) Liens for Taxes not yet due or being contested in good faith, or (iii) any other Liens which in the aggregate exceed $50,000. (b) Schedule 3.07(b) sets forth a list of all material real and personal Non-IPR Property leases to which Seller is a party as lessee or lessor (the "Non IPR Leasehold Property"). Except as set forth in Schedule 3.07(b), each such lease is a valid and binding agreement of Seller and in full force and effect and neither Seller nor, to Seller's Knowledge, any other party thereto is in default or breach under, and no condition exists that with notice or lapse of time or both would constitute a default by Seller under the terms of any such lease, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.08. Litigation. Except as disclosed on Schedule 3.08, there is no action, suit, investigation or proceeding pending against, or to Seller's or LFC's Knowledge, threatened against or affecting, Seller, the Business or Seller's properties before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or which, if pursued, would have a Material Adverse Effect. Section 3.09. Assumed Contracts. (a) Except as set forth on Schedule 3.09(a), each Assumed Contract is a valid and binding agreement of Seller and is in full force and effect, and neither Seller nor, to Seller's Knowledge, any other party thereto is in default or breach under and no condition exists that with notice or lapse of time or both would constitute a default by Seller under, the terms of any such Assumed Contract, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. (b) Except as set forth on Schedule 3.09(b), the Assumed Contracts constitute all of the material contracts, agreements or other instruments (i) which generate revenue to Seller, or (ii) upon which Seller currently relies for the use of property not owned by it or the provision of goods or services in the conduct of the Business. Section 3.10. Compliance with Laws and Court Orders. To Seller's Knowledge, Seller is not in violation of, and is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any law, rule, regulation, judgment, injunction, order or decree applicable to Seller or the conduct of the Business that would have a Material Adverse Effect. Section 3.11. Intellectual Property. (a) Except as set forth on Schedules 1.01A - 1.01G, Seller and LFC represent and warrant that the intellectual property rights comprising the Excelis Systems are exclusively proprietary to Seller to the extent that such types of intellectual property rights are protected by applicable law. (b) Schedules 1.01A - 1.01F specify all modules, components or parts of the Excelis Systems that Seller and LFC represent and warrant that Seller leases, licenses or in which Seller otherwise has nonexclusive or limited ownership or use rights but which are necessary to implement, achieve or exploit the full functionality (as of the date hereof) of the Excelis Systems (unless included within Excluded Assets). Except as set forth in such schedules, each such license or lease is a valid and binding agreement of Seller and in full force and effect and neither Seller nor, to Seller's Knowledge, any other party thereto is in default or breach under, and no condition exists that with notice or lapse of time or both would constitute a default by Seller under the terms of any such lease, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. (c) The Proprietary and Non-Proprietary IPR and the other Intellectual Property Rights to be transferred to Buyer pursuant to Section 2.01 constitute all of the material Intellectual Property Rights used principally or held principally for use in connection with the Business. The Excelis Systems' Computer Programming Code (not including any Work-In-Progress) will function on the equipment identified in the Documentation and with operating systems for which they are designed, and the Excelis Systems' Computer Programming Code (not including any Work-In-Progress) conforms in all material respects to the Functional Specifications and is sufficient, as of the Closing Date, to perform Buyer's then current obligations under the Assumed Contracts and the Service Bureau Agreement, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. (d) Except as set forth on Schedule 1.01 A through Schedule 1.01 G, there are no circumstances that renders any of the Proprietary or, to Seller's knowledge, Non-Proprietary IPR, unenforceable, invalid or capable of invalidation, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.11(d) and except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect, (i) neither Seller nor any Affiliate is a defendant in any action, suit or proceeding relating to, or has otherwise been notified of or is aware of, any alleged claim of infringement by Seller or Affiliate of any patents, trademarks, trade secrets, tradenames, service marks or copyrights of any other Person, (ii) Seller has no Knowledge of any infringement or continuing infringement by any other Person of any Proprietary IPR and (iii) no Proprietary IPR or Non- Proprietary IPR is subject to any outstanding lien, encumbrance, judgment, injunction, order, decree or agreement restricting the use thereof by Seller or, except for restrictions on use or transferability contained in agreements with respect to Non-Proprietary IPR leased or licensed by Seller, restricting the licensing or assignment thereof by Seller to any Person. Except as set forth on Schedule 3.11(d), to Seller's Knowledge there are no outstanding claims, judgments, or settlements to be paid by Seller relating to the Proprietary IPR or Non-Proprietary IPR. (e) Except as set forth in Schedule 3.11(e) hereof, neither Seller nor any Affiliate is currently subject to any demand by any Person to indemnify any other Person against any material charge of infringement by Seller of any third party's Intellectual Property Right. (f) Except as disclosed in Schedules 1.01 A through Schedule 1.01 G hereof, Seller has good title to all of the Proprietary IPR, free and clear of any adverse claims, liens, encumbrances, charges or licenses (either as licensee or licensor), or options or other ownership interests, including, without limitation, claims or rights of employees, agents, consultants, joint venturers, former employers of any of Seller's current or former employees, or other Persons involved in the development or creation of such Intellectual Property Rights, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. Except with respect to items set forth in Schedules 1.01 A through 1.01 E, Seller has the full right and license to use, sublicense, assign, modify, and transfer the Proprietary IPR free and clear of any adverse claim, limitation on use, encumbrance, option, or other charge or restriction, and the Buyer, upon Closing, will have the free and unfettered right to use all of the Proprietary IPR after the Closing without restriction, charge, option, claim or encumbrance, of any sort whatsoever. Except as set forth in Schedules 1.01 A through Schedule 1.01 G, none of the Proprietary IPR (not including any Work-In-Progress) is dependent upon any other intellectual property in order to freely operate or be fully utilized in the manner heretofore utilized by Seller in its Business, except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. (g) Except as disclosed on Schedule 3.11(g) hereof, after Closing and giving effect to the transactions contemplated hereby, Buyer will have the exclusive right to use or exploit any of the Excelis Systems (considering such systems as a whole, as opposed to certain individual components or modules thereof which may be Non-Proprietary IPR) for commercial purposes (as distinguished from any licenses of any other Person to use such property, or any portion thereof, solely for its own internal use), and no Persons have any licenses from Seller or any Affiliate to use all or any portion of MLS, MSS, LPS, SMS or CMS (considering each such system as a whole, as opposed to certain individual components or modules thereof which may be Non-Proprietary IPR) for commercial purposes within or without the United States. (h) Neither Seller nor LFC makes any representation or warranty as to any rights or other matters relating to any or all of the Excelis Systems outside of the United States. Section 3.12. [INTENTIONALLY OMITTED] Section 3.13. Finders' Fees. Except for Solomon Brothers Inc. and Lazard Freres Inc., whose fees, if any, will be paid by Seller, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement. Section 3.14. Licenses and Permits. Schedule 3.14 correctly describes each Governmental Permit, and such Governmental Permits are valid and in full force and effect. Section 3.15. Certain Interests. Except as set forth in Schedule 3.15, to Seller's actual knowledge (without any duty to inquire), no Senior Officer of Seller has any material interest in any business, corporate or otherwise, that materially competes with the Business or other than any entity that, directly or indirectly, has securities that are publicly traded securities. Since the Balance Sheet Date, there has not been any amount paid or asset sold by Seller to, or to Seller by, any Senior Officer other than salaries and employee benefits in accordance with the established policies of Seller or otherwise in accordance with the ordinary course of Seller's business. Section 3.16. No Insolvency. Seller is not, and shall not be rendered as a result of the consummation of the transactions provided for and described in this Agreement, "insolvent" or "bankrupt" within the meaning of Title 11 of the United States Code or any other Federal, Texas or Nevada statute relating to the relief of financially distressed debtors. Section 3.17. Ability to Conduct Business. The Purchased Assets, the Assumed Contracts, the employees to be employed by Buyer as provided in Section 9.01 hereof and the lease of facilities pursuant to the Lease are sufficient in all material respects for Buyer to continue the conduct of the Business (as the same is conducted on the Closing Date). Section 3.18. Known Intended Expansion by Customers. The Senior Officer signing this Agreement on behalf of Seller below hereby represents and warrants that, except as set forth on Schedule 3.18 hereto, to such Senior Officer's actual knowledge (without having made independent inquiry), no existing or former customers of Seller (excluding Seller's Affiliates) that use or have used MLS intend significantly to increase (or are actively considering increasing) their volume of loans on MLS (or, in the case of former customers of Seller, intend to enter into, or are actively considering entering into, a long-term contract or other arrangement with Seller or with Buyer for use of MLS), excluding any increase in MLS usage attributable to normal course of business increases in any such customer's servicing volume, in a manner that would cause an increase in the "Adjusted Principal Amount" of the Buyer Note in accordance with Section 2.C thereof. Section 3.19. Enforceability and Fair Consideration. This Agreement and each of the Ancillary Agreements are enforceable according to their respective terms. The consideration paid, delivered and given (including but not limited to the assumption of the Assumed Liabilities) by Buyer and RSCA (as applicable) for (i) the acquisition of the Purchased Assets and (ii) the obligations undertaken by Seller and/or its Affiliates under this Agreement and the Ancillary Agreements, is fair, reasonable and equivalent value therefor to Seller (and, as applicable, to Seller's Affiliates), bargained for and arrived at through arm's length negotiations by and between Buyer and Seller and their respective Affiliates as parties to this Agreement. Seller presently intends to use, (i) within a reasonable period of time after Closing, an amount of cash substantially equal to the cash portion of the Purchase Price, to pay the expenses of the transactions contemplated by this Agreement and accrued but unpaid liabilities of Seller or LFC and (ii) the remainder of the Purchase Price for the general corporate purposes of Seller and LFC. Seller and LFC entered into this Agreement and consummated the transactions contemplated hereunder for good faith, bona fide business purposes and not with an intent to hinder, delay or defraud any creditor of Seller or LFC. Section 3.20. Effect of Investigation. No due diligence or other investigation by Buyer or other information received by Buyer (other than those items specifically disclosed on all Schedules hereto except Schedules 1.01 H, 2.01 and 2.05) shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller, LFC or Lomas Mortgage under this Agreement. ARTICLE 3.1 REPRESENTATIONS AND WARRANTIES OF LFC AND LOMAS MORTGAGE LFC and Lomas Mortgage severally, and not jointly, each represent and warrant to Buyer as to itself as of the Closing Date that: Section 3.1.01. Corporate Existence and Power. It is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material Governmental Permits required to carry on its operations as now conducted, and is in good standing in the state of its incorporation and in the State of Texas. Section 3.1.02. Corporate Authorization. The execution, delivery and performance of this Agreement by it are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Agreement constitutes its valid and binding agreement. Section 3.1.03. Governmental Authorization. The execution, delivery and performance by it of this Agreement require no material action by or in respect of, or filing with, any governmental body, agency or official other than (i) as set forth in Schedule 3.1.03 or (ii) such filings or actions the failure to make or take would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.1.04. Non-Contravention. The execution, delivery and performance by Seller and by it of this Agreement do not and will not (i) violate its articles of incorporation or bylaws, (ii) assuming compliance with the matters referred to in Section 3.1.03, violate any applicable law, rule, regulation, judgment, injunction, order or decree or (iii) except as set forth in Schedule 3.1.04, (x) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of itself or to a loss of any benefit relating to its business to which it is entitled under any provision of any agreement, contract, agreement or other instrument binding upon it or by which any of its assets is or may be bound or any of its Governmental Permits or (y) result in the creation or imposition of any Lien on any of its assets, except, in the case of (ii) or (iii), for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.1.05. Compliance with Laws and Court Orders. To its Knowledge, it is not in violation of, and is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any law, rule, regulation, judgment, injunction, order or decree applicable to it which in any manner prohibits, restricts, or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby. Section 3.1.06. No Insolvency. It is not, nor will it be rendered as a result of the consummation of the transactions provided for and described in this Agreement, "insolvent" or "bankrupt" within the meaning of Title 11 of the United States Code or any other federal, Texas, Delaware (in the case of LFC) or Connecticut (in the case of Lomas Mortgage) statute relating to the relief of financially distressed debtors. ARTICLE 3.2 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO ANCILLARY AGREEMENTS LFC and LIS severally, and not jointly, each represent and warrant to Buyer as to itself as of the Closing Date that: Section 3.2.01. Corporate Authorization. The execution, delivery and performance of the Lease and the Service Bureau Agreement by Lomas Mortgage are within Lomas Mortgage's corporate powers and have been duly authorized by all necessary corporate action on Lomas Mortgage's part. The Lease and Service Bureau Agreement constitute valid and binding agreements of Lomas Mortgage. Section 3.2.02. Governmental Authorization. The execution, delivery and performance by Lomas Mortgage of the Lease and the Service Bureau Agreement require no material action by or in respect of, or filing with, any governmental body, agency or official other than (i) as set forth in Schedule 3.2.02 or (ii) such filings or actions the failure to make or take would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.2.03. Non-Contravention. The execution, delivery and performance by Lomas Mortgage of the Lease and the Service Bureau Agreement do not and will not (i) violate Lomas Mortgage's articles of incorporation or bylaws, (ii) assuming compliance with the matters referred to in Section 3.1.08, violate any applicable law, rule, regulation, judgment, injunction, order or decree or (iii) except as set forth in Schedule 3.2.03, (x) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Lomas Mortgage or to a loss of any benefit relating to Lomas Mortgage's business to which Lomas Mortgage is entitled under any provision of any agreement, contract, agreement or other instrument binding upon it or by which any of its assets is or may be bound or any of its Governmental Permits or (y) result in the creation or imposition of any Lien on any of Lomas Mortgage's assets, except, in the case of (ii) or (iii), for such matters as would not, individually or in the aggregate, have a Material Adverse Effect. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF RSCA AND BUYER Buyer and RSCA jointly represent and warrant to Seller as of the Closing Date that: Section 4.01. Organization and Existence. Buyer is a limited partnership duly formed under the laws of Delaware and has all powers and all material Governmental Permits required to carry on the Business as conducted as of the Closing Date. RSCA is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material Governmental Permits required to carry on its operations as now conducted. The sole general partner of Buyer is Residential Information Services, Inc., a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and having all corporate powers and all material Governmental Permits required to carry on its operations as general partner of Buyer. The sole limited partner of Buyer is RSCA. Section 4.02. Authorization. The execution, delivery and performance by Buyer, and, where RSCA is a signatory, of RSCA, of this Agreement, the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the Ancillary Agreements are within the respective powers of RSCA and Buyer and have been duly authorized by all necessary corporate or partnership action, as the case may be, on the part of RSCA and Buyer. This Agreement, the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the Ancillary Agreements constitute valid and binding agreements of Buyer, and, where RSCA is a signatory, of RSCA. Section 4.03. Governmental Authorization. The execution, delivery and performance by Buyer and, where RSCA is a signatory, RSCA, of this Agreement, the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the Ancillary Agreements require no action by or in respect of, or filing with, any governmental body, agency or official. Section 4.04. Non-Contravention. The execution, delivery and performance by Buyer, and, where RSCA is a signatory, of RSCA, of this Agreement, the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the Ancillary Agreements do not and will not (i) violate the certificate of incorporation or bylaws of RSCA or the limited partnership agreement of Buyer, respectively, or (ii) assuming compliance with the matters referred to in Section 4.03, violate any applicable law, rule, regulation, judgment, injunction, order or decree or any agreements or contracts to which RSCA or Buyer is a party. Section 4.05. Finders' Fees. Except for Lehman Brothers, whose fees have been and/or will be paid by or on behalf of Buyer, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of RSCA or Buyer in connection with the transactions contemplated in this Agreement who might be entitled to any fee or commission in connection with such transactions. Section 4.06. Financing. Buyer has or will have as of the Closing Date sufficient cash or other sources of immediately available funds to enable it to pay to Seller the funds required pursuant to Section 2.07(a)(i), but in no event less than Two Million Five Hundred Thousand Dollars ($2,500,000). Section 4.07. Litigation. Except as disclosed on Schedule 4.07, there is no action, suit, investigation or proceeding pending against, or to Buyer's or RSCA's Knowledge, threatened against or affecting, Buyer or RSCA before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or which, if pursued, would have a Material Adverse Effect. Section 4.08. No Insolvency. Neither RSCA nor Buyer is, and neither will be rendered as a result of the consummation of the transactions provided for and described in this Agreement, "insolvent" or "bankrupt" within the meaning of Title 11 of the United States Code or any other federal, Delaware or Texas statute relating to the relief of financially distressed debtors. ARTICLE 5 COVENANTS OF SELLER AND LFC Section 5.01. Confidential Information and Noncompetition. (a) Confidential Information. On or promptly after the Closing Date, all copies of the Excelis Systems' Computer Programming Code and Documentation possessed by Seller or any of its Affiliates (other than user manuals for the use of Affiliates of Seller) shall be delivered to Buyer. After the Closing, neither Seller nor any of its Affiliates shall, directly or indirectly, use any Confidential Information (as defined below) in any way, or divulge, disclose or make available or accessible any Confidential Information to any person, firm, partnership, corporation, trust or any other entity or third party (other than when required to do so by a lawful order of a court of competent jurisdiction); provided that LFC or Seller may disclose such information to officers, directors, employees, accountants, counsel, consultants, advisors and agents of Seller, LFC or other Affiliate ("Affiliated Persons") so long as such Affiliated Persons are informed by LFC or Seller of the confidential nature of such information and are directed by LFC or Seller to treat such information confidentially. The obligation of LFC, Seller, their Affiliates and their Affiliated Persons to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. In addition, after the Closing Seller shall not create any derivative work or other product based on or resulting from any Confidential Information. For purposes of this Agreement, "Confidential Information" shall mean the Excelis Systems' Computer Programming Code and Documentation, all financial information respecting the Business or Buyer and its partners, Buyer's business plans or strategies, and all other information respecting the Business and activities of Seller and, after the Closing, the activities of Buyer, including, without limitation, customers or vendees, and computer or other files, projects, products, computer disks or other media, methodologies, know-how, processes, practices, formats, systems, and data gathering methods with respect to the Excelis Systems. Notwithstanding the immediately preceding sentence, Confidential Information shall not include (i) any information that is in, or becomes generally applicable to, the public domain through no breach of any duty of confidentiality by Seller, any of its Affiliates or any Affiliated Persons, or (ii) lawfully acquired subsequent to Closing by the Seller, LFC or Affiliated Persons from sources other than Buyer or any of its Affiliates. (b) Noncompetition. Neither Seller, LFC nor Lomas Mortgage shall, from the Closing Date through December 31, 2001, within or with respect to the United States of America, engage in or undertake, directly or indirectly, any business or activity which competes in any material manner with (i) the marketing, use, exploitation or provision of services based upon the Excelis Systems, as the same may exist as of the Closing Date, (ii) the business of providing data processing services of the type or types provided (as of the Closing Date) by any of the Excelis Systems or other systems designed to perform similar functions either through a service bureau or a licensing arrangement; provided, however, that nothing herein shall prevent Seller, LFC or Lomas Mortgage or any Persons that are their Affiliates as of the Closing Date from acting as a servicer, subservicer or master servicer for investors in such loans. (c) Nonsolicitation. Neither Seller, LFC nor Lomas Mortgage shall, directly or indirectly, from the Closing Date through December 31, 1997, induce any person in the employment of Buyer (other than purely clerical employees) to (i) terminate such employment, or consulting arrangement or (ii) accept employment, or enter into any consulting arrangement, with anyone other than Buyer; provided, however, that Seller, LFC and Lomas Mortgage may advertise generally their employment vacancies and may hire such employees of Buyer who respond to such general advertisements. (d) Injunctive Relief. Seller acknowledges and agrees that Buyer will have no adequate remedy at law, and would be irreparably harmed, if Seller or any of its Affiliates breaches or threatens to breach any of the provisions of this Section 5.04, Seller agrees that Buyer shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of this Section 5.04, and to specific performance of each of the terms of such Section in addition to any other legal or equitable remedies that Buyer may have. Seller further agrees that it shall not, in any equity proceeding relating to the enforcement of the terms of this Section 5.04, raise the defense that Buyer has an adequate remedy at law. (e) Special Severability. The terms and provisions of this Section 5.04 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the potential restrictions on Seller's future business imposed by this Section 5.04 be reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provision of this Section 5.04 unreasonable in duration or geographic scope or otherwise, Seller and Buyer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction. Section 5.02. Cooperation Concerning Assumed Contracts. Seller shall cooperate with Buyer and shall use commercially reasonable efforts (not including the payment of amounts not otherwise owed to the Persons whose consent is sought or the incurrence of any additional obligations other than with respect to the transfer to Buyer of those Purchased Assets described on Schedule 2.05) to assist Buyer in obtaining consents to the assignment to Buyer of the Assumed Contracts. Section 5.03. Restrictions on Distributions. LFC agrees that it will not cause, or permit to occur, the distribution or other expenditure of moneys or other property received by Seller, or by it or any other Affiliate as successor-in-interest to Seller, from Buyer pursuant to the terms of this Agreement in a manner which would violate or breach any applicable restrictions thereon pursuant to the LFC Trust Indenture or the Lomas Mortgage Trust Indenture. ARTICLE 6 COVENANTS OF BUYER AND RSCA Section 6.01. Confidentiality. (a) Confidentiality. RSCA and Buyer each agrees that prior to the Closing Date and after any termination of this Agreement, RSCA, Buyer and their Affiliates will hold, and will use all reasonable business efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Business, Seller, LFC and the Affiliates of LFC furnished to RSCA or Buyer or their Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of RSCA or Buyer or (iii) later lawfully acquired by RSCA or Buyer on a nonconfidential basis from sources other than Seller or any of its Affiliates; provided that RSCA or Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such Persons are informed by RSCA or Buyer of the confidential nature of such information and are directed by RSCA or Buyer to treat such information confidentially. The obligation of RSCA, Buyer and their Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, RSCA, Buyer and their Affiliates will, and will use all reasonable business efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by RSCA, Buyer or their Affiliates or on their behalf from Seller, LFC or any of their Affiliates in connection with this Agreement that are subject to such confidentiality. (b) Injunctive Relief. RSCA and Buyer each acknowledges and agrees that Seller, LFC and their Affiliates will have no adequate remedy at law, and would be irreparably harmed, if RSCA, Buyer or any of their Affiliates breaches or threatens to breach any of the provisions of this Section 6.01. RSCA and Buyer each agrees that Seller, LFC and their Affiliates shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of this Section 6.01, and to specific performance of each of the terms of such Section in addition to any other legal or equitable remedies that they may have. RSCA and Buyer each further agrees that it shall not, in any equity proceeding relating to the enforcement of the terms of this Section 6.01, raise the defense that Seller, LFC or any of its Affiliates seeking relief hereunder has an adequate remedy at law. (c) Special Severability. The terms and provisions of this Section 6.01 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the potential restrictions on RSCA's or Buyer's future business imposed by this Section 6.01 be reasonable in all respects. If for any reason any court of competent jurisdiction shall find any provision of this Section 6.01 unreasonable, Seller, LFC, RSCA and Buyer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction. Section 6.02. RSCA Agreement to Convert. Upon termination of the existing contract between The Prudential Home Mortgage Company, Inc. ("PHMC") and Computer Power, Inc., in accordance with that contract's terms, RSCA agrees that it will cause PHMC to enter into a service bureau agreement with Buyer to convert the data processing of PHMC's mortgage loan servicing operations to use of MLS (as the same may have been modified at such time) for all first-lien, closed-end, residential mortgage loans serviced by PHMC and/or any of RSCA's or PHMC's controlled subsidiaries, on reasonable and fair market terms and conditions. Any transfer of such servicing rights to any Affiliate of PHMC or RSCA will be subject to the execution of a substantially similar service bureau agreement with Buyer. RSCA will use good faith reasonable efforts to seek to cause The Prudential Insurance Company of America and any of its controlled entities to execute comparable covenants. ARTICLE 7 COVENANTS OF BOTH PARTIES Buyer and Seller agree that: Section 7.01. Reasonable Efforts; Further Assurances. (a) Subject to the terms and conditions of this Agreement, Buyer and Seller will each use good faith reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement and the Ancillary Agreements. Seller and Buyer each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer all of Seller's right, title and interest in or to title to the Purchased Assets. (b) Seller hereby constitutes and appoints, effective as of the Closing Date, Buyer and its successors and assigns as the true and lawful attorney of Seller with full power of substitution in the name of Buyer or in the name of Seller, but for the benefit of Buyer (i) to collect for the account of Buyer any items of Purchased Assets and (ii) to institute and prosecute all proceedings which Buyer may in its sole discretion deem proper in order to assert or enforce any right, title or interest in, to or under the Purchased Assets, and to defend or compromise any and all actions, suits or proceedings in respect of the Purchased Assets; provided that Seller and/or LFC shall cooperate with Buyer in connection with such activities described in clauses (i) and (ii) to the extent such request for cooperation and the cooperation or assistance asked to be provided by Buyer is reasonable; and, provided, further, that Buyer shall promptly reimburse Seller and LFC for any costs and expenses incurred in connection therewith upon presentation of bills, invoices or other written evidence thereof together with written demand for reimbursement. Buyer shall be entitled to retain for its own account any amounts collected pursuant to the foregoing powers, including any amounts payable as interest in respect thereof. Section 7.02. Certain Filings. Seller and Buyer shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Section 7.03. Public Announcements. Any press release or other public statement with respect to this Agreement or the transactions contemplated hereby and the method of its release shall be approved in writing by both Buyer (or RSCA on behalf of Buyer) and Seller (or LFC on behalf of Seller) and no such publicity shall be released without such approval, except as may be required by applicable law or any listing agreement with any national securities exchange. Section 7.04. Trademarks, Tradenames. (a) Except as set forth in the other subsections of this Section 7.04, after the Closing, Buyer and its Affiliates shall not use any of the names listed in Schedule 7.04. Such names shall be referred to, collectively or individually as the context requires, as the "Seller Tradenames." (b) After the Closing, Buyer shall have the right to use existing packaging, labeling, containers, supplies, advertising materials, technical data sheets and any similar materials bearing any Seller Tradenames until the earlier of (i) one year after the Closing Date and (ii) the date existing stocks are exhausted. Buyer shall have the right to use Seller Tradenames in advertising that cannot be changed by Buyer using reasonable efforts for a period not to exceed one year after the Closing Date. Buyer shall comply with all applicable laws or regulations in any use of packaging or labelling containing Seller Tradenames. (c) The obliteration of Seller Tradenames shall be deemed compliance with Buyer's covenants not to use Seller Tradenames pursuant to this Section 7.04. (d) Buyer agrees to cease using Seller Tradenames on buildings and other fixed assets as soon as reasonably possible after the Closing Date. ARTICLE 8 TAX MATTERS Section 8.01. Tax Schedules. Schedule 8.01 contains a list of all jurisdictions (whether foreign or domestic) to which any Tax is properly payable by the Seller. Section 8.02. Transfer Taxes. (a) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the sale of the Purchased Assets or otherwise in connection with the transactions effected pursuant to this Agreement (collectively, the "Transfer Taxes") shall be borne and paid by the Seller, notwithstanding any provision of Texas or other law otherwise imposing primary liability therefor on Buyer. To the extent permissible under Texas law or regulations, Seller shall undertake such actions and file such returns or other forms or instruments as may be necessary to make payment of any Transfer Taxes due with respect to the sale of the Purchased Assets prior to or as soon as practicable after (but in no event later than six months from) the Closing Date, and present evidence of such payment promptly to Buyer. (b) Seller shall request (or, if Buyer must make such request under Texas law, Buyer shall request), within thirty (30) days after the Closing Date, a certificate from the Comptroller of Public Accounts of the State of Texas (the "Comptroller") stating that as of the first Business Day following the Closing Date, no Transfer Tax is due by Seller or a statement of the amount required to be paid with respect to the issuance of such certificate, such certificate or statement as of a date subsequent to the Closing Date, and Seller shall promptly make its records available to representatives of the Comptroller for audit and shall otherwise cooperate with Buyer and representatives of the Comptroller with respect to obtaining such certificate. Seller shall send Buyer a copy of such certificate promptly following its receipt by Seller. Any Transfer Taxes which are reflected as being due on such subsequent certificate shall be paid when due in accordance with applicable law, unless Seller contests the Comptroller's determination of the assessment or amount thereof in accordance with applicable law. If for any reason such Transfer Tax liability is assessed against Buyer and Seller is in good faith contesting the assessment or amount thereof upon a reasonable basis, and if Seller so requests, in writing, Buyer will not pay such Transfer Tax; provided, however, that Seller's contest prevents or suspends the imposition of any liens upon Buyer or its assets or any interest or penalties assessable against Buyer on or with respect to the Transfer Tax liability. If, subject to the foregoing, Buyer is required (in order to prevent the imposition of such a lien or such interest or penalties) to pay any portion of the Transfer Taxes, Seller and LFC shall be deemed to have breached Section 8.02(a) hereof as of the date of Buyer's payment and Buyer shall become entitled to indemnification therefor pursuant to Article 11 hereof, and such claim shall be treated as an indemnification claim described in Section 11.01(i) hereof. Section 8.03. Cooperation on Tax Matters. (a) From and after the Closing Date, Buyer and Seller shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of any Return (including any report required pursuant to Section 6043 of the Code and all Treasury Regulations promulgated thereunder), and in connection with any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Seller agrees and, to the extent books and records are transferred to Buyer as part of the Purchased Assets, Buyer agrees, (i) to retain all books and records with respect to Tax matters pertinent to Seller and the Group relating to any Pre-Closing Tax Period, and to abide by all record retention agreements entered into with any Taxing Authority, and (ii) to give Buyer or Seller, as the case may be, reasonable written notice prior to destroying or discarding any such books and records and, if Buyer or Seller, as the case may be, so requests, Seller or Buyer, as the case may be, shall allow the other party reasonable access to such books and records. (b) Buyer and Seller further agree, upon request, to use all reasonable efforts to timely obtain any certificate or other document from any governmental authority or customer of Seller or any other Person as may be necessary to calculate, mitigate, reduce or eliminate any Tax that will or could be imposed (including, but not limited to, Taxes with respect to the transactions contemplated hereby, and calculation of the Transfer Taxes due for purposes of Section 8.02(b) hereof). ARTICLE 9 EMPLOYMENT MATTERS Section 9.01. Employees and Offers of Employment. Buyer has extended offers of "at will" employment to all but eleven of Seller's employees. Buyer agrees that it will not terminate the employment of any persons who accept employment with Buyer for a period of seventy (70) days following the Closing Date; provided, however, that Buyer may terminate any such person for cause based on demonstrable performance problems. Section 9.02. Excluded Liabilities Related to Employment. The following obligations or liabilities of Seller and/or its Affiliates shall be treated as Excluded Liabilities: (a) All liabilities and obligations of Seller arising under any group life, accident, medical, dental or disability plan or similar arrangement (whether or not insured) to the extent that such liability or obligation relates to contributions or premiums accrued (whether or not payable prior to the opening of business on the first Business Day following the Closing Date), or to claims incurred (whether or not reported prior to the opening of business on the first Business Day following the Closing Date), prior to the opening of business on the first Business Day following the Closing Date. A claim shall be deemed to be incurred when the services giving rise to such claim are rendered. (b) With respect to any of Seller's employees hired by Buyer (including any beneficiary or dependent thereof) who enters a hospital under any Employee Plan or Benefit Arrangement prior to the opening of business on the first Business Day following the Closing Date and continues in a hospital after the opening of business on the first Business Day following the Closing Date, Seller and/or LFC shall be responsible for claims and expenses incurred both before and after the opening of business on the first Business Day following the Closing Date in connection with such Person, until such time as such person has returned to work and worked for Buyer for at least one complete day (or, if a beneficiary or dependent of an employee, until such time as the beneficiary or dependent is discharged from the hospital). (c) Buyer is not, and shall not be deemed to be, a successor employer to Seller or any Affiliate thereof with respect to any Benefit Agreement, the Pension Plan, Individual Account Plan or any other Employee Plan; and no plan adopted or maintained by Buyer after the Closing is or shall be deemed to be a "successor plan," as such term is defined in Section 4021(a) of ERISA, of the Pension Plan, the Individual Account Plan or any Employee Plan. No assets held under the Pension Plan, the Individual Account Plan or any other Employee Plan shall be transferred from any such plan to Buyer or to any plan adopted or maintained by Buyer. Except as specifically set forth in Section 9.01 hereof, Buyer shall not be obligated to assume or continue any term or condition of employment currently or previously promised or maintained by Seller with regard to its current, former or retired employees or contractors, and shall not be responsible for any debt, payment, obligation, claim, liability or agreement which relates to or arises from Seller's employment (or termination of employment) of, or contract (or termination of contract) with its current, former or retired employees, regardless of whether such employees are offered employment by Buyer. No service for Seller or an ERISA Affiliate under any Benefit Arrangement, the Pension Plan, Individual Account Plan or any other Employee Plan shall be treated as service for the Buyer under any employee benefit plan maintained or contributed to by Buyer. (d) No present, former or future employee or contractor of Buyer or Seller shall be treated as a third party beneficiary in or under this Agreement. Section 9.03. WARN Notices, Requirements. Seller and Buyer covenant that they shall comply with all requirements of the Worker Adjustment and Restraining Notification Act ("WARN"), if any, applicable with respect to the sale of the Purchased Assets or termination of any of Seller's employees following the Closing Date. Section 9.04. Covenants Relating to Seller's Employees. On or before the Closing Date, Seller and/or LFC shall pay any and all employees hired by Buyer effective as of the day after the Closing Date each such employee's accumulated, unused sick days and vacation days to the extent such employees are entitled thereto in accordance with Seller's and/or LFC's employment practices and policies. ARTICLE 10 CONDITIONS TO CLOSING Section 10.01. Conditions to the Obligations of Each Party. The obligations of Buyer and Seller to consummate the Closing are subject to the satisfaction of the following conditions: (i) Buyer and Seller shall have executed and delivered each of the Ancillary Agreements, including the Assignment and Assumption Agreement. (ii) Seller shall have received all material approvals from governmental agencies referred to in Section 3.03 and all consents and authorizations described on Schedule 2.05 hereto, in each case in form and substance reasonably satisfactory to Buyer, and no such consents, authorization or approval shall have been revoked. (iii) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Closing. Section 10.02. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction of the following further conditions: (i) Seller shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Closing Date. (ii) Buyer shall have received an opinion of Davis Polk & Wardwell, counsel to Seller, dated the Closing Date, substantially in the form attached as Exhibit K. (iii) Delivery of certification from a Senior Officer of LFC certifying that LFC has received an opinion from Salomon Brothers that the consideration for the purchase of the Purchased Assets is fair from a financial point of view, and that such opinion is satisfactory in all respects to LFC. Buyer acknowledges and agrees that it is not a third party beneficiary of the Salomon Brothers opinion, and disclaims any right as against Salomon Brothers with respect to such opinion or the services performed by it in rendering such opinion. (iv) Delivery of a legal opinion from Hughes and Luce, Dallas, Texas, substantially in form attached as Exhibit L. (v) Delivery of certificates of a Senior Officer of LFC and Lomas Mortgage that the consummation of the transactions contemplated by this Agreement will not violate any condition or covenant of the LFC Trust Indenture or Lomas Mortgage Trust Indenture, or trigger or accelerate the right of the noteholders under such indentures to require the complete or partial redemption of the notes, and that the obligations undertaken by LFC or Lomas Mortgage under this Agreement will not breach any covenant or condition of the LFC or Lomas Mortgage Trust Indentures, in the form of Exhibit M hereto. (vi) Delivery of a certificate of a Senior Officer of LFC and Seller affirming and reiterating the representation and warranty of Section 3.19 hereof, in the form of Exhibit N hereto. (vii) Delivery of a description by a Senior Officer of LFC of the history of the process and manner in which the sale of Seller's assets was arranged, considered by others and achieved, through September 19, 1994, the date of execution of a Letter of Intent between Seller and Buyer for the purchase of substantially all of Seller's assets. (viii) Buyer shall have received all documents it may reasonable request relating to the existence of Seller and the authority of Seller to enter into this Agreement, all in form and substance reasonably satisfactory to Buyer. (ix) Since September 30, 1994, there shall not have occurred any change in the Business or the financial condition of Seller that, individually or collectively, has a Material Adverse Effect. (x) Lomas Mortgage shall have assigned all of its right, title and interest in and to (A) MSS, and (B) certain assets to Seller, as evidenced by appropriate written instruments in form and substance reasonably satisfactory to Buyer, in the form of Exhibit O hereto. (xi) Buyer shall have received an opinion of Louis Gregory, Esq., counsel for Seller, LFC and Lomas Mortgage, dated the Closing Date, substantially in the form of Exhibit P hereto. Section 10.03. Conditions to Obligation of Seller. The obligation of Seller to consummate the Closing is subject to the satisfaction of the following further conditions: (i) Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement and in any certificate or other writing delivered by Buyer pursuant hereto shall be true in all material respects at and as of the Closing Date, as if made at and as of such date and (iii) Seller shall have received a certificate signed by a Senior Officer of Buyer to the foregoing effect. (ii) Seller shall have received all documents it may reasonably request relating to the existence of Buyer and RSCA and the authority of Buyer and RSCA to enter into this Agreement, all in form and substance reasonably satisfactory to Seller. (iii) Seller shall have received an opinion of Brownstein, Zeidman & Lore, A Professional Corporation, counsel to Buyer, dated the Closing Date, substantially in the form attached as Exhibit Q. (iv) Seller shall have received an opinion of Porter & Hedges, L.L.P., counsel to Buyer, dated the Closing Date, substantially in the form attached as Exhibit R. (v) Seller shall have received an opinion of Jeffrey P. Marston, Esq., counsel to RSCA, dated the Closing Date, substantially in the form of Exhibit S hereto. ARTICLE 11 SURVIVAL; INDEMNIFICATION Section 11.01. Survival. The covenants, agreements, representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing only as set forth below: (i) all covenants, agreements, representations and warranties contained in this Agreement or in any certificate or schedule delivered pursuant hereto or in connection herewith relating to Excluded Liabilities (including but not limited to Taxes and Transfer Taxes) and Assumed Liabilities shall survive for the entire period of the applicable statute of limitations with respect to such liabilities; (ii) the obligations of Seller and LFC pursuant to Section 11.02(f) hereof (relating to liabilities for violation of certain federal and state securities' laws) shall survive for the applicable statute of limitations with regard to any violations of law giving rise to indemnity claims thereunder; (iii) the representations and warranties made by Seller and LFC pursuant to Section 3.19 hereof shall survive until and including December 31, 1996; (iv) all representations and warranties contained in Section 3.11 hereof shall survive for a period of three (3) years from the Closing Date; (v) all covenants, agreements, representations and warranties contained in Sections 5.01(a) and (b), 6.01, 6.02 and 7.04 hereof shall survive until and including December 31, 2001; (vi) all covenants, agreements, representations and warranties contained in Sections 5.01(c) hereof shall survive until and including December 31, 1997; and (vii) all other covenants, agreements, representations and warranties contained in this Agreement or in any certificate or other writing delivered pursuant hereto not described in clauses (i) through (vi) above shall survive until and including December 31, 1995. Notwithstanding the provisions of this Section 11.01 or Section 11.07, all covenants, agreements, representations and warranties in respect of which indemnification may be sought under this Agreement shall survive the time they would otherwise terminate pursuant to clauses (i) through (vii) above if notice of the inaccuracy or breach thereof giving rise to a right of indemnification under this Article 11 shall have been given to the party against whom such indemnification may be subject prior to such time. Section 11.02. Indemnification. (a) LFC and Seller jointly and severally agree to indemnify Buyer, its general partner(s) and the directors, Senior Officers and shareholders of the general partner(s) (the "Buyer Indemnified Parties"), without duplication, against and agree to hold them harmless, on an After-Tax Basis, from any Loss incurred or suffered by any Buyer Indemnified Party related to, in connection with or as a result of (a) misrepresentation or breach of warranty, covenant or agreement made or to be performed by Seller pursuant to this Agreement or (b) any Excluded Liability. or (c) enforcing or collecting amounts owed by Seller pursuant to this Agreement. (b) LFC agrees to indemnify the Buyer Indemnified Parties, without duplication, against and agree to hold them harmless, on an After-Tax Basis, from any and all Loss incurred or suffered by any Buyer Indemnified Party related to, in connection with or as a result of (a) misrepresentation or breach of warranty, covenant or agreement made or to be performed by LFC pursuant to this Agreement, or (b) enforcing or collecting amounts owed by LFC pursuant to this Agreement. (c) Lomas Mortgage agrees to indemnify the Buyer Indemnified Parties, without duplication, against and agree to hold them harmless, on an After-Tax Basis, from any and all Loss incurred or suffered by any Buyer Indemnified Party related to, in connection with or as a result of (a) misrepresentation or breach of warranty made by Lomas Mortgage pursuant to this Agreement, (b) any Taxes for which. under applicable law, Lomas Mortgage is jointly and severally liable with Seller, or (c) enforcing or collecting amounts owed by Lomas Mortgage pursuant to this Agreement. (d) RSCA and Buyer hereby indemnify Seller, its directors, Senior Officers and Affiliates (the "Seller Indemnified Parties") against and agrees to hold the Seller Indemnified Parties harmless, on an After-Tax Basis, from any and all Loss incurred or suffered by any Seller Indemnified Party related to, in connection with or as a result of (a) misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement, (b) any Assumed Liability (including but not limited to any obligation of any Affiliate of Seller (whether such obligation is created by contract or otherwise and whether or not such obligation is joint and several with Seller) to the extent such obligation relates to an Assumed Liability (including any guaranty of any Assumed Liability) (all such Affiliate obligations, "Related Obligations")); provided, however, that Buyer's and RSCA's agreement to indemnify Affiliates of Seller with respect to any Related Obligations shall not in any way cause the amount of their aggregate liability hereunder to exceed the amount of Buyer's liability under the express terms of the Assumed Contract giving rise to the Assumed Liability, or (c) enforcing or collecting amounts owed by Buyer pursuant to this Agreement. (e) RSCA hereby indemnifies the Seller Indemnified Parties against and agrees to hold them harmless, on an After-Tax Basis, from any and all Loss incurred or suffered by any Seller Indemnified Party related to, in connection with or as a result of (a) misrepresentation or breach of warranty made by RSCA, or nonperformance or other breach of Sections 6.01 or 6.02 hereof, or (b) enforcing or collecting amounts owed by RSCA pursuant to this Agreement. (f) Seller and LFC hereby agree to indemnify and hold Buyer harmless from any and all Loss incurred or suffered by Buyer with respect to any violation by Seller, LFC or any of LFC's Affiliates of any federal or state securities law or any other law in connection with the sale or other transfer of the Buyer Note or Adjustable Earn-Out Certificate. (g) The fact that more than one of Seller, LFC and Lomas Mortgage or more than one of Buyer and RSCA may be subject to an indemnification obligation under this Section shall not reduce the amount of the indemnification obligation of any indemnifying party under this Agreement, and each such indemnifying party shall be fully liable to the Buyer or Seller Indemnified Parties, as the case may be, for the entire amount of Loss, on an After-Tax Basis related to its obligation under Sections 11.02 (a), (b), (c), (d) (e) or (f), as the case may be; provided, however, that the Indemnified Parties may not collect more than the amount of Loss, on an After-Tax Basis, due hereunder from all indemnifying parties obligated under this Article 11 to the Indemnified Parties. In any case in which such joint and several or other form of multiple party liability exists under this Section 11.02, the party seeking indemnification hereunder is not and shall not be required to pursue or exhaust any and all rights or remedies it may have against any one or more of such parties before proceeding against any other of such parties. (h) The parties agree to treat any amount paid pursuant to this Article 11 as an adjustment to purchase price of the Purchased Assets for Tax purposes unless there is a final determination by the relevant Taxing Authority, which the Indemnified Party has contested in good faith, that such amount is required to be included in income. (i) No investigation by Buyer or any of its Affiliates at or prior to the Closing Date shall relieve Seller, LFC or Lomas Mortgage of, or otherwise reduce or mitigate, any of their liability hereunder. Section 11.03. Notice and Settlement of Claims. (a) Notice. Each signatory party to this Agreement ("Party") shall promptly notify all other Parties in writing of the existence of any material fact known to it giving rise to any obligations of the other Parties under this Article 11 and, in the case of any claim, action or proceeding (including any Tax audit) brought or initiated by a third party which may give rise to any such obligations, each Party shall promptly notify the other Parties of the making of such claim or the commencement of such action or proceeding by a third party as and when same becomes known to it, and the Party seeking indemnification shall provide reasonable supporting documentation for such claim, action or proceeding. (b) Assumption of Defense or Prosecution. Following the receipt of written notice in accordance with Section 11.03(a), the indemnifying party (the "Indemnifying Party") shall seek to cure the problem giving rise to the claim, demand, action or proceeding, if possible, within thirty (30) Business Days. The Indemnifying Party may, at its own cost and expense, elect within such thirty (30) Business Day period by written notice to the indemnified party or parties (the "Indemnified Party") to assume and control defense of any claim, demand, action or proceeding including, without limitation, the right to designate counsel and to control all negotiations, litigation, settlements, compromises and appeals of any such claim or potential claim; provided that the counsel is satisfactory to the Indemnified Party in the exercise of its reasonable discretion, and provided, further, that the Indemnifying Party first admits, in writing to the Indemnified Party, that the Indemnifying Party is obligated under this Article 11 to and shall indemnify the Indemnified Party for the Loss incurred by the Indemnified Party with respect to any such claim or potential claim, action or proceeding as to which the Indemnifying Party assumes such control. If the Indemnifying Party assumes such defense, (i) so long as the Indemnifying Party retains such control the Indemnified Party may not settle such claim without the Indemnified Party's prior written consent, (ii) the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof at its own cost and expense, and to employ counsel, at its own cost and expense, separate from the counsel employed by the Indemnifying Party (which cost and expense shall not be a Loss to which it is entitled to indemnification hereunder), and (iii) the Indemnifying Party shall thereafter consult with Indemnified Party upon the Indemnified Party's reasonable request for such consultation from time to time with respect to such suit, action or proceeding. The Indemnifying Party shall be entitled to settle, compromise, decline to appeal, or otherwise dispose of any claim without the prior written consent of the other Party if (i) any monetary damages payable as a result thereof are paid directly by the Indemnifying Party to the claimant(s) and (ii) the settlement, compromise, declination to appeal or other disposition does not result in injunctive or other relief (excepting the payment of monetary damages by the Indemnifying Party) against the Indemnified Party that could materially interfere with the business, operations, assets, condition or prospects of such Indemnified Party. Following the discharge of the Indemnifying Party's obligations under this Article 11, the Indemnified Party shall assign to the Indemnifying Party any and all related claims against third parties. Within fifteen (15) days after receipt, the Indemnified Party shall refund to the Indemnifying Party the amounts of all recoveries received by the Indemnified Party for any claim with respect to which it is reimbursed for Loss. (c) Right to Control Upon Waiver. Notwithstanding the foregoing, if the Indemnifying Party elects to participate in the defense of any claim, action or proceeding against the Indemnified Party, the Indemnified Party shall have sole, absolute and exclusive right, at any time, to contest, assume the defense of, compromise, settle, litigate, appeal or otherwise deal with any such suit, action or proceeding (including a Tax audit) in respect of which indemnity may be sought hereunder in its sole and absolute discretion without any right of cooperation or participation of any Indemnifying Party in the defense of such claim, action or proceeding if all appropriate Indemnified Parties elect, in written notice delivered to the Indemnifying Party, to waive any and all rights to indemnification under this Agreement for all Loss related to such suit, action or proceeding (including a Tax audit) and the subject matter thereof; provided, however, that the foregoing shall not in any manner limit the right of the Indemnifying Party to defend or otherwise deal with any claim, action or proceeding against it. Unless the appropriate Indemnified Parties have made the election to waive indemnification in accordance with the foregoing sentence, Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense thereof but shall not be so liable for such costs and expenses incurred after the assumption thereof. (d) Effect of Failure to Assume Defense. If the Indemnifying Party fails to elect to assume the defense of any claim, action, suit or proceeding (including any Tax audit) for which an Indemnified Party is entitled to indemnification under this Article 11 within the thirty (30) Business Day period as provided in Section 11.03(b), the Indemnified Party may pay, compromise or contest the claim, action or proceeding at issue, as in its sole and unfettered discretion it sees fit, and the Loss incurred by the Indemnified Party with respect to such controversy shall, to the extent such Loss otherwise qualifies for indemnification under this Article 11, constitute a Loss for which the Indemnified Party is entitled to be indemnified under this Article 11. (e) Effect of Failure to Notify. The Indemnifying Party shall not be liable under this Article 11 with respect to any Loss of an Indemnified Party resulting from a third party claim or demand, or action or proceeding of which Indemnifying Party had no actual knowledge and the defense of which Indemnifying Party was not offered the opportunity to assume as provided under this Section 11.03, but only to the extent the Indemnifying Party's liability under this Article 11 is adversely affected as a result of a failure by the Indemnified Party to notify Indemnifying Party in sufficient time for the Indemnified Party to effectively defend against such Loss (or items thereof). (f) Agent for Indemnification Claims. Any claim of any of Buyer's Affiliates entitled to indemnification under this Section 11.03 may be made and enforced by Buyer on behalf of such Affiliates. Section 11.04. Certain Indemnities With Respect to the Arrangements. (a) Notwithstanding anything to the contrary in this Agreement, Buyer shall not be required or obligated at any time to participate in, bring, continue or prosecute any action or lawsuit or collection activities brought or initiated by Seller in connection with the Arrangements or which Seller would have been entitled to bring in connection with the Arrangements. (b) Buyer shall have no liability to any Person and Seller shall indemnify and hold Buyer harmless from and against any and all liabilities, costs, expenses, claims with respect to any act or omissions to act of Seller or any Affiliate thereof with respect to any action or lawsuit brought in connection with the Arrangements. Neither Seller nor any Affiliate thereof shall have any liability to Buyer or any other Person (and Buyer shall indemnify and hold Seller and its Affiliates harmless for any acts or omissions to act (excluding omissions to act permitted by Section 11.04(a) above) of Buyer or any of its Affiliates with respect to any action or lawsuit brought in connection with the Arrangements), or shall be required to assist in the collection of any amounts that Buyer may assert it is owed under the Arrangements. Notwithstanding the foregoing, Seller shall cease prosecution of any action or lawsuit brought by it in connection with the Arrangements on the Closing Date and cooperate with Buyer to either terminate or hand over the prosecution thereof to Buyer, as Buyer shall elect in its sole discretion. Section 11.05. Payment; Interest on Late Payments. (a) Any indemnification payment required to be made to an Indemnified Party pursuant to this Article 11 shall be made not later than thirty (30) days after receipt by the Indemnifying Party of written notice from the Indemnified Party stating that any Loss has been incurred or paid (subject, however, to the contest rights and other provisions of Section 11.08 hereof) by the Indemnified Party and the amount thereof, together with written evidence of payment thereof, and of the indemnity payment requested by the Indemnified Party, as calculated on an After-Tax Basis (such notice referred to herein as a "Demand for Indemnification Payment"). The Indemnified Party shall promptly provide any other information or documentation as may reasonably be requested by the Indemnifying Party or related to such Loss. As to any claim for indemnity for which the Demand for Indemnification Payment is given as hereinbefore provided, the corresponding obligation of indemnity shall continue to survive until whichever of the following events first occurs: (1) the Indemnifying Party shall have discharged its obligation of indemnity to the Indemnified Party with respect to such claim as required hereunder; (2) arbitrators have finally determined that the Indemnifying Party is not liable to the Indemnified Party with respect to such claim in accordance with Section 11.08 hereof; (3) if the Indemnified Party is a Buyer Indemnified Party, Buyer has offset the unpaid indemnity amount against Buyer's obligations under the Adjustable Earn-Out Certificate in accordance with the terms thereof, or (4) the Indemnified Party shall have released in writing (or be held to have released) the Indemnified Party from any liability with respect to such claim. (b) Any payment required to be made by an Indemnifying Party under this Article 11 that is not made when due shall bear interest from the date that the Indemnified Party has paid such Loss at the Default Rate until paid; provided, however, that any amount owed by a Seller Indemnifying Party under this Article 11 which may not be collected when due because such amount exceeds the Out-Of-Pocket Collection Limit (as defined in Section 11.07 hereof) shall accrue interest at the Interest Rate until such amounts are offset by Buyer against the amounts otherwise payable by Buyer under the Adjustable Earn-Out Certificate as permitted by Section 11.07(c) hereof. Section 11.06. No Waiver or Discharge; Subordination. Each Indemnifying Party shall be fully liable to any Indemnified Party hereunder whether or not the Indemnified Party has or shall obtain any other or further guaranties, or indemnities, and irrespective of whether other or further guarantees or indemnities are effective or enforceable or are related in whole or in part, voluntarily or involuntarily, or by operation of law or otherwise. The Indemnified Party shall have no obligation to pursue or attempt to pursue any rights or remedies under any other or further guaranties or indemnification obligations and may enforce all rights and obligations hereunder, irrespective of the existence or nonexistence of other or further guaranties or indemnification obligations. Section 11.07. Overall Limitations on Indemnification Obligations. (a) Notwithstanding any other provision of this Agreement to the contrary, neither Buyer Indemnified Parties, on the one hand, nor Seller Indemnified Parties on the other, shall be entitled to indemnification under this Article 11, in the aggregate for any or all members of each such respective groups, with respect to claims or demands for indemnification described in Section 11.01 other than Sections 11.01(i) and (ii) thereof (the "Capped Indemnity Obligations") in excess of the following amounts: (i) $10,000,000 (in excess of the "Indemnity Floor," as defined below) for any and all claims or demands for indemnification with respect to Capped Indemnity Obligations made on or prior to the first anniversary of the Closing Date; (ii) the excess of $5,000,000 (in excess of the Indemnity Floor) over any amounts paid or determined to be due with respect to claims made under Section 11.07(a)(i) for any and all claims or demands for indemnification with respect to Capped Indemnity Obligations made after the first anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date; provided, however, that in the event of a claim or demand for indemnification relating to the inaccuracy of Section 3.19 hereof made after the first anniversary of the Closing Date and on or before the second anniversary of the Closing Date, then the limit with respect to such claim relating to the inaccuracy of Section 3.19 under this clause (ii) shall be increased by $3,000,000; and (iii) zero for any and all claims or demands for indemnification with respect to Capped Indemnity made after the third anniversary of the Closing Date; provided, however, that (A) no Seller Indemnifying Party shall be obligated to pay any claims or demands for indemnification claims with respect to Capped Indemnity Obligations under this Article 11 unless and until the Buyer Indemnified Parties have suffered or incurred, in the aggregate, at least Seven Hundred Fifty Thousand Dollars ($750,000) of Loss with respect to Capped Indemnity Obligations and then only to the extent of amounts in excess thereof (the "Indemnity Floor"), and (B) the maximum amount that all Buyer Indemnified Parties may collect, in the aggregate, pursuant to this Article 11 with respect to Capped Indemnity Obligations from all Seller Indemnifying Parties shall not exceed the sum of Two Million Five Hundred Thousand Dollars ($2,500,000) plus the amount of cash actually paid under the Adjustable Earn- Out Certificate to Seller (such sum, the "Out-of-Pocket Collection Limit"), its successors or assigns and the holders of the Adjustable Earn-Out Certificate, and the remaining portion of any amounts owed by any Seller Indemnifying Party in accordance with this Article 11 with respect to Capped Indemnity Obligations shall be recouped by the Buyer Indemnified Parties, if at all, solely as an offset or reduction to the amount, if any, otherwise payable pursuant to the terms of the Adjustable Earn-Out Certificate. To the extent that any indemnity payments due from a Seller Indemnifying Party in accordance with this Article 11 do not exceed the remaining Out-of-Pocket Collection Limit then outstanding, the Buyer Indemnified Party shall first provide the Seller Indemnifying Party or Parties with the opportunity to make such indemnity payment prior to offsetting such amount against the Adjustable Earn-Out Certificate; provided, however, that if the relevant Seller Indemnifying Party or Parties have not paid such amount within thirty (30) days of the date such payment is due, the Buyer Indemnified Party shall no longer be required to first seek payment from the relevant Seller Indemnifying Party or Parties but may seek collection thereof or offset the amount due under the Adjustable Earn-Out Certificate when and as it in its sole and absolute discretion determines. (b) There is and shall be no limitation upon the amount of any Indemnifying Parties' obligations under this Article 11 with respect to claims or demands for indemnification described in Sections 11.01(i) and (ii) hereof (the "Unlimited Indemnity Obligations"). (c) Except as provided in Section 11.07(a) hereof, Buyer may, in its sole and absolute discretion, offset any indemnity payments due to any Buyer Indemnified Party in accordance with this Article 11 (provided that amounts being disputed in any arbitration proceeding pursuant to Section 11.08 hereof shall not be considered due under this Article 11 during the pendency of such arbitration proceeding) and unpaid against amounts payable by Buyer under the Adjustable Earn-Out Certificate in accordance with the terms thereof in lieu of collecting or enforcing collection any such amounts from the appropriate Indemnifying Party. The Adjustable Earn-Out Certificate is delivered to Seller by Buyer as part of the consideration for Buyer's acquisition of the Purchased Assets, and the parties hereto intend that the mechanism established in this Agreement and in the Adjustable Earn-Out Certificate for reduction of amounts otherwise payable under such certificate by indemnity amounts owed in accordance with this Article 11 is intended to correctly measure and reflect the proper purchase price ultimately to be paid by Buyer to Seller. Accordingly, Buyer shall retain such right of offset without regard to (i) the lapse of any period of time between the date the indemnity payment is otherwise due under this Article 11 and the date Buyer elects to offset such amount against the Adjustable Earn-Out Certificate (provided that such amount has still not been paid), (ii) any action or inaction of any Buyer Indemnified Party to collect such amount, and (iii) the continuing existence of any or all of Seller Indemnified Parties, their ability to pay, or any cancellation or discharge of their obligations under this Article 11 in whole or in part in bankruptcy or by other operation of law. Section 11.08. Disputes. (a) Notice of Dispute. In the event that Indemnifying Party disagrees with any Demand for Indemnification Payment under this Article 11 presented in accordance with Section 11.05 hereof, whether the Indemnifying Party contests the validity, timing or amount thereof or otherwise, the Indemnifying Party may, within thirty (30) Business Days after receiving the Indemnified Party's demand, deliver a notice of disagreement to the Indemnified Party setting forth in reasonable detail a written explanation of the basis for Indemnifying Party's dispute (the "Notice of Disagreement"). Failure by Indemnifying Party to deliver the Notice of Disagreement to the Indemnified Party within such thirty (30) Business Day period shall be conclusively deemed to constitute complete and final acceptance by the Indemnifying Party of the validity and correctness of the calculation of the Loss and the amount to which the Indemnified Party is entitled, and that indemnification under this Article 11 is properly due, and the Indemnifying Party may not otherwise contest or dispute the validity, timing, determination or assessment of such Loss or the calculation of the amount due by the Indemnifying Party under this Article 11. (b) Efforts to Resolve. The Indemnified Party and Indemnifying Party will use reasonable good faith efforts to resolve any such disagreement. If, within thirty (30) Business Days after the date of receipt by the Indemnified Party of the Indemnifying Party's Notice of Disagreement, the Indemnified Party and Indemnifying Party are unable to resolve such disagreement, they shall promptly proceed to arbitration in accordance with Section 11.08(c) hereof. To the extent that the Indemnified Party and Indemnifying Party resolve any dispute initiated by Indemnifying Party pursuant to this Section 11.08(b) and in accordance therewith the Indemnified Party and Indemnifying Party determine that an amount is owing pursuant to this Article 11, the Indemnifying, Party shall pay to Indemnified Party such undisputed amount by wire transfer of funds within three (3) Business Days following resolution of the dispute as to such items (regardless of whether other disputed items are to be submitted to arbitration in accordance with Section 11.08). (c) Arbitration. (i) Any and all disputes arising out of or in connection with the validity of any claim for indemnification pursuant to or nonperformance of this Article 11 or the calculation of amounts due hereunder unresolved pursuant to Section 11.08(b) hereof shall be solely and finally settled by a panel of three arbitrators in accordance with the Commercial Rules of the American Arbitration Association (the "Rules"); provided, however, that in the event of conflict between the Rules and the terms of this Article 11, the terms of this Article 11 shall govern. The place of arbitration shall be Dallas, Texas, and the law applicable to the arbitration procedure shall be the Federal Arbitration Act (9 U.S.C. Sections 2 et seq.). The substantive law which shall be applied by the arbitrators shall be the law of the State of Texas, without regard to the principles of conflicts of law thereof. To commence arbitration of any such dispute, the party desiring arbitration shall notify the other party in writing in accordance with the Rules. Due consideration shall be given by the parties to the nature of the dispute in determining the composition of the arbitration board. In the event that the parties fail to agree on the selection of the arbitrators within fifteen (15) Business Days after the delivery of such notice, the arbitrators shall be selected by the American Arbitration Association upon the request of either party. (ii) On the fortieth (40) Business Day following the appointment of the arbitrators, each party shall submit to the arbitrators its claims specifying the relief to which such party in good faith believes it is entitled. Within thirty (30) Business Days after the submission of such claims, or as soon thereafter as may be reasonably possible, the arbitrators shall make their written decision. The arbitrators shall be required to provide the reasons for their decision in writing. (iii) The arbitrators' award shall be no lower than the lower of the Seller and the Buyer claims and no higher than the higher of the Seller and the Buyer claims. The parties agree that the decision of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, or issues presented to the arbitrators. The parties hereto agree that the decision of the arbitrators shall be final, enforceable and not subject to appeal and that judgment on the arbitration decision may be entered and enforced in any court having jurisdiction over the parties or their assets. (iv) Each party shall, except as otherwise provided herein, be responsible for its own expenses, including legal fees, incurred in the course of any arbitration proceedings. The fees of the arbitrators shall be divided equally between the parties. However, the parties agree that any costs, fees, or taxes incident to enforcing or collecting on any decision of the arbitrators shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. ARTICLE 12 TERMINATION Section 12.01. Grounds for Termination. This Agreement may be terminated at any time prior to the Closing: (i) by mutual written agreement of Seller and Buyer; or (ii) by either Seller or Buyer if there shall be any law or regulation that makes the consummation of the transactions contemplated hereby illegal or otherwise prohibited or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any court or governmental body having competent jurisdiction. The Party desiring to terminate this Agreement pursuant to clause (ii) shall give notice of such termination to the other Parties. Section 12.02. Effect of Termination. If this Agreement is terminated as permitted by Section 12.01, such termination shall be without liability of any Party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other Parties to this Agreement; provided that if such termination shall result from the willful failure of a Party to fulfill a condition to the performance of the obligations of the other Parties, the willful failure of a Party to perform a covenant of this Agreement or a willful misrepresentation as of the date hereof with respect to any representation or warranty contained herein (any such events a "Wrongful Termination"), such Party shall be fully liable for the Loss (calculated for this purpose by excluding the costs for which the party suffering such Wrongful Termination is responsible in accordance with Section 13.04 hereof) incurred or suffered by the other parties as a result of such Wrongful Termination. RSCA shall be jointly and severally liable with Buyer to Seller and its Affiliates for any Wrongful Termination by Buyer or RSCA, and LFC shall be jointly and severally liable with Seller to Buyer for any Wrongful Termination by Seller or LFC. The provisions of this Section 12.02 and Sections 6.01 and 13.04 shall survive any termination hereof pursuant to Section 12.01. ARTICLE 13 MISCELLANEOUS Section 13.01. No Warranties to Continue Business; Absence of Other Duties. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR ANY OTHER EXHIBIT TO THE CONTRARY (OTHER THAN SECTION 6.02 HEREOF), AND NOTWITHSTANDING ANY IMPLICATIONS THEREFROM OR FROM THE TERM OF THE BUYER NOTE OR THE ADJUSTABLE EARN-OUT CERTIFICATE. (I) BUYER SHALL HAVE NO AFFIRMATIVE DUTY TO ACTIVELY MARKET MLS, MSS, LPS, SMS OR CMS OR TO OTHERWISE ATTEMPT TO MAXIMIZE OR INCREASE REVENUES OF THE BUSINESS; (II) ANY MARKETING ACTIVITIES UNDERTAKEN OR OMITTED BY IT SHALL BE IN ITS SOLE AND ABSOLUTE DISCRETION, WHETHER REASONABLE OR UNREASONABLE; (III) NEITHER RESIDENTIAL INFORMATION SERVICES, INC. (THE GENERAL PARTNER OF BUYER), RSCA NOR ANY OTHER AFFILIATE OF BUYER SHALL HAVE ANY DUTY TO INVEST IN OR TO FUND OPERATING LOSSES OF BUYER FOR ANY PERIOD OF TIME, BUT ANY SUCH INVESTMENT OR FUNDING, AND THE MEANS THEREOF, SHALL BE AT SUCH TIMES, IN SUCH MANNER AND IN SUCH AMOUNTS, IF ANY, AS RESIDENTIAL INFORMATION SERVICES, INC., RSCA OR OTHER AFFILIATE OF BUYER DEEMS SUFFICIENT OR DESIRABLE IN ITS SOLE AND ABSOLUTE DISCRETION, WHETHER REASONABLE OR UNREASONABLE; AND (IV) THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND OTHER EXHIBITS HERETO, AND THE OBLIGATIONS OF BUYER THEREUNDER SHALL IN NO WAY IMPOSE ANY OBLIGATION OR IMPLIED WARRANTIES BY BUYER, RESIDENTIAL INFORMATION SERVICES, INC., RSCA OR ANY OTHER AFFILIATE OF BUYER TO CONTINUE THE BUSINESS OF SELLER FOR ANY SPECIFIED OR REASONABLE PERIOD OF TIME, OR OTHERWISE RESTRICT, IMPEDE, IMPACT OR OTHERWISE AFFECT BUYER'S, RESIDENTIAL INFORMATION SERVICES, INC.'S, RSCA'S OR ANY OTHER AFFILIATE OF BUYER'S UNFETTERED ABILITIES TO MAKE AND IMPLEMENT THEIR RESPECTIVE BUSINESS PLANS AND MARKETING STRATEGIES. Section 13.02. Notices. All notices, requests and other communications to either party hereunder shall be in writing (including facsimile transmission) and shall be given, If to Buyer, to: Residential Information Services Limited Partnership c/o The Prudential Home Mortgage Company, Inc. 8000 Maryland Avenue, Suite 1400 Clayton, Missouri 63105 Attention: W. Blake Wilson Telecopy: (314) 726-4423 With a copy to each of: The Prudential Home Mortgage Company, Inc. 7485 New Horizon Way Frederick, MD 21701 Attn: Legal Dept. Telecopy: (301) 696-7555 and: Brownstein Zeidman and Lore A Professional Corporation 1401 New York Avenue, N.W. Suite 900 Washington, D.C. 20004 Attn: Laurence E. Platt, Esq. Telecopy: (202) 879-5773 If to Seller, to: Lomas Information Systems, Inc. c/o Lomas Financial Corporation 1600 Viceroy Drive Dallas, Texas 75235 Attention: General Counsel Telecopy: (214) 879-5528 With a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Christopher Mayer, Esq. Telecopy: (212) 450-4800 If to LFC: Lomas Financial Corporation 1600 Viceroy Drive Dallas, Texas 75235 Attention: General Counsel Telecopy: (214) 879-5528 With a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Christopher Mayer, Esq. Telecopy: (212) 450-4800 If to Lomas Mortgage: Lomas Mortgage USA, Inc. c/o Lomas Financial Corporation 1600 Viceroy Drive Dallas, Texas 75235 Attention: General Counsel Telecopy: (214) 879-5528 With a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Christopher Mayer, Esq. Telecopy: (212) 450-4800 If to RSCA: Residential Services Corporation of America c/o The Prudential Home Mortgage Company, Inc. 7485 New Horizon Way Frederick, MD 21701 Attn: Legal Dept. Telecopy: (301) 696-7555 With a copy to: Brownstein Zeidman and Lore A Professional Corporation 1401 New York Avenue. N.W. Suite 900 Washington, D.C. 20004 Attn: Laurence E. Platt. Esq. Telecopy: (202) 879-5773 or to such other address(es) as may be notified to the other parties hereof. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. Section 13.03. Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Closing Date if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 13.04. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement, including legal, accounting and other professional fees and expenses, shall be paid by the party incurring such cost or expense. Section 13.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Buyer may transfer or assign. in whole or from time to time in part, to one or more of its Affiliates, the right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. Section 13.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas, without regard to the principles of conflicts of law of such state. Section 13.07. Counterparts, Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Section 13.08. Entire Agreement. Third Party Beneficiaries. This Agreement, the Assignment and Assumption Agreement and the Ancillary Agreements constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Except as otherwise expressly provided herein, neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 13.09. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. Section 13.10. Waiver. LFC, Lomas Mortgage and Seller agree that they will not assert and hereby waive any claims that they may have against Buyer or RSCA as a successor-in-interest to Seller except for the rights and obligations of the parties provided in this Agreement and the Ancillary Agreements. [Signatures on next page] IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be duly executed by their respective authorized officers as of the day and year first above written. RESIDENTIAL INFORMATION SERVICES LIMITED PARTNERSHIP, a Delaware limited partnership By: Residential Information Services, Inc., a Delaware corporation, its General Partner By: /S/W. BLAKE WILSON ----------------------------------- Name: W. Blake Wilson ------------------------------ Title: Vice President ----------------------------- LOMAS INFORMATION SYSTEMS, INC. By: /S/JAMES L. CROWSON ----------------------------------- Name: James L. Crowson ------------------------------ Title: Executive Vice President ---------------------------- [Signatures continued on next page] [Signatures continued from previous page for Asset Purchase Agreement] THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 3, 3.1, 3.2, 11 (AS APPLICABLE) AND 13 AND SECTIONS 5.01, 5.03, 7.03, 9.02, 9.04, AND 12.02 HEREOF: LOMAS FINANCIAL CORPORATION By: /S/JAMES L. CROWSON ----------------------------------- Name: James L. Crowson ------------------------------ Title: Executive Vice President ---------------------------- THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 3.1, 11 (AS APPLICABLE) AND 13 AND SECTION 5.01 HEREOF: LOMAS MORTGAGE USA, INC. By: /S/JAMES L. CROWSON ----------------------------------- Name: James L. Crowson ------------------------------ Title: Executive Vice President ---------------------------- [Signatures continued on next page] [Signatures continued from previous page for Asset Purchase Agreement] THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 4, 6, 11 (AS APPLICABLE) AND 13, AND SECTIONS 7.03, AND 12.02 HEREOF: RESIDENTIAL SERVICES CORPORATION OF AMERICA By: /S/W. BLAKE WILSON ----------------------------------- Name: W. Blake Wilson ------------------------------ Title: Vice President ---------------------------- The Exhibits and Schedules to the Asset Purchase Agreement dated as of December 16, 1994 by and between Lomas Information Systems, Inc., as Seller, Residential Information Services Limited Partnership, as Buyer, the registrant, Lomas Mortgage USA, Inc. and Residential Services Corporation of America (the "Asset Purchase Agreement") have not been filed herewith pursuant to Item 601(b)(2) of Regulation S-K. Pursuant to this Regulation, set forth below is a list briefly identifying the contents of all omitted Exhibits and Schedules to the Asset Purchase Agreement. In addition, pursuant to such Regulation, the registrant hereby agrees to furnish supplementally a copy of any such omitted Exhibits and Schedules to the Securities and Exchange Commission upon request. EXHIBITS Exhibit A - Form of Lease Agreement Exhibit B - Form of Management Data Processing Services Agreement Exhibit C - Form of Telecommunications Services Agreement Exhibit D - Form of Service Bureau Agreement Exhibit E - Form of Trademark Assignment Exhibit F - Form of Copyright Assignment Exhibit G - Form of Promissory Note Exhibit H - Form of Guaranty Exhibit I - Form of Adjustable Earn-Out Certificate Exhibit J - Form of Assignment and Assumption Agreement Exhibit K - Form of Legal Opinion of Davis Polk and Wardwell Exhibit L - Form of Legal Opinion of Hughes and Luce Exhibit M - Form of Senior Officer Certificate - Trust Indentures Exhibit N - Form of Senior Officer Certificate - Enforceability Exhibit O - Form of Assignment - MSS and Certain Assets Exhibit P - Form of Opinion of Louis Gregory, Esq. Exhibit Q - Form of Opinion of Brownstein Zeidman & Lore A Professional Corporation Exhibit R - Form of Opinion of Porter & Hedges, L.L.P. Exhibit S - Form of Opinion of Jeffrey P. Martson, Esq. SCHEDULES Schedule 1.01 A Third Party Rights Relating to EXCELIS Conduit Mortgage System Schedule 1.01 B Third Party Rights Relating to EXCELIS Loan Production System Schedule 1.01 C Third Party Rights Relating to EXCELIS Mortgage Loan Servicing System Schedule 1.01 D Third Party Rights Relating to EXCELIS Master Servicing System Schedule 1.01 E Third Party Rights Relating to EXCELIS Secondary Marketing System Schedule 1.01 F Certain Non-Proprietary IPR Necessary to Excelis Schedule 1.01 G Service Change Schedule Schedule 1.01 H List of Assumed Contracts Schedule 2.01 List of Included Assets Schedule 2.02 List of Excluded Assets Schedule 2.05 List of Group 1 and Group 2 Contracts Schedule 3.01 List of Jurisdictions in Which Qualified to do Business Schedule 3.03 List of Governmental Approvals Schedule 3.04 List of Required Direct Consents Schedule 3.06 List of Changes Schedule 3.07(a) List of Limitations in Title of Non-IPR Property Schedule 3.07(b) List of Non-IPR Leasehold Property Schedule 3.08 List of Litigation Schedule 3.09(a) List of Defaults on Contracts Schedule 3.09(b) List of Missing Material Contracts Schedule 3.11(d) List of Claims or Infringement of Any Intellectual Property Right Schedule 3.11(e) Indemnification Demands Schedule 3.11(f) Limitations of Title to Intellectual Property Rights Schedule 3.11(g) Exceptions to Exclusive Right to Commercial Exploitation Schedule 3.14 List of Government Permits Schedule 3.15 List of Certain Interests Schedule 3.18 List of Known Intended Expansion Schedule 3.1.03 List of Governmental Approvals Schedule 3.1.04 List of Required Indirect Consents Schedule 3.2.02 List of Certain Other Governmental Approvals Schedule 3.2.03 List of Certain Other Required Indirect Consents Schedule 4.07 List of Litigation Schedule 7.04 List of Seller Tradenames (not being assigned) Schedule 8.01 List of Taxing Jurisdictions EX-10.13 14 EXHIBIT 10.13 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of December 1, 1994 by and between Lomas Financial Corporation, a Delaware corporation, (the "Company") and Eric D. Booth ("Executive"). WHEREAS, the Company desires to employ Executive as its Chief Executive Officer ("CEO"); WHEREAS, the parties intend that Executive shall also be a Director of the Company; WHEREAS, the Company and Executive desire to enter into an agreement (the "Agreement") embodying the terms of such employment; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. Term of Employment. Executive's employment by the Company shall be for a term (the "Employment Term") which shall commence on December 12, 1994 (the "Commencement Date") and shall terminate on June 30, 1996 (the "Initial Term"); provided that, beginning July 1, 1996 the Employment Term may be extended for successive one year periods (commencing on July 1 and terminating on June 30) if not earlier than 120 days and not later than 60 days prior to any such July 1, the Company or Executive shall have given notice to the other party that he or it desires to extend the Employment Term. Notwithstanding the foregoing, the Employment Term shall terminate in any and all events upon the termination of Executive's employment hereunder. 2. Position. (a) During the Employment Term Executive shall serve as CEO of the Company. Executive shall report directly to the Board of Directors of the Company (the "Board") and shall have such duties and authority as shall be determined from time to time by the Board; provided that such duties shall be consistent with those of a chief executive officer. Effective the Commencement Date, Executive shall have been appointed to the Board and, annually during the Employment Term, shall be nominated for election to the Board. Executive shall serve on the Board without additional compensation. (b) During the Employment Term, Executive shall devote substantially all of his business time and best efforts to the performance of his duties hereunder and shall not engage in any other business, profession or occupation for compensation or otherwise. (c) Executive shall be permitted to reside in the location of his choice, but shall spend as much time in Dallas, Texas as he deems necessary to perform his duties hereunder. 3. Base Salary. During the Employment Term, the Company shall pay Executive an annual base salary (the "Base Salary") at an initial rate of $600,000, payable in arrears, in accordance with the usual payment practices of the Company. Executive's Base Salary shall be subject to annual increases equal to not less than the greater of the increase in the National Consumer Price Index for All Urban Consumers as of the close of the preceding twelve-month period and 5%; provided that for the fiscal year beginning July 1, 1995, such annual increase shall be equal to not less than the greater of one-half of the increase in such Consumer Price Index as of the close of the preceding twelve-month period and 2 1/2%. 4. Incentive Compensation. (a) During the Employment Term, Executive shall be eligible to receive, in addition to his Base Salary, an annual bonus (the "Bonus") equal to up to 50% of Base Salary for such fiscal year, payable by July 15 of the following fiscal year, based upon personal and corporate goals and objectives agreed upon by Executive and the Company prior to July 1 of such fiscal year. For the period from December 1, 1994 through June 30, 1995, Executive shall receive a guaranteed bonus equal to $150,000 plus any additional amounts the Board may deem appropriate based upon personal and corporate performance. (b) Executive shall be eligible to participate in the Company's 1993 Intermediate and Long-Term Incentive Plan (the "Plan"). Effective as of the Commencement Date, Executive shall have been granted 200,000 phantom shares of common stock of the Company under the Plan. Such phantom shares shall entitle Executive to receive a payment with respect to each fiscal year in the Employment Term equal to the increase in value of such shares during such year, determined based on the excess, if any, of (i) the average of the closing prices of a share of common stock of the Company for the 30 day period immediately preceding June 30 of such fiscal year, as listed in the Wall Street Journal, over (ii) the "Base Value", which payment shall be made by July 15 of the following fiscal year. The initial Base Value of such shares shall be the closing price of a share of common stock of the Company on December 6, 1994, as listed in the Wall Street Journal. The Base Value shall be reset as of June 30 of any fiscal year if the average of the closing prices of a share of common stock for the 30 day period immediately preceding June 30 as listed in the Wall Street Journal is higher than the Base Value of such shares during the previous fiscal year. The new Base Value from and after such date (subject to further adjustment in accordance with this Section 4) shall be such closing price. 5. Employee Benefits. During the Employment Term, Executive shall be provided employee benefits (the "Employee Benefits") as shall be maintained by the Company from time to time on the same basis as the other senior executives of the Company. 6. Business Expenses and Perquisites. (a) The Company shall reimburse such of Executive's travel, entertainment and other business expenses as are reasonably and necessarily incurred by Executive during the Employment Term in the performance of his duties hereunder, in accordance with the Company's policies as in effect from time to time. During the Employment Term, the Company shall (i) reimburse Executive for travel expenses incurred for one round trip airline fare per week between Dallas and Detroit to be used by either Executive or his spouse, (ii) furnish Executive with a suitable furnished Dallas apartment or condominium and an automobile in Dallas, Texas and (iii) furnish Executive with office facilities (including secretarial support) in the metropolitan Detroit, Michigan area commensurate with the Executive's needs, taking into account the proportion of his business time spent in such location. To the extent any expenditure under this paragraph 6 is reportable by Executive and the Company as "wages", Executive shall be entitled to receive additional compensation commensurately to cover Executive's tax liability resulting from such reporting and from the receipt of any such additional compensation. 7. Termination. Except as provided in this Section 7, upon a termination of employment Executive shall be entitled to no other payment or benefit under this Agreement or any other plan or program of the Company, and the entitlements described in this Section 7 shall be his exclusive entitlements in the event of termination of employment. (a) For Cause by the Company. (i) Subject to the notification and cure provisions of subparagraph (ii) of this Section 7(a), Executive's employment hereunder may be terminated by the Company for "Cause". For purposes of this Agreement, "Cause" shall mean (A) Executive's willful and continued failure substantially to perform his duties hereunder, including duties directed by the Board consistent with the provisions of Section 2(a), (other than as a result of total or partial incapacity due to physical or mental illness), (B) material dishonesty in the performance of Executive's duties hereunder, (C) an act or acts on Executive's part constituting a felony under the laws of the United States or any state thereof, excluding acts imputed to Executive by reason of his position as CEO of the Company, or (D) any other willful act or omission which is materially injurious to the Company and its subsidiaries and affiliates, taken as a whole, financially or otherwise (including but not limited to breach of the non-competition and confidentiality covenants set forth in Sections 8 and 9 hereof). For purposes of subparagraph (D), an act or failure to act, on the part of Executive, shall be deemed "willful" if done, or omitted to be done, by Executive not in good faith and without a reasonable belief that the act or omission was in or not opposed to the best interests of the Company. (ii) If the Company proposes to terminate Executive's employment hereunder for Cause pursuant to clause (A) of Section 7(a)(i), the Company shall give Executive written notice in accordance with Section 7(f). Such notice shall be given with sufficient particularity that Executive will have an opportunity to correct the situation to the reasonable satisfaction of the Company within 60 days. If such correction is not so made, the Company may, within 60 days after the expiration of the time within which Executive had the opportunity to correct such situation, give written notice to Executive that it is terminating his employment for Cause effective forthwith with the effect stated in this Section 7(a). (iii) If Executive is terminated for Cause, he shall be entitled to receive (i) his Base Salary through the date of termination, (ii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. All other benefits due Executive following Executive's termination of employment pursuant to this Subsection 7(a) shall be determined in accordance with the plans, policies and practices of the Company. (b) Disability or Death. Executive's employment hereunder shall terminate upon (i) his death or (ii) at the Company's election if Executive becomes physically or mentally incapacitated and is therefore unable for a period of 6 consecutive months or for an aggregate of 9 months in any 24 consecutive month period to perform his duties (such incapacity is hereinafter referred to as "Disability"). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement. Upon termination of Executive's employment hereunder by reason of death, Executive's estate shall receive (i) continued payment of his Base Salary at the rate in effect at the time of Executive's death through the end of the month in which his death occurs, (ii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. Upon termination of Executive's employment hereunder by reason of Disability, Executive shall receive (i) continued payment of his Base Salary through the date on which Executive is first eligible to receive payment of disability benefits in lieu of Base Salary to the maximum extent permitted under the Company's employee benefit plans as then in effect, (ii) the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. All other benefits due Executive following Executive's termination by reason of Disability or death shall be determined in accordance with the plans, policies and practices of the Company. (c) Without Cause by the Company. If Executive's employment is terminated by the Company without "Cause" (other than by reason of death or Disability), subject to compliance with the provisions of Sections 8 and 9 below, Executive shall receive (i) continued payment of Base Salary through the balance of the Employment Term (assuming no such termination of employment), (ii) (A) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year and (B) if, after Executive has given notice pursuant to Section 1 of the Agreement that he desires to extend the Employment Term, Executive' employment is terminated in the 60 day period prior to the end of the applicable fiscal year, 50% of the Bonus that he received for the fiscal year in which his employment is terminated, in each case payable at the time such Bonus would have been paid absent such termination, (iii) any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b), as if Executive had remained employed through the end of the Employment Term, payable at the time such amounts would have been paid absent such termination and (iv) to the extent permitted by the relevant plans, continued provision of health and welfare benefits through the balance of the Employment Term (assuming no such termination of employment). All other benefits due Executive following Executive's termination of employment by the Company without Cause shall be determined in accordance with the plans, policies and practices of the Company. (d) Termination by Executive. Subject to the notification and cure provisions of this Section 7(d), Executive may terminate his employment for Good Reason pursuant to this Section 7(d) and thereupon shall be entitled to the same payments and benefits as described in Section 7(c) above. For purposes of this Section 7(d), "Good Reason" shall mean the occurrence of any of the following events without the prior written consent of Executive: (i) removal of Executive from his position as CEO other than for Cause, death or Disability, (ii) a failure by the Company to pay Executive any amounts due hereunder or (iii) a material reduction or change inconsistent with the provisions of Section 2(a) in Executive's duties and responsibilities. If Executive proposes to terminate his employment for Good Reason pursuant to this Section 7(d), he shall give the Company written notice in accordance with Section 7(f). Such notice shall be given with sufficient particularity that the Company will have an opportunity to correct the situation to the reasonable satisfaction of Executive within 60 days. If such correction is not so made, Executive may, within 60 days after the expiration of the time within which the Company had the opportunity to correct such situation, give written notice to the Company that he is terminating his employment for Good Reason effective forthwith with the effect stated in this Section 7(d). If Executive terminates his employment hereunder other than for Good Reason as defined in this Section 7(d), he shall be entitled to receive the payments and benefits to which he would be entitled in the event of a termination of employment by the Company for Cause. (e) Termination as a Result of Non-Renewal of the Employment Term. If Executive's employment with the Company terminates by reason of the expiration or non-renewal of the Employment Term, Executive shall be entitled to receive Base Salary, Bonus, if any, and any amounts due with respect to his phantom shares through the end of the Employment Term. All other benefits due Executive following Executive's termination of employment pursuant to this Subsection 7(a) shall be determined in accordance with the plans, policies and practices of the Company. (f) Notice of Termination. Any purported termination of employment by the Company or by Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13(h) hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. 8. Non-Competition. Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and accordingly agrees that: (a) During the Employment Term, Executive shall not enter into any competitive endeavors with and shall not undertake any commercial activity which is contrary to the best interests of the Company, including becoming an employee, owner (except for passive investments of not more than 1% of the outstanding shares of, or any other equity interest in, any company or entity listed or traded on a national securities exchange or in an over-the-counter securities market), officer, agent or director of any firm or person in any geographic area in which the Company or any of its affiliates conducted any such competing line of business. (b) During the Employment Term and for a period of one year after termination of Executive's employment, Executive shall not directly or indirectly knowingly, or under circumstances in which he reasonably should have known, induce any employee of the Company to engage in any activity in which Executive is prohibited from engaging by Section 8(a) above or to terminate his employment with the Company and shall not directly or indirectly knowingly, or under circumstances in which he reasonably should have known, employ or offer employment to any such person unless such person shall have ceased to be employed by the Company and such cessation of employment shall have occurred at least 3 months prior thereto, except that Executive may employ or offer employment to any person whose employment was terminated by the Company (other than at the direction of Executive). 9. Confidentiality. Executive shall not, during the Employment Term or thereafter, without the prior written consent of the Board, use, divulge, disclose or make accessible to any other person, firm, partnership or corporation any Confidential Information, as hereinafter defined, except (i) while employed by the Company in the business of and for the benefit of the Company or (ii) when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative body or legislative body, including a committee thereof, with jurisdiction to order him to divulge, disclose or make accessible such Information; provided, that in the case of any such requirement or purported requirement Executive shall provide written notice to the Company prior to producing such Information, which notice shall be given at least 10 days prior to the producing of such Information, if practicable, so that the Company may seek a protective order or other appropriate remedy. For purposes of this Agreement, "Confidential Information" shall mean all non-public information concerning the business of the Company, including, without limitation, information relating to its financial products, product development, customer lists, relationships with customers, other information about or provided by customers, financial information, business and marketing plans and strategies, operating policies and manuals, securities positions, and current or prospective transactions, except for specific items which become publicly available information other than through a breach by Executive of his fiduciary duty or any confidentiality agreement, including without limitation this Section 9. Executive agrees that upon termination of his employment hereunder for any reason, he shall return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company, except that he may retain personal notes, notebooks and diaries. Executive further agrees that he shall not retain or use for his account at any time any trade name, trademark, service mark or other proprietary business designation used or owned in connection with the business of the Company. 10. Specific Performance and Other Remedies. Executive acknowledges and agrees that the Company has no adequate remedy at law for a breach or threatened breach of any of the provisions of Sections 8 or 9 and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company (i) without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available and (ii) shall have no further obligation to make any payments to Executive. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. 11. Sale of the Company. Upon a termination of employment by either party within one year of the consummation of a "Sale" of the Company, Executive shall be entitled to receive a lump sum payment consisting of (i) payment of Base Salary through the balance of the Employment Term (assuming no such termination of employment), (ii) 100% of the Bonus that Executive would have been eligible to receive through the balance of the Employment Term (assuming no such termination of employment and assuming all applicable performance goals were satisfied) and (iii) any amounts due with respect to Executive's phantom shares through the date of the consummation of the Sale, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as hereinafter set forth rather than at the end of the fiscal year). For purposes of determining amounts due under this Section 11 with respect to Executive's phantom shares, in the case of a stock purchase, the stock price shall be the price per share of common stock received by (or imputed to) the shareholders of the Company in connection with any such transaction, if applicable, or, if no such transaction price is determinable, the stock price shall be the average of the closing prices of a share of common stock of the Company for the 30 day period immediately preceding the date of the Sale as listed in the Wall Street Journal. For purposes of this Agreement, the term "Sale" shall mean the occurrence of any one of the following events: (i) (A) (x) any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934 (the "Act")) subject to the reporting requirements of Sections 13(d) or 13(g) of the Act with respect to the Company increases its "beneficial ownership" (as such term is used in Rule 13d-3 promulgated under the Act) of voting securities of the Company by 20 or more percentage points or (y) any other "person" becomes a "beneficial owner" of 20% or more of the voting securities of the Company, and (B) at any time during the period beginning upon the occurrence of an event described in clause (A) above and ending on the later of (i) the date which is six months after the date of such occurrence and (ii) the meeting of the Company's shareholders next following such occurrence, nonemployee directors of the Board on the Commencement Date (the "Incumbent Board") cease for any reason to constitute at least a majority of the nonemployee directors of the Board; provided that any individual becoming a nonemployee director subsequent to the Commencement Date whose appointment or election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (ii) all or substantially all of the business or assets of the Company is disposed of pursuant to a merger, consolidation or other transaction. 12. Indemnification. The Company shall indemnify Executive against liabilities incurred as a result of or in connection with any actions taken or omitted to be taken in the performance of his duties hereunder to the fullest extent permitted by Delaware law. Executive acknowledges that the Company's Certificate of Incorporation currently provides such indemnification to its officers and directors. 13. Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS. (b) Entire Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein and therein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. (c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any such waiver must be in writing and signed by Executive or an authorized officer of the Company, as the case may be. (d) Severability. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Sections 8 and 9 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory restriction in Section 8 or any other restriction contained in Section 8 or 9 is an unenforceable restriction against Executive, such provision shall not be rendered void but shall be deemed amended to apply to such maximum time and territory, if applicable, or otherwise to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in Section 8 or 9 is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. In the event that any one or more of the other provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. (e) Assignment. This Agreement shall not be assignable by Executive and shall be assignable by the Company only with the consent of Executive. (f) Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of the parties hereto. (g) Communications. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when faxed or delivered or two business days after being mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt; provided that all notices to the Company shall be directed to the attention of the General Counsel with a copy to the Secretary of the Company; and provided further that a copy of all notices to Executive shall be sent to: Mark K. Rabidoux, Esq. Jaffe, Raitt, Heuer & Weiss One Woodward Avenue, Suite 2400 Detroit, Michigan 48226 (h) Withholding Taxes. The Company may withhold from any and all amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation. (i) Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of Executive's employment to the extent necessary to the agreed preservation of such rights and obligations. (j) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (k) Headings. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EXECUTIVE /S/ ERIC D. BOOTH --------------------------- Eric D. Booth 18920 Edenderry Drive Northville, Michigan 48167 COMPANY LOMAS FINANCIAL CORPORATION By:/S/ JESS HAY ------------------------- Name: Jess Hay Title: Chairman and Chief Executive Officer Lomas Financial Corporation 1600 Viceroy Drive Dallas, Texas 75235 EX-10.14 15 EXHIBIT 10.14 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of December 1, 1994 by and between Lomas Financial Corporation, a Delaware corporation, (the "Company") and Robert R. Denton ("Executive"). WHEREAS, the Company desires to employ Executive as Executive Vice President ("EVP"); and WHEREAS, the Company and Executive desire to enter into an agreement (the "Agreement") embodying the terms of such employment; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. Term of Employment. Executive's employment by the Company shall be for a term (the "Employment Term") which shall commence on December 12, 1994 (the "Commencement Date") and shall terminate on June 30, 1996 (the "Initial Term"); provided that, beginning July 1, 1996 the Employment Term may be extended for successive one year periods (commencing on July 1 and terminating on June 30) if not earlier than 120 days and not later than 60 days prior to any such July 1, the Company or Executive shall have given notice to the other party that he or it desires to extend the Employment Term. Notwithstanding the foregoing, the Employment Term shall terminate in any and all events upon the termination of Executive's employment hereunder. 2. Position. (a) During the Employment Term Executive shall serve as EVP of the Company. Executive shall report directly to the chief executive officer of the Company and shall have such duties and authority as shall be determined from time to time by the chief executive officer and the Board of Directors of the Company (the "Board"); provided that such duties shall be consistent with those of an executive vice president. (b) During the Employment Term, Executive shall devote substantially all of his business time and best efforts to the performance of his duties hereunder and shall not engage in any other business, profession or occupation for compensation or otherwise; provided that Executive may continue his present ownership or other present interests in Pegasus Investment Advisors, Inc. and Woodward Securities Corporation as long as Executive's attention to such other interests do not materially detract him from devoting his full attention to his duties to the Company hereunder. (c) Executive shall be permitted to reside in the location of his choice, but shall spend as much time in Dallas, Texas as he deems necessary to perform his duties hereunder. 3. Base Salary. During the Employment Term, the Company shall pay Executive an annual base salary (the "Base Salary") at an initial rate of $250,000, payable in arrears, in accordance with the usual payment practices of the Company. Executive's Base Salary shall be subject to annual increases equal to not less than the greater of the increase in the National Consumer Price Index for All Urban Consumers as of the close of the preceding twelve-month period and 5%; provided that for the fiscal year beginning July 1, 1995, such annual increase shall be equal to not less than the greater of one-half of the increase in such Consumer Price Index as of the close of the preceding twelve-month period and 2 1/2%. 4. Incentive Compensation. (a) During the Employment Term, Executive shall be eligible to receive, in addition to his Base Salary, an annual bonus (the "Bonus") equal to up to 50% of Base Salary for such fiscal year, payable by July 15 of the following fiscal year, based upon personal and corporate goals and objectives agreed upon by Executive and the Company prior to July 1 of such fiscal year. For the period from December 1, 1994 through June 30, 1995, Executive shall receive a guaranteed bonus equal to $62,500 plus any additional amounts the Board may deem appropriate based upon personal and corporate performance. (b) Executive shall be eligible to participate in the Company's 1993 Intermediate and Long-Term Incentive Plan (the "Plan"). Effective as of the Commencement Date, Executive shall have been granted 100,000 phantom shares of common stock of the Company under the Plan. Such phantom shares shall entitle Executive to receive a payment with respect to each fiscal year in the Employment Term equal to the increase in value of such shares during such year, determined based on the excess, if any, of (i) the average of the closing prices of a share of common stock of the Company for the 30 day period immediately preceding June 30 of such fiscal year, as listed in the Wall Street Journal, over (ii) the "Base Value", which payment shall be made by July 15 of the following fiscal year. The initial Base Value of such shares shall be the closing price of a share of common stock of the Company on December 6, 1994, as listed in the Wall Street Journal. The Base Value shall be reset as of June 30 of any fiscal year if the average of the closing prices of a share of common stock for the 30 day period immediately preceding June 30 as listed in the Wall Street Journal is higher than the Base Value of such shares during the previous fiscal year. The new Base Value from and after such date (subject to further adjustment in accordance with this Section 4) shall be such closing price. 5. Employee Benefits. During the Employment Term, Executive shall be provided employee benefits (the "Employee Benefits") as shall be maintained by the Company from time to time on the same basis as the other senior executives of the Company. 6. Business Expenses and Perquisites. (a) The Company shall reimburse such of Executive's travel, entertainment and other business expenses as are reasonably and necessarily incurred by Executive during the Employment Term in the performance of his duties hereunder, in accordance with the Company's policies as in effect from time to time. During the Employment Term, the Company shall (i) reimburse Executive for travel expenses incurred for one round trip airline fare per week between Dallas and Detroit to be used by either Executive or his spouse, (ii) furnish Executive with a suitable furnished Dallas apartment or condominium and an automobile in Dallas, Texas and (iii) furnish Executive with office facilities (including secretarial support) in the metropolitan Detroit, Michigan area commensurate with the Executive's needs, taking into account the proportion of his business time spent in such location. To the extent any expenditure under this paragraph 6 is reportable by Executive and the Company as "wages", Executive shall be entitled to receive additional compensation commensurately to cover Executive's tax liability resulting from such reporting and from the receipt of any such additional compensation. 7. Termination. Except as provided in this Section 7, upon a termination of employment Executive shall be entitled to no other payment or benefit under this Agreement or any other plan or program of the Company, and the entitlements described in this Section 7 shall be his exclusive entitlements in the event of termination of employment. (a) For Cause by the Company. (i) Subject to the notification and cure provisions of subparagraph (ii) of this Section 7(a), Executive's employment hereunder may be terminated by the Company for "Cause". For purposes of this Agreement, "Cause" shall mean (A) Executive's willful and continued failure substantially to perform his duties hereunder, including duties directed by the Board consistent with the provisions of Section 2(a), (other than as a result of total or partial incapacity due to physical or mental illness), (B) material dishonesty in the performance of Executive's duties hereunder, (C) an act or acts on Executive's part constituting a felony under the laws of the United States or any state thereof, excluding acts imputed to Executive by reason of his position as EVP of the Company, or (D) any other willful act or omission which is materially injurious to the Company and its subsidiaries and affiliates, taken as a whole, financially or otherwise (including but not limited to breach of the non-competition and confidentiality covenants set forth in Sections 8 and 9 hereof). For purposes of subparagraph (D), an act or failure to act, on the part of Executive, shall be deemed "willful" if done, or omitted to be done, by Executive not in good faith and without a reasonable belief that the act or omission was in or not opposed to the best interests of the Company. (ii) If the Company proposes to terminate Executive's employment hereunder for Cause pursuant to clause (A) of Section 7(a)(i), the Company shall give Executive written notice in accordance with Section 7(f). Such notice shall be given with sufficient particularity that Executive will have an opportunity to correct the situation to the reasonable satisfaction of the Company within 60 days. If such correction is not so made, the Company may, within 60 days after the expiration of the time within which Executive had the opportunity to correct such situation, give written notice to Executive that it is terminating his employment for Cause effective forthwith with the effect stated in this Section 7(a). (iii) If Executive is terminated for Cause, he shall be entitled to receive (i) his Base Salary through the date of termination, (ii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. All other benefits due Executive following Executive's termination of employment pursuant to this Subsection 7(a) shall be determined in accordance with the plans, policies and practices of the Company. (b) Disability or Death. Executive's employment hereunder shall terminate upon (i) his death or (ii) at the Company's election if Executive becomes physically or mentally incapacitated and is therefore unable for a period of 6 consecutive months or for an aggregate of 9 months in any 24 consecutive month period to perform his duties (such incapacity is hereinafter referred to as "Disability"). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement. Upon termination of Executive's employment hereunder by reason of death, Executive's estate shall receive (i) continued payment of his Base Salary at the rate in effect at the time of Executive's death through the end of the month in which his death occurs, (ii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. Upon termination of Executive's employment hereunder by reason of Disability, Executive shall receive (i) continued payment of his Base Salary through the date on which Executive is first eligible to receive payment of disability benefits in lieu of Base Salary to the maximum extent permitted under the Company's employee benefit plans as then in effect, (ii) the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year, payable at the time such Bonus would have been paid absent such termination and (iii) any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as of the close of trading on the date of termination rather than at the end of the fiscal year), as if Executive had remained employed through the end of such fiscal year, payable at the time such amounts would have been paid absent such termination. All other benefits due Executive following Executive's termination by reason of Disability or death shall be determined in accordance with the plans, policies and practices of the Company. (c) Without Cause by the Company. If Executive's employment is terminated by the Company without "Cause" (other than by reason of death or Disability), subject to compliance with the provisions of Sections 8 and 9 below, Executive shall receive (i) continued payment of Base Salary through the balance of the Employment Term (assuming no such termination of employment), (ii) (A) a prorated portion (based on the number of days in such fiscal year prior to the date of termination) of the Bonus, if any, determined in accordance with Section 4(a), for the fiscal year in which employment is terminated that Executive would have received had he remained employed through the end of such fiscal year and (B) if, after Executive has given notice pursuant to Section 1 of the Agreement that he desires to extend the Employment Term, Executive' employment is terminated in the 60 day period prior to the end of the applicable fiscal year, 50% of the Bonus that he received for the fiscal year in which his employment is terminated, in each case payable at the time such Bonus would have been paid absent such termination, (iii) any amounts due with respect to Executive's phantom shares, determined in accordance with Section 4(b), as if Executive had remained employed through the end of the Employment Term, payable at the time such amounts would have been paid absent such termination and (iv) to the extent permitted by the relevant plans, continued provision of health and welfare benefits through the balance of the Employment Term (assuming no such termination of employment). All other benefits due Executive following Executive's termination of employment by the Company without Cause shall be determined in accordance with the plans, policies and practices of the Company. (d) Termination by Executive. Subject to the notification and cure provisions of this Section 7(d), Executive may terminate his employment for Good Reason pursuant to this Section 7(d) and thereupon shall be entitled to the same payments and benefits as described in Section 7(c) above. For purposes of this Section 7(d), "Good Reason" shall mean the occurrence of any of the following events without the prior written consent of Executive: (i) removal of Executive from his position as EVP other than for Cause, death or Disability, (ii) a failure by the Company to pay Executive any amounts due hereunder or (iii) a material reduction or change inconsistent with the provisions of Section 2(a) in Executive's duties and responsibilities. If Executive proposes to terminate his employment for Good Reason pursuant to this Section 7(d), he shall give the Company written notice in accordance with Section 7(f). Such notice shall be given with sufficient particularity that the Company will have an opportunity to correct the situation to the reasonable satisfaction of Executive within 60 days. If such correction is not so made, Executive may, within 60 days after the expiration of the time within which the Company had the opportunity to correct such situation, give written notice to the Company that he is terminating his employment for Good Reason effective forthwith with the effect stated in this Section 7(d). If Executive terminates his employment hereunder other than for Good Reason as defined in this Section 7(d), he shall be entitled to receive the payments and benefits to which he would be entitled in the event of a termination of employment by the Company for Cause. (e) Termination as a Result of Non-Renewal of the Employment Term. If Executive's employment with the Company terminates by reason of the expiration or non-renewal of the Employment Term, Executive shall be entitled to receive Base Salary, Bonus, if any, and any amounts due with respect to his phantom shares through the end of the Employment Term. All other benefits due Executive following Executive's termination of employment pursuant to this Subsection 7(a) shall be determined in accordance with the plans, policies and practices of the Company. (f) Notice of Termination. Any purported termination of employment by the Company or by Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13(h) hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. 8. Non-Competition. Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and accordingly agrees that: (a) During the Employment Term, Executive shall not enter into any competitive endeavors with and shall not undertake any commercial activity which is contrary to the best interests of the Company, including becoming an employee, owner (except for passive investments of not more than 1% of the outstanding shares of, or any other equity interest in, any company or entity listed or traded on a national securities exchange or in an over-the-counter securities market), officer, agent or director of any firm or person in any geographic area in which the Company or any of its affiliates conducted any such competing line of business; provided that Executive's present ownership or other present interests in Pegasus Investment Advisors, Inc. and Woodward Securities Corporation shall not be deemed a breach of this Section 8(a). (b) During the Employment Term and for a period of one year after termination of Executive's employment, Executive shall not directly or indirectly knowingly, or under circumstances in which he reasonably should have known, induce any employee of the Company to engage in any activity in which Executive is prohibited from engaging by Section 8(a) above or to terminate his employment with the Company and shall not directly or indirectly knowingly, or under circumstances in which he reasonably should have known, employ or offer employment to any such person unless such person shall have ceased to be employed by the Company and such cessation of employment shall have occurred at least 3 months prior thereto, except that Executive may employ or offer employment to any person whose employment was terminated by the Company (other than at the direction of Executive). 9. Confidentiality. Executive shall not, during the Employment Term or thereafter, without the prior written consent of the Board, use, divulge, disclose or make accessible to any other person, firm, partnership or corporation any Confidential Information, as hereinafter defined, except (i) while employed by the Company in the business of and for the benefit of the Company or (ii) when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative body or legislative body, including a committee thereof, with jurisdiction to order him to divulge, disclose or make accessible such Information; provided, that in the case of any such requirement or purported requirement Executive shall provide written notice to the Company prior to producing such Information, which notice shall be given at least 10 days prior to the producing of such Information, if practicable, so that the Company may seek a protective order or other appropriate remedy. For purposes of this Agreement, "Confidential Information" shall mean all non-public information concerning the business of the Company, including, without limitation, information relating to its financial products, product development, customer lists, relationships with customers, other information about or provided by customers, financial information, business and marketing plans and strategies, operating policies and manuals, securities positions, and current or prospective transactions, except for specific items which become publicly available information other than through a breach by Executive of his fiduciary duty or any confidentiality agreement, including without limitation this Section 9. Executive agrees that upon termination of his employment hereunder for any reason, he shall return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company, except that he may retain personal notes, notebooks and diaries. Executive further agrees that he shall not retain or use for his account at any time any trade name, trademark, service mark or other proprietary business designation used or owned in connection with the business of the Company. 10. Specific Performance and Other Remedies. Executive acknowledges and agrees that the Company has no adequate remedy at law for a breach or threatened breach of any of the provisions of Sections 8 or 9 and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company (i) without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available and (ii) shall have no further obligation to make any payments to Executive. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. 11. Sale of the Company. Upon a termination of employment by either party within one year of the consummation of a "Sale" of the Company, Executive shall be entitled to receive a lump sum payment consisting of (i) payment of Base Salary through the balance of the Employment Term (assuming no such termination of employment), (ii) 100% of the Bonus that Executive would have been eligible to receive through the balance of the Employment Term (assuming no such termination of employment and assuming all applicable performance goals were satisfied) and (iii) any amounts due with respect to Executive's phantom shares through the date of the consummation of the Sale, determined in accordance with Section 4(b) (except that the phantom share payment shall be determined by reference to the price of a share of common stock as hereinafter set forth rather than at the end of the fiscal year). For purposes of determining amounts due under this Section 11 with respect to Executive's phantom shares, in the case of a stock purchase, the stock price shall be the price per share of common stock received by (or imputed to) the shareholders of the Company in connection with any such transaction, if applicable, or, if no such transaction price is determinable, the stock price shall be the average of the closing prices of a share of common stock of the Company for the 30 day period immediately preceding the date of the Sale as listed in the Wall Street Journal. For purposes of this Agreement, the term "Sale" shall mean the occurrence of any one of the following events: (i) (A) (x) any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934 (the "Act")) subject to the reporting requirements of Sections 13(d) or 13(g) of the Act with respect to the Company increases its "beneficial ownership" (as such term is used in Rule 13d-3 promulgated under the Act) of voting securities of the Company by 20 or more percentage points or (y) any other "person" becomes a "beneficial owner" of 20% or more of the voting securities of the Company, and (B) at any time during the period beginning upon the occurrence of an event described in clause (A) above and ending on the later of (i) the date which is six months after the date of such occurrence and (ii) the meeting of the Company's shareholders next following such occurrence, nonemployee directors of the Board on the Commencement Date (the "Incumbent Board") cease for any reason to constitute at least a majority of the nonemployee directors of the Board; provided that any individual becoming a nonemployee director subsequent to the Commencement Date whose appointment or election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (ii) all or substantially all of the business or assets of the Company is disposed of pursuant to a merger, consolidation or other transaction. 12. Indemnification. The Company shall indemnify Executive against liabilities incurred as a result of or in connection with any actions taken or omitted to be taken in the performance of his duties hereunder to the fullest extent permitted by Delaware law. Executive acknowledges that the Company's Certificate of Incorporation currently provides such indemnification to its officers and directors. 13. Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS. (b) Entire Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein and therein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. (c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any such waiver must be in writing and signed by Executive or an authorized officer of the Company, as the case may be. (d) Severability. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Sections 8 and 9 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory restriction in Section 8 or any other restriction contained in Section 8 or 9 is an unenforceable restriction against Executive, such provision shall not be rendered void but shall be deemed amended to apply to such maximum time and territory, if applicable, or otherwise to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in Section 8 or 9 is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. In the event that any one or more of the other provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. (e) Assignment. This Agreement shall not be assignable by Executive and shall be assignable by the Company only with the consent of Executive. (f) Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of the parties hereto. (g) Communications. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when faxed or delivered or two business days after being mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt; provided that all notices to the Company shall be directed to the attention of the General Counsel with a copy to the Secretary of the Company; and provided further that a copy of all notices to Executive shall be sent to: Mark K. Rabidoux, Esq. Jaffe, Raitt, Heuer & Weiss One Woodward Avenue, Suite 2400 Detroit, Michigan 48226 (h) Withholding Taxes. The Company may withhold from any and all amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation. (i) Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of Executive's employment to the extent necessary to the agreed preservation of such rights and obligations. (j) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (k) Headings. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EXECUTIVE /S/ ROBERT R. DENTON ------------------------------- Robert R. Denton COMPANY LOMAS FINANCIAL CORPORATION By:/S/ JESS HAY ---------------------------- Name: Jess Hay Title: Chairman and Chief Executive Officer Lomas Financial Corporation 1600 Viceroy Drive Dallas, Texas 75235 EX-10.15 16 EXHIBIT 10.15 LOMAS FINANCIAL CORPORATION 1993 INTERMEDIATE AND LONG TERM INCENTIVE PLAN PHANTOM STOCK AGREEMENT AGREEMENT dated as of December 12, 1994 between Lomas Financial Corporation, a Delaware corporation (the "Company"), and Eric D. Booth (the "Executive"). 1. (a) The following terms shall have the following meanings: "Base Value" shall mean the closing price of a share of Common Stock on December 6, 1994, as reported in the Wall Street Journal, as such Base Value may be subsequently adjusted pursuant to Section 2(d). "Employment Agreement" shall mean the Employment Agreement dated as of December 1, 1994 between the Company and Executive. "Phantom Shares" shall mean Awards granted under the Plan hereunder pursuant to the terms and conditions of this Agreement. "Plan" shall mean the Lomas Financial Corporation 1993 Intermediate and Long Term Incentive Plan. (b) Defined terms not otherwise defined in this Agreement shall have the meaning set forth in Section 2 of the Plan. 2. (a) Pursuant to the Plan, the Executive is hereby granted, on the terms and conditions set forth in this Agreement and in the Plan, 200,000 Phantom Shares. (b) Each Phantom Share shall entitle Executive to receive a payment with respect to each fiscal year in the Employment Term (as defined in the Employment Agreement) equal to the excess, if any, of (i) the average of the closing prices of a share of Common Stock for the 30 day period immediately preceding June 30 of such fiscal year over (ii) the Base Value at the time of such payment. (c) Except as set forth in Sections 7 and 11 of the Employment Agreement, payments owing in respect of the Phantom Shares for any fiscal year shall be made no later than July 15 of the following fiscal year. (d) If on June 30 of any fiscal year, the average of the closing prices of a share of Common Stock for the immediately preceding 30 day period determined for purposes of Section 2(b)(i) above is higher than the Base Value on such date, such that a payment is made to Executive pursuant to Section 2(b), the Base Value shall be reset to such price determined for purposes of Section 2(b)(i) and such reset Base Value shall be the Base Value for subsequent fiscal years, subject to further adjustment in accordance with this Section 2(d). 3. Except to the extent set forth in Sections 7 and 11 of the Employment Agreement, the Phantom Shares shall expire and any rights of Executive with respect to the Phantom Shares granted hereunder shall immediately terminate on the date that the Executive ceases for any reason to be employed by the Company. 4. Phantom Shares are not transferable by the Executive; however, in the event of the Executive's death, payment of amounts owing to him in respect of the Phantom Shares will be made to his estate in accordance with the terms of the Employment Contract. 5. (a) This Agreement is subject to the provisions of the Plan. The Plan may at any time be amended by the Board or its delegee as set forth in the Plan. This Agreement may be amended by Committee with the Executive's consent at any time in any manner not inconsistent with the terms of the Plan. Except as set forth above, any applicable determinations, orders, resolutions or other actions of the Committee shall be final, conclusive and binding on the Company and the Executive. (b) As a condition to the delivery of payments due with respect to the Phantom Shares, the Executive is required to satisfy any obligation in respect of withholding or other taxes in accordance with procedures established by the Committee. 6. All notices hereunder shall be in writing, and if to the Company, shall be delivered personally or mailed by first class mail to the Secretary of the Company at its principal office, 1600 Viceroy Drive, Dallas, Texas 75235; and if to the Executive, shall be delivered personally or mailed by first class mail to the Executive at the address then appearing in the personnel records of the Company. Such addresses, as well as the officer designated by the Company to receive notices hereunder, may be changed at any time by notice from one party to the other. 7. This Agreement shall bind and inure to the benefit of the parties hereto and the successors and assigns of the Company and, to the extent provided in the Plan and in this Agreement, the successors, assigns and legal representatives of the Executive. 8. Neither this Agreement nor the award of the Options hereunder shall be construed as giving the Executive any right to be retained in the employ of the Company or its affiliates or as limiting in any manner the Company's right to dismiss the Executive from employment for any reason. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. COMPANY LOMAS FINANCIAL CORPORATION By /S/JESS HAY ------------------------------ Name: Jess Hay Title: Chairman and Chief Executive Officer EXECUTIVE /S/ERIC D. BOOTH -------------------------------- Eric D. Booth EX-10.16 17 EXHIBIT 10.16 LOMAS FINANCIAL CORPORATION 1993 INTERMEDIATE AND LONG TERM INCENTIVE PLAN PHANTOM STOCK AGREEMENT AGREEMENT dated as of December 12, 1994 between Lomas Financial Corporation, a Delaware corporation (the "Company"), and Robert R. Denton (the "Executive"). 1. (a) The following terms shall have the following meanings: "Base Value" shall mean the closing price of a share of Common Stock on December 6, 1994, as reported in the Wall Street Journal, as such Base Value may be subsequently adjusted pursuant to Section 2(d). "Employment Agreement" shall mean the Employment Agreement dated as of December 1, 1994 between the Company and Executive. "Phantom Shares" shall mean Awards granted under the Plan hereunder pursuant to the terms and conditions of this Agreement. "Plan" shall mean the Lomas Financial Corporation 1993 Intermediate and Long Term Incentive Plan. (b) Defined terms not otherwise defined in this Agreement shall have the meaning set forth in Section 2 of the Plan. 2. (a) Pursuant to the Plan, the Executive is hereby granted, on the terms and conditions set forth in this Agreement and in the Plan, 100,000 Phantom Shares. (b) Each Phantom Share shall entitle Executive to receive a payment with respect to each fiscal year in the Employment Term (as defined in the Employment Agreement) equal to the excess, if any, of (i) the average of the closing prices of a share of Common Stock for the 30 day period immediately preceding June 30 of such fiscal year over (ii) the Base Value at the time of such payment. (c) Except as set forth in Sections 7 and 11 of the Employment Agreement, payments owing in respect of the Phantom Shares for any fiscal year shall be made no later than July 15 of the following fiscal year. (d) If on June 30 of any fiscal year, the average of the closing prices of a share of Common Stock for the immediately preceding 30 day period determined for purposes of Section 2(b)(i) above is higher than the Base Value on such date, such that a payment is made to Executive pursuant to Section 2(b), the Base Value shall be reset to such price determined for purposes of Section 2(b)(i) and such reset Base Value shall be the Base Value for subsequent fiscal years, subject to further adjustment in accordance with this Section 2(d). 3. Except to the extent set forth in Sections 7 and 11 of the Employment Agreement, the Phantom Shares shall expire and any rights of Executive with respect to the Phantom Shares granted hereunder shall immediately terminate on the date that the Executive ceases for any reason to be employed by the Company. 4. Phantom Shares are not transferable by the Executive; however, in the event of the Executive's death, payment of amounts owing to him in respect of the Phantom Shares will be made to his estate in accordance with the terms of the Employment Contract. 5. (a) This Agreement is subject to the provisions of the Plan. The Plan may at any time be amended by the Board or its delegee as set forth in the Plan. This Agreement may be amended by Committee with the Executive's consent at any time in any manner not inconsistent with the terms of the Plan. Except as set forth above, any applicable determinations, orders, resolutions or other actions of the Committee shall be final, conclusive and binding on the Company and the Executive. (b) As a condition to the delivery of payments due with respect to the Phantom Shares, the Executive is required to satisfy any obligation in respect of withholding or other taxes in accordance with procedures established by the Committee. 6. All notices hereunder shall be in writing, and if to the Company, shall be delivered personally or mailed by first class mail to the Secretary of the Company at its principal office, 1600 Viceroy Drive, Dallas, Texas 75235; and if to the Executive, shall be delivered personally or mailed by first class mail to the Executive at the address then appearing in the personnel records of the Company. Such addresses, as well as the officer designated by the Company to receive notices hereunder, may be changed at any time by notice from one party to the other. 7. This Agreement shall bind and inure to the benefit of the parties hereto and the successors and assigns of the Company and, to the extent provided in the Plan and in this Agreement, the successors, assigns and legal representatives of the Executive. 8. Neither this Agreement nor the award of the Options hereunder shall be construed as giving the Executive any right to be retained in the employ of the Company or its affiliates or as limiting in any manner the Company's right to dismiss the Executive from employment for any reason. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. COMPANY LOMAS FINANCIAL CORPORATION By /S/JESS HAY ----------------------------- Name: Jess Hay Title: Chairman and Chief Executive Officer EXECUTIVE /S/ROBERT R. DENTON ------------------------------- Robert R. Denton EX-10.17 18 EXHIBIT 10.17 CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of August 2, 1994 by and between Lomas Financial Corporation, a Texas corporation (the "Company") and Jess Hay ("Consultant"). WHEREAS, Consultant and the Company have previously entered into an Employment Agreement dated as of October 7, 1983 (the "Employment Agreement"); WHEREAS, Consultant wishes to resign from his position as Chairman and Chief Executive Officer of the Company and the parties wish to terminate the Employment Agreement; WHEREAS, the Company's management desires that it be able to continue to call upon the experience and knowledge of Consultant for consultation services and advice; and WHEREAS, Consultant is willing to render such services to the Company on the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and Consultant's long prior service to the Company, and in cancellation and settlement of all obligations under the Employment Agreement, the parties agree as follows: 1. Resignation and Appointment. (a) Consultant shall remain employed as an officer of the Company through December 31, 1994, and will retire effective December 31, 1994. Consultant will resign his positions of Chairman and Chief Executive Officer of the Company effective upon his retirement or, if earlier, effective as of the date on which his successor shall have been appointed by the Company's Board of Directors. (b) Upon the effectiveness of Consultant's resignation, he shall be appointed Chairman Emeritus by the Board of Directors. (c) Consultant shall continue to serve as a director of the Company until the Company's Annual Meeting of Stockholders in 1995 and thereafter if he is nominated by the Board of Directors and elected by the stockholders of the Company. Consultant shall not receive any additional remuneration (e.g. directors' fees, meeting fees or director stock options or awards) for any services rendered as a director prior to December 31, 2000. 2. Term of Agreement. Consultant shall be retained by the Company for a period commencing on January 1, 1995 and terminating on December 31, 2004, which period may be extended or renewed by mutual written agreement of the parties hereto. The initial period and any extensions or renewals thereof shall constitute the "Consulting Term". 3. Position and Responsibilities. Consultant agrees to serve as a consultant to the Company and to render such advice and services to the Company as may be reasonably requested by the Chief Executive Officer or the Board of Directors of the Company; provided, however, that Consultant shall not be required to render more than 500 hours of service in the first three years and shall be ratably reduced thereafter in accordance with amounts payable hereunder. Without limiting the generality of the foregoing, during the first three calendar years of the Consulting Term, Consultant shall make himself available in person to render such services at the Company's headquarters location on a regular basis equivalent to one day per week, allowing for reasonable and customary vacations and taking into account the nature of the services provided. During the Consulting Term, Consultant shall report directly to the Board of Directors of the Company. 4. Compensation. (a) The Company shall pay Consultant a retainer (the "Retainer") of (i) $300,000 per year for the period from January 1, 1995 through December 31, 1997, (ii) $100,000 per year for the period from January 1, 1998 through December 31, 2000 and (iii) $50,000 per year for each of the remaining calendar years in the Consulting Term. The Retainer shall be payable in equal monthly installments during the Consulting Term. Consultant shall be entitled to the full Retainer regardless of the amount and frequency of consulting services actually rendered by him. (b) During the Consulting Term, the Company shall continue the participation of Consultant and his spouse in all employee benefit arrangements of the Company that provide life insurance and health, medical, hospitalization and similar benefits, to the extent that Consultant and his spouse are covered under existing policies, if any, on a basis no less favorable than that on which they are currently covered under any such plan or policy. (c) All outstanding stock options granted to Consultant prior to the date of his retirement under any stock incentive plan of the Company shall be fully vested as of such date and shall continue to be exercisable for the remainder of their terms, and the Company shall make such amendments to the plans and the outstanding awards as may be necessary to effectuate the provisions of this paragraph 4(c), except that the Company shall be obliged to make any such amendment only to the extent that shareholder approval thereof would not be required to maintain the current status of any such plan under any applicable regulatory regime. (d) Consultant shall continue to be eligible to participate in the "success bonus" arrangement established by the Compensation Committee of the Board of Directors for senior executives of the Company in connection with the sale of all or a substantial portion of the Company. (e) Consultant shall be eligible to participate in any bonus or incentive plan established for the senior corporate executives of the Company in respect of fiscal year 1995, provided that such bonus shall be based on amounts actually received by Consultant pursuant to his existing employment agreement and this Agreement. 5. Expenses and Other Facilities. (a) During the period from January 1, 1995 through December 31, 1999, the Consultant shall be reimbursed in accordance with the policies of the Company for necessary and reasonable business expenses incurred by Consultant in connection with the performance of his duties hereunder. (b) During the period from January 1, 1995 through December 31, 1999, the Company shall continue to make available to Consultant, without any expense to him, Consultant's current office at 2001 Bryan Tower along with the furniture, fixtures and equipment currently associated therewith. The Company shall also employ an administrative assistant whose skills, availability and compensation shall be satisfactory to Consultant; provided that Consultant agrees that his currently assigned administrative assistant and her existing compensation arrangements are satisfactory to him. (c) In the event that the Company is unable to furnish Consultant with his existing office at 2001 Bryan Tower because the Company's lease on such space is terminated or modified after the date hereof or because such space is subleased to a party other than the Company or an affiliate of the Company, the Company shall provide Consultant and Consultant's administrative assistant with equivalent and comparable office facilities (including furniture, equipment and other amenities) located at the Company's headquarters. 6. Termination and Liquidated Damages. (a) This Agreement and Consultant's retention hereunder may be terminated at any time by either party upon sixty (60) days prior written notice to the other party. In the event of (i) such a termination by the Company, other than a termination for "Cause", as hereinafter defined, or (ii) a termination at any time by Consultant as a result of a breach of this Agreement by the Company, Consultant shall be entitled to receive as liquidated damages an amount in cash equal to the then present value of all remaining payments due hereunder during the balance of the Consulting Term. Such amount shall be calculated using a discount rate of 6% per annum and shall be paid in a single sum not later than 10 days after any such termination. (b) In the event of a voluntary termination of his retention hereunder by the Consultant prior to the end of the Consulting Term other than as set forth in clause (ii) above, the Company will have no further obligation to make payments to Consultant following any such termination. Consultant shall not be subject to liability for breach of this Agreement by reason of his termination of his retention hereunder. (c) For purposes of this Agreement, "Cause" shall mean (i) Consultant's willful and continued failure substantially to perform his duties hereunder (other than as a result of Disability and other than as a result of breach of this Agreement by the Company), (ii) Consultant's dishonesty in the performance of his duties hereunder or (iii) an act or acts on Consultant's part constituting a felony under the laws of the United States or any state thereof. (d) In the event of any termination of this Agreement pursuant to Paragraph 6(a), the Company shall continue to provide Consultant or his spouse, or both, with the benefits specified in paragraph 4(b) until December 31, 2004. 7. Status; Taxes. (a) Status of Consultant. During the Consulting Term, Consultant shall not be an employee of the Company and shall not be entitled to participate in any employee benefit plans or other benefits or conditions of employment available to the employees of the Company except to the extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant shall have no authority to act as an agent of the Company, except on authority specifically so delegated, and he shall not represent to the contrary to any person. Consultant shall only consult, render advice and perform such tasks as Consultant determines are necessary to achieve the results specified by the Company. He shall not direct the work of any employee of the Company, or make any management decisions, or undertake to commit the Company to any course of action in relation to third persons. Although the Company may specify the results to be achieved by the Consultant and may control and direct him in that regard, the Company shall not control or direct the Consultant as to the details or means by which such results are accomplished. (b) Taxes. It is intended that the fees paid hereunder shall constitute revenues to Consultant. To the extent consistent with applicable law, the Company will not withhold any amounts therefrom as federal income tax withholding from wages or as employee contributions under the Federal Insurance Contributions Act or any other state or federal laws. Consultant shall be solely responsible for the withholding and/or payment of any federal, state or local income or payroll taxes. 8. Non-Competition. During the period from January 1, 1995 through December 31, 2000, Consultant shall not directly or indirectly be or remain employed by, or render services for, any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise engaged in any business, which is in competition with any business currently conducted by the Company; provided, however, that no provision of this paragraph shall in any way restrict Consultant from engaging in the practice of law or the rendering of legal services to anyone in any location. 9. Confidentiality. During and after the Consulting Term, Consultant shall not disclose or use for Consultant's own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary or affiliate of the Company; provided that the foregoing shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Consultant's breach of this covenant. Any provision of this Agreement to the contrary notwithstanding, Consultant's obligations pursuant to this Paragraph 9 shall survive any termination of this Agreement and Consultant's retention hereunder. 10. Specific Performance. Consultant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in recognition of this fact, Consultant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 11. Fees and Expenses. The Company agrees to pay any and all legal fees and related expenses incurred by Consultant in connection with the formation of this Agreement. The Company also agrees, in the event of a dispute between Consultant and the Company with respect to any of Consultant's rights under this Agreement, to reimburse Consultant for any and all reasonable legal fees and related expenses incurred by Consultant in connection with enforcing such rights if Consultant is successful as to at least part of the disputed claim by reason of arbitration, litigation or settlement. 12. Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. (b) Entire Agreement; Amendments. This Agreement supersedes all prior agreements between Consultant and the Company relating to Consultant's employment and the termination thereof, including, without limitation, the Employment Agreement, and, together with the agreements evidencing the stock options and other awards referred to in Paragraph 4(c) and the documents evidencing the benefits to which Consultant and his spouse are entitled pursuant to Paragraphs 4(b), (d) and (e), contains the entire understanding of the parties with respect to the retention of Consultant by the Company; provided, however, that this Agreement shall not impair any rights or benefits accrued by Consultant under any benefit plan, compensation arrangement or pension, excess retirement or management security plan of the Company prior to the termination of his employment on December 31, 1994. Except as aforesaid, there are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. (c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (d) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. (e) Assignment. This Agreement shall not be assignable by Consultant and shall be assignable by the Company only with the consent of Consultant; provided that no such assignment by the Company shall relieve the Company of any liability hereunder, whether accrued before or after such assignment. (f) Arbitration. Any dispute between the parties to this Agreement arising from or relating to the terms of this Agreement or the retention of Consultant by the Company shall be submitted to arbitration in Dallas, Texas under the auspices of the American Arbitration Association. (g) Successors; Binding Agreement. (i) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or the assets of the Company to expressly assume and agree to perform this agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Consultant to the benefits set forth in Paragraph 6(a). (ii) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. (h) Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement; provided that all notices to the Company shall be directed to the attention of Ramona Taylor or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (i) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. /S/JESS HAY ------------------------------- JESS HAY LOMAS FINANCIAL CORPORATION By: /S/JAMES L. CROWSON ---------------------------- James L. Crowson Executive Vice President ATTEST: /S/RAMONA TAYLOR - - ------------------------- Ramona Taylor, Secretary (SEAL) EX-10.18 19 EXHIBIT 10.18 CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of November 1, 1994, by and between Lomas Financial Corporation, a Delaware corporation (the "Company") and Gary White ("Consultant"). WHEREAS, Consultant and the Company have previously entered into an Employment Agreement dated as of August 1, 1993 (the "Employment Agreement"); WHEREAS, effective December 1, 1994, Consultant wishes to retire as an employee of the Company and the parties wish to terminate the Employment Agreement; WHEREAS, the Company's management desires that it be able to continue to call upon the experience and knowledge of Consultant for consultation services and advice; and WHEREAS, Consultant is willing to render such services to the Company on the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and Consultant's long prior service to the Company, and in cancellation and settlement of all obligations under the Employment Agreement, the parties agree as follows: 1. Retirement and Appointment. Consultant shall remain employed by the Company until December 1, 1994, upon which date Consultant shall retire under the terms (as applicable to Consultant) of the Voluntary Early Retirement Program that was made available to certain employees of the Lomas Financial Group on or about September 9, 1994; provided, however, that Consultant shall continue to be an officer of the Company with the title of Senior Vice President - Control through December 31, 1996, unless a successor shall have been elected at an earlier date by the Company's Board of Directors. 2. Term of Agreement. Consultant shall be retained by the Company for a period commencing on December 1, 1994 (the "Effective Date"), and terminating on December 31, 1996 (the "Consulting Term"). 3. Position and Responsibilities. Consultant agrees to serve as a consultant to the Company and to render such advice and services to the Company as reasonably may be requested by the Chief Executive Officer or the Board of Directors of the Company. The services to be performed by Consultant under this Agreement shall include, but not be limited to, the performance of the services (including supervisory services) that Consultant was performing in the period immediately preceding the Effective Date, and Consultant shall continue to perform such services during the Consulting Term unless and until another person is designated to perform any of such services by the Chief Executive Officer or the Board of Directors. Consultant (i) shall not be required to render more than 2,000 hours of service during the first 13 months of the Consulting Term; provided, however, that during the first 13 months of the Consulting Term Consultant shall make himself available in person to render such services at the Company's headquarters location on a regular basis equivalent to not less than four days per week, allowing for reasonable and customary vacations and taking into account the nature of the services provided, and (ii) shall not be required to render more than 925 hours of service during the final 12 months of the Consulting Term; provided, however, Consultant (during such final 12 months) shall make himself available in person to render such services at the Company's headquarters location on a regular basis equivalent to not less than two and one-half days per week, allowing for reasonable and customary vacations and taking into account the nature of the services provided. 4. Compensation. (a) The Company shall pay Consultant a retainer (the "Retainer") of (i) $239,200 for the period from December 1, 1994 through December 31, 1995, and (ii) $165,000 for the period from January 1, 1996 through December 31, 1996. The Retainer shall be payable in equal monthly installments during the Consulting Term. Consultant shall be entitled to the full Retainer regardless of the amount and frequency of consulting services actually rendered by him. (b) During the Consulting Term, the Company shall continue the participation of Consultant and his spouse in all employee benefit arrangements of the Company that provide life insurance and health, medical, hospitalization and similar benefits, to the extent that Consultant and his spouse are covered under existing policies, if any, on a basis no less favorable than that on which they are currently covered under any such plan or policy, and, thereafter, on the basis and for the remainder of the period set forth in the Voluntary Early Retirement Program. (c) All outstanding stock options granted to Consultant prior to the date of his retirement under any stock incentive plan of the Company shall be fully vested as of such date and shall continue to be exercisable for the remainder of their terms, and the Company shall make such amendments to the plans and the outstanding awards as may be necessary to effectuate the provisions of this paragraph 4(c), except that the Company shall be obliged to make any such amendment only to the extent that shareholder approval thereof would not be required to maintain the current status of any such plan under any applicable regulatory regime. (d) Consultant shall continue to be eligible to participate in the "success bonus" arrangement established by the Compensation Committee of the Board of Directors for senior executives of the Company in connection with the sale of all or a substantial portion of the Company. (e) Consultant shall be eligible to participate in any bonus or incentive plan established for the senior corporate executives of the Company in respect of fiscal year 1995, provided that such bonus shall be based on amounts actually received by Consultant pursuant to the Employment Agreement and this Agreement. 5. Expenses and Other Facilities. (a) During the Consulting Term the Consultant shall be reimbursed in accordance with the policies of the Company for necessary and reasonable business expenses incurred by Consultant in connection with the performance of his duties hereunder. (b) During the Consulting Term the Company shall continue to make available to Consultant, without any expense to him, an office and such administrative staff as reasonably may be necessary to perform his consulting duties. 6. Termination and Liquidated Damages. (a) This Agreement and Consultant's retention hereunder may be terminated at any time by either party upon sixty (60) days prior written notice to the other party. In the event of (i) such a termination by the Company, other than a termination for "Cause," as hereinafter defined, or (ii) a termination at any time by Consultant as a result of a breach of this Agreement by the Company, Consultant shall be entitled to receive as liquidated damages an amount in cash equal to the then-present value of all remaining payments due hereunder during the balance of the Consulting Term. Such amount shall be calculated using a discount rate of 6% per annum and shall be paid in a single sum not later than 10 days after any such termination. (b) In the event of a voluntary termination of his retention hereunder by the Consultant prior to the end of the Consulting Term other than as set forth in clause (a) (ii) above, the Company will have no further obligation to make payments to Consultant following any such termination. Consultant shall not be subject to liability for breach of this Agreement by reason of his termination of his retention hereunder. (c) For purposes of this Agreement, "Cause" shall mean (i) Consultant's willful and continued failure substantially to perform his duties hereunder (other than as a result of "disability" [as defined under the Company's Long-Term Disability Plan] and other than as a result of breach of this Agreement by the Company), (ii) Consultant's dishonesty in the performance of his duties hereunder or (iii) an act or acts on Consultant's part constituting a felony under the laws of the United States or any state thereof. (d) In the event of any termination of this Agreement pursuant to Paragraph 6(a), the Company shall continue to provide Consultant or his spouse, or both, with the benefits specified in paragraph 4(b) until the expiration of the Consulting Term. 7. Status; Taxes. (a) Status of Consultant. During the Consulting Term, Consultant shall not be an employee of the Company and shall not be entitled to participate in any employee benefit plans or other benefits or conditions of employment available to the employees of the Company except to the extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant shall have no authority to act as an agent of the Company, except on authority specifically so delegated, and he shall not represent to the contrary to any person. Consultant shall only consult, render advice and perform such tasks as Consultant determines are necessary to achieve the results specified by the Company. Although the Company may specify the results to be achieved by the Consultant and may control and direct him in that regard, the Company shall not control or direct the Consultant as to the details or means by which such results are accomplished. (b) Taxes. It is intended that the fees paid hereunder shall constitute revenues to Consultant. To the extent consistent with applicable law, the Company will not withhold any amounts therefrom as federal income tax withholding from wages or as employee contributions under the Federal Insurance Contributions Act or any other state or federal laws. Consultant shall be solely responsible for the withholding and/or payment of any federal, state or local income or payroll taxes. 8. Non-Competition. During the Consulting Term Consultant shall not directly or indirectly be or remain employed by, or render services for, any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise engaged in any business, which is in competition with any business currently conducted by the Company. 9. Confidentiality. During and after the Consulting Term, Consultant shall not disclose or use for Consultant's own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary or affiliate of the Company; provided that the foregoing shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Consultant's breach of this covenant. Any provision of this Agreement to the contrary notwithstanding, Consultant's obligations pursuant to this Paragraph 9 shall survive any termination of this Agreement and Consultant's retention hereunder. 10. Specific Performance. Consultant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in recognition of this fact, Consultant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 11. Fees and Expenses. The Company agrees, in the event of a dispute between Consultant and the Company with respect to any of Consultant's rights under this Agreement, to reimburse Consultant for any and all reasonable legal fees and related expenses incurred by Consultant in connection with enforcing such rights if Consultant is successful as to at least part of the disputed claim by reason of arbitration, litigation or settlement. 12. Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. (b) Entire Agreement; Amendments. This Agreement supersedes all prior agreements between Consultant and the Company relating to Consultant's employment and the termination thereof, including, without limitation, the Employment Agreement, and, together with the agreements evidencing the stock options and other awards referred to in Paragraph 4(c) and the documents evidencing the benefits to which Consultant and his spouse are entitled pursuant to Paragraphs 4(b), (d) and (e), contains the entire understanding of the parties with respect to the retention of Consultant by the Company; provided, however, that this Agreement shall not impair any rights or benefits accrued by Consultant under any benefit plan, compensation arrangement or pension, excess retirement or management security plan of the Company prior to the termination of his employment on December 1, 1994. Except as aforesaid, there are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. (c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (d) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. (e) Assignment. This Agreement shall not be assignable by Consultant and shall be assignable by the Company only with the consent of Consultant; provided that no such assignment by the Company shall relieve the Company of any liability hereunder, whether accrued before or after such assignment. (f) Arbitration. Any dispute between the parties to this Agreement arising from or relating to the terms of this Agreement or the retention of Consultant by the Company shall be submitted to arbitration in Dallas, Texas under the auspices of the American Arbitration Association. (g) Successors; Binding Agreement. (i) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or the assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Consultant to the benefits set forth in Paragraph 6(a). (ii) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. (h) Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement; provided that all notices to the Company shall be directed to the attention of the General Counsel of the Lomas Financial Group or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (i) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. /S/GARY WHITE ------------------------------ GARY WHITE Address: 13616 Far Hills Lane Dallas, Texas 75240 LOMAS FINANCIAL CORPORATION ATTEST: By: /S/JESS HAY ------------------------- Jess Hay Chairman and Chief /S/RAMONA TAYLOR Executive Officer - - ------------------------- Ramona Taylor, Secretary Address: 1600 Viceroy Drive Dallas, TX 75235 (SEAL) EX-10.19 20 EXHIBIT 10.19 CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of November 1, 1994, by and between Lomas Financial Corporation, a Delaware corporation (the "Company") and Ramona Taylor ("Consultant"). WHEREAS, Consultant and the Company have previously entered into an Employment Agreement dated as of April 1, 1993 (the "Employment Agreement"); WHEREAS, effective December 1, 1994, Consultant wishes to retire as an employee of the Company and the parties wish to terminate the Employment Agreement; WHEREAS, the Company's management desires that it be able to continue to call upon the experience and knowledge of Consultant for consultation services and advice; and WHEREAS, Consultant is willing to render such services to the Company on the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and Consultant's long prior service to the Company, and in cancellation and settlement of all obligations under the Employment Agreement, the parties agree as follows: 1. Retirement and Appointment. Consultant shall remain employed by the Company until December 1, 1994, upon which date Consultant shall retire under the terms (as applicable to Consultant) of the Voluntary Early Retirement Program that was made available to certain employees of the Lomas Financial Group on or about September 9, 1994; provided, however, that Consultant shall continue to be an officer of the Company with the title of Senior Vice President and Secretary through December 31, 1996, unless a successor shall have been elected at an earlier date by the Company's Board of Directors. 2. Term of Agreement. Consultant shall be retained by the Company for a period commencing on December 1, 1994 (the "Effective Date"), and terminating on December 31, 1996 (the "Consulting Term"). 3. Position and Responsibilities. Consultant agrees to serve as a consultant to the Company and to render such advice and services to the Company as reasonably may be requested by the Chief Executive Officer or the Board of Directors of the Company. The services to be performed by Consultant under this Agreement shall include, but not be limited to, the performance of the services (including supervisory services) that Consultant was performing in the period immediately preceding the Effective Date, and Consultant shall continue to perform such services during the Consulting Term unless and until another person is designated to perform any of such services by the Chief Executive Officer or the Board of Directors. During the first 13 months of the Consulting Term, Consultant shall render 163 days of service of which at least 108 days shall be rendered at the Company's headquarters location. During the final 12 months of the Consulting Term, Consultant shall render 150 days of service of which 100 days shall be rendered at the Company's headquarters location. 4. Compensation. (a) The Company shall pay Consultant a retainer (the "Retainer") of (i) $141,700 for the period from December 1, 1994 through December 31, 1995, and (ii) $130,800 for the period from January 1, 1996 through December 31, 1996. The Retainer shall be payable in equal monthly installments during the Consulting Term. Consultant shall be entitled to the full Retainer regardless of the amount and frequency of consulting services actually rendered by her. (b) During the Consulting Term, the Company shall continue the participation of Consultant in all employee benefit arrangements of the Company that provide life insurance and health, medical, hospitalization and similar benefits, to the extent that Consultant is covered under existing policies, if any, on a basis no less favorable than that on which she is currently covered under any such plan or policy, and, thereafter, on the basis and for the remainder of the period set forth in the Voluntary Early Retirement Program. (c) All outstanding stock options granted to Consultant prior to the date of her retirement under any stock incentive plan of the Company shall be fully vested as of such date and shall continue to be exercisable for the remainder of their terms, and the Company shall make such amendments to the plans and the outstanding awards as may be necessary to effectuate the provisions of this paragraph 4(c), except that the Company shall be obliged to make any such amendment only to the extent that shareholder approval thereof would not be required to maintain the current status of any such plan under any applicable regulatory regime. (d) Consultant shall continue to be eligible to participate in the "success bonus" arrangement established by the Compensation Committee of the Board of Directors for senior executives of the Company in connection with the sale of all or a substantial portion of the Company. (e) Consultant shall be eligible to participate in any bonus or incentive plan established for the senior corporate executives of the Company in respect of fiscal year 1995, provided that such bonus shall be based on amounts actually received by Consultant pursuant to the Employment Agreement and this Agreement. 5. Expenses and Other Facilities. (a) During the Consulting Term the Consultant shall be reimbursed in accordance with the policies of the Company for necessary and reasonable business expenses incurred by Consultant in connection with the performance of her duties hereunder. (b) During the Consulting Term the Company shall continue to make available to Consultant, without any expense to her, an office and such administrative staff as reasonably may be necessary to perform her consulting duties. 6. Termination and Liquidated Damages. (a) This Agreement and Consultant's retention hereunder may be terminated at any time by either party upon sixty (60) days prior written notice to the other party. In the event of (i) such a termination by the Company, other than a termination for "Cause," as hereinafter defined, or (ii) a termination at any time by Consultant as a result of a breach of this Agreement by the Company, Consultant shall be entitled to receive as liquidated damages an amount in cash equal to the then present value of all remaining payments due hereunder during the balance of the Consulting Term. Such amount shall be calculated using a discount rate of 6% per annum and shall be paid in a single sum not later than 10 days after any such termination. (b) In the event of a voluntary termination of her retention hereunder by the Consultant prior to the end of the Consulting Term other than as set forth in clause (a) (ii) above, the Company will have no further obligation to make payments to Consultant following any such termination. Consultant shall not be subject to liability for breach of this Agreement by reason of her termination of her retention hereunder. (c) For purposes of this Agreement, "Cause" shall mean (i) Consultant's willful and continued failure substantially to perform her duties hereunder (other than as a result of "disability" [as defined under the Company's Long-Term Disability Plan] and other than as a result of breach of this Agreement by the Company), (ii) Consultant's dishonesty in the performance of her duties hereunder or (iii) an act or acts on Consultant's part constituting a felony under the laws of the United States or any state thereof. (d) In the event of any termination of this Agreement pursuant to Paragraph 6(a), the Company shall continue to provide Consultant with the benefits specified in paragraph 4(b) until the expiration of the Consulting Term. 7. Status; Taxes. (a) Status of Consultant. During the Consulting Term, Consultant shall not be an employee of the Company and shall not be entitled to participate in any employee benefit plans or other benefits or conditions of employment available to the employees of the Company except to the extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant shall have no authority to act as an agent of the Company, except on authority specifically so delegated, and she shall not represent to the contrary to any person. Consultant shall only consult, render advice and perform such tasks as Consultant determines are necessary to achieve the results specified by the Company. Although the Company may specify the results to be achieved by the Consultant and may control and direct her in that regard, the Company shall not control or direct the Consultant as to the details or means by which such results are accomplished. (b) Taxes. It is intended that the fees paid hereunder shall constitute revenues to Consultant. To the extent consistent with applicable law, the Company will not withhold any amounts therefrom as federal income tax withholding from wages or as employee contributions under the Federal Insurance Contributions Act or any other state or federal laws. Consultant shall be solely responsible for the withholding and/or payment of any federal, state or local income or payroll taxes. 8. Non-Competition. During the Consulting Term Consultant shall not directly or indirectly be or remain employed by, or render services for, any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise engaged in any business, which is in competition with any business currently conducted by the Company. 9. Confidentiality. During and after the Consulting Term, Consultant shall not disclose or use for Consultant's own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary or affiliate of the Company; provided that the foregoing shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Consultant's breach of this covenant. Any provision of this Agreement to the contrary notwithstanding, Consultant's obligations pursuant to this Paragraph 9 shall survive any termination of this Agreement and Consultant's retention hereunder. 10. Specific Performance. Consultant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in recognition of this fact, Consultant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 11. Fees and Expenses. The Company agrees, in the event of a dispute between Consultant and the Company with respect to any of Consultant's rights under this Agreement, to reimburse Consultant for any and all reasonable legal fees and related expenses incurred by Consultant in connection with enforcing such rights if Consultant is successful as to at least part of the disputed claim by reason of arbitration, litigation or settlement. 12. Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. (b) Entire Agreement; Amendments. This Agreement supersedes all prior agreements between Consultant and the Company relating to Consultant's employment and the termination thereof, including, without limitation, the Employment Agreement, and, together with the agreements evidencing the stock options and other awards referred to in Paragraph 4(c) and the documents evidencing the benefits to which Consultant is entitled pursuant to Paragraphs 4(b), (d) and (e), contains the entire understanding of the parties with respect to the retention of Consultant by the Company; provided, however, that this Agreement shall not impair any rights or benefits accrued by Consultant under any benefit plan, compensation arrangement or pension, excess retirement or management security plan of the Company prior to the termination of her employment on December 1, 1994. Except as aforesaid, there are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto. (c) No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party's rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (d) Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. (e) Assignment. This Agreement shall not be assignable by Consultant and shall be assignable by the Company only with the consent of Consultant; provided that no such assignment by the Company shall relieve the Company of any liability hereunder, whether accrued before or after such assignment. (f) Arbitration. Any dispute between the parties to this Agreement arising from or relating to the terms of this Agreement or the retention of Consultant by the Company shall be submitted to arbitration in Dallas, Texas under the auspices of the American Arbitration Association. (g) Successors; Binding Agreement. (i) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or the assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Consultant to the benefits set forth in Paragraph 6(a). (ii) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. (h) Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the execution page of this Agreement; provided that all notices to the Company shall be directed to the attention of the General Counsel of the Lomas Financial Group or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (i) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. /S/RAMONA TAYLOR ------------------------------ RAMONA TAYLOR Address: 14765 Lochinvar Drive Addison, TX 75240 LOMAS FINANCIAL CORPORATION By: /S/JESS HAY ------------------------- Jess Hay Chairman and Chief Executive Officer Address: 1600 Viceroy Drive Dallas, TX 75235 ATTEST: /S/JAMES L. CROWSON - - ------------------------------ James L. Crowson, Assistant Secretary (SEAL) EX-10.20 21 EXHIBIT 10.20 NINTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into effective as of December 31, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as Administrative Agent (in that capacity "Administrative Agent"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with Administrative Agent, "Agents"). The Company, Lenders, and Agents have entered into the Restated Loan and Security Agreement (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement") dated as of July 8, 1993, providing for loans to the Company on a revolving basis up to $120,000,000 outstanding at any one time. The Company has requested amendments to the Loan Agreement in order to modify certain financial covenants and change certain provisions relating to dividends, loans, and advances to Lomas Financial Corporation. Accordingly, for adequate and sufficient consideration, the parties agree as follows: 1. Certain Definitions. Unless otherwise specified in this amendment (a) all terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) all references to "Sections" and "Schedules" are references to the Loan Agreement's sections and schedules. 2. Amendments. (a) Section 7.2(a) is entirely amended as follows: Any Debt if, after giving effect thereto and to any simultaneous retirement of other debt, the Company's consolidated Debt (other than Excepted Debt) would exceed 250% of the Company's Consolidated Net Worth; (b) Section 7.3(b)(i) is entirely amended as follows: $25,000,000 at any time prior to December 31, 1994, and $10,000,000 at any time thereafter, as reduced by the outstanding principal of any advances or loans (at any date of determination) by the Company or any of its Subsidiaries to Lomas Financial Corporation permitted under Section 7.8(e), plus (c) Section 7.4 is entirely amended as follows: 7.4 Consolidated Net Worth. Permit its Consolidated Net Worth to be less than the greater of either (i) the amount required by FHA, FHLMC, FNMA, VA, and GNMA at any and all times for maintaining the Company's status as an approved mortgagee, seller/servicer, or issuer, or (ii) $150,000,000. (d) Section 7.8(e) is entirely amended as follows: While no Potential Default or Default exists, loans or advances to Lomas Financial Corporation by the Company or any of its Subsidiaries that never exceed a total of $10,000,000 principal -- as that amount is reduced by any dividends made to Lomas Financial Corporation on or after December 31, 1994. 3. Conditions Precedent. The foregoing is not effective unless (a) Agents receive counterparts of this amendment executed by the Company, by Agents, and all Lenders and (b) all of the representations and warranties -- in this amendment and in all other Loan Papers are true and correct as of -- as if made on -- the date of this amendment. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the other Loan Papers. Except as expressly modified and superseded by this amendment, the terms and provisions of the other Loan Papers are ratified and confirmed and continue in full force and effect. The Company, all Lenders, and Agents agree that the Loan Papers, as amended by this amendment, continue to be legal, valid, binding, and enforceable in accordance with their respective terms. The Company ratifies and confirms that all Liens granted to Agents, on behalf of Lenders, were intended to, do, and continue to secure the full payment and performance of the Obligations. The Company shall perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents as either Agent or any Lender may reasonably request in order to perfect and protect such Liens and preserve and protect the rights of Agents and Lenders in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Lenders and Agents that (a) this amendment and the other Loan Papers to be delivered under this amendment have been duly authorized, executed, and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and those other Loan Papers (c) this amendment and those other Loan Papers are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery, and performance by the Company of this amendment and those other Loan Papers do not require the consent of any other Person and do not and will not constitute a violation of any Laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties in the Loan Agreement, as amended by this amendment, and each other Loan Paper are true and correct in all material respects on and as of the date of this amendment as though made as of the date of this amendment, and (f) as of the date of this amendment, no Default or Potential Default (other than any Default or Potential Default which is cured by the modifications contained within this amendment) exists. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment. Because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if included in this amendment verbatim. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts must be construed together to constitute one and the same document. 8. Parties Bound. This amendment binds and inures to the Company, Agents, each Lender, and (subject to Section 10.10) their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGE(S) FOLLOW. EXECUTED on February 13, 1995, but effective as of the date first stated above. 1600 Viceroy Dr., 8th Floor LOMAS MORTGAGE USA, INC., as the Company Dallas, Texas 75235 Attn: Robert E. Byerley, Jr., Executive Vice President and Treasurer By /S/ROBERT E. BYERLEY, JR. ------------------------------------ Telecopy: 214/879-7018 Robert E. Byerley, Jr., Executive Vice President and Treasurer Mortgage Finance Group BANK ONE, TEXAS, N.A., 1717 Main Street, 4th Floor as Administrative Agent and a Lender Dallas, Texas 75201 Attn: Kathleen C. Stewart, Vice President Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART ------------------------------------ Kathleen C. Stewart, Vice President 717 Travis Street - 7-TCB-S56 TEXAS COMMERCE BANK NATIONAL Houston, Texas 77002 ASSOCIATION, as Syndication Agent Attn: Carlotta M. Hudler, and a Lender Vice President Telecopy: 713/216-2082 By /S/CARLOTTA M. HUDLER ------------------------------------ Carlotta M. Hudler, Vice President First Bank Place, 2nd Floor MPFP0801 FIRST BANK NATIONAL ASSOCIATION, 601 Second Avenue South as a Lender Minneapolis, Minnesota 55402-4302 Attn: Kathlyn K. Slater, Vice President Telecopy: 612/973-0826 By /S/KATHLYN K. SLATER ------------------------------------ Kathlyn K. Slater, Vice President 8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B., Dallas, Texas 75255 as a Lender Attn: Abbie Y. Tidmore, Vice President Telecopy: 214/360-1660 By /S/ABBIE Y. TIDMORE ------------------------------------ Abbie Y. Tidmore, Vice President EX-11 22 EXHIBIT 11 LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE (in thousands, except per share amounts) Quarter Ended Six Months Ended December 31 December 31 ------------------ ------------------ 1994 1993 1994 1993 -------- -------- -------- -------- Primary earnings (loss) per share: Average common shares outstanding 20,132 20,100 20,115 20,099 Common stock equivalents under Nonemployee Directors Long Term Incentive Plan 22 32 29 30 -------- -------- -------- -------- Total shares 20,154 20,132 20,144 20,129 ======== ======== ======== ======== Loss from continuing operations $(33,709) $ (42,503) $(41,059) $(82,201) Loss from discontinued operations (7,500) (5,635) (13,000) (15,504) -------- -------- -------- -------- Net loss $(41,209) $ (48,138) $(54,059) $(97,705) ======== ======== ======== ======== Primary earnings (loss) per share: Loss from continuing operations $(1.67) $ (2.11) $(2.04) $(4.08) Loss from discontinued operations (.37) (.28) (.64) (.77) ------ ------ ------ ------ Net loss $(2.04) $ (2.39) $(2.68) $(4.85) ====== ====== ====== ====== Fully diluted earnings (loss) per share: Average common shares outstanding 20,132 20,100 20,115 20,099 Common stock equivalents under Nonemployee Directors Long Term Incentive Plan 22 32 29 30 -------- -------- -------- -------- Total shares 20,154 20,132 20,144 20,129 ======== ======== ======== ======== Loss from continuing operations $(33,709) $ (42,503) $(41,059) $(82,201) Loss from discontinued operations (7,500) (5,635) (13,000) (15,504) -------- -------- -------- -------- Net loss $(41,209) $ (48,138) $(54,059) $(97,705) ======== ======== ======== ======== Primary earnings (loss) per share: Loss from continuing operations $(1.67) $ (2.11) $(2.04) $(4.08) Loss from discontinued operations (.37) (.28) (.64) (.77) ------ ------ ------ ------ Net loss $(2.04) $ (2.39) $(2.68) $(4.85) ====== ====== ====== ====== EX-27 23
5 0000060150 GARY WHITE 1,000 6-MOS JUN-30-1995 JUL-01-1994 DEC-31-1994 13,587 13,468 104,041 (29,578) 0 0 102,777 (17,342) 1,225,398 0 0 0 0 0 0 0 0 111,472 0 0 84,206 31,071 37,254 (41,059) 0 (41,059) (13,000) 0 0 (54,059) (2.68) (2.68)
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