-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EclckQ24gDoeZhA+98O+YG4c75Iot9A5vREkmX/ePBvt3iz8opzyEgypDS/DNMMR KVJTSLjD5cJfYFr6e/U80Q== 0000950134-99-000210.txt : 19990115 0000950134-99-000210.hdr.sgml : 19990115 ACCESSION NUMBER: 0000950134-99-000210 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTEAD MORTGAGE CORP CENTRAL INDEX KEY: 0000766701 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752027937 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08896 FILM NUMBER: 99506561 BUSINESS ADDRESS: STREET 1: 2711 NORTH HASKELL AVE STREET 2: STE 900 CITY: DALLAS STATE: TX ZIP: 75204 BUSINESS PHONE: 2148742323 MAIL ADDRESS: STREET 1: 2711 NORTH HASKELL AVENUE STREET 2: STE 900 CITY: DALLAS STATE: TX ZIP: 75204 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS MORTGAGE CORP DATE OF NAME CHANGE: 19891105 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: DECEMBER 31, 1998 (Date of Earliest Event Reported) CAPSTEAD MORTGAGE CORPORATION ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) MARYLAND 1-8896 75-2027937 (State of Incorporation) (Commission File No.) I.R.S. Employer Identification No.) 2711 NORTH HASKELL AVENUE SUITE 900 DALLAS, TEXAS 75204 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (214) 874-2323 2 ITEM 2. DISPOSITION OF ASSETS CAPSTEAD MORTGAGE CORPORATION ANNOUNCES SALE OF MORTGAGE BANKING OPERATIONS On December 31, 1998 Capstead Mortgage Corporation's affiliate Capstead Inc. closed the sale of its mortgage banking operation to Homecomings Financial Network, Inc., an affiliate of GMAC Mortgage Group, Inc., (a wholly-owned subsidiary of General Motors Acceptance Corporation ("GMAC")) for aggregate cash consideration of more than $44 million, subject to certain post-closing adjustments. Homecomings Financial Network, Inc. is a wholly-owned subsidiary of Residential Funding Corporation ("RFC"). Capstead Inc. has had a long-term alliance with RFC, currently subservicing approximately $18.6 billion of RFC's single-family mortgage loans. Previously, on December 21, 1998 Capstead Inc. closed the sale of its $38 billion single-family mortgage servicing portfolio, including the conveyance of certain related hedging instruments, to another GMAC affiliate, GMAC Mortgage Corporation. After retiring indebtedness related to its mortgage servicing portfolio, related hedge instruments and loan production financing, and certain transaction costs, these transactions generated net cash proceeds of approximately $500 million. Of these proceeds, $26.5 million is being held in escrow for a period of up to eighteen months to secure related indemnifications. Merrill Lynch & Co. and Cohane Rafferty Securities, Inc. advised Capstead Mortgage Corporation and Capstead Inc. on the sale of the mortgage banking operations. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS FINANCIAL STATEMENTS: This Form 8-K filing does not contain the required pro forma financial information relative to the disposition of the Company's mortgage banking operations. Such pro forma financial information will be filed with an amendment to this Form 8-K on or prior to March 16, 1999. EXHIBITS: EXHIBIT NUMBER 2.1 Asset Purchase Agreement dated as of December 10, 1998 by and among Capstead Mortgage Corporation, Capstead Holdings, Inc. and Capstead Inc. and Homecomings Financial Network, Inc. 10.32 Purchase and Sale Agreement dated as of November 30, 1998 by and among Capstead Inc. and GMAC Mortgage Corporation. 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 hereunto duly authorized. CAPSTEAD MORTGAGE CORPORATION January 14, 1999 By: /s/ Phillip A. Reinsch ------------------------------------ Phillip A. Reinsch - Senior Vice President - Control 3 EXHIBIT INDEX EXHIBIT NUMBER Description 2.1 Asset Purchase Agreement dated as of December 10, 1998 by and among Capstead Mortgage Corporation, Capstead Holdings, Inc. and Capstead Inc. and Homecomings Financial Network, Inc. 10.32 Purchase and Sale Agreement dated as of November 30, 1998 by and among Capstead Inc. and GMAC Mortgage Corporation. EX-2.1 2 ASSET PURCHASE AGREEMENT DATED 12/10/98 1 EXHIBIT 2.1 EXECUTION COPY ASSET PURCHASE AGREEMENT dated as of December 10, 1998 by and among CAPSTEAD MORTGAGE CORPORATION, CAPSTEAD HOLDINGS, INC. AND CAPSTEAD INC. and HOMECOMINGS FINANCIAL NETWORK, INC. 2 TABLE OF CONTENTS
ARTICLE I SALE AND PURCHASE...................................................2 1.01 PURCHASE BY PURCHASER......................................2 1.02 EXCLUDED ASSETS............................................3 1.03 ASSUMED OBLIGATIONS........................................4 1.04 CLOSING....................................................5 1.05 PURCHASE PRICE.............................................6 1.06 ESCROWED PAYMENT...........................................9 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE CAPSTEAD COMPANIES ..................................................................10 2.01 ORGANIZATION..............................................10 2.02 SUBSIDIARIES OF THE COMPANY...............................10 2.03 GOOD STANDING.............................................10 2.04 VALIDITY OF AGREEMENT.....................................10 2.05 CAPITALIZATION............................................11 2.06 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK.................11 2.07 FINANCIAL STATEMENTS......................................12 2.08 SUBSEQUENT EVENTS.........................................13 2.09 CONTRACTS.................................................16 2.10 NO DEFAULT................................................18 2.11 PROPERTIES................................................19 2.12 REAL PROPERTY.............................................19 2.13 ENVIRONMENTAL.............................................20 2.14 QUALIFICATION AS LENDER...................................21 2.15 SERVICING. ..............................................21 2.16 ACCOUNTS RECEIVABLE.......................................21 2.17 BANK ACCOUNTS.............................................22 2.18 GUARANTEES................................................22 2.19 INSURANCE.................................................22 2.20 TAXES.....................................................22 2.21 EMPLOYEE BENEFITS.........................................27 2.22 COMPENSATION..............................................30 2.23 CERTAIN ADVANCES..........................................30 2.24 RELATED PARTIES...........................................30 2.25 LICENSES AND PERMITS......................................31
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2.26 PROPRIETARY RIGHTS........................................31 2.27 LABOR.....................................................32 2.28 COMPLIANCE WITH LAW.......................................32 2.29 LITIGATION................................................33 2.30 NO CONFLICT...............................................34 2.31 COPIES OF CERTAIN DOCUMENTS...............................34 2.32 UNDERLYING DOCUMENTS......................................34 2.33 BUSINESS OF THE COMPANY...................................34 2.34 BROKERS OR FINDERS........................................35 2.35 DISCLOSURE OF MATERIAL FACTS..............................35 2.36 FINANCIAL CONDITION.......................................35 2.37 EMPLOYEES.................................................36 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER........................36 3.01 ORGANIZATION..............................................36 3.02 VALIDITY OF AGREEMENT.....................................36 3.03 NO CONFLICT...............................................37 3.04 BROKERS OR FINDERS........................................37 3.05 BOARD ACTION..............................................37 ARTICLE IV COVENANTS..........................................................37 4.01 CONDUCT OF BUSINESS.......................................37 4.02 NEGATIVE COVENANTS........................................38 4.03 PRESERVATION OF BUSINESS..................................38 4.04 UPDATING OF SCHEDULES.....................................38 4.05 ACCESS TO INFORMATION.....................................39 4.06 FULFILLMENT OF CONDITIONS AND COVENANTS...................39 4.07 PRESS RELEASES............................................39 4.08 THIRD PARTY CONSENTS......................................39 4.09 CERTAIN NOTIFICATIONS.....................................40 4.10 ANTITRUST MATTERS.........................................41 4.11 EMPLOYEE BENEFITS.........................................41 4.12 POST-CLOSING INFORMATION..................................43 4.13 ADMINISTRATION OF ACCOUNTS................................44 4.14 ASSUMPTION OF QUALIFICATION...............................44
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ARTICLE V CONDITIONS TO OBLIGATIONS OF SELLERS...............................44 5.01 PERFORMANCE...............................................44 5.02 REPRESENTATIONS AND WARRANTIES............................45 5.03 LEGAL OPINION.............................................45 5.04 OFFICERS' CERTIFICATE.....................................45 ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER.............................45 6.01 PERFORMANCE...............................................45 6.02 REPRESENTATIONS AND WARRANTIES............................45 6.03 MATERIAL ADVERSE EFFECT...................................46 6.04 LEGAL OPINION.............................................46 6.05 THIRD PARTY CONSENTS......................................46 6.06 DELIVERY OF BUSINESS RECORDS..............................46 6.07 EMPLOYMENT OF NEW HIRES...................................47 6.08 TERMINATION OF CONTRACTUAL ARRANGEMENTS...................47 6.09 OFFICERS' CERTIFICATES....................................47 6.10 RESERVED..................................................47 6.11 ADDITIONAL DOCUMENTS......................................47 6.12 ENVIRONMENTAL.............................................47 ARTICLE VII CONDITIONS TO OBLIGATIONS OF EACH OF THE PARTIES...................47 7.01 NO PROCEEDINGS............................................47 7.02 HART-SCOTT-RODINO ACT.....................................48 7.03 SERVICING PURCHASE AGREEMENT..............................48 7.04 TRANSITION SERVICES AGREEMENT.............................48 ARTICLE VIII TERMINATION OF AGREEMENT...........................................48 8.01 TERMINATION...............................................48 8.02 EFFECT OF TERMINATION.....................................49
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ARTICLE IX INDEMNIFICATION....................................................49 9.01 INDEMNIFIABLE CLAIMS......................................49 9.02 NOTICE OF CLAIM...........................................51 9.03 RIGHT OF OFFSET...........................................53 9.04 SURVIVAL..................................................53 9.05 TAX INDEMNIFICATION PAYMENTS..............................54 9.06 LIMITATION ON INDEMNITY...................................55 ARTICLE X MISCELLANEOUS......................................................56 10.01 NOTICES...................................................56 10.02 ENTIRE AGREEMENT..........................................57 10.03 WAIVERS AND AMENDMENTS....................................57 10.04 CONFIDENTIALITY...........................................57 10.05 EXPENSES..................................................58 10.06 FURTHER ACTIONS...........................................58 10.07 SURVIVAL..................................................58 10.08 GOVERNING LAW.............................................58 10.09 ASSIGNMENT................................................58 10.10 VARIATIONS IN PRONOUNS....................................58 10.11 COUNTERPARTS..............................................58 10.12 SCHEDULES.................................................58 10.13 HEADINGS..................................................59 10.14 EXCLUSIVITY...............................................59 10.15 CONFIDENTIALITY AND NONCOMPETITION........................59 10.16 SEVERABILITY..............................................62 10.17 NO THIRD PARTY BENEFICIARIES..............................62 10.18 REMEDIES EXCLUSIVE........................................62 10.19 EQUITABLE REMEDIES........................................62 10.20 JOINT PREPARATION.........................................62 10.21 ATTORNEYS' FEES...........................................62
6 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of December 10, 1998, by and among CAPSTEAD INC., a Delaware corporation (the "Company"), CAPSTEAD HOLDINGS, INC., a Delaware corporation ("Holdings" and, together with the Company, the "Sellers"), and CAPSTEAD MORTGAGE CORPORATION, a Maryland corporation ("CMC" and, together with Holdings and the Company, collectively the "Capstead Companies" and each individually a "Capstead Company"), and HOMECOMINGS FINANCIAL NETWORK, INC., a Delaware corporation ("Purchaser"). RECITALS A. The authorized capital stock of the Company consists solely of 20,000 shares of common stock, par value $0.01 per share, of which 13,252 shares (the "Shares") are issued and outstanding (exclusive of any treasury shares). All of the Shares are owned by Holdings. B. The Company is in the business of servicing and originating residential mortgage loans and is the primary operator of the Business. C. The parties believe that it is in their respective best interests for Purchaser to acquire the Business by purchasing the Purchased Assets subject to the Assumed Obligations (each as defined herein), subject to the terms and conditions set forth in this Agreement. D. The Company is entering into an asset purchase and sale agreement with GMAC Mortgage Corporation ("GMACMC") for the sale of all or substantially all of the Company's mortgage servicing rights and certain related assets and liabilities (as set forth therein), a copy of which is attached hereto as Exhibit I (the "Servicing Purchase Agreement"). E. For purposes of this Agreement, capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings specified or referred to in Appendix I attached hereto. THEREFORE, the parties agree as follows: 7 ARTICLE I SALE AND PURCHASE 1.01 PURCHASE BY PURCHASER. Subject to the terms and conditions set forth in this Agreement, other than Excluded Assets (as defined in Section 1.02 below), Purchaser agrees to purchase from the Sellers, and the Sellers agree to sell, transfer and convey to Purchaser, at the Closing (as defined below) all of the Sellers' right, title and interest in and to the Business and all the properties, assets and rights of whatever kind and description, tangible or intangible, real, personal or mixed, and wherever located, which are used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business, including, without limitation, all of Sellers' good will with respect to the Business, and all of the following assets (collectively, the "Purchased Assets"): (a) All leases of real property occupied by the Sellers in connection with the Business as specified on Schedule 1.01(a) (collectively, the "Real Property Leases"); (b) All office supplies used in connection with the Business; (c) All machinery, equipment (including, without limitation, computer equipment, telephonic systems and other communication and information systems), fixtures and office furniture, vehicles and other tangible personal property owned or leased by the Sellers and used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business (collectively, the "Equipment"); (d) All books of account, records, files, invoices, customer lists, supplier lists and other data used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business; (e) All rights under, and interest in, the Contracts listed on Schedule 1.01(e) including, without limitation, the Capstead Inc. Retention Incentive Plan dated as of September 24, 1998, and the Severance Benefits Agreement dated as of September 25, 1998 between the Company and Christopher T. Gilson (the "Employment Agreements") (collectively, including any and all amendments and supplements disclosed on such Schedule, the "Assumed Contracts"); (f) All right, title and interest with respect to all Assumed Obligations (as defined in Section 1.03) (including, without limitation, refunds, claims thereto, security deposits, and any other claims thereunder); 2 8 (g) All sales literature, promotional literature and other selling material used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business; (h) All intellectual property, including, without limitation, patents, patent applications and patent rights to inventions, if any, owned, in-house developed or licensed software (including, without limitation, all software listed in Schedule 1.01(h)), customized modifications to software including modifications to the servicing or default management software system (including, without limitation, modifications to LSAMS), trademarks, trade names, service marks and applications therefor, copyrights, registrations and applications therefor, processes, products, apparatus, trade secrets and know-how used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business; provided, however, that Purchaser acknowledges and agrees that it shall not purchase hereby or otherwise gain any interest in any rights to the "Capstead" name or trademark, except as permitted in the Transition Services Agreement (as defined in Section 7.04); (i) All government and other permits, licenses, approvals, certificates of inspection, filings, franchises and other authorizations pertaining to the Business or the Sellers' operation of the Business, which are assignable to Purchaser, except as set forth on Schedule 1.01(i); (j) All accounts receivable and prepaid expenses related to, or associated with, directly or indirectly (in whole or in part), the operation of the Business; (k) All pending applications for residential mortgage loans; and (l) All other property and rights, tangible and intangible, real, personal or mixed, including, without limitation, Confidential Information, which are used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business, wherever located and regardless of whether (1) reflected on the Sellers' books and records, or (2) enumerated in clauses (a) through (k), above, or on the Schedules referred to in clauses (a) through (k), above. 1.02 EXCLUDED ASSETS. Anything herein to the contrary notwithstanding, the Sellers are not selling to Purchaser, and Purchaser is not purchasing, any asset sold to GMACMC pursuant to the Servicing Purchase Agreement or any of the assets listed on Schedule 1.02 (the "Excluded Assets"). Purchaser may, at any time prior to the commencement of the fifth calendar day before the Closing Date (but excluding for the purpose of counting such number of calendar days the calendar day on which the Closing occurs), at Purchaser's sole discretion, revise and deliver to Sellers Schedule 1.02 to add to such Schedule any other assets which 3 9 would have been included in the Purchased Assets but for the Purchaser's determination that it is not in Purchaser's best interest to purchase such asset; provided, however, that such five-day notice limitation shall not apply with respect to (i) any assets disclosed or modified in a Permitted Supplement to the Schedules delivered by the Sellers to Purchaser during such five-day period, or (ii) if the Closing for any reason occurs prior to the Scheduled Closing Date, any assets disclosed or modified on a Permitted Supplement (as defined in Section 4.04) to the Schedules delivered by Sellers to Buyer at any time prior to such Closing Date. Purchaser shall not be obligated to purchase or assume, and shall not purchase or assume, any of such assets that are added to Schedule 1.02 by Purchaser before the Closing Date as permitted by the immediately preceding sentence, and all of such assets shall be considered Excluded Assets hereunder and shall not be considered Purchased Assets hereunder for any purpose whatsoever. The revision of Schedule 1.02 pursuant to this Section 1.02 shall not result in any adjustment (as contemplated by Section 1.05(e)) to the Purchase Price (as defined in Section 1.05(a) below). 1.03 ASSUMED OBLIGATIONS. Upon the sale and purchase of the Purchased Assets, Purchaser shall assume and agree to pay or discharge when due in accordance with their respective terms, all Liabilities and obligations of each Seller pursuant to the Assumed Contracts to the extent they are accrued and outstanding at the time of the Closing (subject to Section 1.05(d)) or become due on or after the Closing (the "Assumed Obligations"). Except for the Assumed Obligations, Purchaser shall not assume, become responsible for, or incur, any Liability or Contract of any Capstead Company of any nature whatsoever, whether known or unknown, contingent or otherwise (the "Retained Liabilities"), including, without limitation, the Retained Liabilities listed on Schedule 1.03. Each of the Capstead Companies shall continue to be liable for and shall appropriately discharge its respective obligations with respect to the Retained Liabilities and any other obligations which are not Assumed Obligations. Without limiting the foregoing, in no event shall Purchaser assume, or otherwise be liable in any respect whatsoever with respect to the following Retained Liabilities: (i) any Liabilities incurred by any of the Capstead Companies in connection with this Agreement and the transactions provided for herein, including, without limitation, attorneys' and accountants' fees, and expenses pertaining to the performance by any of the Capstead Companies of their obligations hereunder; (ii) except as otherwise set forth in Section 2.20(b)(iii) or Section 9.05(b)(ii), any Taxes of the Capstead Companies (whether relating to periods before or after the transactions contemplated in this Agreement or incurred by any Capstead Company in connection with this Agreement and the transactions provided for herein), including, without limitation, any Liability for Taxes arising out of the inclusion of any 4 10 Capstead Company in any group filing consolidated, combined or unitary tax returns or arising out of any transferee Liability; (iii) any Liabilities of any Capstead Company to its dissenting shareholders, if any, under any applicable law; (iv) any Liabilities of any Capstead Company with respect to any options, warrants, agreements or convertible or other rights to acquire any shares of its capital stock of any class; (v) any Liabilities of any Capstead Company in connection with or relating to all Proceedings, assessments and judgments, costs, losses, Liabilities, damages, deficiencies and expenses (whether or not arising out of third-party claims), including, without limitation, interest, penalties, attorneys' and accountants' fees and out-of-pocket expenses and all amounts paid in investigation, defense or settlement of any of the foregoing; and (vi) any Liabilities of any Capstead Company with respect to or arising out of the Capstead Litigation. The assumption of the Assumed Obligations by Purchaser hereunder shall not enlarge any rights of third parties under Contracts with Purchaser or any Capstead Company, and nothing herein shall prevent any party from contesting in good faith with any third party any of said Liabilities. 1.04 CLOSING. (a) The sale and purchase of the Purchased Assets and the assumption of the Assumed Obligations (the "Closing") shall occur at the offices of Andrews & Kurth L.L.P., 1717 Main Street, Suite 3700, Dallas, Texas at 10:00 AM, Dallas time, on the date which is three Business Days following the later of (i) the date of expiration or termination of any waiting period or extension thereof which may be applicable to the purchase of the Business contemplated under this Agreement pursuant to the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), or (ii) the date on which all other conditions set forth herein have been fulfilled or waived, but in no event sooner than December 31, 1998 (herein, the "Scheduled Closing Date"), or at such other place or such other date and time as may be mutually agreed to by the parties in accordance with this Agreement (the date of the Closing being the "Closing Date"). 5 11 (b) On the Closing Date, the following actions shall be taken: (i) Purchaser shall pay the Closing Payment (as defined in Section 1.05(b)) by wire transfer, payable to the Sellers or their agent in immediately available funds to an account designated to Purchaser by the Sellers in writing as set forth in Schedule 1.04(b) (and Sellers shall allocate the Closing Payment, and all other payments made by the Purchaser jointly to Sellers hereunder, in a manner consistent with Section 2.20(b)(iv)); (ii) The Purchaser shall deposit the Escrowed Payment with the Escrow Agent (each as defined in Section 1.05(c)); (iii) The Sellers shall deliver, or caused to be delivered to Purchaser (or otherwise surrender possession to Purchaser of), all of the Purchased Assets, together with executed Consents, assignments, including, without limitation, assignments of the Real Property Leases and related estoppel certificates, full warranty bills of sale, warranty deeds and other instruments of conveyance in form and substance reasonably satisfactory to Purchaser, sufficient to convey to Purchaser good and valid title to such Purchased Assets, free and clear of all Liens; (iv) The Sellers and Purchaser shall execute and deliver such bills of sale, assignments and assignment and assumption agreements as are appropriate to transfer the Purchased Assets and the Assumed Obligations to Purchaser; and (v) Each party shall execute and deliver such other documents or certificates required under this Agreement or reasonably requested by the other parties to further evidence the consummation of the transactions contemplated under this Agreement. 1.05 PURCHASE PRICE. (a) The aggregate purchase price (the "Purchase Price"), subject to adjustment pursuant to subparagraph (e) below, shall be an amount equal to the sum of (i) the Closing Payment (as defined below), (ii) the Pipeline Loan Payment (as defined below) and (iii) the Escrowed Payment (as defined below). (b) (i) The portion of the Purchase Price payable to the Sellers at the Closing shall be $42,673,855, as calculated in Schedule 1.05(b) (the "Closing Payment"); and (ii) the value of the Pipeline Loans as of the Closing Date ("Pipeline Loan Valuation Amount") shall be determined and paid as provided in Section 1.05(f) hereto. 6 12 (c) The portion of the Purchase Price payable to First Union National Bank (the "Escrow Agent") at the Closing shall be $1,500,000 (the "Escrowed Payment"). (d) All operating expenses and fees applicable to the Assumed Contracts accrued or prepaid prior to the Closing Date, including, without limitation, rents, license fees, utility payments, personal property taxes, and any annual operation assessments (e.g., common area maintenance) relating to the Purchased Assets, shall be equitably prorated between the parties to the extent not otherwise provided for purposes of the September 30 Listing (as defined below). Such payment shall be made by Purchaser to Sellers, or by Sellers to Purchaser, as the case may be, within ninety (90) days following the Closing based on a schedule prepared by Purchaser and Sellers in good faith promptly after the Closing. (e) Within ninety (90) calendar days following the Closing Date, Purchaser shall deliver to Sellers true and complete copies of an acquisition audit of the Purchased Assets and Assumed Obligations as of the Closing Date (the "Carve Out Audit"). The Carve Out Audit shall be prepared by PricewaterhouseCoopers LLP (which preparation shall be paid for by Purchaser), in a form substantially comparable to Exhibit II hereto, which lists, and sets forth values as of September 30, 1998 for, the Purchased Assets and Assumed Obligations (the "September 30 Listing") and is prepared in accordance with generally accepted accounting principles, applied on a consistent basis with prior periods ("GAAP"). The "Adjustment Amount" (which may be a positive or negative number) shall be calculated based on the Carve Out Audit and shall be an amount equal to (a) the amount of any net increase or decrease in the book value of the Purchased Assets and Assumed Obligations, minus (b) the amount of any increase in the Purchased Assets attributable to the items listed on Schedule 1.05(e) hereto, each for the period between September 30, 1998 and the Closing Date. For purposes of determining the Adjustment Amount, the September 30, 1998 value of the assets and Liabilities of the Business will be the values set forth in the September 30 Listing, and the Closing Date values of the assets and Liabilities will be the values set forth in the Carve Out Audit. The Adjustment Amount shall be calculated by Purchaser, and Purchaser shall notify the Sellers of the Adjustment Amount, within 14 calendar days of the delivery of the Carve Out Audit to Purchaser. Subject to the following paragraph, the Sellers shall have a period of 14 calendar days from the date of notification to review the Adjustment Amount as determined by Purchaser. If the Sellers agree with Purchaser as to the Adjustment Amount, then on the Business Day immediately following the end of such 14-calendar day period (i) if the Adjustment Amount is positive, Purchaser shall remit by wire transfer to the Sellers (or their successors) the Adjustment Amount, and (ii) if the Adjustment Amount is negative, at the option of the Purchaser, (A) the Sellers shall remit to Purchaser by wire transfer the Adjustment Amount, or (B) the Purchaser shall be entitled to claim against the funds held 7 13 pursuant to the Escrow Agreement up to the Adjustment Amount (to the extent that such funds are sufficient to satisfy such obligation, with the Sellers being responsible to pay any deficiency within the timeframe contemplated by this Section 1.05(e)). If the Sellers do not agree with the Adjustment Amount calculated by the Purchaser, the Sellers shall deliver to Purchaser, within 14 calendar days following notification of the Sellers by Purchaser of the Adjustment Amount, written notice containing specific objections (prepared in good faith) to the Adjustment Amount as determined by Purchaser as well as the amount of the Adjustment Amount as estimated by Sellers based upon such specific objections. To the extent that there is no dispute as to any portion of the Adjustment Amount, Purchaser or Sellers shall follow the provisions of the immediately preceding paragraph with respect to such undisputed portion. Once the Sellers give such notice of objection, a 10-day period shall commence whereby the parties hereto agree to work to resolve such dispute. After such 10- day period, any issues still in dispute will be submitted to KPMG Peat Marwick, certified public accountants (the "Accountants"), for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party or its subsidiaries (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties, each of whom shall also have the right to enter a judgment upon the determination in any court having jurisdiction; and (iii) Purchaser and Sellers will each bear 50% of the fees of the Accountants for such determination. No interest will be due on any Adjustment Amount paid in accordance with the provisions hereof; provided, however, that interest shall accrue daily at the Prime Rate published in the Wall Street Journal as of the first date of the interest period for any period following the date on which the payment of the Adjustment Amount is required to be made (which, with respect to disputed amounts submitted to the Accountants, shall be the date following the date of resolution by the Accountants). (f) Within forty-five (45) calendar days following the Closing Date, Purchaser shall deliver to Sellers true and complete copies of its determination of the Pipeline Loan Valuation Amount as of the Closing Date. The Pipeline Loan Valuation Amount shall be prepared by Purchaser in a manner consistent with the requirements of Schedule 1.05(f). Subject to the following paragraph, the Sellers shall have a period of fourteen (14) calendar days from the date of notification to review the Pipeline Loan Valuation Amount as determined by Purchaser. As soon as the Sellers agree with Purchaser as to the Pipeline Loan Valuation Amount (in whole or part), then on the Business Day immediately following such 8 14 agreement Purchaser shall remit by wire transfer to the Sellers (or their successors) the agreed portion of the Pipeline Loan Valuation Amount. If the Sellers do not agree with the Pipeline Loan Valuation Amount calculated by the Purchaser, the Sellers shall deliver to Purchaser, within 14 calendar days following notification of the Sellers by Purchaser of the Pipeline Loan Valuation Amount, written notice containing specific objections (prepared in good faith) to the Pipeline Loan Valuation Amount as determined by Purchaser as well as the amount of the Pipeline Loan Valuation Amount as estimated by Sellers based upon such specific objections. To the extent that there is no dispute as to any portion of the Pipeline Loan Valuation Amount, Purchaser shall follow the provisions of the immediately preceding paragraph with respect to such undisputed portion. Once the Sellers give such notice of objection, a 10-day period shall commence whereby the parties hereto agree to work to resolve such dispute. After such 10-day period, any issues still in dispute will be submitted to the Accountants for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party or its subsidiaries (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants, as set forth in a notice delivered to all parties by the Accountants, will be binding and conclusive on the parties, each of whom shall also have the right to enter a judgment upon the determination in any court having jurisdiction; and (iii) Purchaser and Sellers will each bear 50% of the fees of the Accountants for such determination. No interest will be due on any Pipeline Loan Valuation Amount paid in accordance with the provisions hereof; provided, however, that interest shall accrue daily at the Prime Rate published in the Wall Street Journal as of the first date of the interest period for any period following the date on which the payment of the Pipeline Loan Valuation Amount is required to be made (which, with respect to disputed amounts submitted to the Accountants, shall be the date following the date of resolution by the Accountants). 1.06 ESCROWED PAYMENT. The Escrowed Payment will be administered in accordance with the provisions of an escrow agreement (the "Escrow Agreement") substantially in the form attached as Exhibit III hereto. 9 15 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE CAPSTEAD COMPANIES Each of the Capstead Companies, jointly and severally, represent and warrant to Purchaser, as of the date hereof and hereafter through the Closing Date, as follows: 2.01 ORGANIZATION. Each of the Company and Holdings is a corporation duly organized, validly existing and in good standing under the laws of Delaware. CMC is a corporation duly organized, validly existing and in good standing under the laws of Maryland. Each Seller has all requisite corporate power and authority to own, lease and operate its properties and assets in the manner in which such properties and assets are now owned, leased and operated and to carry on the business in which it is now engaged. Prior to the date hereof, each of the Sellers has delivered or made available to Purchaser true and complete copies of its Certificate of Incorporation and its by-laws, as currently in effect. 2.02 SUBSIDIARIES OF THE COMPANY. The Company does not own any equity interest, directly or indirectly, in any corporation, partnership, joint venture, firm or other Person. 2.03 GOOD STANDING. Each of the Sellers is qualified to transact business and is in good standing as a foreign corporation in each state or jurisdiction in which it is required to be so qualified. Schedule 2.03 sets forth the states in which each of the Sellers is qualified. There is no other jurisdiction in which the ownership, leasing, licensing or use of property or assets by each of the Sellers or the conduct of their respective businesses makes such qualification necessary, and where the failure to be so qualified would have a Material Adverse Effect with respect to the Sellers or the Business. 2.04 VALIDITY OF AGREEMENT. (a) Each Capstead Company has full power and authority to execute and deliver this Agreement and all of the other Contracts and documents referred to herein, executed in connection herewith or contemplated hereby to which such Capstead Company is a party (all other Contracts and documents referred to herein, executed in connection herewith or contemplated hereby, including, without limitation, the Servicing Purchase Agreement, are herein referred to collectively as the "Related Agreements") and this Agreement constitutes, and the Related Agreements, when executed and delivered, will constitute, the legal, valid and binding obligations of each Capstead Company which is a party thereto, enforceable against each of them in accordance with their respective terms. Each Capstead Company's execution and delivery of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the board of directors (and, if necessary, stockholders) of such Capstead Company and any 10 16 other vote or corporate Consent necessary for due authorization and, except as set forth in Schedule 2.04, such execution and delivery, and the consummation of such transactions, does not require the Consent of any other Person other than such as may be required under the HSR Act. (b) Each Capstead Company has the right and power to execute this Agreement and each Related Agreement to which it is a party, and each Seller has the right and power to sell, transfer and assign the Purchased Assets being sold, transferred or assigned by it pursuant to this Agreement or such Related Agreement. 2.05 CAPITALIZATION. (a) None of the Company's capital stock has been issued in violation of any federal or state law. The authorized capital stock of the Company consists of 20,000 shares of common stock, $0.01 par value, of which 13,252 shares are duly and validly issued, outstanding, fully paid and non-assessable (excluding treasury shares) and of which 6,748 shares are authorized but unissued. (b) Each Share and each outstanding share of capital stock of each of the Sellers is validly authorized and issued, fully paid, nonassessable and free of preemptive rights. (c) Holdings owns of record and beneficially all of the Shares as set forth in Recital A and Section 2.05(a) of this Agreement free and clear of any Lien, including, without limitation, any Contracts or other rights of any character whatsoever granted to any Person. (d) The authorized capital stock of Holdings consists of (i) 100,000 shares of Class A Common Stock, $0.01 par value, (ii) 100,000 shares of Class B Common Stock, $0.01 par value, and (iii) 100,000 shares of Class A Preferred Stock, $0.01 par value. CMC owns of record and beneficially 18,857 shares of the Class A Preferred Stock of Holdings; approximately 265 shares of Class A Common Stock of Holdings are held by approximately 27 individuals. Such shares of Class A Common Stock outstanding may change only due to repurchases of such stock by Holdings in the event of termination of employment of such individuals. No other shares of Holdings are outstanding, and no shares of the Class B Common Stock of Holdings have been issued. 2.06 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth on Schedule 2.06 to this Agreement, the Company does not have any commitment or obligation, either firm or conditional, to issue, deliver or sell, under any offer, subscription, stock option Contract, stock bonus Contract, stock purchase plan, incentive compensation plan, warrant, call, conversion right or otherwise, any shares of its capital stock or other securities. No 11 17 Capstead Company has any commitment or obligation, either firm or conditional, to issue, deliver or sell, under any offer, subscription, stock option Contract, stock bonus Contract, stock purchase plan, warrant, call, conversion right or otherwise, with respect to any of the Shares, except as specifically described in Section 4.11. There are no voting agreements, trusts, proxies or other Contracts or instruments with respect to the voting of the Company's capital stock to which any Capstead Company is a party. There are no other equity securities of any class of the Company issued, reserved for issuance or outstanding. 2.07 FINANCIAL STATEMENTS. (a) Attached hereto as Appendix II is a true and complete copy of audited financial statements of the Company for the years ended December 31, 1997 and 1996 (the "Year End Financial Statements"). The Year End Financial Statements include audited balance sheets of the Company as of December 31, 1997 and 1996 (and notes thereto) (such 1997 balance sheet being termed the "1997 Balance Sheet"), together with related statements of operations, changes in stockholder's equity and cash flows of the Company (and notes thereto) for each of such periods and together with the report thereon of Ernst & Young LLP, certified independent public accountants. The Year End Financial Statements fairly present in accordance with GAAP the financial position and the results of operations of the Company for the periods therein identified. (b) Attached hereto as Appendix III is a true and complete copy of unaudited financial statements of the Company for the nine months ended September 30, 1998 (the "1998 Financial Statements"). The 1998 Financial Statements include an unaudited balance sheet of the Company as of September 30, 1998 (the "1998 Balance Sheet"). The 1998 Financial Statements fairly present in accordance with GAAP the financial position and the results of operations of the Company for the period therein identified. (c) Promptly following the end of each calendar month after the date of execution and delivery of this Agreement which is completed prior to the Closing Date, the Sellers shall deliver to Purchaser the "Month End Management Report" prepared by the Company with respect to such month (the first of which shall in any event cover each calendar month completed since September 30, 1998) in the ordinary and usual course of business consistent with past practices, which report shall include (i) a balance sheet of the Company as of the end of such month prepared in a manner consistent with, and in a format comparable to, the 1998 Balance Sheet (a "Monthly Balance Sheet"), and (ii) a report of the results of operations for such month (the "Monthly Operations Report"). (d) Each of the Monthly Balance Sheets contained or to be contained in the Month End Management Reports presents (or will present) fairly in accordance with GAAP, the financial condition, assets, Liabilities and stockholder's equity of the Company as of its 12 18 date; results of operations contained or to be contained in the Month End Management Report presents (or will present) fairly in accordance with GAAP, the financial condition and the results of operations of the Company for the periods therein identified. The financial statements referred to in Section 2.07 (including, without limitation, those contained or to be contained in the Month End Management Reports), including all notations and schedules thereto, have been (or will be) prepared in accordance with GAAP, subject, in the case of interim unaudited financial statements, to normal recurring year-end adjustments other than those which have a year-to-date impact, and the absence of notes; the financial statements referred to in this Section 2.07 (including, without limitation, those contained or to be contained in the Month End Management Reports) reflect the consistent application of GAAP throughout the periods involved and are (or will be) in accordance with the books and records of the Company, which books and records are true and complete in all material respects. (e) At the dates of the aforementioned balance sheets, to the Knowledge of each Capstead Company, except as set forth in Schedule 2.07(e), the Company did not have (nor will have with respect to such balance sheets dated subsequent to the date hereof) any Liabilities of any nature, whether accrued, absolute, contingent or otherwise, whether due or to become due, whether related to the Business or otherwise, and whether or not required to be disclosed on a balance sheet prepared in conformity with GAAP, not fully or properly reflected or reserved against in such balance sheets, or in any notes thereto. 2.08 SUBSEQUENT EVENTS. Except as otherwise described in the attached Schedule 2.08 or consented to in writing by Purchaser: (a) Since December 31, 1997, the Business has not been in default in any material respect of any Contract, suffered the revocation of any license or right to do business, total or partial termination, suspension, or adverse modification of any Contracts, or been the subject of any restriction, regulation, investigation or inquiry by any Governmental Body. (b) Since September 30, 1998, there has been no Material Adverse Effect with respect to the Business. (c) Since September 30, 1998, neither the Company nor Holdings has issued, or authorized for issuance, any equity security, bond, note or other security of the Company, and neither the Company nor Holdings has granted, or entered into, any Contract to issue or sell any such equity security, bond, note or other security of the Company, whether pursuant to any offer, underwriting Contract, stock option Contract, stock bonus Contract, stock purchase plan, incentive compensation plan, warrant, call, conversion right or otherwise. (d) Since September 30, 1998, the Business has not incurred additional debt for borrowed money, or, to the Knowledge of each Capstead Company, incurred any other 13 19 obligation or Liability (fixed, contingent or otherwise), except in the ordinary and usual course of its business and consistent with past practices. (e) Since September 30, 1998, the Capstead Companies have not paid or prepaid any obligation or Liability (fixed, contingent or otherwise), or discharged or satisfied any Lien, or settled any Liability, claim, dispute, or Proceeding, relating to the Business, except for current Liabilities included in the September 30 Listing and current Liabilities incurred since that date in the ordinary and usual course of business of the Business. (f) Except as contemplated by the Servicing Purchase Agreement, since September 30, 1998, the Sellers have not mortgaged, pledged or otherwise encumbered or subjected to a Lien any of the assets or properties of the Business, tangible or intangible, including, without limitation, servicing rights, except for Liens for current Taxes which are not yet due and payable and Permitted Liens arising out of the ordinary and usual course of business. (g) Except as contemplated by the Servicing Purchase Agreement, since September 30, 1998, none of the Sellers has sold, leased or otherwise disposed of any asset or property, tangible or intangible, relating to the Business, including, without limitation, any mortgage loans or mortgage servicing rights, except in the ordinary and usual course of business, and in each case for consideration at least equal to the fair value of such asset or property, nor have any of the Sellers leased or licensed to others (including, without limitation, officers and directors) any asset or property, or discontinued any product or service line, or the sale or other disposition of any of its products or services. (h) Since September 30, 1998, the Company has not purchased or otherwise acquired any debt securities or equity securities of any Person other than in connection with ordinary hedging activities and not for investment purposes. (i) Since September 30, 1998, except for individual expenditures and commitments made in the ordinary and usual course of business and involving amounts not exceeding $10,000 individually, the Business has not made any expenditure for the purchase, acquisition, construction or improvement of a capital asset; the aggregate amount of all such expenditures and commitments made in the ordinary and usual course of business has not exceeded $100,000 in the aggregate. (j) Since September 30, 1998, the Capstead Companies have not entered into any transaction or Contract with respect to the Business, except in the ordinary and usual course of business and not involving an amount in any case in excess of $25,000, and the Business has not waived any right, canceled any debts or claims, or voluntarily suffered any losses, in each case of a value of more than $25,000. 14 20 (k) Since December 31, 1997, the Capstead Companies have not sold, assigned, transferred or conveyed any Proprietary Right (as defined in Section 2.26 of this Agreement) with respect to the Business. (l) Since December 31, 1997, the Company has not effected any amendment or supplement to, or extension of, any employee profit-sharing, stock option, stock purchase, pension, bonus, incentive, retirement, medical reimbursement, life insurance, deferred compensation or any other employee benefit plan or arrangement other than as set forth in the Employment Agreements. (m) Since December 31, 1997, the Company has not paid to or for the benefit of any of its directors, officers, employees or shareholders any compensation of any kind other than wages, salaries, bonuses, dividends and benefits, other than as set forth in the Employment Agreements. (n) Since December 31, 1997, none of the Sellers has effected any change in its directors or executive management (e.g., Senior Vice President and more senior officers). (o) Since September 30, 1998, none of the Sellers has effected any amendment or modification to its charter documents, by-laws or other governing documents. (p) Since December 31, 1997, the Business has not experienced any material problems in employee relations, including, without limitation, strikes, shutdowns, slowdowns, work stoppages or threats thereof. (q) Since December 31, 1997, none of the Sellers has made any change in accounting methods or principles used for financial reporting purposes, except as required by a change in GAAP and concurred with by its independent public accountants. (r) To the Knowledge of each Capstead Company, since December 31, 1997, there have been no instances of fraud involving management or employees of the Company in respect to the Business. (s) Since December 31, 1997, the Business has otherwise been conducted in the ordinary and usual course. (t) To the extent a representation or warranty has been made by a Seller in this Section 2.08, such Seller has not entered into any Contract to take any action described in this Section 2.08. 15 21 (u) Since December 31, 1997, through the date of this Agreement, there have been no resignations of key employees with respect to the Business. 2.09 CONTRACTS. (a) The attached Schedule 2.09 constitutes a true and complete list (subject, in the case of clauses (i), (xi) and (xiv) below, to the dollar amount indicated therein, and in the case of clause (xviii) the time limitations indicated therein) of each Contract to which any Capstead Company is a party or by which any Capstead Company is bound in any respect and, in each case, which relates to the Business (except for any Contract described in Section 2.20, 2.21 or 2.24 hereof or any Contract referenced in Section 1.8 of the Servicing Purchase Agreement or the Schedules thereto or any forward delivery Contracts with FNMA and FHLMC (as hereinafter defined)), including, without limitation, any and all: (i) Contracts for the disposition, by sale, lease or otherwise, of Equipment, goods, materials, research and development, supplies, studies or capital assets, or for the performance of services (other than mortgage loan servicing), in any case involving more than $100,000 each, except that such limitation as to dollar amounts shall not apply as to any Contracts covered by Section 2.26 of this Agreement; (ii) Contracts for the disposition, by sale, lease or otherwise, of mortgage loans, or mortgage servicing, or for the performance of mortgage servicing under any pooling and/or servicing Contracts; (iii) Contracts for the joint performance of work or services, and all other joint venture, partnership or other similar Contracts, including, without limitation, any sub-servicing Contracts or mortgage origination Contracts; (iv) management or employment Contracts, consulting Contracts, collective bargaining Contracts or other Contracts with any labor union, or termination and severance Contracts; (v) notes, mortgages, deeds of trust, loan Contracts, security Contracts, guarantees, debentures, indentures, credit Contracts, warehousing Contracts, repurchase Contracts and other evidences of indebtedness as to which any Capstead Company is an obligor other than endorsements for collection or deposit in the ordinary and usual course of business; (vi) pension, retirement, profit-sharing, deferred compensation, bonus, incentive, life insurance, hospitalization, or other employee benefit plans or 16 22 arrangements (including, without limitation, any Contracts with trustees, insurance companies or others relating to any such employee benefit plan or arrangement); (vii) stock option, stock purchase, warrant, repurchase or other Contract with any employee or officer of the Company relating to any Shares or other equity security of the Company; (viii) Contracts with underwriters, agents, brokers or sales representatives; (ix) Contracts with any director or officer of any of the Sellers or with any Person affiliated or associated with such a director or officer; (x) powers of attorney or similar authorizations granted by any Capstead Company to any third party; (xi) licenses, sublicenses, royalty Contracts and any other Contract to which any Capstead Company is a party, or otherwise subject, relating to technical assistance, Proprietary Rights, confidentiality, non-disclosure, non-use or other similar Contracts in any case involving more than $25,000 each; (xii) deeds or Contracts relating to real property owned of record or beneficially by any Capstead Company; (xiii) leases, whether as lessor or lessee, with respect to (i) individual items of personal property, which are not terminable without material penalty in 30 days and (ii) any real property; (xiv) Contracts for the purchase of any Equipment, capital assets or services (other than mortgage loan servicing), except individual service orders made in the ordinary and usual course of business involving less than $25,000 each; provided, however, that if the aggregate of such individual service orders from one party exceeds $100,000, such information shall be included on Schedule 2.09; (xv) Contracts for the purchase of any mortgage loan or mortgage loan servicing; (xvi) Contracts containing covenants limiting the freedom of any Capstead Company to compete in any line of business or with respect to any particular product or service or with any Person; 17 23 (xvii) requirements Contracts in which any Capstead Company is the purchaser or the seller; and (xviii) any material Contract, not of the type covered by or excluded from any of the other items of this Section 2.09, which by its terms is either not to be completely performed by a Capstead Company within 30 days of the date hereof or is not to terminate or is not terminable without penalty to a Capstead Company prior to 30 days from the date hereof. (b) Except as set forth in Schedule 2.09 (and except for any Contract referenced in the Servicing Purchase Agreement or the Schedules thereto), the Company is not a party to, nor is it bound by, any Contract which: (i) it can reasonably foresee will result in any material loss upon the performance thereof (including, without limitation, any Liability for penalties or damages, whether liquidated, direct, indirect, incidental, or consequential); and (ii) is not reflected or adequately reserved against on the Company's 1998 Balance Sheet. (c) The Capstead Companies have made available to representatives of Purchaser, for their review and examination, written summaries of all oral Contracts referred to in this Section 2.09 and all of the written Contracts referred to in this Section 2.09, and have provided true and complete copies of all of such written Contracts upon request. 2.10 NO DEFAULT. (a) The Capstead Companies, in each case to the extent involving or relating to the Business, have in all respects performed, or are now performing, the obligations of, and are not in default (and would not by the lapse of time and/or the giving of notice be in default), nor have they received notice of default or notice of termination, in respect of, any Contract binding upon them or their assets or properties (including, without limitation, any Contract described in Section 2.09 hereof). Each of the Contracts or other instruments required to be shown on the Schedules referred to in this Agreement is a legal, binding and enforceable obligation of or against the Sellers. Except as set forth in the attached Schedule 2.10(a), to the Knowledge of the Capstead Companies, no party with whom one or more Sellers has a Contract described in the preceding sentence is in default thereunder or has Breached any terms or provisions thereof. To the Knowledge of each Capstead Company, there are no currently existing facts or circumstances which make a default under, or termination or suspension of, any of the Contracts referred to in this Section 2.10 likely to occur subsequent to the date hereof nor has any third party raised any claim, dispute or controversy with respect 18 24 to any such Contracts. With respect to any servicing agreement, no Capstead Company has received any notice or other information from an investor that such investor has terminated the applicable servicing agreement or that it intends to do so. All fees and expenses due and owing to any investor under any servicing agreement have been remitted on a timely basis to the applicable investor, with the exception of bona fide disputes as to said amounts. (b) Without limiting the scope of the representations and warranties set forth in Section 2.10(a) above, no Capstead Company has received any notice of, or is otherwise aware of facts or circumstances which would form the basis of, any default by the Company with respect to the servicing of any mortgage loan or the performance of the respective obligations of the Company under any Contract relating to mortgage loans owned or serviced by it, and, to the Knowledge of the Capstead Companies, no other party thereto is in default under any such Contract. Without limiting the generality of the foregoing, no Seller has received any notice of default from HUD, FHLMC, FNMA (as such terms are defined in Section 2.14) or any other Governmental Body with respect to the servicing obligations relating to any mortgage loans or other loans serviced by the Company. 2.11 PROPERTIES. The September 30 Listing reflects all of the assets and properties, real and personal, used by the Sellers in the Business or otherwise held by the Company, except for (a) property acquired or disposed of in the ordinary and usual course of business since the date of such September 30 Listing, (b) property not required under GAAP to be reflected thereon and (c) assets and properties which are subject to transfer pursuant to the Servicing Purchase Agreement. Except as set forth on the attached Schedule 2.11 and except for property disposed of in the ordinary and usual course of business since the date of the September 30 Listing, the Company has good and valid title to all assets and properties included in such September 30 Listing and thereafter acquired, free and clear of any imperfection of title or Lien, of any kind or nature, except for the Lien of current Taxes not yet due and payable. All of the Equipment, software and properties reflected on the September 30 Listing and thereafter acquired are in good operating condition and repair, reasonable wear and tear only excepted, and are free from any material defect; provided, however, that solely with respect to any matter relating to the Year 2000 compliance of any such Equipment, software or properties, reference is made to the representation and warranty set forth in Section 2.26(b), which is the only representation and warranty made herein with respect to any such Equipment, software or properties being Year 2000 Compliant. The attached Schedule 2.11 contains a true and complete list of each item of Equipment and software and other property consisting of personal property and having an original cost in excess of $1,000. 2.12 REAL PROPERTY. No Capstead Company owns or has an option to purchase any real property which is used or held for use in, related to, or associated with, directly or indirectly (in whole or in part) the Sellers' operation of the Business, including any real estate 19 25 acquired under mortgage servicing agreements. The attached Schedule 2.12 constitutes a true and complete list of all real property leased, or under option to be leased, by any Seller to the extent it is used or held for use in, related to, or associated with, directly or indirectly (in whole or in part) the Sellers' operation of the Business. All such property leased by each Seller is held under valid and existing leases. Except as set forth on Schedule 2.12, no Seller leases any real or personal property as lessor or sub-lessor. Each Seller enjoys peaceful and undisturbed possession of all property described on Schedule 2.12. The operations of the Sellers on any of such real property, including improvements thereon, do not violate any applicable building code, zoning requirement or classification, or pollution control ordinance or statute relating to the particular property or to such operations, and such non-violation is not dependent, in any instance, on so-called non-conforming use exceptions. 2.13 ENVIRONMENTAL. (a) To the Knowledge of each Capstead Company, no Hazardous Materials (as defined in clause (f) below) have been used, stored or otherwise handled in any manner on, under, in, from or affecting any real property leased, owned or managed by any Capstead Company or in which any Capstead Company has an interest, in each case to the extent it is used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business (any such real property being herein referred to in this Section 2.13 as the "Property"). No Capstead Company has and, to the Knowledge of any Capstead Company, no prior or current owner or prior occupant of the Property has, used Hazardous Materials on, under, in, from or affecting the Property. (b) To the Knowledge of each Capstead Company, no Hazardous Materials have at any time been released into, stored or deposited over, upon or below the Property, into any water systems on or below the surface of the Property, or directly or indirectly onto any property or water system adjoining, adjacent to or abutting the Property, or have been used in the construction of any improvements located on or about the Property. (c) To the Knowledge of each Capstead Company, there are no, and never have been, underground storage tanks located on or under the Property. (d) No Capstead Company has received any notice of any violations (nor are they aware of any existing violations) of any Legal Requirements governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials on, under, in, from or affecting the Property and, to the Knowledge of each Capstead Company, there are not any Proceedings commenced or Threatened by any Person with respect to any such violations. 20 26 (e) The Property is currently being, and has in the past been, operated by one of the Capstead Companies in accordance with, and in compliance with, all applicable Environmental Laws, and to the Knowledge of each Capstead Company, the Property has been operated in the past by third parties in accordance with, and in compliance with, all applicable Environmental Laws. (f) "Hazardous Materials" are any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances or petroleum products (including gasoline, crude oil or any fraction thereof), defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea formaldehyde insulation. "Environmental Laws" are any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any governmental authority or other requirements of law (including common law) regulating, relating to or imposing Liability or standards of conduct concerning protection of human health or the environment. 2.14 QUALIFICATION AS LENDER. The Company is approved by the U.S. Department of Housing and Urban Development ("HUD") as a lender and servicer of mortgage loans and meets all applicable HUD regulations so as to be entitled to originate and service mortgage loans sold to or insured by HUD. The Company is also an approved servicer of mortgage loans to the Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA") and meets all applicable FHLMC and FNMA guidelines so as to be entitled to service mortgage loans sold to FHLMC and FNMA. In addition, the Company is in good standing and eligible to sell mortgage loans to each of FHLMC and FNMA. The Company is in good standing and is eligible as a mortgage lender and servicer under applicable rules, regulations and procedures promulgated by each of the mortgage participation or sale of mortgage-backed bond or pass-through certificate programs for which the Company originates or services mortgage loans. The Company is in compliance in all material respects with all eligibility requirements under any correspondent or servicing arrangement pursuant to which the Company services mortgage loans. 2.15 SERVICING. Each mortgage loan serviced by the Company and the servicing of each such mortgage loan complies, in all respects, with the terms of any Governmental Body program, FNMA or FHLMC program, or other investor commitment or arrangement related thereto, including, without limitation, the terms of any applicable regulation or servicing Contract and all applicable documents relating to such mortgage loan. 2.16 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company shown on the September 30 Listing or thereafter acquired arose and are collectible in the ordinary and usual course of the business of the Company. The values at which accounts receivable, net of 21 27 reserves, are carried on the Company's books and records reflect the amounts deemed fully collectible and are determined in accordance with GAAP. 2.17 BANK ACCOUNTS. The attached Schedule 2.17 constitutes a true and complete list of all the bank accounts, including escrow accounts, of the Company, together with the names of Persons authorized to draw thereon. Except as set forth in such Schedule, all cash in such accounts is held in demand deposits and is not subject to any restriction or limitation as to withdrawal. All of such accounts are reconciled on a timely basis, are fully funded and are free from errors. 2.18 GUARANTEES. Except as otherwise noted on the attached Schedule 2.18, none of the Liabilities of the Company is guaranteed by any Person. Schedule 2.18 is a true and complete list of all guarantees by, or other similar Liabilities of, the Company (including, without limitation, any repurchase Contracts) showing the parties and amounts involved and the expiration dates thereof. 2.19 INSURANCE. The attached Schedule 2.19 constitutes a true and complete list of all policies of insurance to which the Company or Holdings is a party or is a beneficiary or named insured, other than insurance policies with respect to individual mortgage loans serviced by the Company. All such policies of insurance are in full force and effect, with all premiums due thereon paid. Schedule 2.19 also sets forth a list of insurance policies to which other parties (including Sellers and other affiliates of the Company) are a party or a beneficiary which relate to the properties, assets or operations of the Business and the names of such other parties. No notice of cancellation or termination has been received with respect to any insurance policy described in this Section 2.19. The Business carries insurance in amounts and types of coverage which are adequate and customary in the industry and against risks and losses which are adequate and usually insured against by Persons holding or operating similar properties and similar businesses. Except as specifically disclosed on such Schedule 2.19, no claims have been asserted with respect to the Business by any Capstead Company under any of such insurance policies. 2.20 TAXES. (a) For purposes of this Agreement, the following definitions shall apply: "Applicable Tax Law" means any Law of any nation, state, region, province, locality, municipality or other jurisdiction relating to Taxes, including, without limitation, regulations and other official pronouncements of any Governmental Body of such jurisdiction charged with interpreting such Laws. 22 28 "Post-Closing Period" means, with respect to the Company, any Tax Period beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date. "Pre-Closing Period" means, with respect to the Company, any Tax Period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date. "Straddle Period" means, with respect to the Company, any Tax Period that begins before and ends after the Closing Date. "Tax" or "Taxes" mean: (i) any income, corporation, gross receipts, franchise, profits, gains, capital stock, capital duty, withholding, social security, unemployment, disability, property, wealth, welfare, stamp, excise, occupation, sales, use, value added, payroll, premium, property, or windfall profits tax, estimated, ad valorem or excise tax, alternative or add-on minimum tax or other similar tax (including, without limitation, any fee, assessment or other charge in the nature of or in lieu of any tax) imposed by any Governmental Body; and (ii) any Liability for the payment of any amount of the type described in clause (i) as a result of the Company being a successor to or transferee of any other corporation at any time on or prior to the Closing Date, and any interest, penalties, additions to tax (whether imposed by law, contractual agreement or otherwise) and any Liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group. "Tax Authority" means, with respect to any Tax, the Governmental Body that imposes such Tax, and the Governmental Body (if any) charged with the collection of such Taxes, including, without limitation, any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums. "Tax Period" means, with respect to any Tax, the period for which the Tax is reported as provided under Applicable Tax Laws. "Tax Return" or "Tax Returns" mean any or all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and any claims for refunds of Taxes, including any amendments or supplements to any of the foregoing. 23 29 "Code" means the Internal Revenue Code of 1986, as amended. All citations to the Code, or to the Treasury Regulations promulgated thereunder, shall include any amendments or any substitute or successor provisions thereto. (b) Except as otherwise set forth in Schedule 2.20(b), the Capstead Companies represent, warrant and covenant as follows with regard to the Purchased Assets: (i) Filing of Tax Returns. Each of the Capstead Companies has timely filed all Tax Returns, statements and reports, including any attachment thereto or amendment thereof, with respect to Taxes required to be filed with any Tax Authority through the date hereof with the appropriate Taxing Authorities and shall prepare and timely file, in a manner consistent with prior years and applicable law and regulations, all Tax Returns required to be filed on or before the Closing Date. (ii) Payment of Taxes. Each of the Capstead Companies has paid, and as of the Closing Date, each will have paid each material Tax due and owing with respect to the Purchased Assets, ownership, operations and activities of the Business (whether or not shown on any Tax Return) and has withheld and paid each material Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other Person. (iii) Sales or Transfer Taxes. All sales Taxes, documentary and stamp Taxes, transfer Taxes, use Taxes, gross receipts Taxes and all other charges for filing and recording documents in connection with the transfer of the Purchased Assets (including, without limitation, patent and trademark filing and recording fees) will be paid by the Purchaser. (iv) Allocation of Purchase Price. Sellers and Purchaser shall allocate the Purchase Price (and all other capitalized costs) among the Purchased Assets. Such allocation shall be made in accordance with the provisions of Section 1060 of the Code and mutually agreed upon by Sellers and Purchaser prior to the Closing Date. Such allocations shall be used in preparing IRS Form 8594, Asset Acquisition Statement, for the Sellers and Purchaser (which Form 8594 shall be completed, executed and delivered by such parties at the Closing) and all Tax Returns. The Sellers and Purchaser shall each file Form 8594 prepared in accordance with this Section 2.20 with their federal income tax returns for their tax period which includes the Closing Date. All allocations made pursuant to this Section 2.20 shall be binding upon the parties hereto and upon each of their successors and assigns, and the parties hereto shall report the transactions contemplated by this Agreement in accordance with such allocations. 24 30 (v) Tax Obligations of the Capstead Companies. Subject to the provisions of Section 2.20(b)(iii) above, the Capstead Companies will be liable for, and will promptly pay when due, any and all Taxes for any Tax Period ending on or before the Closing Date due or payable with respect to the Purchased Assets. (vi) Tax Obligations of the Purchaser. Subject to the provisions of Section 2.20(b)(iii) above, the Purchaser will be liable for, and will promptly pay when due, any and all Taxes with respect to the Purchased Assets, for any Tax Period beginning after the Closing Date. (vii) Allocation of Certain Taxes. (A) Subject to the provisions of Section (iii) above, any Taxes other than Income Taxes ("Non-Income Taxes"), refunds or credits of non-income Taxes for a Straddle Period pertaining to the Purchased Assets and reflected in a Tax Return covering the Straddle Period (a "Straddle Period Return") will be apportioned between the Purchaser and the Sellers based on the number of days during the portion of the assessment period occurring on and before the Closing Date, and the number of days during such period occurring after the Closing Date, and for purposes of Sections (v), (vi) and (viii), each portion of such period will be deemed to be a Tax Period (whether or not it is, in fact, a Tax Period). (B) To the extent estimated Non-Income Taxes have been paid before the Closing Date with respect to a Straddle Period, the Sellers' Liability with respect thereto shall be reduced by that amount, provided that, if such payment or accrual of Non-Income Taxes exceeds the Sellers' Liability as calculated pursuant to this Section (vii), the Purchaser shall promptly pay the Sellers the amount of such excess. (C) Prior to 45 days from the due date of any Straddle Period Return, the Purchaser will allow the Sellers (or the tax advisors or accountants of the Sellers, as the case may be) to review such Straddle Period Return and related work papers for the purpose of determining the accuracy of the amount of Non-Income Taxes determined to be due from, or due to, the Sellers. (D) The Sellers or the Purchaser, as the case may be, will pay the other at least 10 days prior to the date any payment for Non-Income Taxes described in this Section (vii) is due. 25 31 (E) The Sellers also agree not to change any accounting methods or take any filing position inconsistent with Tax Returns filed for prior Tax Periods to the extent that taking such position could result, directly or indirectly, in an increase in any Taxes of the Purchaser for any Tax Periods ending after the Closing Date, without first consulting with the Purchaser. (viii) Refunds and Credits. (A) The Sellers will be entitled to any refunds or credits of Taxes with respect to the Purchased Assets attributable to or arising in Tax Periods ending on or before the Closing Date. (B) The Purchaser will be entitled to any refunds or credits of Taxes with respect to the Purchased Assets attributable to or arising in Tax Periods beginning after the Closing Date. (C) The Purchaser will promptly forward to the Sellers or reimburse the Sellers for any refunds or credits due the Sellers (pursuant to the terms of Sections (vi) and (vii) hereof) within 15 days after receipt thereof, and the Sellers shall promptly forward to the Purchaser (pursuant to the terms of Sections (vi) and (vii) hereof) or reimburse the Purchaser for any refunds or credits due the Purchaser within 15 days after receipt thereof. (ix) Cooperation and Exchange of Information. (A) Each Capstead Company and the Purchaser (including their tax advisors or accountants) will cooperate in the preparation of all Tax Returns with regard to the Purchased Assets relating in whole or in part to Tax Periods ending on or before or including the Closing Date that are required to be filed after such date. (B) Such cooperation will include, without limitation, provision of powers of attorney for purposes of signing Tax Returns and defending audits and providing copies of relevant Tax Returns or return preparation packages illustrating previous reporting practices or containing historical information (with accompanying schedules and related work papers, documents relating to rulings or other determinations by any domestic or foreign Tax Authority) and records concerning the ownership and Tax basis of property with regard to the Purchased Assets which may be relevant to the preparation of such Tax Returns, and providing such other information within such party's possession requested by the party filing such Tax Returns as may be relevant to 26 32 their preparation or to respond to audits by any domestic or foreign Tax Authority with respect to the Purchased Assets and to otherwise enable the Purchaser to satisfy its internal accounting, Tax and other legitimate requirements. The Capstead Companies and the Purchaser will make their employees, facilities and tax advisors or accountants available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. (C) For a period of ten years after the Closing Date or such longer period as may be required by law, the Capstead Companies (or their tax advisors or accountants) will retain and not destroy or dispose of all Tax Returns, books and records (including computer files and software programs) of, or with respect to the activities of, the Purchased Assets for all Tax Periods ending on or prior to the Closing Date. Thereafter, the Capstead Companies (or their tax advisors or accountants) may not destroy or dispose of any Tax Returns, books or records unless it first offers in writing to provide such Tax Returns, books and records to the Purchaser, and the Purchaser fails to accept such offer within 60 days of its being made. (D) In the case of any state, local or foreign joint, consolidated, combined or unitary Tax Returns, such cooperation will also relate to any other Tax Periods in which one party could reasonably require the assistance of the other party in obtaining any necessary information with regard to the Purchased Assets. (E) The Purchaser and the Capstead Companies, upon request, will use their respective Commercially Reasonable Efforts to obtain any certificate or other document from any Tax Authority or other Person as may be necessary to mitigate, reduce or eliminate any Taxes that would otherwise be imposed with respect to the Purchased Assets. The party requesting such information and assistance pursuant to this Section (ix)(E) will reimburse the other party for all reasonable out-of-pocket costs and expenses incurred by such party in providing such information and in rendering such assistance. 2.21 EMPLOYEE BENEFITS. (a) Sellers have made available to Purchaser true and complete copies (including all amendments) of each of the following, a true and complete list of which is attached as Schedule 2.21: (i) each "employee pension benefit plan" (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) of which the Company is the plan sponsor (within the meaning of Section 3(16)(A) 27 33 of ERISA) and which provides benefits to employees of the Company, together with the related trust agreement providing the funding medium for pension benefits thereunder, such plans being hereinafter referred to in this Section 2.21 as the "Pension Plans"; (ii) each "employee welfare benefit plan" (within the meaning of Section 3(1) of ERISA) of which the Company is the plan sponsor and which provides benefits to employees of the Company, together with the related trust agreement or insurance contract providing the funding medium for benefits thereunder and any related contracts thereunder, such plans being hereinafter referred to in this Section 2.21 as the "Welfare Plans"; (iii) the summary plan description for each Pension Plan and Welfare Plan; (iv) the most recent financial statement, if any, including audit reports thereon, Annual Report Form 5500 and actuarial report for each such Pension Plan and Welfare Plan; (v) any investment management agreement which delegates authority for investment of the assets of any such Pension Plan or Welfare Plan; and (vi) the most recent qualification letter from the IRS for each Pension Plan and for any Welfare Plan funded through any tax-exempt trust qualified under Section 501(c) of the Code. (b) With respect to any Pension Plan or Welfare Plan (hereinafter, the "Plans"): (i) the financial statements relating to the Plans furnished to Purchaser have been prepared in accordance with GAAP consistently applied throughout the periods involved and are in accordance with the books and records of such Plans, which books and records are true and complete in all respects; (ii) the Sellers do not maintain or contribute to, or have any obligation to contribute to, or otherwise make payments under, any Plan or material compensation arrangement relating to the Business or arrangement other than those listed on Schedule 2.09 or Schedule 2.21; (iii) all such Plans comply in all material respects with the applicable requirements of ERISA, all such Pension Plans comply with the qualification requirements under Section 401(a) and the requirements for tax-exempt status under Section 501(a) or (c) of the Code, and each Plan has been operated in all material respects in accordance with its terms; (iv) [Intentionally Left Blank]; (v) all required contributions to the Plans have been timely made; the Company has not incurred any Liability under Title IV of ERISA which has not been paid in full prior to the date hereof; all premiums due to the Pension Benefit Guaranty Corporation ("PBGC") have been paid; no Pension Plan maintained by the Company and subject to Title IV of ERISA has any "unfunded benefit liabilities" within the 28 34 meaning of ERISA Section 4001(a)(18), as of the Closing Date which could subject the Company to Liability either directly or indirectly (including, without limitation, through any obligation of indemnification or contribution); (vi) [Intentionally Left Blank]; (vii) there have been no transactions between any such Plan and any "party in interest" or "disqualified person", within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code, which might subject the Company to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code or to a civil action under Section 502 of ERISA; (viii) no investigation or review by the IRS is pending or is contemplated in which the IRS has asserted or may assert that any Pension Plan is not qualified under Section 401(a) of the Code or that any related trust, including any trust for a Welfare Plan, is not exempt from tax under Section 501 of the Code. No assessment of any federal income taxes has been made or is contemplated against the Company or any related trust of any such Plan on the basis of failure of such qualification or exemption nor is there any basis for any such assertion or assessment; and (ix) no event has occurred or, to Sellers' Knowledge, is Threatened or about to occur for which is required to be filed a notice of a reportable event, within the meaning of Section 4043(b) of ERISA and the PBGC regulations issued thereunder. No notice of termination has been filed by the plan administrator pursuant to Section 4041 of ERISA or issued by the PBGC pursuant to Section 4042 of ERISA with respect to any such Pension Plan nor is there any basis for the filing of any such notice of termination. (c) The Company neither is nor has been a contributing employer to any multiemployer pension plan (within the meaning of Section 3(37) of ERISA); the Company is not under any obligation to make contributions to any multiemployer pension plan; and the Company does not have not any actual or potential Liability under Section 4201 of ERISA for any complete or partial withdrawal from any multiemployer pension plan relating to employees or officers of the Company. To the Knowledge of the Capstead Companies, the Company is not obligated to provide health care or any other non-pension benefits to any employees after their employment is terminated (other than as required by part 6 of subtitle B of Title I of ERISA) and has not promised to provide such post-termination benefits. (d) Except for the Plans or the programs and arrangements, contractual or otherwise, listed or referred to in Schedule 2.09 to this Agreement (i) the Company does not 29 35 maintain or contribute to, or otherwise have any obligation under, any plans, programs or arrangements providing for (A) payment of deferred compensation or retirement benefits; (B) the accrual or payment of bonuses or special or incentive compensation of any kind; (C) any severance or termination payments; (D) loans, loan guarantees or other extensions of credit to directors, officers or employees of the Company; (E) life, health, disability or other welfare benefits; or (F) moving or other relocation expense benefits or reimbursements; and (ii) the Company does not maintain any other stock bonus, stock option, stock purchase or similar plans or practices, whether formal or informal. (e) [Intentionally Left Blank]. (f) No payment that is owed or may become due to any director, officer, employee, or agent of any of the Sellers as a consequence of the transaction contemplated by this Agreement will be non-deductible to the Sellers or subject to tax under Section 280G or Section 4999 of the Code; nor will any Seller nor the Purchaser be required to "gross-up" or otherwise compensate any such person because of the imposition of any excise tax on such a payment to such person. 2.22 COMPENSATION. The attached Schedule 2.22 constitutes a true and complete list of each director, officer, employee or consultant of the Company whose total compensation from the Company on an annualized basis in respect of calendar year 1998 exceeds $80,000, specifying their names and job designations, the total amount paid or payable, the basis of such compensation, whether fixed, commission or bonus or a combination thereof, and their current rate of pay. Except as otherwise disclosed on such Schedule 2.22, since December 31, 1997, there has been no material change in compensation, by means of wages, salaries, bonuses, gratuities or otherwise, to any such director, officer, employee or consultant of the Company, or any change in compensation, either material in amount or other than in the ordinary and usual course of business, to any other director, officer, employee or consultant of the Company. 2.23 CERTAIN ADVANCES. There are no receivables of the Company owing by directors, officers, employees, Holdings, CMC, consultants of the Business, or owing by any Affiliate of any director or officer of the Company, other than advances in the ordinary and usual course of business to directors, officers and employees for reimbursable business expenses. 2.24 RELATED PARTIES. Except as set forth in the attached Schedule 2.24, no Seller, or to the Knowledge of the Capstead Companies, no officer or director of any Seller, or any Affiliate of any such Person, has, either directly or indirectly, (a) any greater than 5% interest in any corporation, partnership, firm or other Person which furnishes or sells services or products which are similar to those furnished or sold by the Business, or (b) a beneficial 30 36 interest, or alleges a claim of beneficial interest, in any Contract to which any Seller may be bound pertaining to the Business. Such Schedule 2.24 shall list and describe all of the Contract relationships between or among any Capstead Companies, and any beneficial interest or claim of beneficial interest of any Capstead Company in any property, asset, or right (including, without limitation, any Proprietary Right (as defined in Section 2.26(a))) which is owned, leased, used or held for use by any other Capstead Company in, related to, or associated with, directly or indirectly (in whole or in part) the operation of the Business. 2.25 LICENSES AND PERMITS. The Sellers have obtained, and are in compliance in all material respects with, all necessary licenses, permits, Consents, Orders, certificates, authorizations, declarations and filings ("Authorizations") required by any Governmental Bodies (including, without limitation, any Governmental Body regulating consumer lenders, assignees of consumer credit receivables, mortgage bankers, brokers, servicers or originators and their operations) and all courts and other tribunals for the conduct of the Business as now conducted. The attached Schedule 2.25 contains a true and complete list of all such Authorizations. There are no Proceedings pending or, to the Knowledge of the Capstead Companies, Threatened which may result in the revocation, cancellation or suspension, or any adverse modification, of any such Authorizations. There are no disciplinary actions under any such Authorizations pending or, to the Knowledge of the Capstead Companies, Threatened. No prior Proceeding or disciplinary action has resulted in adverse action against the Business and, to the Knowledge of the Capstead Companies, there are no facts which may give rise to such Proceedings or disciplinary actions. 2.26 PROPRIETARY RIGHTS. (a) The attached Schedule 2.26 constitutes a true and complete list of all trademarks, trade names, service marks, copyrights and patents, or applications therefor, owned, leased, used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business. The Sellers own or possess adequate licenses or other rights to use all patents, patent applications, trademarks, trademark registrations, applications for trademark registrations, trade secrets, service marks, service mark registrations, applications for service mark registrations, trade names, labels, slogans, claims of copyright, copyright registrations, applications for copyright registrations, copyrights, drawings, designs, proprietary know-how or information, or other rights with respect thereto (collectively referred to as "Proprietary Rights" and individually as a "Proprietary Right"), owned, leased, used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business, and the same are sufficient to conduct such Business as it has been and is now being conducted. The operations of the Business do not conflict with or infringe upon, and, to the Knowledge of the Capstead Companies, no one has asserted to any Capstead Company that such operations conflict with or infringe upon, any Proprietary Rights owned, possessed or used by any third 31 37 party. To the Knowledge of the Capstead Companies, there are no third parties whose operations conflict with or infringe upon, nor has anyone asserted that such operations conflict with or infringe upon, any Proprietary Rights owned, leased, used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business. The Sellers have the unrestricted right to use, free of any rights or claims of others, all Proprietary Rights in the development, provision, use, sale or other disposition of any or all products or services presently being, or contemplated to be, used, furnished or sold in connection with the operation of the Business. Without limiting the generality of the foregoing, the Capstead Companies have conducted routine audits to ensure the removal of unlicensed software used in the Business, and licenses have been obtained for all software used in the Business that require license. (b) All of the Business' internal systems and all products and services marketed by the Business are in the process of review and revision pursuant to the Company's plan to make such systems Year 2000 Compliant and, pursuant to such plan, such systems are reasonably scheduled and expected to be Year 2000 Compliant by June 30, 1999, so long as Purchaser, in its operation of the Business following the Closing Date, continues to proceed with such plan and does not depart in any material respect therefrom. There are no pending, and none of the Capstead Companies has any Knowledge of any Threatened, claims against the Business relating to whether the products and services of the Business are Year 2000 Compliant. Sellers will assign to Purchaser all contractual indemnification and warranty rights that could be exercised by Sellers with respect to any Year 2000 Compliant issue. 2.27 LABOR. (a) There are no labor controversies pending or, to the Knowledge of each Capstead Company, Threatened which would have, individually or in the aggregate, a Material Adverse Effect with respect to the Business or the Company, as the case may be. (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not constitute "plant closings" or "mass layoffs" (each as defined in the Workers Adjustment and Retraining Notification Act ("WARN")) or otherwise require notification to employees under WARN. (c) The employees of the Sellers involved in the Business are neither subject to any collective bargaining agreement nor subject to any petition pending, or to the Knowledge of the Capstead Companies, Threatened before the National Labor Relations Board seeking recognition of a collective bargaining unit. 2.28 COMPLIANCE WITH LAW. The operation of the Business has been conducted in all material respects in accordance with all applicable Legal Requirements of Governmental 32 38 Bodies, including, without limitation, ERISA, all Environmental Laws, all Legal Requirements, and orders relating to antitrust or trade regulation, employment practices and procedures, the health and safety of employees, consumer credit, servicing and mortgage lending or brokering. No Seller has received any notice of alleged violations of any of the foregoing, except as set forth in the attached Schedule 2.28, nor has the Business been the subject of any criminal proceedings or convicted of any felony or misdemeanor. In particular, and without limiting the foregoing, neither any Seller nor, to the Knowledge of the Capstead Companies, any director, officer, agent, employee, or other Person associated with or acting on behalf of any Seller has, directly or indirectly in connection with or related to the Business, used any corporate funds of any Seller for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to political activity; made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; established or maintained any unlawful or unrecorded fund of corporate moneys or other assets of any Seller; made any false or fictitious entry on the books or records of any Seller; made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment of a similar or comparable nature, whether lawful or not, to any Person, private or public, regardless of form, whether in money, property, or services, to obtain favorable treatment in securing business or to obtain special concessions, or to pay for favorable treatment for business secured or for special concessions already obtained. 2.29 LITIGATION. Except as set forth in the attached Schedule 2.29, and whether or not covered by insurance, to the extent it relates to or is associated with, directly or indirectly (in whole or in part) the Sellers' operation of the Business, there is no claim, dispute, Proceeding, appeal or, to the Knowledge of each Capstead Company, investigation or inquiry, at law or in equity, involving any Seller, or involving any of the Purchased Assets (including, without limitation, claims relating to the use of any Proprietary Rights) before any court, agency, authority, arbitration panel or other Governmental Body (other than those, if any, with respect to which service of process or similar notice has not yet been made on such Seller), and, to the Knowledge of the Capstead Companies, none have been Threatened against any Seller. To the Knowledge of each Capstead Company, there are no facts which, if known to shareholders, customers, Governmental Bodies, bondholders or other investors, mortgage insurance companies, HUD, FHLMC, FNMA or other Persons, would form the basis of any such claim, dispute, Proceeding, or appeal which would have a Material Adverse Effect on the Business. No Seller is subject to any settlement agreement, writ, injunction, decree or other Order (including any consent decree) of any court, agency, authority, arbitration panel or other Governmental Body relating to, or associated with, directly or indirectly (in whole or in part), the Business or that would affect the execution or performance of this Agreement or any Related Agreement or the performance of any Capstead Company's obligations hereunder or thereunder. 33 39 2.30 NO CONFLICT. The execution and delivery of this Agreement and any Related Agreement by the Capstead Companies, and the performance of their respective obligations hereunder or thereunder, (a) are not in violation or breach of, and will not conflict with or constitute a default under, any of the terms of the charter documents or by-laws of the applicable Capstead Company or any note, debt instrument, security agreement, lease, deed of trust or mortgage, license, franchise, permit or any other Contract binding upon the applicable Capstead Company, or upon any of its assets or properties; (b) will not result in the creation or imposition of any Lien in favor of any third party upon any of the material assets or properties of the applicable Capstead Company, (including, without limitation, any of the Purchased Assets); and (c) will not conflict with or violate any Order or any applicable Legal Requirement of any Governmental Body having jurisdiction over any Capstead Company or any of the Purchased Assets. The attached Schedule 2.30 contains a true and complete list of all permits, Authorizations and Consents of third parties required to be obtained by any Capstead Company in connection with (i) the execution and delivery of this Agreement and any applicable Related Agreement by each Capstead Company and the performance of its respective obligations hereunder or thereunder, (ii) the continuation of the Business through the Closing Date, or (iii) the sale, transfer and assignment of the Purchased Assets (including, without limitation, any Consents), and the assumption by Purchaser of the Assumed Liabilities, in each case in order to avoid a Breach, default, termination, acceleration or modification of any Contract included within the foregoing. 2.31 COPIES OF CERTAIN DOCUMENTS. Each Seller has heretofore delivered or made available to Purchaser true and complete copies of: (a) all Contracts entered into by such Seller, if any, providing for the acquisition or disposition of businesses or product or service lines to the extent it relates to or is associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business and; (b) all federal and other Tax Returns filed by the Company and, to the extent it relates to or is associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business, by any Seller for the years ended December 31, 1997 and December 31, 1996. 2.32 UNDERLYING DOCUMENTS. Any underlying documents listed or described in the Schedules referred to in this Agreement have heretofore been delivered or made available to Purchaser or its representatives. All such documents furnished to Purchaser are true and complete copies, and there are no amendments or modifications thereto, except as expressly noted in the Schedules in which such documents are incorporated. 2.33 BUSINESS OF THE COMPANY. There exist no condition or conditions with respect to the markets, products, facilities or personnel of the Company or the operation of the Business which either individually or in the aggregate could have a Material Adverse Effect with respect to the Business. 34 40 2.34 BROKERS OR FINDERS. No Capstead Company has incurred, and no Capstead Company will incur, directly or indirectly, any Liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby, except for fees to Merrill Lynch & Co. and to Cohane Rafferty Securities, Inc., payment of which fees shall be the sole responsibility of the Capstead Companies. There are no outstanding liabilities or claims for brokerage or finders' fees or agents' commissions or any other similar charges in connection with any Purchased Asset or Assumed Obligation. 2.35 DISCLOSURE OF MATERIAL FACTS. To the Knowledge of each Capstead Company, the representations and warranties contained in this Article II of this Agreement and in the Schedules hereto, and any other documents or information furnished to Purchaser by or on behalf of any Capstead Company, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein or therein in the light of the circumstances under which they were made, not misleading. 2.36 FINANCIAL CONDITION. (a) The Capstead Companies, both individually and taken as a whole are solvent; and no bankruptcy, reorganization, insolvency or similar proceeding with respect to any Capstead Company has been initiated or is presently contemplated; (b) Sellers have received reasonably equivalent value for the Purchased Assets from Purchaser; (c) The transactions contemplated by this Agreement and the Related Agreements are not being entered into: (i) with any intent to hinder, delay or defraud any Person to which the Capstead Companies or any of them were or will become indebted on or after the Closing Date; (ii) while the Capstead Companies or any of them was insolvent, nor will the consummation of such contemplated transactions render the Capstead Companies or any of them insolvent; (iii) at a time when or under circumstances where the Capstead Companies or any of them were engaged in business or a transaction, for which any property remaining with the transferor would constitute unreasonably small capital; or 35 41 (iv) at a time when or under circumstances where the Capstead Companies or any of them intended to incur, or believed that any of them would incur, Liabilities that would be beyond the ability of the Capstead Companies or any of them to pay as such Liabilities matured; (d) To the Knowledge of each Capstead Company, the Purchaser is not a creditor of the Capstead Companies or any of them. The transactions contemplated by this Agreement and the Related Agreements are not being made on account of or in satisfaction of any claim held by the Purchaser, other than such claim or claims that might arise or have arisen in connection with the execution of this Agreement or any Related Agreement; and (e) Except as set forth in Schedule 2.36(e), since November 30, 1997, there have been no transfers, sales or assignments between or among any of the Capstead Companies with respect to any of the Purchased Assets or Assumed Obligations. Each such sale, transfer or assignment set forth on Schedule 2.36(e) was for consideration at least equal to the fair value of such asset or property. 2.37 EMPLOYEES. The Company employs a total of approximately 265 full-time employees, 5 part-time employees and 21 part-time interns; to the Knowledge of the Capstead Companies, all employees employed by the Company work solely in the Business and no employees involved in the Business are employed by anyone other than the Company. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Sellers, as of the date hereof and hereafter through the Closing Date, as follows: 3.01 ORGANIZATION. Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is a wholly owned subsidiary of Residential Funding Corporation, a Delaware corporation. 3.02 VALIDITY OF AGREEMENT. Purchaser has full corporate power and authority to execute and deliver this Agreement and any applicable Related Agreement and to perform its obligations hereunder and thereunder. This Agreement constitutes, and each Related Agreement to which Purchaser is a party, when executed and delivered, will constitute, the legal, valid and binding obligation of Purchaser, enforceable against it in accordance with its terms. The execution and delivery of this Agreement and any applicable Related Agreement by Purchaser, as the case may be, and the consummation of the transactions contemplated hereby 36 42 and thereby, have been duly authorized by the Board of Directors of Purchaser, and such executions and delivery, and the consummation of such transactions, do not require the Consent of any Person other than the Board of Directors of HomeComings Financial Network, Inc., Residential Funding Corporation, GMAC Mortgage Group, Inc., General Motors Acceptance Corporation, and General Motors Corporation and such Consent as may be required under the HSR Act. 3.03 NO CONFLICT. The execution and delivery of this Agreement and any Related Agreement by Purchaser, and the performance of its obligations hereunder or thereunder, are not in violation or breach of, and will not conflict with or constitute a default under, any of the terms of its Certificate of Incorporation or by-laws (each as amended to date), or any note, debt instrument, security instrument, deed of trust or mortgage or any other Contract binding upon Purchaser or its assets or properties, and will not result in the creation or imposition of any Lien in favor of any third party upon any of the assets or properties of Purchaser, or conflict with or violate any applicable Legal Requirement or Order of any Governmental Body having jurisdiction over Purchaser or its assets or properties. 3.04 BROKERS OR FINDERS. Purchaser has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby, except for fees to Countrywide Capital Markets, which fees shall be the sole responsibility of Purchaser. 3.05 BOARD ACTION. The execution and delivery of this Agreement and each Related Agreement and the consummation of the transactions contemplated hereby and thereby have been submitted to the Board of Directors of each of General Motors Acceptance Corporation and General Motors Corporation accompanied by a request that each such Board find no objection with respect thereto. ARTICLE IV COVENANTS 4.01 CONDUCT OF BUSINESS. Except for matters required by this Agreement, and such other matters, if any, as may be consented to by Purchaser in writing, from the date of this Agreement until the Closing Date, the Capstead Companies shall conduct the Business and the affairs of the Business only in the ordinary and usual course and shall not engage in any activity or enter into any transaction outside the ordinary and usual course of business. The Sellers shall maintain their books, accounts and records in the ordinary and usual manner and in accordance with GAAP. Anything herein to the contrary notwithstanding, acquisition of additional servicing rights (not including sub-servicing) other than pursuant to pre-existing 37 43 "flow" agreements or pursuant to the Company's origination program or other Contracts, activities and businesses as set forth on Schedule 4.01, shall not be considered a transaction in the ordinary and usual course of business, and shall require the consent of Purchaser. 4.02 NEGATIVE COVENANTS. Except as contemplated by this Agreement, no Seller shall, without the prior written consent of Purchaser, take or cause to be taken any action described in clauses (c) through (u), inclusive, of Section 2.08 between the date of this Agreement and the Closing Date to the extent applicable to such Seller. 4.03 PRESERVATION OF BUSINESS. Except as otherwise contemplated in Section 6.08 of this Agreement, from the date of this Agreement until the Closing Date, each Seller shall use Commercially Reasonable Efforts to preserve intact the Business' business organization and to preserve for Purchaser the goodwill of the Business as to employees, suppliers, customers and others having business relations with the Business or to the extent it relates to or is associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business or the Company. From the date of this Agreement until the Closing Date, the Company shall use its Commercially Reasonable Efforts to retain the active employment of its employees and to assist Purchaser in hiring such employees as New Hires (as defined in Section (b)) as Purchaser shall desire. The Sellers agree to cooperate with Purchaser by permitting Purchaser throughout the period prior to the Closing Date to meet with employees of the Company at such times as shall be approved by a representative of the Company. 4.04 UPDATING OF SCHEDULES. Between the date of this Agreement and the Closing Date, each Capstead Company will promptly notify Purchaser in writing if such Capstead Company becomes aware of any fact or condition that causes or constitutes a Breach of any of the Capstead Companies' representations and warranties as of the date of this Agreement, or if such Capstead Company becomes aware of the occurrence after the date of this Agreement of any fact or condition that would cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Schedules if the Schedules were dated the date of the occurrence or discovery of any such fact or condition, the Capstead Companies will promptly deliver to Purchaser a supplement to the Schedules specifying such change; provided, that to the extent any such facts or conditions are solely the result of any of the activities permitted by Section 4.01 and not prohibited by Section 4.02, such facts or conditions, when disclosed by such Seller in a supplement to the Schedule in accordance with this Section 4.04 (each such supplement to the extent it relates solely to facts or conditions referred to in this proviso, a "Permitted Supplement"), shall not constitute a Breach hereunder. During the same period, each Capstead Company will promptly notify Purchaser of the occurrence of any Breach of any covenant of the Capstead Companies in this Agreement. 38 44 4.05 ACCESS TO INFORMATION. The Capstead Companies will afford to the officers, attorneys, accountants and other representatives of Purchaser full access during reasonable business hours to all of the assets, properties, books and records of the Business to the extent it relates to, or is associated with, directly or indirectly (in whole or in part), the Sellers' operation of the Business in order to afford Purchaser such full opportunity of review, examination and investigation as Purchaser shall desire with respect to the affairs of the Business. The Capstead Companies shall furnish or cause to be furnished to Purchaser such financial and operating data and other information as to the condition (financial or otherwise), business, net worth, assets, properties, servicing rights, escrow accounts, operations or future prospects of the Business as Purchaser may reasonably request and which is either normally available to the Capstead Companies in the ordinary and usual course of business or which may be obtained or produced by the Capstead Companies at a reasonable cost to the Sellers. No such review, examination or investigation by Purchaser shall affect or in any way diminish the representations, warranties or covenants of the Capstead Companies hereunder. In addition, the Capstead Companies shall furnish to Purchaser any information or copies of any document in their possession or control which may be relevant to any audit, examination or proceeding arising subsequent to the Closing Date and relating to the assessment or collection of any Tax relating, directly or indirectly, to the Purchased Assets, the Assumed Obligations, or the Business. 4.06 FULFILLMENT OF CONDITIONS AND COVENANTS. No party will take any course of action inconsistent with satisfaction of the requirements or conditions applicable to it set forth in this Agreement. Each party shall use its Commercially Reasonable Efforts to perform as early as possible the obligations herein provided to be performed by it. 4.07 PRESS RELEASES. No party will issue or authorize to be issued any press release or similar announcement concerning this Agreement or any of the transactions contemplated hereby without the prior approval of the other parties, which approval shall not be unreasonably withheld and which approval shall be given in order to allow compliance with the disclosure requirements of applicable laws and regulatory authorities. 4.08 THIRD PARTY CONSENTS. Each Capstead Company shall use Commercially Reasonable Efforts to obtain, as soon as reasonably practicable, all Consents required to be obtained by any of the Capstead Companies from third parties or Governmental Bodies necessary to consummate this Agreement and the transactions contemplated hereby, including, without limitation, (i) any such Consents required to be obtained by any of the Capstead Companies in connection with the transfer of the Purchased Assets or the Assumed Obligations to Purchaser and (ii) all Consents necessary to permit the assignment of the Assumed Contracts listed on Schedule 1.01(e). All such Consents shall be obtained at the joint and several expense of the Capstead Companies. With respect to the assignment of the Assumed Contracts, Purchaser's assumption of such Contracts shall be on terms no less favorable than, 39 45 and at prices no greater than, currently in effect. Without in any way limiting or modifying the conditions to the Purchaser's obligations set forth in Section 6.05, each Capstead Company will continue to use Commercially Reasonable Efforts after the Closing Date to obtain any Consents that are not obtained prior to the Closing Date. This Agreement shall not operate to assign any Contract, or any claim, right or benefit arising thereunder or resulting therefrom, if an attempted assignment thereof, without the Consent of a third party thereto, would constitute a Breach, default or other contravention thereof or in any way adversely affect the rights of any Capstead Company or Purchaser thereunder. If a Consent required to assign any Contract is not obtained on or prior to the Closing Date, then, to the extent permitted by law, the Capstead Companies will (until such time as such Consent is obtained and the assignment of such Contract to Purchaser is effected to Purchaser's reasonable satisfaction) use Commercially Reasonable Efforts at their sole expense to (i) provide to Purchaser the benefits of the applicable Contract on terms no less favorable than, and at prices no greater than, are currently in effect with respect to the Capstead Companies, (ii) cooperate in any reasonable and lawful arrangement designed to provide the benefits of the applicable Contract to Purchaser, including, without limitation, entering into subcontracts for performance, and (iii) enforce at the request of Purchaser and for the account of Purchaser any rights of the Capstead Companies arising from any such Contract (including, without limitation, the right to elect to terminate such Contract in accordance with the terms thereof upon the request of Purchaser), which termination shall, upon becoming effective, relieve the Capstead Companies of any further obligation under this Section 4.08 with respect to such Contract. Until such time as any Consent is obtained and the assignment of such Contract to Purchaser is effected to Purchaser's reasonable satisfaction, such Contract shall not be an Assumed Contract and shall be deemed an Excluded Asset and a Retained Liability. Notwithstanding anything contained in this Section 4.08 or elsewhere in this Agreement to the contrary, except with respect to Contracts which Purchaser has requested be terminated (and as to which such termination has become effective), the Capstead Companies shall not be relieved of (i) their obligation to assign effectively to Purchaser all of the Assumed Contracts listed in Schedule 1.01(e) or (ii) any Liability for failing to have done so. Purchaser covenants, upon request of any of the Capstead Companies, to use its Commercially Reasonable Efforts to provide the following assistance to the Capstead Companies (at the sole expense of the Capstead Companies) in connection with their attempting to obtain any Consents required hereunder: (i) providing reasonable access to an appropriate employee or employees of Purchaser solely for the purpose of speaking with third parties (from whom any such Consents are requested by any of the Capstead Companies) concerning the general nature of the business of Purchaser to the extent it reasonably relates to Purchaser's obligations to acquire the Purchased Assets and the Assumed Contracts and (ii) the provision of the financial information concerning Purchaser specifically identified on Schedule 4.08 hereto. 4.09 CERTAIN NOTIFICATIONS. Each party shall promptly notify the others in writing of the occurrence of any event which will or could reasonably be expected to result in the failure 40 46 to satisfy any of the conditions to the obligations of such other parties specified in Article V, VI or VII, as the case may be, of this Agreement. 4.10 ANTITRUST MATTERS. The Capstead Companies and Purchaser shall prepare and file, and shall in all respects cooperate with each other in the preparation and filing of, any documents required in connection with providing notification to the Federal Trade Commission and the Antitrust Division of the Department of Justice of the transactions contemplated hereunder, and shall respond, or cooperate in responding, to any inquiry made by either with respect to such transactions. 4.11 EMPLOYEE BENEFITS. (a) Except to the extent otherwise provided in Subsection (c) of this Section 4.11, each of the Capstead Companies shall retain all Liabilities and obligations resulting from or arising out of the Plans (and defined in Section 2.21(b)) and Purchaser shall not assume any such Liability or obligation and the Capstead Companies shall, jointly and severally, indemnify and hold Purchaser harmless with respect thereto. The indemnification set forth in the preceding sentence shall be in addition to and shall not limit the indemnification set forth in Section 9.01, but shall be subject to the provisions of Article IX. (b) Purchaser shall offer "at will" employment to no fewer than 95% of the full-time employees of the Business as of the Closing Date (the "Offerees") with job responsibilities reasonably comparable to those performed by such Offerees with respect to the Business prior to the Closing, and such offer of employment shall give each such Offeree, as a New Hire, the opportunity to participate in each of the benefit plans of Purchaser under the same terms and conditions as similarly situated employees of Purchaser and Purchaser shall give credit for such Offeree's years of service as an employee of any one or more of the Capstead Companies with respect to nonwage-related terms of employment such as vacation days and eligibility for participation and vesting in Purchaser's employee benefit plans but not for the purpose of benefit accrual. Such Offerees shall be offered base salary and wage levels of no less than, and bonus structures (but excluding any Christmas/Holiday bonus) comparable to, those provided by the applicable Capstead Company to such employees immediately prior to the Closing. Any such Offerees hired by Purchaser shall be deemed "new hires" of Purchaser ("New Hires") and Purchaser shall have no Liability on account of the previous employment of such New Hires by any of the Capstead Companies. (c) To the extent permitted under Applicable Tax Law, each Capstead Company shall take such steps as may be necessary to enable employees of any of the Capstead Companies who become New Hires to receive a distribution of amounts credited to their accounts under any of the Capstead Company Pension Plans which are intended to qualify under Section 401(k) of the Code ("Sellers' 401(k) Plan"). To the extent permitted under 41 47 Applicable Tax Law, Purchaser agrees to make available a plan which is intended to qualify under Section 401(k) of the Code ("Purchaser's 401(k) Plan") for the benefit of employees of the Capstead Companies who become employees of Purchaser after the Closing and to provide such employees the opportunity under such plan to transfer thereto the amounts distributed from Capstead Companies' 401(k) Plan. Each Capstead Company shall take such action as is necessary to cause the New Hires to become 100% vested as of the Closing Date in their benefits under Sellers' 401(k) Plan, any other Pension Plan intended to meet the qualification requirements of Section 401(a) of the Code, and any nonqualified deferred compensation plan or arrangement. Furthermore, each Capstead Company shall take whatever action is necessary to cause the New Hires to become 100% vested as of the Closing Date in all stock options, restricted stock grants, and all other equity based awards and be entitled to exercise and continue to exercise all stock options and all other equity based awards having an exercise schedule and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms. Each Capstead Company will cause, to the extent permitted under Applicable Tax Law without causing a loan to become a taxable distribution or to violate the provisions of ERISA, Sellers' 401(k) Plan to provide that loans do not become due and will not be deemed to be in default until at least sixty (60) days after the Closing Date. Within sixty (60) days after the Closing Date, Purchaser will loan to each Company employee who (i) becomes an employee of Purchaser immediately after the Closing Date and remains an employee of Purchaser on the date of the loan and (ii) signs and delivers to Purchaser a promissory note in the form specified by the Purchaser in the amount of the employee's outstanding loan balance in Sellers' 401(k) Plan in order to allow the employee to repay that loan prior to making a direct rollover from the Seller's 401(k) Plan to Purchaser's 401(k) Plan. (d) Each Seller shall continue to provide health care continuation coverage required to be provided under the provisions of Sections 601 through 608 of ERISA, including, without limitation, the regulations promulgated thereunder, for all employees (and their dependents and beneficiaries), for qualifying events occurring at or before the Closing Date, including, without limitation, any obligations arising as a result of any termination of employment of employees in connection with this Agreement. Purchaser shall be responsible for providing health care continuation coverage required to be provided under the provisions of Section 601 through 608 of ERISA for the New Hires (and their dependents and beneficiaries) for qualifying events occurring after the Closing Date; provided that, if requested by Purchaser, and with respect to any New Hires (and their dependents and beneficiaries) that are not eligible for coverage under the Purchaser's health plans, each Seller shall provide such continuation coverage for the New Hires (and their dependents and beneficiaries) until the earlier of (i) the expiration of a period of 18 months following the Closing Date, and (ii) the date on which such New Hires (and their dependents and beneficiaries) are covered under Purchaser's health care plans. Purchaser shall reimburse such Seller for the Seller's actual out-of-pocket costs and expenses in providing such requested coverage. 42 48 (e) Each Seller shall comply with all applicable Legal Requirements of any Governmental Body relating to employees in connection with the transactions contemplated herein, including, without limitation, New Hires, and any notice or other requirements under WARN, or any similar Legal Requirements, and the Capstead Companies shall, jointly and severally, indemnify and hold Purchaser harmless with respect thereto. The indemnification set forth in the preceding sentence shall be in addition to and shall not limit the indemnification set forth in Section 9.01, but shall be subject to the provisions of Article IX, other than the time limitations contained in Section 9.04. (f) Each Capstead Company shall retain the Liability for all claims which are incurred under any Pension Plan, Welfare Plan or other plan or arrangement maintained by any of them prior to the Closing Date, and neither Purchaser nor any of its Affiliates shall have any responsibility or Liability for the payment of such benefits. More specifically, but not expanding or limiting such retained Liability, each Capstead Company shall retain Liability for (i) incurred but unpaid life insurance claims; (ii) workers' compensation, long term disability and short term disability claims incurred before the Closing Date and not yet reported or claims made and not paid; (iii) life insurance waiver of premium claims incurred before the Closing Date and not yet reported or claims made and not yet paid; (iv) medical coverage (to the extent provided) for individuals disabled as of the Closing Date; (v) benefits to all individuals entitled to benefits required to be provided by the continuation health care coverage requirements of Section 4980B of the Code and Sections 601 through 607 of ERISA as of the Closing Date; (vi) continuation of benefit coverage for surviving spouses and other dependents and beneficiaries of employees (to the extent provided) who die prior to the Closing Date; and (vii) all benefits of any kind for (A) all former or current employees of each Seller (and their spouses and dependents and beneficiaries) who are (1) on a leave of absence, workers' compensation, long-term disability or short-term disability as of the Closing Date or (2) not New Hires and (B) all spouses, dependents and beneficiaries of New Hires who are, as of the Closing Date, receiving disability benefits of any kind. In addition, neither Purchaser nor any of its Affiliates shall have any obligation to establish or continue in effect any benefit program, plan or arrangement available to New Hires prior to the Closing Date. 4.12 POST-CLOSING INFORMATION. From time to time after the Closing, the parties shall deliver to each other and shall furnish access to and copies of any books and records and other information and data as any party may reasonably request, including, without limitation, that required in order to enable such party to complete and file all Federal, state and local Tax Returns which may be required to be filed by it and to complete all customary Tax and accounting procedures, to make any disclosures required under any applicable securities laws or other local regulations and otherwise to enable such party to satisfy its internal accounting, Tax, and other requirements. 43 49 4.13 ADMINISTRATION OF ACCOUNTS. (a) In Trust for Purchaser. All payments and reimbursements made by any third party in the name of or to any Capstead Company in connection with or arising out of the Purchased Assets and Assumed Obligations in respect of any period on or after the Closing Date shall be held by such Capstead Company in trust for the benefit of Purchaser and, promptly upon receipt by such Capstead Company of any such payment or reimbursements, such Capstead Company shall pay over to Purchaser the amount of such payment or reimbursement without right of set off. (b) In Trust for Capstead Companies. All payments and reimbursements made by any third party in the name of or to Purchaser in connection with or arising out of (i) the Excluded Assets (other than those assets listed on Schedule 1.05(e) which assets are to be for the benefit of GMACMC as provided in the Servicing Purchase Agreement), (ii) Retained Liabilities, or (iii) in respect of any period prior to the Closing Date, the Purchased Assets and Assumed Obligations, shall be held by Purchaser in trust for the benefit of such Capstead Company and, promptly upon receipt by Purchaser of any such payment or reimbursement, Purchaser shall pay over to such Capstead Company the amount of such payment or reimbursement without right of set off. 4.14 ASSUMPTION OF QUALIFICATION. Purchaser agrees that, solely for purposes of the Capstead Companies' representations and warranties contained in this Agreement, the Capstead Companies may assume that Purchaser is duly qualified and has all material approvals as a lender, servicer of mortgage loans and seller of mortgage loans in order to permit it to acquire the Purchased Assets and undertake the Assumed Obligations; provided, however, that in no event shall Purchaser be deemed to have made any representation or warranty whatsoever with respect to the foregoing. ARTICLE V CONDITIONS TO OBLIGATIONS OF SELLERS The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the following conditions, except as Sellers may waive the same in writing in accordance with Section 10.01 of this Agreement. 5.01 PERFORMANCE. Purchaser shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or satisfied by it on or prior to the Closing Date. 44 50 5.02 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Purchaser set forth in Article III hereof shall be true and complete in all material respects on the date hereof and on the Closing Date, as if made again at and as of such time, subject to any transactions which are expressly contemplated or permitted by this Agreement. 5.03 LEGAL OPINION. Lorna Gleason, General Counsel of Residential Funding Corporation, shall, immediately prior to the Closing Date, have delivered to Sellers an opinion, dated the Closing Date and addressed to Sellers, in form and substance reasonably satisfactory to counsel for Sellers, to the following effect: (a) Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of its state of incorporation; and (b) this Agreement and the Related Agreements to which Purchaser is a party and the transactions contemplated hereby and thereby have been duly authorized on behalf of Purchaser by all requisite corporate action and this Agreement and the Related Agreements to which Purchaser is a party constitutes the legal, valid and binding obligation of Purchaser. 5.04 OFFICERS' CERTIFICATE. Purchaser shall furnish to Sellers such certificates of its officers, to evidence compliance with the conditions set forth in this Article V, as may be reasonably requested by Sellers. ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER The obligations of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the following conditions, except as Purchaser may waive the same in writing in accordance with Section 10.01 of this Agreement. 6.01 PERFORMANCE. Each Capstead Company shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or satisfied by it on or prior to the Closing Date (considered collectively) and each of such agreements and covenants (considered individually), shall have been performed and complied with in all material respects. 6.02 REPRESENTATIONS AND WARRANTIES. (i) All of the representations and warranties of each of the Capstead Companies in this Agreement (considered collectively), and each of those representations and warranties (considered individually), must have been true and complete in all material respects as of the date of this Agreement, and (ii) all of the representations and warranties of the Capstead Companies in this Agreement (considered collectively), and each of those representations and warranties (considered individually), must be true and complete in all material respects as of the Closing Date as if made again at and as 45 51 of such time, without giving effect to any supplement to the Schedules permitted by Section 4.04 except Permitted Supplements, and (iii) each representation and warranty of any of the Capstead Companies in this Agreement, to the extent there appears therein any qualifiers, modifiers or limitations with respect to (A) "Knowledge" or (B) "material," "Material," "materiality," "in all material respects" or words of similar import or meaning, must also have been true and complete in all respects as of the date of this Agreement, and (iv) each representation and warranty of any of the Capstead Companies in this Agreement, to the extent there appears therein any qualifiers, modifiers or limitations with respect to (A) "Knowledge" or (B) "material," "Material," "materiality," "in all material respects" or words of similar import or meaning, must also have been true and complete in all respects as of the Closing Date as if made again at and as of such time, without giving effect to any supplement to the Schedules permitted by Section 4.04 except Permitted Supplements. 6.03 MATERIAL ADVERSE EFFECT. From September 30, 1998 to the Closing Date, there shall have been no Material Adverse Effect with respect to the Business, and there shall be no condition or conditions existing with respect to the markets, products, facilities or personnel of the Company or the operation of the Business which, either individually or in the aggregate, could have a Material Adverse Effect with respect to the Business. 6.04 LEGAL OPINION. Andrews & Kurth L.L.P., as counsel to the Capstead Companies, shall, immediately prior to the Closing, have delivered to Purchaser its opinion, dated the Closing Date and addressed to Purchaser, in substantially the form attached hereto as Appendix IV. 6.05 THIRD PARTY CONSENTS. (a) The Capstead Companies shall have obtained each of the Consents referred to in Schedule 6.05 of this Agreement (the "Material Consents") in form and substance reasonably satisfactory to Purchaser. (b) The Capstead Companies shall also have obtained all Consents (other than the Material Consents) referred to on Schedule 2.30 of this Agreement in form and substance reasonably satisfactory to Purchaser (other than Consents, the failure of which to obtain, in the aggregate, would not have a Material Adverse Effect with respect to the Business). Purchaser shall have received evidence reasonably satisfactory to it of the receipt of all such Consents. 6.06 DELIVERY OF BUSINESS RECORDS. The Capstead Companies shall, on or immediately prior to the Closing Date, have delivered to Purchaser, or caused to be delivered (or otherwise surrendered possession to Purchaser of) all material documents and records related to the Purchased Assets and the Assumed Obligations. 46 52 6.07 EMPLOYMENT OF NEW HIRES. On or prior to the Closing Date, at least 75% of the Offerees referred to in Section 4.11(b) and at least eight (8) of the Offerees specified in Schedule 6.07 shall have agreed to accept employment with Purchaser, on terms and conditions reasonably satisfactory to Purchaser. 6.08 TERMINATION OF CONTRACTUAL ARRANGEMENTS. Prior to the Closing Date, the Sellers shall have delivered to Purchaser evidence, satisfactory to Purchaser in its discretion, that each of the Contracts described on the attached Schedule 6.08 have been terminated and have no further force or effect, and such termination shall result in no Liability or expense on the part of the Capstead Companies or the Purchaser. 6.09 OFFICERS' CERTIFICATES. Each Capstead Company shall have furnished to Purchaser (a) a certification executed by its senior officers that the conditions set forth in Sections 6.01, 6.02, and 6.03 have been fulfilled, and (b) such other certificates of its officers, to evidence its compliance with the conditions set forth in this Article VI, as may be reasonably requested by Purchaser. 6.10 RESERVED. 6.11 ADDITIONAL DOCUMENTS. The Capstead Companies shall have delivered to Purchaser such other documents as Purchaser may reasonably request for the purpose of evidencing the satisfaction of any condition referred to in this Article VI. 6.12 ENVIRONMENTAL. Purchaser shall have received prior to the Closing Date an acceptable Phase I environmental report relating to Cityplace Center East, 2711 North Haskell Avenue, Dallas, Texas 75204-2915. ARTICLE VII CONDITIONS TO OBLIGATIONS OF EACH OF THE PARTIES The obligations of each of the parties to consummate the transactions contemplated by this Agreement shall be subject to the following conditions, except as any of them may waive the same in writing in accordance with Section 10.01 of this Agreement. 7.01 NO PROCEEDINGS. Immediately prior to the Closing Date, there shall (a) have been no Order issued or any other action taken by any Governmental Body, restraining, enjoining, otherwise prohibiting the transactions contemplated under this Agreement or the Servicing Purchase Agreement, or that would prevent, delay, make illegal or otherwise materially interfere with or materially affect the ability of the Capstead Companies to perform their obligations under this Agreement (including, without limitation, paying claims made 47 53 under Article IX); and (b) be no Proceeding pending or Threatened with respect to any Capstead Company or Purchaser, which, if decided adversely to such party would have a Material Adverse Effect with respect to any of the Capstead Companies, the Business, any of the Purchased Assets or the right of Purchaser to purchase or retain the Purchased Assets or to continue the operations of the Business and which, in the judgment of Purchaser would make the consummation of this Agreement inadvisable; provided, however, that the foregoing condition shall not apply to the Capstead Litigation pending on the date of this Agreement so long as no further event shall have occurred with respect to such litigation after the date of this Agreement that would fall within the matters described in the preceding clauses (a) and (b). 7.02 HART-SCOTT-RODINO ACT. Each of the Capstead Companies, Purchaser and any other Person (as defined in the HSR Act and the rules and regulations thereunder) required in connection with the transactions contemplated by this Agreement to file a Notification and Report Form for Certain Mergers and Acquisitions with the Department of Justice and the FTC pursuant to Title II of the HSR Act shall have made such filing and the applicable waiting period with respect to each such filing (including any extension thereof by reason of a request for additional information) shall have expired or been terminated. 7.03 SERVICING PURCHASE AGREEMENT. On or prior to the Closing Date, the Company and GMACMC shall have closed the transactions contemplated pursuant to the Servicing Purchase Agreement. 7.04 TRANSITION SERVICES AGREEMENT. Purchaser and the Capstead Companies shall have executed and delivered an agreement (the "Transition Services Agreement") substantially in the form attached hereto as Exhibit IV hereto. ARTICLE VIII TERMINATION OF AGREEMENT 8.01 TERMINATION. This Agreement may be terminated as follows: (a) By mutual written consent of each Capstead Company and of Purchaser; (b) At the election of all the Capstead Companies (and not less than all of them), by written notice to Purchaser, if any one or more of the conditions to the obligations of the Capstead Companies to consummate the transactions hereunder, as specified in Article V or VII of this Agreement, has not been fulfilled as of the Closing Date or has at any time become impossible of being fulfilled by the Closing Date or if Purchaser fails or refuses to perform its obligations, or execute and deliver the documents, required under this Agreement (provided that no Capstead Company shall have failed or refused to perform its respective obligations under this Agreement); 48 54 (c) At the election of Purchaser by written notice from it to the Capstead Companies, if any one or more of the conditions to the obligations of Purchaser to consummate the transactions hereunder, as specified in Article VI or VII of this Agreement, has not been fulfilled as of the Closing Date or has at any time become impossible of being fulfilled by the Closing Date or if any Capstead Company fails or refuses to perform its obligations, or execute and deliver the documents, required under this Agreement (provided that Purchaser shall not have failed or refused to perform its obligations under this Agreement); or (d) By either Purchaser or the Capstead Companies if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement pursuant to this Section 8.01(d) to comply fully with its obligations under this Agreement) on or before March 31, 1999 or such later date as the parties may agree upon. 8.02 EFFECT OF TERMINATION. Each party's right of termination under Section 8.01 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 8.01, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 10.04 and 10.05 will survive; provided, however, that if this Agreement is terminated by Purchaser because of the Breach of the Agreement by a Capstead Company or by the Capstead Companies because of the Breach of this Agreement by the Purchaser, or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of such other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. ARTICLE IX INDEMNIFICATION 9.01 INDEMNIFIABLE CLAIMS. (a) Regardless of any investigation made at any time by or on behalf of Purchaser or any information Purchaser or any of its representatives or Affiliates may have, each Capstead Company will and hereby does, jointly and severally, indemnify and hold Purchaser and any Affiliate of Purchaser, and their respective officers, directors, employees and agents harmless from and against any and all Liability, claim, loss, cost, damage or expense whatsoever (including, without limitation, costs of investigation and defense and 49 55 attorneys' fees and expenses) or diminution of value, whether or not involving a third party claim (collectively, "Damages") resulting or arising, directly or indirectly, from or in conjunction with: (i) any Breach of any representation or warranty made by the Capstead Companies in this Agreement at the date of execution and delivery of this Agreement (without taking into account or giving effect to any qualifiers, modifiers or limitations contained therein using (A) "Knowledge" or (B) "material," "materiality," "in all material respects" or words of similar import or meaning, and without taking into account or giving effect to any supplement to the Schedules, including any Permitted Supplement), the Schedules, the supplements to the Schedules, any Related Agreement or any other certificate or document delivered by the Capstead Companies pursuant to this Agreement; (ii) any Breach of any representation or warranty made by the Capstead Companies in this Agreement as if such representation or warranty were made on and as of the Closing Date (without taking into account or giving effect to any qualifiers, modifiers or limitations contained therein using (A) "Knowledge" or (B) "material," "materiality," "in all material respects" or words of similar import or meaning, and without taking into account or giving effect to any supplement to the Schedules other than a Permitted Supplement); (iii) any Breach of any covenant or obligation of any of the Capstead Companies contained herein or in any Related Agreement; (iv) in whole or in part, any Liability arising from or out of the conduct of the Business or any Capstead Company's ownership or use of any of the Purchased Assets prior to the Closing Date, whether such claims are asserted before or after the Closing Date (except for any Liability under any Assumed Contract or under any Assumed Obligation, the performance or payment of which was not due or owing on or prior to the Closing Date), including, without limitation, any and all Liability for (A) fees and expenses (including, without limitation, termination fees) owed by any Capstead Company to any provider of professional services, including, without limitation, legal, accounting or investment banking services, for services rendered in connection with the transactions contemplated hereunder, (B) all Taxes (including, without limitation, interest and penalties thereon) relating to the Business or to any of the Capstead Companies for periods prior to the Closing Date, (C) payments or penalties or Taxes arising out of or relating to any of the employee benefit plans or other pension plans of the Company, and (D) the Retained Liabilities; (v) or out of any Contract described on Schedule 6.08 of this Agreement; (vi) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any Contract alleged to have been made by any such Person with any of the Capstead Companies (or any Person acting on its behalf) in connection with any of the transactions contemplated hereby; or (vii) the Capstead Litigation. (b) Regardless of any investigation made at any time by or on behalf of the Capstead Companies or any information the Capstead Companies or any of their representatives or Affiliates may have, Purchaser will and hereby does indemnify and hold each Capstead Company harmless from and against any and all Liability, claim, loss, cost, damage or expense whatsoever (including, without limitation, attorneys' fees and expenses) (i) resulting from or arising out of any Breach of any representation or warranty of Purchaser 50 56 contained herein or in any Related Agreement, (ii) resulting from or arising out of any Breach of any covenant or obligation of Purchaser contained herein or in any Related Agreement, (iii) resulting or arising directly or indirectly from or out of the conduct of the Business or operation of the Purchased Assets after the Closing Date, (iv) resulting or arising directly or indirectly from or out of any Assumed Obligation; provided, however that Purchaser shall not be obligated to so indemnify any of the Capstead Companies to the extent that such payments are attributable to a Breach by any Capstead Company of any representation, warranty or covenant made by any Capstead Company contained in this Agreement, or (v) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any Contract alleged to have been made by any such Person with Purchaser (or any Person acting on its behalf) in connection with any of the transactions contemplated hereby. (c) Notwithstanding the provisions set forth in Sections 9.01(a)(i) and (a)(ii) that eliminate the effect of any qualifiers, modifiers or limitations contained in the Capstead Companies' representations and warranties using "Knowledge" or "material," "Material," "materiality," "in all material respects" or words of similar import or meaning, for purposes of this Article IX, the representations and warranties set forth in: (i) Section 2.07, to the extent there appears therein any qualifiers, modifiers or limitations with respect to "Knowledge" and "material," "Material," "materiality," and "in all material respects" , such words shall be taken into account and given effect; (ii) Section 2.08(b) and Section 2.33, to the extent there appears therein any qualifiers, modifiers, or limitations with respect to "material," "Material," materiality," and "in all material respects," such words shall be taken into account and given effect; and (iii) Section 2.13, "Knowledge" shall be taken into account and given effect to the extent such word appears therein. 9.02 NOTICE OF CLAIM. If any Proceeding is brought against any Person entitled to indemnification pursuant to Section 9.01 or Section 9.05 (a "Claimant") in respect of a claim under Section 9.01 above (an "Indemnifiable Claim"), the Claimant shall promptly notify Purchaser or Andrew F. Jacobs, as the representative of the Capstead Companies (the "Representative"), as the case may be, in writing of the institution of such Proceeding (but the failure so to notify shall not relieve any Capstead Company or Purchaser, as the case may be (the "Indemnifying Parties"), from any liability the Indemnifying Parties may have except to the extent such failure materially prejudices the Indemnifying Party). Unless otherwise agreed to by the Purchaser or Representative, as the case may be, the Indemnifying Parties shall assume and direct the defense of such Proceeding, including the employment of counsel, and all fees, costs and expenses incurred in connection with defending or settling the Indemnifiable Claim shall be borne solely by the Indemnifying Parties; provided, however, that such counsel shall be satisfactory to the Claimant in the exercise of its reasonable judgment. If the Indemnifying Parties shall elect to compromise or defend any such asserted Liability, it shall promptly notify the Claimant of its intention to do so, and the Claimant agrees to cooperate fully with the Indemnifying Parties and their counsel in the compromise of, or defense against, 51 57 any such asserted Liability; provided, however, that after notice from the Indemnifying Parties to the Claimant of its election to assume the defense of such Proceeding, the Indemnifying Parties will not, as long as they diligently conduct such defense, be liable to the Claimant under this Article IX for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the Claimant in connection with the defense of such Proceeding, other than reasonable costs of investigation. Notwithstanding an election by the Indemnifying Parties to assume the defense of such Proceeding, the Claimant shall have the right to employ separate counsel and to participate in the defense of such action or proceeding, and the Indemnifying Parties shall bear the reasonable fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses at least quarterly), if (a) the use of counsel chosen by the Indemnifying Parties to represent the Claimant would present such counsel with a conflict of interest; (b) the defendants in, or targets of, any such Proceeding include both a Claimant and an Indemnifying Party, and the Claimant shall have reasonably concluded that there may be legal defenses available to it or to other Claimants which are different from or additional to those available to the Indemnifying Parties (in which case the Indemnifying Parties shall not have the right to direct the defense of such Proceeding on behalf of the Claimant); (c) the Indemnifying Parties fail to provide reasonable assurance to the Claimant of their financial capacity to defend such Proceeding and to provide indemnification with respect to such Proceeding; or (d) the Representative or the Purchaser, as the case may be, shall authorize the Claimant to employ separate counsel at the expense of the Indemnifying Parties. All costs and expenses incurred in connection with a Claimant's cooperation shall be borne by the Indemnifying Parties. If the Indemnifying Parties assume the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the Indemnifying Parties without the Claimant's consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (C) the compromise or settlement includes as an unconditional term thereof the giving by the plaintiff or other claimant to the indemnified parties of an unconditional release, in form and substance satisfactory to such indemnified parties, from all Liability in respect of any such claim; and (iii) the Claimant will have no Liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an Indemnifying Party of the commencement of any Proceeding and the Indemnifying Parties do not, within ten (10) days after the Claimant's notice is given, give notice to the Claimant of their election to assume the defense of such Proceeding, the Indemnifying Parties will be bound by any determination made in such Proceeding or any compromise or settlement effected by the Claimant. Notwithstanding the foregoing, if Claimant determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this 52 58 Agreement, the Claimant may, by notice to the Indemnifying Parties, assume the exclusive right to defend, compromise, or settle such Proceeding, but the Indemnifying Parties will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. In any event, the Claimant shall have the right at its own expense to participate in the defense of such asserted Liability. 9.03 RIGHT OF OFFSET. In the event an Indemnifying Party is required to indemnify or make payments to any Claimant under any provision of this Agreement (including Section 9.01 above) or any document, instrument or agreement referred to herein or executed in connection with the consummation of the transactions contemplated hereby, in addition to any other right available to the Claimant hereunder, at law or in equity, the Claimant shall be entitled to offset the amount of such required indemnity or any claim for any and all amounts owed by any Claimant, or any Affiliate of a Claimant, to any Indemnifying Party or any Affiliate of any Indemnifying Party, hereunder or otherwise, including, where the Claimant is the Purchaser, any amount held in escrow pursuant to the Escrow Agreement. 9.04 SURVIVAL. The rights of indemnification provided in Section 9.01(a)(i) and (ii) of this Agreement shall survive the consummation of the transactions contemplated hereunder for a period of 819 calendar days following the Closing Date; the rights of indemnification provided by Section 9.01(a)(iv) of this Agreement with respect to third-party claims shall survive the consummation of the transactions contemplated hereunder for a period of 819 calendar days after the Closing Date; and the rights of indemnification provided in Sections 9.01(a)(iii), (iv) (other than with respect to third-party claims), (v), (vi) and (vii) and Sections 4.11 and 4.12 of this Agreement shall survive the consummation of the transactions contemplated hereunder and shall remain in full force and effect at all times thereafter. With respect to a claim for indemnification that may fall under more than one provision of Section 9.01, the expiration of the survival period for a claim under one applicable provision shall not impact in any way a party's right to bring a claim under another applicable provision, the survival period of which has not yet expired. Notwithstanding the foregoing time limitation, a claim under Section 9.01(a)(i) or 9.01(a)(ii) for a Breach of the representations and warranties contained in (i) Section 2.11 shall survive the consummation of the transactions contemplated hereunder and shall remain in full force and effect at all times thereafter; and (ii) Section 2.21 with respect to violations of ERISA shall survive the consummation of the transactions contemplated hereunder and shall remain in full force and effect for the full period of all applicable statutes of limitations. 53 59 9.05 TAX INDEMNIFICATION PAYMENTS. (a) Scope of Tax Indemnity Provisions/Relationship of this Article to General Indemnity Provisions. (i) In the case of any indemnity claim for Taxes for a Pre-Closing Period, the indemnity obligations of the Capstead Companies, and the rights of the Purchaser with respect to indemnification, will be governed by this Section 9.05 and not by the general indemnity provisions contained in Section 9.01(a) of this Agreement. (ii) Despite any other provision in this Agreement, the indemnities provided for in this Section will survive for the full period of all applicable statutes of limitation, including extensions. (iii) Any Person entitled to indemnification for Taxes under this Section shall also be entitled to indemnification for all reasonable fees and costs (including professional fees and costs and expenses) associated with enforcing its rights under this Section. (b) Allocation of Liability for Taxes. (i) General. Subject to Section (b)(ii) below: (A) The Capstead Companies will be jointly and severally liable for, and will indemnify, defend and hold harmless the Purchaser and the Purchaser's Affiliates from and against, any and all Taxes imposed on or due with respect to the operation of the Business, the Capstead Companies or their assets, operations or activities for any Pre-Closing Period, to the extent such Taxes have not been specifically disclosed in the Schedules. For purposes of the preceding sentence, the Capstead Companies' Liability will include, without limitation, the following: (1) any Liability for Taxes arising from the inclusion (or termination of the inclusion) of the Capstead Companies in a consolidated, combined, unitary or separate company Tax Return filed by any of the Capstead Companies or their Tax Affiliates, (2) any Liability for Taxes relating to the merger, reorganization or other transactions by which the business, operations, properties or stock of the Capstead Companies were incorporated or acquired by Affiliates or former Affiliates of the Capstead Companies, 54 60 (3) any Liability for Taxes arising out of the transactions contemplated by this Agreement, (4) any amounts due from the Capstead Companies under any Tax sharing or Tax allocation agreement or arrangement, whether imposed by law or otherwise, and (5) any Liability for Taxes arising from the disallowance or adjustment of deductions taken for periods prior to the Closing Date (regardless of the year in which such disallowance or adjustment occurs); and (B) The Purchaser will be liable for, and will indemnify, defend and hold the Capstead Companies harmless from and against, any and all Taxes imposed on or with respect to the Capstead Companies or their assets, operations, or activities related to the Purchased Assets for any Post-Closing Period. (ii) Certain Transaction Costs. Notwithstanding anything to the contrary in this Section, the Purchaser will be liable for and pay any and all transfer Taxes arising in connection with the transfer of the Purchased Assets under this Agreement, and the Purchaser will indemnify, defend and hold the Sellers harmless against any and all such transfer taxes. (c) Right of Offset. Notwithstanding any other provision of this Agreement or any Related Agreement, in the event an Indemnifying Party under this Section 9.05 is required to indemnify the Claimant hereunder, the Claimant shall be entitled to offset the amount of such required indemnity or any claim from any and all amounts owed by any Claimant, or any Affiliate of Claimant, to any Indemnifying Party under this Section 9.05. In the event that the Claimant is the Purchaser, it may also make a claim against any amount held in Escrow pursuant to the Escrow Agreement. 9.06 LIMITATION ON INDEMNITY. The provisions for indemnity provided in Sections 9.01(a)(i) and (ii) of this Agreement shall be effective against the Capstead Companies only if the aggregate amount of all Damages for which the Capstead Companies are liable thereunder exceeds $1,000,000, but if the aggregate amount of such Damages exceeds $1,000,000 the Purchaser shall be entitled to recover all such Damages without giving effect to such $1,000,000 threshold amount. For purposes of determining and calculating Damages under this Article IX, the representations and warranties of the Capstead Companies shall be read without taking into account or giving effect to any qualifiers, modifiers or limitations contained therein using (i) "Knowledge" or (ii) "material," "Material," "materiality," "in all material 55 61 respects" or words of similar import or meaning, except only to the extent specifically set forth in Section 9.01(c). In no event shall any recovery under this Article IX exceed the aggregate cash proceeds received by the Capstead Companies pursuant to this Agreement (including, for this purpose, the $1,500,000 deposited with the Escrow Agent pursuant to Section 1.04(b)(ii) and 1.05(c)). ARTICLE X MISCELLANEOUS 10.01 NOTICES. Any notice or other communication required or which may be given hereunder shall be in writing and either delivered personally to the addressee, telegraphed or telexed to the addressee or mailed, certified or registered mail, postage prepaid, and shall be deemed given when so delivered personally, telegraphed or telexed, or if mailed, two days after the date of mailing as follows: (a) if to Sellers, to: Capstead Mortgage Corporation Capstead Holdings, Inc. 2711 North Haskell Avenue 2711 North Haskell Avenue Suite 1000 Suite 900 Dallas, Texas 75204 Dallas, Texas 75204 Attention: Treasurer Attention: Treasurer Capstead Inc. 2711 North Haskell Avenue Suite 1000 Dallas, Texas 75204 Attention: Treasurer with a copy to: Andrews & Kurth L.L.P. 1717 Main Street Suite 3700 Dallas, Texas 75201 Attention: David Barbour, Esquire 56 62 (b) if to Purchaser, to: HomeComings Financial Network, Inc. 8400 Normandale Lake Blvd., Suite 600 Minneapolis, Minnesota 55437 Attention: President with a copy to: GMAC Mortgage Group, Inc. Residential Funding Corporation c/o GM Legal Staff 8400 Normandale Lake Blvd., Suite 600 3031 West Grand Blvd. Minneapolis, Minnesota 55437 Detroit, Michigan 48202 Attention: Office of the General Counsel Attention: General Counsel 10.02 ENTIRE AGREEMENT. This Agreement and the Servicing Purchase Agreement (including the Exhibits and the Schedules hereto and thereto) contain the entire agreement among the parties with respect to the transactions contemplated hereby and supersedes all prior agreements, written or oral, with respect thereto (including, without limitation, any bid letters or written expressions of interest of Purchaser or any information contained in the related Confidential Descriptive Memorandum dated August 1998). 10.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 10.04 CONFIDENTIALITY. All information which is not public knowledge disclosed heretofore or hereafter by any party to any other party (including its attorneys, accountants or other representatives) in connection with this Agreement or any Related Agreement (including, without limitation, the existence of this Agreement or any Related Agreement and the terms hereof and thereof) shall be kept confidential by such other party, and shall not be used by such other party otherwise than for use as herein contemplated, except to the extent (a) it is or hereafter becomes public knowledge or becomes lawfully obtainable from other sources, including a third party who is under no obligation of confidentiality to the party disclosing such information or to whom information was released without restriction, or (b) such other party is compelled to disclose such information by judicial or administrative process or, in the opinion 57 63 of its counsel, by other Legal Requirements, or (c) such duty as to confidentiality and non-use is waived by such disclosing party. In the event of termination of this Agreement, each party shall exercise all reasonable efforts to return, upon request, to the other parties all documents and reproductions thereof received from such other parties (and, in the case of reproductions, all such reproductions made by the receiving party) that include information not within the exceptions contained in the first sentence of this Section 10.04. 10.05 EXPENSES. Except as otherwise provided in Section 8.02 of this Agreement, each party shall bear the respective legal, accounting and other costs and expenses of any nature, relating to or in connection with the negotiation of this Agreement and the Related Agreements and the consummation of the transactions contemplated by this Agreement and such Related Agreement, incurred by each of them, whether or not this Agreement is consummated or terminated. 10.06 FURTHER ACTIONS. At any time and from time to time, each party agrees, without further consideration, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. 10.07 SURVIVAL. Except as otherwise provided herein, the covenants, agreements, representations and warranties contained in or made pursuant to this Agreement shall survive the Closing Date, irrespective of any review, examination or investigation made by or on behalf of any party. 10.08 GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of Texas applicable to agreements made and to be performed entirely within such state. 10.09 ASSIGNMENT. This Agreement is not assignable, except that Purchaser may assign its rights or obligations under this Agreement to any Affiliate of Purchaser provided that Purchaser shall continue to be bound by this Agreement. 10.10 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 10.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 10.12 SCHEDULES. The Schedules to this Agreement are a part of this Agreement as if set forth in full herein. 58 64 10.13 HEADINGS. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 10.14 EXCLUSIVITY. Between the date hereof and the Closing Date (or the earlier termination of this Agreement) each of the Capstead Companies shall not, and shall not permit any Affiliate or representative to the extent within its control to, directly or indirectly, encourage, initiate or engage in discussions or negotiations with, or provide any information to, any Person or group of Persons, other than Purchaser, concerning any proposal for an acquisition or other business combination involving all or any part of the Business or Purchased Assets or any interest therein (other than sales of mortgage loans and hedging activities in the ordinary and usual course of business). 10.15 CONFIDENTIALITY AND NONCOMPETITION. For purposes of this Section 10.15, the term "Capstead Companies" or "Capstead Company" shall also include each Person (other than an individual) who is an Affiliate thereof. (a) The Capstead Companies jointly and severally agree that none of the Capstead Companies will, at any time, disclose any Confidential Information to any unauthorized Persons, without Purchaser's prior written consent. (b) The Capstead Companies further agree that: (i) For a period of 912 calendar days after the Closing: (A) None of the Capstead Companies will, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, or render services or advice to (including, without limitation, by way of consulting or similar services) the Restricted Business. The Capstead Companies may, in the aggregate, purchase or otherwise acquire up to (but not more than) four and one half percent (4.5%) of any class of securities of any Person (but without otherwise participating in the activities of such Person) involved in the Restricted Business; provided, further, that a Capstead Company shall not be deemed to be engaged in the Restricted Business or in violation of this subparagraph (A) as a result of (1) the bona fide acquisition on an arm's length basis of the Capstead Companies or any Capstead Company by a Person (which is not an Affiliate of any of the Capstead Companies) engaged in whole or in part in the Restricted Business (it being understood and acknowledged, however, that none of the Capstead Companies shall thereby be released from the application of this subparagraph (A) to the 59 65 activities of any of the Capstead Companies), or (2) the acquisition by the Capstead Companies or any Capstead Company of one or more Persons engaged partly in the Restricted Business (but only in any instance where (i) no more than thirty percent (30%) of any such Person's gross revenues are derived from the Restricted Business during the twelve (12) full calendar months immediately preceding such acquisition and (ii) the outstanding principal balance of all 1-to-4 family "A" to "A-" conventional residential mortgage loans being serviced by such Person (when taken together with the outstanding principal balance of all mortgage loans then being serviced by any of the Capstead Companies) does not exceed $5 Billion; but provided further, however, that at no time during the 912 calendar day period referred to above shall the aggregate outstanding principal balance of all mortgage loans being serviced by the Capstead Companies, whether through acquisitions or otherwise, exceed $5 Billion in the aggregate) or (3) as a result of providing solely debt financing to (without any right or contingent rights to acquire any equity or other interest in) a Restricted Business without in any other way violating any of the other provisions of this subparagraph (A). (B) None of the Capstead Companies will, directly or indirectly, either for themselves or any other Person, solicit the business, whether or not related in any way to the Restricted Business specifically or residential mortgage lending generally, of any Person known to the Capstead Companies to be a mortgagor of a mortgage loan serviced or subserviced by the Business (other than any loan serviced or subserviced on behalf of any Capstead Company as investor or master servicer; provided that, as of the Closing Date, a Capstead Company either owns, or has a recourse obligation with respect to, such exempted loan), whether or not any of the employees of the Capstead Companies had personal contact with such Person (each a "Customer Mortgagor"). (ii) None of the Capstead Companies will, at any time during or after the 912 calendar-day period, directly or indirectly disparage Purchaser or the Business (outside of Proceedings, if any, in connection with any Capstead Company's enforcement of its rights against Purchaser under any Contract between one or more of the Capstead Companies and Purchaser), or any of their shareholders, directors, officers, employees, or agents; (iii) None of the Capstead Companies will, for a period of 912 calendar days after the Closing, directly or indirectly, either for themselves or 60 66 any other Person, (A) induce or attempt to induce any individual listed on Schedule 2.22 or any employee of the Purchaser who was an employee of the Business immediately prior to the Closing to leave the employ of the Business or the Purchaser, (B) in any way interfere with the relationship between the Business and any such individual or employee of the Business or the Purchaser, or (C) employ, or otherwise engage as an employee, independent contractor, or otherwise, any such individual or employee of the Business or the Purchaser (except any employee who has not been employed by Purchaser for a period exceeding twelve (12) consecutive months following the Closing Date); (iv) None of the Capstead Companies will, for a period of 912 calendar days after the Closing, (A) induce or attempt to induce any Customer Mortgagor, supplier, licensee, or business relation of the Business to cease doing business with the Business, or (B) in any way interfere with the relationship between any customer, supplier, licensee, or business relation of the Business; and (v) In the event of a Breach by any of the Capstead Companies of any covenant set forth in Subsections (b)(i), (b)(iii) and (b)(iv), the term of such covenant will be extended by the period of the duration of such breach; (c) Without in any way limiting any other provisions of this Agreement, if any Capstead Company Breaches any of the covenants set forth in Section 10.15(a) or 10.15(b), the Purchaser will be entitled to the following remedies: (i) Damages from the Capstead Companies; and/or (ii) injunctive or other equitable relief to restrain any Breach or Threatened Breach or otherwise to enforce specifically the provisions of Subsections (a) and (b) of this Section 10.15, it being agreed that money damages alone cannot adequately compensate the Purchaser and the Business, and would be an inadequate remedy for such breach. (d) Each of the Capstead Companies acknowledges and agrees that the payment of the Purchase Price by Purchaser was expressly in recognition of the value that the current employees of any of the Capstead Companies involved in the Business had to the Purchaser in respect of its anticipated continuation of the Business following the Closing. Each of the parties hereto expressly covenants, agrees and acknowledges that the provisions of this Section 10.15 are reasonable with respect to limitations as to time, geographical area, and scope of the activity to be restrained and do not impose upon the Capstead Companies or any of the Capstead Companies a greater restraint than is necessary to protect the goodwill or other 61 67 business interests of the Purchaser. Each of the Capstead Companies expressly acknowledges and agrees that the Purchaser would not have entered into this Agreement nor any of the Related Agreements without having each of the Capstead Companies make each and every covenant and agreement contained in this Section 10.15. 10.16 SEVERABILITY. Any portion or provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be reformed to the extent necessary to avoid such invalidity, illegality or unenforceability, without affecting in any way the remaining portions or provisions hereof in such jurisdiction or, to the extent permitted by law, rendering that or any other portion or provision hereof invalid, illegal or unenforceable in any other jurisdiction. 10.17 NO THIRD PARTY BENEFICIARIES. No employee of any of the Capstead Companies or former employee thereof (or his/her spouse or beneficiary), or any other Person not a party to this Agreement, shall be entitled to assert any claim hereunder. In no event shall this Agreement constitute a third party beneficiary Contract. 10.18 REMEDIES EXCLUSIVE. Except for remedies based on fraud, intentional misrepresentation, willful misconduct or deliberate Breach and except for equitable remedies (including, but not limited to, specific performance) and the remedies provided for in Section 1.05(e) of this Agreement, the remedies provided in Article IX and in the Escrow Agreement constitute the sole and exclusive remedies for recovery against the Capstead Companies based upon the Breach of any representation or warranty of any of the Capstead Companies contained in this Agreement or in any certificate, schedule or exhibit furnished by any of the Capstead Companies hereunder or in any Contract or instrument delivered in connection with the transactions contemplated hereby, or based upon the failure of any of the Capstead Companies to perform any covenant, agreement or undertaking required by the terms of this Agreement to be performed by any of the Capstead Companies. 10.19 EQUITABLE REMEDIES. The obligations of Purchaser and the Capstead Companies under this Agreement are unique. The parties acknowledge that it would be extremely impracticable to measure damages resulting from any default under this Agreement. Accordingly, it is agreed that a party not in default under this Agreement may sue in equity for specific performance or injunctive relief. 10.20 JOINT PREPARATION. This Agreement has been jointly prepared by the parties and the provisions of this Agreement shall not be construed more strictly against any party hereto as a result of its participation in such preparation. 10.21 ATTORNEYS' FEES. Except as and to the extent specifically provided in Section 1.05(e), if any party to this Agreement initiates any legal action against any other party 62 68 relating to this Agreement or any agreement executed pursuant hereto, the prevailing party in such action shall be entitled to receive reimbursement from the other party for all reasonable attorneys' fees, expert fees and other costs and expenses incurred by the prevailing party in respect of such proceeding. 63 69 IN WITNESS WHEREOF, the parties have executed this Agreement the date first above written. CAPSTEAD MORTGAGE CORPORATION By: /s/ RONN K. LYTLE --------------------------------- Name: RONN K. LYTLE ------------------------------- Its: Chairman CAPSTEAD HOLDINGS, INC. By: /s/ RONN K. LYTLE --------------------------------- Name: RONN K. LYTLE ------------------------------- Its: Chairman CAPSTEAD INC. By: /s/ RONN K. LYTLE --------------------------------- Name: RONN K. LYTLE ------------------------------- Its: Chairman HOMECOMINGS FINANCIAL NETWORK, INC. By: /s/ DAVEE OLSON --------------------------------- Name: DAVEE OLSON ------------------------------- Its: CFO 64 70 APPENDIX I "AFFILIATE" --with respect to any Person, (i) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the stock having ordinary voting power in the election of directors of such person, (ii) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person, (iii) each of such Person's officers, directors, joint venturers and partners, (iv) any trust or beneficiary of a trust of which such Person is the sole trustee, or (v) any lineal descendants, ancestors, spouse or former spouses (as part of a marital dissolution) of such Person (or any trust for the benefit of such Person). For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "BREACH" --a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (a) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision, or (b) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence or circumstance. "BUSINESS" --is the Company's residential mortgage loan servicing, subservicing and origination operations and all assets, whether owned by the Company, Holdings, CMC, or any other affiliate of CMC, which are used or held for use in, related to, or associated with, directly or indirectly (in whole or in part), such operations. "BUSINESS DAY" --any day of the week other than a Saturday, Sunday, or a legal holiday, or a bank holiday in the State of Texas or the Commonwealth of Pennsylvania. "CAPSTEAD LITIGATION" --the class action lawsuit styled Marvin J. Netsky, et al. v. Capstead Mortgage Corporation, et al. pending in the U.S. District Court of the Northern District of Texas, Civil Action No. 3-98CV1716-R (the "Netsky action") and any other lawsuits naming CMC and/or certain of its officers and directors as defendants, whether or not consolidated with other such actions, which (i) relate to or arise out of such lawsuits, (ii) relate to or arise out of the facts or allegations which are, in whole or in part, the subject of the Netsky action, or (iii) relate to or arise out of federal or state securities laws or other state law, common law, or equity actions or claims, including, without limitation, stockholder derivative actions. This definition shall be deemed to include any action to which the Company and/or Holdings may be named or joined. Appendix I - page 1 71 "COMMERCIALLY REASONABLE EFFORTS" --the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved in the required timeframe. "CONFIDENTIAL INFORMATION" --means (i) all information concerning the specific operations, methods of doing business and affairs of the Business, including the following: product specifications, data, know-how, formulae, compositions, processes, inventions and ideas, past, current and planned research and development, current and planned residential mortgage servicing and origination manufacturing and distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures and architectures (and related processes, formulae, compositions, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information) of the Business and any other information, however documented, of the Business that is a trade secret within the meaning of Texas trade secret law; (ii) any and all information concerning the Business (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and addresses of key personnel, and personnel training and techniques and materials), however documented; and (iii) any and all notes, analysis, compilations, studies, summaries, and other material prepared by or for the Business to the extent containing or based, in whole or in part, on any information included in the foregoing; provided, however, that Confidential Information shall not include information which (a) relates to the business of residential mortgage servicing and origination generally known to other operators of mortgage companies, (b) is or becomes generally available to the public other than as a result of a disclosure by any of the Capstead Companies or any of their Representatives (as defined below), or (c) becomes available to any of the Capstead Companies on a nonconfidential basis from a Person who is not bound by a duty of confidentiality to Purchaser, or is otherwise not known to the Capstead Companies to be under an obligation to Purchaser not to transmit such information to the Capstead Companies or its Representatives. "CONSENT" --any approval, consent, ratification, waiver, Authorization or other authorization (including any Governmental Authorization). "CONTRACT" --any agreement, contract, commitment, obligation, promise, arrangement, understanding, or undertaking (whether written or oral and whether express or implied) that is legally binding. "GOVERNMENTAL AUTHORIZATION" --any approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. Appendix I - page 2 72 "GOVERNMENTAL BODY" --any: (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature. "GUARANTY" --means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing (whether by reason of being a general partner of a partnership or otherwise) any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; and (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation. "IRS" --the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. "KNOWLEDGE" --an individual will be deemed to have "Knowledge" of a particular fact or other matter if: (a) such individual is actually aware of such fact or other matter; or (b) a prudent individual with responsibility with respect to a specific subject matter could be expected to discover or otherwise become aware of such fact or other matter in the ordinary and usual course of business. Appendix I - page 3 73 A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time during the past two years served, as a director or officer of such Person (or in any similar capacity), or as an individual with primary responsibility for such Person with respect to a specific subject matter, has, or at any time had, Knowledge of such fact or other matter (but in any event, including the individuals listed on Schedule A-1 hereto). Without limiting the foregoing, when used in reference to the Capstead Companies or any of the Capstead Companies, if one Capstead Company or any of the individuals referred to above has "Knowledge" of a particular fact or other matter, then each Capstead Company will be deemed to have such Knowledge. "LEGAL REQUIREMENT" --any federal, state, local, municipal, foreign, international, multinational or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty. "LIABILITY" --with respect to any Person means any and all liabilities, debts or other obligations, contingent or otherwise, however imposed or incurred, at any time, including, without limitation: (a) its liabilities for borrowed money or any other indebtedness; (b) its liabilities for the deferred purchase price of property acquired by such Person, including accounts payable arising in the ordinary and usual course of business or otherwise; and including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property; (c) all liabilities required to be included on its balance sheet in accordance with GAAP (in respect of capital leases or otherwise); (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) all liabilities in respect of any Guaranty. "LIEN" --any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership. "MATERIAL ADVERSE EFFECT" --with respect to any Person or the Business, means any event, change, occurrence or effect, direct or indirect, (other than as a result of changes as may affect Appendix I - page 4 74 the mortgage industry generally and other than financial changes directly associated with hedging activities) on the business, operations, properties (including tangible properties), condition (financial or otherwise), assets, obligations or Liabilities (whether absolute, accrued or contingent) of such Person or the Business and its respective subsidiaries that has had, or could reasonably be expected to have a material adverse effect upon such Person or the Business. "ORDER" --any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator. "PERMITTED LIEN" --Statutory liens for amounts not yet due and payable provided Purchaser received a credit for the same at closing and liens securing Assumed Obligations. "PERSON" --any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body. "PROCEEDING" --any action, arbitration, audit, hearing, investigation, inquiry, litigation, suit or appeal (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator. "RESTRICTED BUSINESS" --any business involved in the servicing of 1-to-4 family "A" or "A-" conventional residential mortgage loans anywhere within the United States. For purposes of this definition, "servicing" means mortgage loan servicing services including, without limitation, one or more of the following functions (or a portion thereof): (i) the administration and collection of payments for the reduction of principal and/or the application of interest on a mortgage loan; (ii) the collection of payments on account of Taxes and insurance; (iii) the remittance of appropriate portions of collected payments; (iv) the provision of full escrow administration; (v) the pursuit of foreclosure and alternate remedies against a related mortgaged property; and (vi) the administration and liquidation of residential real property owned by the servicer or the investor for whom the servicer administered the related loan as a result of a foreclosure. Notwithstanding the foregoing, however, the reference for purposes of this definition to "servicing" shall not include (1) the performance of any "stand by" servicing obligations required in connection with the performance of any master servicing duties of any of the Capstead Companies; (2) the servicing of any loans other than 1-to-4 family "A" to "A-" conventional residential mortgage loans; and (3) any Capstead Company retaining the servicing rights, but not actually servicing any loan. Appendix I - page 5 75 "THREATENED" --a claim, Proceeding, dispute, action or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future. "YEAR 2000 COMPLIANT" --an internal system or a product or service that at all times before, during and after January 1, 2000 accurately processes and handles date and time data (including, without limitation, calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries, and the years 1999 and 2000, including, without limitation, leap year calculations, to the extent that other information technology used in combination with such internal systems and such products and services properly exchange date/time data with it. To the extent any such internal systems and such products and services must perform as a system, such internal systems and such products and services used in combination with other such internal systems and such products and services, respectively, must properly exchange date/time data with them. Appendix I - page 6 76 SCHEDULES 1.01(a).....................................................Real Property Leases 1.01(e) .......................................................Assumed Contracts 1.01(h).................................................................Software 1.01(i)..................................................Non-assignable Licenses 1.02.............................................................Excluded Assets 1.03........................................................Retained Liabilities 1.04(b).............................................Sellers' Account Information 1.05(b)..........................................................Closing Payment 1.05(e).................................................Certain Purchased Assets 1.05(f)..................................................Pipeline Loan Valuation 2.03.....................................Good Standing of Company and Subsidiary 2.04....................................Consents Necessary for Due Authorization 2.06............................................Outstanding Options and Warrants 2.07(e)..............................Liabilities Not Reflected on Balance Sheets 2.08...........................................................Subsequent Events 2.09.................................................................. Contracts 2.10(a) ................................................................Defaults 2.11................................................................Fixed Assets 2.12........................................................Real Property Leased 2.17...............................................................Bank Accounts 2.18..................................................................Guarantees 2.19...................................................................Insurance 2.20(b)....................................................................Taxes 2.21...........................................................Employee Benefits 2.22......................................................Executive Compensation 2.24..................................................Related Party Transactions 2.25........................................................Licenses and Permits 2.26..........................................................Proprietary Rights 2.28..........................................................Violations of Laws 2.29..................................................................Litigation 2.30....................................................................Consents 2.36(e)........................................................Certain Transfers 4.01..........................................................Certain Activities 4.08.......................................................Financial Information 6.05...........................................................Required Consents 6.07...........................................................Certain New Hires 6.08..........................................................Canceled Contracts A-1...........................................Certain Individuals with Knowledge
77 CAPSTEAD MORTGAGE CORPORATION AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST. EX-10.32 3 PURCHASE AND SALE AGREEMENT DATED 11/30/98 1 EXHIBIT 10.32 - ------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT BETWEEN CAPSTEAD INC. "SELLER" AND GMAC MORTGAGE CORPORATION "PURCHASER" DATED AS OF NOVEMBER 30, 1998 - ------------------------------------------------------------------------------- 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS
SECTION PAGE Definitions..................................................................1 ARTICLE II SALE AND TRANSFER OF SERVICING 2.1 Items to be Sold; Assumption of Servicing Responsibilities ........12 2.2 Covenants Regarding the Sale and Transfer..........................12 2.3 Obligations of Seller..............................................12 2.4 Purchase Price and Terms of Payment................................12 2.5 Computation; Adjustment............................................14 2.6 [RESERVED].........................................................17 2.7 Reconciliation.....................................................17 2.8 Assignment of Hedging Instruments..................................17 2.9 Update of Schedules and Exhibits...................................17 2.10 Acknowledgment.....................................................18 2.11 Certain Matters Relating to Forward Delivery Agreements............18 ARTICLE III GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER 3.1 Organization.......................................................19 3.2 Good Standing......................................................19 3.3 Validity of Agreement..............................................19 3.4 No Conflict........................................................19 3.5 Compliance with Applicable Requirements; No Default................20 3.6 Title to the Servicing and Related Escrow Accounts.................20 3.7 Litigation.........................................................20 3.8 Disclosure of Material Facts.......................................21 3.9 No Accrued Liabilities.............................................21 3.10 Errors and Omissions and Fidelity Bond.............................21 3.11 Non-Recourse Servicing.............................................21 3.12 Settlement Agreement...............................................22 3.13 Financial Condition................................................22 3.14 Qualification as Lender............................................23
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SECTION PAGE ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO MORTGAGE LOANS 4.1 Information........................................................24 4.2 Origination and Sale of Mortgage Loans.............................24 4.3 Enforceability.....................................................24 4.4 General Servicing of Mortgage Loans................................24 4.5 Escrow Accounts....................................................25 4.6 No Modifications...................................................25 4.7 Mortgage Insurance.................................................26 4.8 Hazard Insurance...................................................26 4.9 Condition of Mortgaged Property; Casualties........................26 4.10 Lien Priority; Title Insurance.....................................27 4.11 Condemnation; Forfeiture...........................................27 4.12 Custodial Files....................................................27 4.13 FHLMC Notes........................................................27 4.14 Exception Loans....................................................28 4.15 Investor Repurchase and Indemnification............................28 4.16 Fraud..............................................................28 4.17 Soldiers and Sailors...............................................28 4.18 Tax Service Contracts..............................................28 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER 5.1 Organization.......................................................29 5.2 Good Standing......................................................29 5.3 Validity of Agreement..............................................29 5.4 No Conflict........................................................29 5.5 Brokers or Finders.................................................30 5.6 Qualification as Lender............................................30 ARTICLE VI INVESTOR APPROVALS 6.1 Seller's Obligations...............................................31 6.2 Purchaser's Obligations............................................31 ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 7.1 Conditions on Closing Date.........................................32 7.2 Non-satisfaction of Condition......................................34
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SECTION PAGE ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 8.1 Conditions on Closing Date.........................................35 8.2 Non-satisfaction of Condition......................................36 ARTICLE IX COVENANTS 9.1 Mutual Cooperation.................................................37 9.2 [RESERVED].........................................................37 9.3 Subservicing Agreement.............................................37 9.4 Transfer Costs.....................................................37 9.5 [RESERVED].........................................................38 9.6 Form 1099, Form 1098 - Purchaser's Obligation......................38 9.7 Reimbursement of Advances..........................................38 9.8 Payment of Interest................................................38 9.9 FHLMC Quality Control Program......................................38 9.10 Bulk Transfer Laws Compliance......................................38 9.11 Press Releases.....................................................39 9.12 Certain Notifications..............................................39 9.13 [RESERVED].........................................................39 9.14 Forward Delivery Pricing Adjustment................................39 9.15 Addendum...........................................................40 ARTICLE X INDEMNIFICATION AND REMEDIES 10.1 Indemnification by Seller..........................................41 10.2 Repurchase; Purchaser's Remedies...................................42 10.3 No Effect of Knowledge.............................................43 10.4 Indemnification by Purchaser.......................................43 10.5 Notice of Claim....................................................43 10.6 Limitation of Liability............................................44 10.7 Right of Offset....................................................44 ARTICLE XI MISCELLANEOUS 11.1 Costs and Expenses.................................................46 11.2 Confidentiality....................................................46 11.3 Broker's Fees......................................................46
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SECTION PAGE 11.4 No Solicitation....................................................47 11.5 Survival...........................................................47 11.6 Notices............................................................47 11.7 Governing Law......................................................48 11.8 Entire Agreement...................................................48 11.9 Waivers and Amendments.............................................49 11.10 Third Party Beneficiaries..........................................49 11.11 Construction.......................................................49 11.12 Headings...........................................................49 11.13 Counterparts.......................................................49 11.14 Attorneys' Fees....................................................49 11.15 Binding Effect.....................................................50 11.16 No Assignment......................................................50 11.17 Location of Closing................................................50 11.18 Severability of Provisions.........................................50 11.19 Grant of Security Interest.........................................50 LIST OF SCHEDULES AND EXHIBITS ..............................................52
iv 6 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT is dated as of November 30, 1998 by and between Capstead Inc. ("Seller"), a Delaware corporation with its principal office located at 2711 North Haskell Avenue, Suite 1000, Dallas, Texas 75204 and GMAC Mortgage Corporation ("Purchaser"), a Pennsylvania corporation with its principal office located at 100 Witmer Road, Horsham, Pennsylvania 19044-0963. RECITALS 1. Seller is or will be the servicer of certain mortgage loans identified on the schedule attached hereto as Exhibit A-1, having an aggregate outstanding principal balance of approximately $37.6 billion as of September 30, 1998 and certain Identified Forward Delivery Loans having an aggregate outstanding principal balance of approximately $1.7 billion as of September 30, 1998 identified on the schedule attached hereto as Exhibit A-2. Seller will also be the servicer of certain Unidentified Forward Delivery Loans identified on the schedule attached hereto as Exhibit A-3 and certain Cutoff Date Refinanced Loans identified on the schedule attached hereto as Exhibit A-4. The mortgage loans identified in Exhibits A-1, A-2, A-3 and A-4 are hereinafter referred to collectively as the "Mortgage Loans." The Mortgage Loans are residential (1-4 family) mortgage loans which (a) have been delivered to FNMA or FHLMC for cash or to back mortgage-backed securities or participation certificates issued by FNMA and FHLMC, respectively or (b) are owned by Capstead Mortgage Corporation, an Affiliate of Seller. 2. Seller desires to sell and Purchaser desires to purchase all right, title, and interest in and to the Servicing and certain other assets in accordance with the terms and conditions of this Agreement, subject to Investor approval. In connection with such sale, Purchaser shall assume certain liabilities and obligations of Seller as provided in this Agreement. 3. Seller and its Affiliates, Capstead Mortgage Corporation and Capstead Holdings, Inc. are entering into an asset purchase agreement dated as of December 9, 1998 with HomeComings Financial Network, Inc. (the "HomeComings Asset Purchase Agreement"), for the sale of certain assets and the assumption of certain liabilities and obligations, related to the operation of Seller's residential mortgage servicing and origination business. 4. Seller and Purchaser are entering into an Addendum as of an even date with the Agreement for the sale by Seller of the servicing rights related to certain mortgage loans which are Post-Cutoff Date Refinanced Loans and Post-Payoff Adjustment Date Refinanced Loans during the period from the Cutoff Date to the closing of the transaction contemplated by the HomeComings Asset Purchase Agreement. NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 7 ARTICLE I Definitions All words or phrases defined in this Article I (except as herein otherwise expressly provided or unless the context otherwise requires) shall, for the purposes of this Agreement, have the respective meanings specified in this Article. 1.1 ADDENDUM means the Addendum to this Agreement dated as of November 30, 1998 and in the form attached hereto as Exhibit J. 1.2 AFFILIATE means, with respect to any party hereto, any person or entity which controls, is controlled by, or is under common control with, such party. 1.3 AGREEMENT means this Purchase and Sale Agreement and all Exhibits and Schedules hereto, all of which are incorporated herein by this reference, and any written and agreed to amendments or modifications hereto signed by both Seller and Purchaser. 1.4 ANCILLARY INCOME means all servicing income derived from the Mortgage Loans other than servicing fees, including without limitation benefits derived from related Escrow Accounts, late charges, fees, commissions or expense reimbursements relating to insurance, other incidental fees, and revenues arising from the cross-selling of services and products. 1.5 APPLICABLE REQUIREMENTS means, with respect to each and every Mortgage Loan and each and every REO Property (a) all applicable contractual obligations, including without limitation those contractual obligations contained (i) in the Mortgage Note, Mortgage and related mortgage loan documents, and any amendments thereto, (ii) in the Servicing Agreements, (iii) in policies of mortgage insurance, or (iv) in policies of hazard (including flood) insurance pertaining to any Mortgaged Property, (b) all applicable statutes, rules, regulations and ordinances of any federal, state, local and other governmental or regulatory authority (including without limitation RESPA, Truth-In-Lending, ECOA, HMDA, fair lending, usury and environmental laws), (c) all applicable requirements and guidelines of each Investor and each governmental agency, government-sponsored entity, board, commission, instrumentality and other governmental body or officer having jurisdiction (including without limitation FNMA, FHLMC, and their respective selling and/or servicing guides), (d) all applicable requirements and guidelines of PMI companies, (e) all applicable judicial and administrative judgments, consent decrees, Orders, stipulations, awards, settlement agreements, writs and injunctions, and (f) the reasonable and customary mortgage servicing practices of prudent mortgage lending institutions that service mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located. 1.6 ARBITRATION PROCEDURES means the procedures set forth in Exhibit M attached hereto. 1.7 ARM LOAN means a Mortgage Loan that is an adjustable rate loan. 1.8 ASSIGNED CONTRACTS means (i) the Mortgage Loan Servicing Rights Purchase and Sale Agreements, the Indemnification Agreements and the Forward Delivery Agreements, in each case identified on Schedule 1.8 hereto, to the extent the Seller has obtained any required consent to the assignment of the applicable agreement to Purchaser and (ii) the Servicing Agreement among Seller, Capstead Mortgage Corporation and CMC Investment Partnership dated July 1, 1994. 2 8 1.9 ASSUMED LIABILITIES means the liabilities identified on Schedule 1.9, as updated as provided in Section 2.9. 1.10 BREACH: a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (a) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision, or (b) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence or circumstance. 1.11 BUSINESS means Seller's residential mortgage loan servicing, subservicing and origination operations and all assets, whether owned by Seller, Capstead Holdings, Inc., Capstead Mortgage Corporation or any other affiliate of Capstead Mortgage Corporation, which are used or held for use in, related to or associated with, directly or indirectly (in whole or in part), such operations. 1.12 BUSINESS DAY means any day of the week other than a Saturday, Sunday, or a legal holiday or a bank holiday in the Commonwealth of Pennsylvania, the State of Iowa, or the State of Texas. 1.13 BUYDOWN LOAN means a Mortgage Loan as to which a specified amount of interest is paid out of a related Escrow Account in accordance with a related buydown agreement. 1.14 CAPSTEAD LITIGATION means the class action lawsuit styled Marvin J. Netsky, et al. v. Capstead Mortgage Corporation, et al. pending in the U.S. District Court of the Northern District of Texas, Dallas Division, Civil Action No. 3-98CV1716-R (the "Netsky action") and any other lawsuits naming Capstead Mortgage Corporation and/or certain of its officers and directors as defendants, whether or not consolidated with other such actions, which (i) relate to or arise out of such lawsuits, (ii) relate to or arise out of the facts or allegations which are, in whole or in part, the subject of the Netsky action, or (iii) relate to or arise out of federal or state securities laws or other state law, common law, or equity actions or claims, including without limitation, stockholder derivative actions. This definition shall be deemed to include any action to which the Seller and/or Capstead Holdings, Inc. may be named or joined. 1.15 CLAIMANT shall have the meaning given in Section 10.5 of the Agreement. 1.16 CLOSING DATE means December 21, 1998, or such other date as may be agreed upon by the parties. 3 9 1.17 CLOSING DATE PAYMENT means the portion of the Purchase Price payable on the Closing Date as specified in Schedule 1.73. 1.18 CONSENT means any approval, consent, ratification, waiver or other authorization (including any Governmental Authorization). 1.19 CONTRACT means any agreement, contract, commitment, obligation, promise, arrangement, understanding, or undertaking (whether written or oral and whether express or implied) that is legally binding. 1.20 CUSTODIAL FILE means the documents required by the applicable Investor under the Servicing Agreement to be retained by a document custodian acceptable to Investor, or by Investor. 1.21 CUSTODIAN means Bank of Maryland, or such other document custodian as may be designated by Purchaser or defined by the Investor. 1.22 CUTOFF DATE means the end of business on November 30, 1998. 1.23 CUTOFF DATE REFINANCED LOAN means a mortgage loan resulting from the refinancing of a Mortgage Loan by Seller on or prior to the Cutoff Date, as identified in the schedule to be attached hereto as Exhibit A-4. 1.24 DEFECT means a breach in any respect of any representation or warranty herein contained with respect to a Mortgage Loan or any failure by Seller to comply with any covenant herein contained with respect to a Mortgage Loan which could reasonably be expected to result in a loss or damage to Purchaser or the imposition of additional servicing burdens with respect to such Mortgage Loan. 1.25 DELINQUENT LOAN means a Mortgage Loan which, as of the Cutoff Date, is ninety (90) days or more past due (i.e., payment due September 1, 1998 or earlier has not been made), or is in bankruptcy, in litigation, or in foreclosure or REO status. The term "IN BANKRUPTCY" shall mean with respect to a Mortgage Loan that the related Mortgagor has sought relief under or has otherwise been subjected to the federal bankruptcy laws or any other similar laws of general application for the relief of debtors through the institution of appropriate Proceedings, and such Proceedings are continuing, and shall continue until the related Mortgaged Property is released from the jurisdiction of the bankruptcy or other court in which the matter is pending, regardless of whether such Proceeding is dismissed, finally concluded, or otherwise. The term "IN FORECLOSURE" shall mean, as to any Mortgage Loan, that the first action necessary to be taken to commence Proceedings in foreclosure or a sale under power of sale under the law of the state wherein the Mortgage is to be enforced, has been taken, and such Proceedings are continuing, or should have been taken in accordance with applicable Investor standards. The term "IN LITIGATION" shall mean a legal action in foreclosure of a Mortgage Loan, or for a deficiency thereunder, in which the sale of the Mortgaged Property in foreclosure (whether by action, power of sale, or otherwise) has been delayed by reason of the defense of such action by the Mortgagor, or any other action commenced or pending which involves the Mortgage Loan. The term "REO 4 10 STATUS" shall mean the ownership of real property as a result of foreclosure of a Mortgage or acquisition of a deed in lieu of foreclosure with respect to a Mortgaged Property. 1.26 ELECTRONIC DATA FILE means tape(s) containing Mortgage Loan and/or Servicing information (a) delivered in connection with the offering materials and Purchaser's due diligence review, and (b) prepared as of each Physical Transfer Date (as that term is defined in the Subservicing Agreement) for the related Mortgage Loans. 1.27 ELIGIBLE MORTGAGE LOAN means a Mortgage Loan which is not a Delinquent Loan. 1.28 ESCROW ACCOUNTS means those accounts established and maintained by Seller with commercial banking institutions or savings and loan associations under the provisions of the Servicing Agreements for (i) the deposit and retention of interest and principal on account of the Mortgage Loans; (ii) the deposit and retention of all collections of taxes, assessments, ground rents, hazard and mortgage insurance or comparable items on account of the Mortgage Loans; and/or (iii) the deposit and retention of buydown funds on account of the Mortgage Loans, and all other escrow or similar accounts maintained by Seller with respect to the Mortgage Loans. 1.29 ESCROW AGREEMENT means the Escrow Agreement pertaining to the administration of the Reserved Funds, in the form attached as Exhibit B hereto. 1.30 ESCROW DEPOSITS means funds held in Escrow Accounts. 1.31 FHA means the Federal Housing Administration of the Department of Housing and Urban Development of the United States of America and any successor or assignee thereof. 1.32 FHLMC means the Federal Home Loan Mortgage Corporation and any successor or assignee thereof. 1.33 FHLMC MORTGAGE LOAN means a Mortgage Loan which has been delivered to FHLMC for cash or to back participation certificates issued by FHLMC. 1.34 FMHA means the Farmers Home Administration of the United States of America acting through Rural Housing Service or its successor, the U.S. Department of Agriculture and any successor or assignee thereof. 1.35 FNMA means the Federal National Mortgage Association and any successor or assignee thereof. 1.36 FNMA MORTGAGE LOAN means a Mortgage Loan which has been delivered to FNMA for cash or to back mortgage-backed securities issued by FNMA. 1.37 FORWARD DELIVERY AGREEMENT means an agreement for the purchase and sale of mortgage loan servicing between Seller and a third-party seller which is specified on Schedule 1.37 hereto. 5 11 1.38 GOVERNMENTAL AUTHORIZATION means any approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. 1.39 GOVERNMENTAL BODY means any (a) nation, state, county, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority or any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature. 1.40 HAZARDOUS MATERIALS means any substance, chemical, waste, or other material which is or may be at any time before the Closing Date listed, defined or otherwise identified as hazardous, toxic or dangerous under applicable law including, without limitation, asbestos, PCB's, petroleum, petroleum product or by-product, crude oil, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas. 1.41 HEDGING INSTRUMENTS means certain hedging instruments maintained by Seller or an Affiliate to manage interest rate risk pertaining to the Servicing, as listed on Schedule 2.8 hereto, as such Schedule may be amended as mutually agreed in writing by Seller and Purchaser. 1.42 HOMECOMINGS ASSET PURCHASE AGREEMENT has the meaning assigned to such term in the Recitals. 1.43 IDENTIFIED FORWARD DELIVERY LOAN means a Mortgage Loan for which the related Servicing Rights were sold to Seller on or prior to September 30, 1998 and will be transferred to Seller or Purchaser by a third-party seller pursuant to a Forward Delivery Agreement, and which is listed on Exhibit A-2 hereto. 1.44 INCLUDED ASSETS means the Escrow Deposits and those assets identified on Schedule 1.44, as updated as provided in Section 2.9. 1.45 INDEMNIFIABLE CLAIM shall have the meaning given in Section 10.5 of the Agreement. 1.46 INDEMNIFYING PARTY shall have the meaning given in Section 10.5 of the Agreement. 1.47 INTEREST RATE means the average thirty (30) day rate for high grade commercial paper (unsecured notes sold through dealers by major corporations) as published daily in the Wall Street Journal 1.48 INVESTOR(S) means FNMA, FHLMC, and/or Capstead Mortgage Corporation, as the case may be. 6 12 1.49 INVESTOR TRANSFER DATE means the close of business on the Cutoff Date. 1.50 KNOWLEDGE OF SELLER means (a) the actual knowledge of the senior management of Seller, including without limitation, the senior servicing officer of Seller, at or prior to the date of this Agreement, and/or (b) information which such officers are presumed to know based on facts, circumstances or information contained or described at any time prior to the date hereof in the books, records, files or other documents of Seller. 1.51 LEGAL REQUIREMENT means any federal, state, local, municipal, foreign, international, multinational or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty. 1.52 LIABILITY means, with respect to any Person, any and all liabilities, debts or other obligations contingent or otherwise, however imposed or incurred, at any time, including without limitation (a) its liabilities for borrowed money or any other indebtedness; (b) its liabilities for the deferred purchase price of property acquired by such Person, including accounts payable arising in the ordinary and usual course of business or otherwise; and including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property; (c) all liabilities required to be included on its balance sheet in accordance with GAAP (in respect of capital leases or otherwise); (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) all liabilities in respect of any Guaranty. 1.53 LIEN means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership. 1.54 LOSSES shall have the meaning given in Section 10.1 of the Agreement. 1.55 MATERIAL ADVERSE EFFECT means, with respect to any Person, the Business, or the Purchased Assets, any event, change, occurrence or effect, direct or indirect, (other than as a result of changes as may affect the mortgage industry generally and other than financial changes directly associated with hedging activities) on the business, operations, properties (including tangible properties), condition (financial or otherwise), assets, obligations or Liabilities (whether absolute, accrued or contingent) of such Person, and its respective subsidiaries (in the case of a Person) or on the Business or the Purchased Assets, as applicable, that has had, or would reasonably be expected to have a material adverse effect upon such Person, the Business or the Purchased Assets, as applicable. 1.56 MORTGAGE means a valid and enforceable mortgage, deed of trust, or other security instrument creating a first lien upon described real property improved by a single family dwelling which secures a Mortgage Note. 1.57 MORTGAGE LOAN means an individual residential (1-4 family) mortgage loan which is the subject of the Servicing Agreements and this Agreement, which shall consist of the 7 13 mortgage loans identified in the schedules attached hereto as Exhibits A-1, A-2, A-3 and A-4 as updated as provided in Section 2.9. 1.58 MORTGAGE LOAN FILE means, with respect to a Mortgage Loan, those origination and servicing documents, escrow documents, and other documents (as stored in various media, including but not limited to paper, microfiche, and electronically stored data) required to be maintained by the servicer of such Mortgage Loan pursuant to the applicable Servicing Agreement including without limitation those specified in Exhibit C to this Agreement. 1.59 MORTGAGE NOTE means a written promise to pay a sum of money at a stated interest rate during a specified term that is secured by a Mortgage along with any riders thereto. 1.60 MORTGAGED PROPERTY means real property which is subject to a lien created by a Mortgage as security for the related Mortgage Loan. 1.61 MORTGAGOR means the obligor on a Mortgage Note. 1.62 ORDER means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator. 1.63 P & I means principal and interest. 1.64 PAYOFF ADJUSTMENT DATE means the 60th day following the Cutoff Date. 1.65 PAYOFF LOAN means any Mortgage Loan that (a) is not a Delinquent Loan as of the Cutoff Date; and (b) is paid off within sixty (60) days after the Cutoff Date. 1.66 PERSON means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body. 1.67 PMI means private mortgage insurance. 1.68 POOL OR POOLS means any pool(s) of Mortgage Loans identified on the Summary of Pools attached hereto as Exhibit D. 1.69 POST-CUTOFF DATE REFINANCED LOAN means an individual residential (1-4 family) mortgage loan (a) funded by Seller or any of its Affiliates after the Cutoff Date or (b) included in the Unclosed Pipeline Listing (as defined in the HomeComings Asset Purchase Agreement), in either case funded on or before the Payoff Adjustment Date, the proceeds of which are applied to pay off a Payoff Loan and for which the related servicing rights are assigned to or acquired by Purchaser or any of its Affiliates pursuant to this Agreement. 1.70 POST-CUTOFF DATE REFINANCED LOAN CREDIT means, with respect to a Post-Cutoff Date Refinanced Loan, the applicable percentage of unpaid principal balance specified in Schedule 1.74(d). 8 14 1.71 POST-PAYOFF ADJUSTMENT DATE REFINANCED LOAN means an individual residential (1-4 family) mortgage loan funded by Seller or any of its Affiliates after the Payoff Adjustment Date, the proceeds of which are applied to pay off a Mortgage Loan and for which the related servicing rights are assigned to or acquired by Purchaser or any of its Affiliates pursuant to this Agreement. It is understood that if the closing of the transaction contemplated by the HomeComings Asset Purchase Agreement occurs on or before the Payoff Adjustment Date, there will not be any Post-Payoff Adjustment Date Refinanced Loans. It is further understood that Seller's ability to fund mortgage loans ceases upon the closing contemplated by the HomeComing Asset Purchase Agreement. 1.72 PROCEEDING means any action, arbitration, audit, hearing, investigation, inquiry, litigation, suit or appeal (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator. 1.73 PURCHASE PRICE means the purchase price for the Purchased Assets as defined in Schedule 1.73. 1.74 PURCHASE PRICE PERCENTAGE means (a) with respect to each Mortgage Loan other than an Identified Forward Delivery Loan, an Unidentified Forward Delivery Loan or a Refinanced Loan, the corresponding percentage stated in Schedule 1.74(a), (b) with respect to Identified Forward Delivery Loans, the corresponding percentage stated in Schedule 1.74(b), (c) with respect to Unidentified Forward Delivery Loans, the purchase price percentage determined pursuant to the applicable Forward Delivery Agreement as adjusted pursuant to Section 9.14 and (d) with respect to Cutoff Date Refinanced Loans, the percentage determined as specified in Schedule 1.74(d). Notwithstanding the foregoing, for all purposes of this Agreement, the Purchase Price Percentage for a Delinquent Loan shall be deemed to be zero percent (0%). 1.75 PURCHASED ASSETS means the Servicing Rights, the Included Assets, the Hedging Instruments and the Assigned Contracts. 1.76 RECOURSE OBLIGATION means, with respect to any Mortgage Loan, any obligation or liability (actual or contingent) of the servicer of such Mortgage Loan (a) for losses incurred in connection with the foreclosure or other disposition of, or other realization or attempt to realize upon the collateral securing, such Mortgage Loan (including, without limitation, losses relating to loss mitigation or obtaining deeds in lieu of foreclosure); (b) to repurchase such Mortgage Loan in the event that the Mortgagor of such Mortgage Loan is in bankruptcy, in foreclosure or in litigation; or (c) to repurchase such Mortgage Loan in the event of a delinquency or other payment default thereunder by the Mortgagor. Notwithstanding the foregoing, a Mortgage Loan shall not be considered subject to a Recourse Obligation merely because the Servicer retains a contingent liability to repurchase a Mortgage Loan that is determined to have been ineligible for sale to the applicable Investor due to a breach of one or more representations and warranties. 1.77 RELATED AGREEMENT means any other agreement or document referred to herein, 9 15 executed in connection herewith or contemplated hereby to which Seller and Purchaser are parties. 1.78 REO PROPERTY means, with respect to a Mortgage Loan, the real property to which Purchaser has taken ownership as a result of foreclosure of a Mortgage or acceptance of a deed in lieu of foreclosure with respect to a Mortgaged Property. 1.79 REPURCHASE PRICE means the repurchase price for certain repurchased Mortgages Loans as defined in Schedule 1.79. 1.80 RESERVED FUNDS means those funds held in the Reserved Funds Escrow Account. 1.81 RESERVED FUNDS ESCROW ACCOUNT means the escrow account established pursuant to the Escrow Agreement. 1.82 SERVICING AGREEMENT means a pool purchase contract or whole loan sale and servicing contract pursuant to which a Mortgage Loan was originated, purchased, sold and/or serviced for the benefit of an Investor. 1.83 SERVICING RIGHTS OR SERVICING means the right, title, and interest in and to the servicing of the Mortgage Loans and the maintenance and servicing of the Escrow Accounts, along with the right to receive the servicing fee income and any and all Ancillary Income arising from or connected to any Mortgage Loan. 1.84 SERVICING RIGHTS PURCHASE PRICE has the meaning specified in Section 2.4. 1.85 SETTLEMENT AGREEMENT means an agreement entered into by Seller in settlement of class action claims and/or litigation. 1.86 SIGNIFICANT UNDERWRITING DEFICIENCY shall, with respect to a FNMA Mortgage Loan, have the meaning assigned to it in the FNMA Selling/Servicing Guides, as amended, and, with respect to FHLMC Mortgage Loan, shall mean that a FHLMC quality control feedback letter has been issued with respect to the eligibility of such Mortgage Loan for sale to FHLMC. 1.87 SUBSERVICER means (a) during the term of the Subservicing Agreement, the Seller, and (b) upon the termination of the Subservicing Agreement, the subservicer designated by Purchaser. 1.88 SUBSERVICING AGREEMENT means the Subservicing Agreement, dated as of the date of the Agreement in the form attached hereto as Exhibit L, between Seller and Purchaser. 1.89 T & I means taxes and insurance. 1.90 THREATENED: a claim, Proceeding, dispute, action or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, 10 16 dispute, action or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future. 1.91 UNIDENTIFIED FORWARD DELIVERY LOAN means a Mortgage Loan for which the related Servicing Rights were sold to Seller between October 1, 1998 and the Cutoff Date, and which will be transferred to Seller or Purchaser by a third party seller pursuant to a Forward Delivery Agreement. The Unidentified Forward Delivery Loans shall be identified on a schedule to be attached to the Agreement as Exhibit A-3, as updated as provided in Section 2.9. 1.92 VA means the Department of Veterans Affairs of the United States of America and any successor or assignee thereof. 11 17 ARTICLE II SALE AND TRANSFER OF SERVICING 2.1 ITEMS TO BE SOLD; ASSUMPTION OF SERVICING RESPONSIBILITIES. (a) Subject to, and upon the terms and conditions of this Agreement, Purchaser agrees to purchase from the Seller, and Seller agrees to sell, transfer, assign and deliver to Purchaser, on the Closing Date, all of Seller's right, title and interest in and to, including all economic benefit derived from, the Purchased Assets. (b) On the Closing Date, Purchaser shall (i) assume and agree to pay or discharge when due in accordance with their respective terms the Assumed Liabilities to the extent they become due on or after the Closing Date and (ii) assume Seller's obligations under the Assigned Contracts to the extent they become due or performable on or after the Closing Date, except as may be provided in a mutually agreeable Assignment and Assumption Agreement. Except as provided in the preceding sentence, Purchaser will not assume or otherwise be responsible for in any way whatsoever any other duties, obligations or liabilities of, or claims against, Seller or Seller's shareholders (or any of their respective agents, officers, directors, trustees, or Affiliates), that accrue or otherwise relate to the period prior to the Closing Date with respect to the Servicing Rights or otherwise. 2.2 COVENANTS REGARDING THE SALE AND TRANSFER. On the Closing Date, Seller will sell, transfer, assign and deliver all of its right, title, and interest in and to the Servicing Rights and Escrow Deposits, including without limitation record title and the obligation to service the Mortgage Loans, to Purchaser. Except as provided herein and as required under the terms of the Subservicing Agreement, on the Closing Date, Seller shall cease all servicing responsibilities with regard to the Mortgage Loans and shall sever its mortgage servicing relationships with the Mortgagors. 2.3 OBLIGATIONS OF SELLER. Seller covenants and agrees that, Seller shall pay, perform and discharge all liabilities and obligations relating to ownership of the Servicing Rights with respect to each Mortgage Loan until the related Investor Transfer Date. 2.4 PURCHASE PRICE AND TERMS OF PAYMENT. (a) The purchase price for the Servicing Rights (the "Servicing Rights Purchase Price") shall be calculated as follows: (1) The Servicing Rights Purchase Price shall be calculated for the Mortgage Loans shown on Exhibit A-1, A-2, A-3 and A-4, as applicable, by multiplying (A) the unpaid principal balance, as of the 12 18 Cutoff Date, of each Eligible Mortgage Loan listed on such Exhibits by (B) the corresponding Purchase Price Percentage for each such Mortgage Loan. (2) No Purchase Price shall be paid for Servicing Rights related to Mortgage Loans which are not Eligible Mortgage Loans as of the Cutoff Date. (b) The purchase price for the Purchased Assets (the "Purchase Price") shall be paid as follows: (1) On the Closing Date, Purchaser shall pay Seller the Closing Date Payment. (2) On the Closing Date, Purchaser shall pay into the Reserved Funds Escrow Account the balance of the Purchase Price. (3) (A) Within ten (10) Business Days following the Payoff Adjustment Date (or on such earlier date as such information may become available using reasonable efforts) Purchaser shall cause Subservicer to provide to Purchaser and Seller in an electronic format the schedules of Payoff Loans and Post-Cutoff Date Refinanced Loans and a statement setting forth in reasonable detail the calculation of the amount set forth in Section 2.4(b)(3)(B)(II) below (the "Payoff Adjustment Factor") which shall include, where appropriate, an estimate of the Post-Cutoff Date Refinanced Loan Credit and (B) within five (5) Business Days following Seller's receipt of such schedules, Seller shall pay to Purchaser an amount equal to the lesser of (I) $16,000,000 and (II) the amount, if any, by which (x) the aggregate of the amounts, computed with respect to each Payoff Loan, equal to (i) the applicable Purchase Price Percentage with respect to such Payoff Loan multiplied by (ii) the unpaid principal balance of such Payoff Loan as of the Cutoff Date, exceeds (y) the aggregate of the amounts computed or estimated with respect to each Post-Cutoff Date Refinanced Loan equal to (i) the Post-Cutoff Date Refinanced Loan Credit for the servicing rights with respect to such Post-Cutoff Date Refinanced Loan (as specified in the Addendum) multiplied by (ii) principal balance at origination of each Post-Cutoff Date Refinanced Loan. If Seller and Purchaser cannot agree on the amount of the Payoff Adjustment Factor during the five (5) Business Day period referred to above, Seller shall pay to Purchaser any amount payable under this Section 2.4(b)(3) which is not in dispute, and Seller and Purchaser shall work in good faith during the next ten (10) Business Days toward 13 19 resolving such disagreement. If a resolution is reached within such ten (10) Business Day period, then the balance of the agreed amount shall be calculated as provided above on the Business Day immediately following the end of such ten (10) Business Day period and paid to Purchaser, together with interest thereon at the Interest Rate for the period commencing with the date on which the five (5) Business Day Period referred to above ends, through and including the date on which such payment is made. Unless a mutually agreeable resolution to such disagreement is reached and the disputed amount is paid within such ten (10) Business Day period, Purchaser and Seller shall act in accordance with the Arbitration Procedures. (4) The Reserved Funds will be administered in accordance with the provisions of the Escrow Agreement. (c) Unless otherwise agreed by the parties, all payments required hereunder shall be made by bank wire transfer in immediately available funds. 2.5 COMPUTATION; ADJUSTMENT. It is understood and agreed that: (a) All wiring instructions and Purchase Price information necessary to effect payment of the Purchase Price shall be provided to the appropriate party at least two Business Days prior to the date of payment. (b) If, during the ninety (90) day period following the Closing Date, information pertaining to any Mortgage Loan or Mortgage Loans used in computing the payment of the Servicing Rights Purchase Price, the amount of any Post-Cutoff Date Refinanced Loan Credit or any computation of such a payment, shall be found to be incorrectly computed, the party discovering such incorrect computation shall promptly notify the other. Seller and Purchaser shall cooperate to resolve any such discrepancies. No later than five (5) Business Days after the expiration of the ninety (90) day period referred to in the preceding sentence, Seller and Purchaser shall agree on an appropriate adjustment to the Servicing Rights Purchase Price, and an adjusting payment in the amount of any such overpayment or underpayment, as applicable, shall be made by the appropriate party, together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which such payment is made. If Seller and Purchaser cannot agree on the amount of such adjustment during the five (5) Business Day period referred to above, to the extent that Seller and Purchaser have agreed that any adjustment is appropriate, 14 20 then the applicable party shall pay to the other party such amount which is not in dispute, together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which such payment is made, and Seller and Purchaser shall work in good faith during the next ten (10) Business Days toward resolving such disagreement. If a resolution is reached within such ten (10) Business Day period, then the balance of the agreed amount shall be calculated as provided above on the Business Day immediately following the end of such ten (10) Business Day period and paid to the appropriate party, together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which such payment is made. Unless a mutually agreeable resolution to such disagreement is reached and the disputed amount is paid within such ten (10) Business Day period, Purchaser and Seller shall act in accordance with the Arbitration Procedures. (c) (i) Within five (5) Business Days following the Closing Date, Seller will provide Purchaser with its preliminary, good faith estimate of the Adjustment Amount as defined in Section 2.5(c)(iii) below (such estimate, the "Preliminary Adjustment Amount"). If the Preliminary Adjustment Amount is positive, Purchaser shall remit by wire transfer to Seller or its successor) the Preliminary Adjustment Amount. If the Preliminary Adjustment Amount is negative, Seller shall remit by wire transfer to Purchaser the Preliminary Adjustment Amount, in either case on the sixth (6th) Business Day following the Closing Date. (ii) Within ninety (90) calendar days following the Closing Date, Purchaser shall deliver to Seller true and correct copies of statements of the Assumed Liabilities and the Included Assets as of the Closing Date (the "Closing Date Statements"). The Closing Date Statements shall be in a form substantially comparable to Schedules 1.9 and 1.44, respectively, attached hereto (such Schedules, the "Cutoff Date Schedules"). (iii) The "Adjustment Amount" (which may be a positive or negative number) shall be calculated based on the Closing Date Statements and shall be an amount equal to (a) the amount of any increase or decrease in the book value of the Assumed Liabilities (which may be a positive or negative number, with a positive number being associated with a decrease in the book value of the Assumed Liabilities), plus (b) the amount of any increase or decrease in the book value of the Included Assets (which may be a positive or 15 21 negative number, with a positive number being associated with an increase in such book value of the Included Assets), each for the period between the Cutoff Date and the Closing Date. For purposes of determining the Adjustment Amount, the Cutoff Date value of the Assumed Liabilities and the Included Assets will be the book values set forth in the Cutoff Date Schedules, and the Closing Date values of the Assumed Liabilities and the Included Assets will be the book values set for in the Closing Date Statements. The book value of any assets and liabilities shall be determined in accordance with generally accepted accounting principles ("GAAP") and the reporting requirements of Seller applied on a basis consistent with past practice. (iv) The Adjustment Amount shall be calculated by Purchaser, and Purchaser shall notify Seller of the Adjustment Amount, within five (5) Business Days of the delivery of the Closing Date Statements to Purchaser and shall be net of any Preliminary Adjustment Amount paid. Subject to the following paragraph, Seller shall have a period of eight (8) Business Days from the date of notification to review the Adjustment Amount as determined by Purchaser. If Seller agrees with Purchaser as to the Adjustment Amount, then (x) if the Adjustment Amount is positive, Purchaser shall remit by wire transfer to Seller (or its successor) the Adjustment Amount, and (y) if the Adjustment Amount is negative, Seller shall remit by wire transfer to Purchaser the Adjustment Amount, in either case on the Business Day immediately following the end of such eight (8) Business Day period together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which such payment is made. (v) If Seller does not agree with the Adjustment Amount calculated by Purchaser, Seller shall deliver to Purchaser, within eight (8) Business Days following notification of Seller by Purchaser of the Adjustment Amount, written notice containing specific objections (prepared in good faith) to the Adjustment Amount as determined by Purchaser. If Seller and Purchaser cannot agree on the calculation of the Adjustment Amount during the five (5) Business Day period following Purchaser's receipt of the notice from Seller referred to in the preceding sentence to the extent that Seller and Purchaser have agreed as to any portion of the Adjustment Amount, then the applicable party shall pay to the other party such amount which is not in dispute, together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which 16 22 such payment is made, and Seller and Purchaser shall work in good faith during the next ten (10) Business Days toward resolving such disagreement. If a resolution is reached within such ten (10) Business Day period, then the agreed Adjustment Amount shall be paid in accordance with clause (x) or (y) of the immediately preceding paragraph on the Business Day immediately following the end of such ten (10) Business Day period together with interest thereon at the Interest Rate for the period commencing with the Closing Date through and including the date on which such payment is made. (vi) Unless a mutually agreeable resolution to such disagreement is reached and the disputed amount is paid within such ten (10) Business Day period, Purchaser and Seller shall act in accordance with the Arbitration Procedures. 2.6 [RESERVED] 2.7 RECONCILIATION. No later than five (5) Business Days after the Closing Date, Seller shall fully reconcile on a loan level basis as of the Cutoff Date (i) the reports generated by Seller's computers with respect to the applicable Escrow Accounts and advances with the reports generated by Seller's electronic data processing servicing system; and (ii) the reports of Seller's electronic data processing servicing system with Investor records and reports for the applicable Servicing Rights. Seller shall be responsible for any payments necessary to bring such Escrow Accounts and advances to full reconciliation. 2.8 ASSIGNMENT OF HEDGING INSTRUMENTS. On the Closing Date, the Hedging Instruments will be assigned to Purchaser at their agreed upon value as specified in Schedule 2.8. 2.9 UPDATE OF SCHEDULES AND EXHIBITS. On the Closing Date, Seller shall deliver to Purchaser updated versions of all Schedules and Exhibits provided for hereunder, updated based on the most current information available at that time. Within fifteen (15) Business Days following the Closing Date, Seller shall deliver to Purchaser (a) Exhibits A-1, A-2, A-3 and A-4 updated as of the Cutoff Date to reflect, among other things, deletions of Mortgage Loans that paid off on or prior to the Cutoff Date; and (b) all Schedules provided for hereunder (except for the Cutoff Date Schedules), updated through and including the Closing Date. 17 23 2.10 ACKNOWLEDGMENT. Contemporaneously with the execution of this Agreement, Seller is entering into the HomeComings Asset Purchase Agreement to sell its servicing business and operations. Upon closing of that transaction, Purchaser acknowledges that Seller will no longer have the people or resources necessary to perform any post-closing accounting and operational functions and has made arrangements with HomeComings Financial Network, Inc. ("HomeComings") to perform such functions. Purchaser agrees to look directly HomeComings for performance of such functions. However, nothing contained herein shall reduce Seller's indemnity or other financial obligations contained herein. 2.11 CERTAIN MATTERS RELATING TO FORWARD DELIVERY AGREEMENTS. If on the Closing Date, Seller is unable to assign to Purchaser a Forward Delivery Agreement, promptly following the Closing Date, Purchaser and Seller shall enter into an agreement substantially identical to such Forward Delivery Agreement to provide for the sale by Seller to Purchaser of servicing rights acquired by Seller under such Forward Delivery Agreement, simultaneously with the acquisition thereof by Seller, at a price equal to the price paid therefor by Seller, subject to adjustment pursuant to Section 9.14. 18 24 ARTICLE III GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER As an inducement to Purchaser to enter into this Agreement, Seller represents and warrants, as of the Closing Date and as of each Investor Transfer Date, as follows: 3.1 ORGANIZATION. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite corporate power and authority to own, lease and operate its properties and assets in the manner in which such properties and assets are now owned, leased and operated and to carry on the business in which it is now engaged. Prior to the date hereof, Seller has delivered to Purchaser true and complete copies of its Certificate of Incorporation and its by-laws, as currently in effect. 3.2 GOOD STANDING. To the extent required by applicable law, Seller is qualified to transact business and is in good standing as a foreign corporation in all appropriate jurisdictions and to conduct all activities performed with respect to the origination and servicing of the Mortgage Loans. Schedule 3.2 sets forth the states in which Seller has qualified. There is no other jurisdiction in which the ownership, leasing, licensing or use of property or assets by Seller or the conduct of its Business makes such qualification necessary, and where the failure to be so qualified would have a material adverse effect on the business of financial condition of Seller. 3.3 VALIDITY OF AGREEMENT. Seller has full corporate power and authority to execute and deliver this Agreement, and any applicable Related Agreement. This Agreement constitutes, and any Related Agreement, when executed and delivered, will constitute the valid and binding obligations of Seller enforceable against it in accordance with its respective terms. The execution, delivery and performance of this Agreement and any Related Agreement by Seller and consummation of the transactions contemplated hereby and thereby have been duly authorized by the board of directors (and if necessary, stockholders) of Seller and any other vote or corporate consent necessary for due authorization and such execution and delivery, and the consummation of such transaction, does not require the consent of any other Person other than such as may be required under the HSR Act and by the applicable Investors whose approval is required in Order to effectuate the transaction of Servicing. 3.4 No Conflict. The execution and delivery of this Agreement and any Related Agreement by Seller and the performance of its obligations hereunder or thereunder (a) are not in violation or breach of, and will not conflict with or constitute a default under, any of the terms of the charter documents 19 25 or by-laws of Seller or any note, debt instrument, security agreement, lease, deed of trust or mortgage, license, franchise, permit or any other contract binding upon Seller or upon any of its assets or properties; (b) will not result in the creation or imposition of any Lien in favor of any third party upon any of the material assets or properties of Seller (including, without limitation, any of the Purchased Assets); and (c) will not conflict with or violate any applicable Legal Requirement of any Governmental Body having jurisdiction over Seller, or any of the Purchased Assets. The attached Schedule 3.4 contains a true and complete list of all permits, authorizations and Consents of third parties required to be obtained by Seller in connection with (i) the execution and delivery of this Agreement and any applicable Related Agreement by Seller and the performance of its obligations hereunder or thereunder or (ii) the sale, transfer and assignment of the Purchased Assets (including, without limitation, any Consents), and the assumption by Purchaser of the Assumed Liabilities, in each case in Order to avoid a Breach, default, termination, acceleration or modification of any Contract included in the foregoing or any Order. 3.5 COMPLIANCE WITH APPLICABLE REQUIREMENTS; NO DEFAULT. (a) With respect to the Mortgage Loans, Seller has complied in all material respects with all Applicable Requirements or, prior to the Closing Date, will have cured any such material non-compliance. Seller has done and Seller will do no act or thing which may materially and adversely affect the Servicing. Seller has not received any notice of alleged violations of the foregoing. (b) No event has occurred and is continuing which, under the provisions of such contracts or such other documents or agreements but for the passage of time or the giving of notice, or both, would constitute an event of default under any Servicing Agreement, and Seller has not received any notice of default or other information from any Investor that it has terminated any applicable Servicing Agreement or that it intends to do so. (c) To the Knowledge of Seller, there exists no noncompliance by Seller with Applicable Requirements which would cause the cancellation of any insurance coverage provided with respect to any Mortgage Loan by any PMI company. 3.6 TITLE TO THE SERVICING AND RELATED ESCROW ACCOUNTS. Seller is the lawful owner of the Servicing, is custodian of the Escrow Accounts and has the sole right and authority to transfer the Servicing as contemplated hereby. The transfer, assignment and delivery of the Servicing and of the Escrow Accounts in accordance with the terms and conditions of this Agreement shall vest in Purchaser all rights as servicer, free and clear of any and all claims, charges, defenses, offsets and encumbrances of any kind or nature whatsoever, including but not limited to those of Seller. Except as disclosed in Schedule 3.6 hereto, neither the Mortgage Loans nor the Servicing Rights have been, and continue to be, hypothecated, assigned, or pledged as collateral by Seller for any loan or for any other purpose. 3.7 LITIGATION. Except as disclosed in Schedule 3.7 hereto, and whether or not covered by insurance, to 20 26 the extent it relates to or is associated with, directly or indirectly (in whole or in part) the Business, there is no claim, dispute, Proceeding, appeal or, to the Knowledge of Seller, investigation or inquiry, at law or in equity, involving Seller, or involving any of the Purchased Assets before any court, agency, authority, arbitration panel or other Governmental Body (other than those, if any, with respect to which service of process or similar notice has not yet been made on Seller), and, to the Knowledge of Seller, none have been Threatened against Seller. To the Knowledge of Seller, there are no facts which, if known to shareholders, customers, Governmental Bodies, bondholders or other investors, mortgage insurance companies, HUD, FHLMC, FNMA or other Persons, would form the basis of any such claim, dispute, Proceeding or appeal which would have a Material Adverse Effect on the Business. Except as disclosed in Schedule 3.7 hereto, Seller is not subject to any settlement agreement, writ, injunction, decree or other Order (including any consent decree) of any court agency, authority, arbitration panel or other Governmental Body relating to, or associated with, directly or indirectly (in whole or in part), the Business or that would affect the execution or performance of this Agreement or any Related Agreement or the performance of Seller's obligations hereunder or thereunder. 3.8 DISCLOSURE OF MATERIAL FACTS. To the Knowledge of Seller, the representations and warranties contained in Articles III and IV of this Agreement and in the Schedules hereto, and any other documents or information furnished to Purchaser by or on behalf of Seller, including, but not limited to any offering memorandum and data tapes, do not contain any untrue statement of a material fact or omit to state any material fact necessary in Order to make the statements contained herein and therein, in the light of the circumstances under which they were made, not misleading. 3.9 NO ACCRUED LIABILITIES. There are no accrued liabilities of Seller with respect to any Mortgage Loan or the related Servicing or circumstances under which such accrued liabilities will arise against Purchaser as successor to the Servicing, with respect to occurrences prior to the Closing Date. 3.10 ERRORS AND OMISSIONS AND FIDELITY BOND. Seller has in full force and effect an errors and omissions policy or policies and fidelity bond with respect to its servicing operations and a blanket bond in accordance with Investor requirements. 3.11 NON-RECOURSE SERVICING. Except as disclosed in Schedule 3.11, the Servicing does not impose a Recourse Obligation on the Servicer, and Purchaser shall not be responsible to Seller or any other person for any losses sustained by Investors arising out of any foreclosure of any Mortgaged Property or the acquisition and subsequent holding or disposition of such Mortgaged Property, including without limitation third party expenses such as attorneys' fees and costs, special hazard losses (including earthquake-related losses), and restoration expenses, except to the extent that such losses are attributable to Purchaser's failure to perform Servicing as required by the Servicing 21 27 Agreements after the Closing Date. 3.12 SETTLEMENT AGREEMENT. Except as disclosed in Schedule 3.7, Seller has not entered into any Settlement Agreement with respect to class action litigation that will bind Purchaser as Servicer of the Mortgage Loans or otherwise materially and adversely affect the Servicing. 3.13 FINANCIAL CONDITION. (a) Seller is solvent; and no bankruptcy, reorganization, insolvency or similar Proceeding with respect to Seller has been initiated or is presently planned; (b) Seller has received reasonably equivalent value for the Purchased Assets from Purchaser; (c) The transactions contemplated by this Agreement and the Related Agreements are not being entered into: (i) with any intent to hinder, delay or defraud any Person to which Seller was or will become indebted on or after the Closing Date; (ii) while Seller was insolvent, nor will the consummation of such contemplated transactions render Seller insolvent; (iii) at a time when or under circumstances where Seller was engaged in Business or a transaction, for which any property remaining with the transferor would constitute unreasonably small capital; or (iv) at a time when or under circumstances where Seller intended to incur, or believed that it would incur, Liabilities that would be beyond the ability of Seller to pay as such Liabilities matured. (d) To the Knowledge of Seller, the Purchaser is not a creditor of Seller and the transactions contemplated by this Agreement and the Related Agreements are not being made on account of or in satisfaction of any claim held by the Purchaser, other than such claim or claims that might arise or have arisen in connection with the execution of this Agreement or any Related Agreement; and (e) Except as set forth in Schedule 3.13(e), since November 30, 1997, there have been no transfers, sales or assignments between or among Seller and its Affiliates with respect to any of the Purchased Assets or Assumed Obligations. Each such sale, transfer or assignment set forth on Schedule 3.13(e) was for consideration at least equal to the fair value of such asset or property. 22 28 3.14 QUALIFICATION AS LENDER. Seller is approved by the U.S. Department of Housing and Urban Development (HUD) as a lender and servicer of mortgage loans and meets all applicable HUD regulations so as to be entitled to originate and service mortgage loans sold to or insured by HUD. Seller is also an approved servicer of mortgage loans to the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA) and meets all applicable FHLMC and FNMA guidelines so as to be entitled to service mortgage loans sold to FHLMC and FNMA. In addition Seller is in good standing and eligible to sell mortgage loans to each of FHLMC and FNMA. Seller is in good standing and is eligible as a mortgage lender and servicer under applicable rules, regulations and procedures promulgated by each of the mortgage participation or sale of mortgage-backed bond and pass-through certificate programs for which Seller originates and services mortgage loans. 23 29 ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO MORTGAGE LOANS As further inducement to Purchaser to enter into this Agreement, Seller represents and warrants to Purchaser as of the Closing Date and as of each Investor Transfer Date, with respect to each Mortgage Loan, as follows: 4.1 INFORMATION. (a) All information contained in each Mortgage Loan File, and in any Electronic Data File, with regard to loan origination and servicing activity is complete and accurate in all material respects, and all monies received with respect to each Mortgage Loan have been properly accounted for and applied. Except as disclosed on Schedule 4.1 hereto, each Mortgage Loan File is complete in all material respects with regard to origination and servicing activity. (b) The amount of the unpaid balance for each Mortgage Loan which is reflected on Exhibit A-1, Exhibit A-2, Exhibit A-3 or Exhibit A-4 is true and correct as of the date of such Exhibit. 4.2 ORIGINATION AND SALE OF MORTGAGE LOANS. (a) Each Mortgage Loan has been originated, serviced and/or sold in accordance, in all material respects, with Applicable Requirements, including without limitation, applicable state or federal laws, rules, or regulations pertaining to consumer credit, truth-in-lending and usury. (b) The selling and origination representations and warranties made to Investors under the Servicing Agreements are true and correct in all material respects as of the date made. (c) The full original principal amount of each Mortgage Note listed has been advanced to the Mortgagor. 4.3 ENFORCEABILITY. Each Mortgage Note and each Mortgage has been duly executed by the appropriate obligor and each is a valid and enforceable document, subject only to applicable antideficiency and bankruptcy statutes and to application of the rules of equity, and there are no defenses, setoffs or counterclaims against any Mortgage Loan. 4.4 GENERAL SERVICING OF MORTGAGE LOANS. (a) Each Mortgage Loan has been serviced in accordance with Applicable Requirements in all material respects. (b) Seller has not taken any action or failed to take any action which might cause the 24 30 cancellation of or otherwise affect any of the insurance contracts pertaining to Servicing of a Mortgage Loan (including without limitation PMI) or which might otherwise materially and adversely affect the Servicing. To the Knowledge of Seller, no prior servicer has taken any action or failed to take any action which might cause the cancellation of or otherwise affect any of the insurance contracts. (c) None of the Servicing Agreements contains, in light of common industry practices as of the Closing Date, any unusual or burdensome servicing obligations with respect to the Servicing Rights, or contains provisions which vary from published Applicable Requirements of the Investor, and no waivers with respect to any published or unpublished Applicable Requirements have been obtained which adversely affect the credit quality of any Mortgage Loan. 4.5 ESCROW ACCOUNTS. (a) All Escrow Accounts required by Applicable Requirements are maintained in accordance with such Applicable Requirements. Except as to payments which are past due under the Mortgage Loan, all Escrow Account balances required by Applicable Requirements and paid to Seller for the account of the Mortgagor and Seller are on deposit in the appropriate Escrow Accounts. (b) All payments for taxes, assessments, ground rents, mortgage insurance, hazard and flood insurance or other payments made from any related T & I Escrow Account have been made on a timely basis, and Seller has paid to the Mortgagor interest on Escrow Deposits only to the extent such payment is required by Applicable Requirements. Seller shall have properly conducted an escrow analysis for each Mortgage Loan for which a T & I Escrow Account is required by Applicable Requirements within the twelve (12) month period immediately preceding the Closing Date. All books and records with respect to each such Mortgage Loan shall be in good condition and shall have been adjusted to reflect properly the results of the escrow analysis. (c) With respect to any Mortgage Loan for which a negative escrow balance existed prior to the Closing Date, Seller has performed an escrow analysis on such Mortgage Loan for the purpose of correcting the negative escrow balance, and has adjusted the related monthly escrow payment on Seller's servicing system as a result of such analysis. (d) Where applicable, Seller has notified each Mortgagor, in accordance with Applicable Requirements, as to any payment adjustments which resulted from an escrow analysis. Seller shall provide Purchaser with copies of any notices and analyses prepared in accordance with subsection 4.5(b) above. (e) Every Escrow Account established with respect to a Buydown Loan has been fully funded by Seller, and not discounted to present value or otherwise. 4.6 NO MODIFICATIONS. Except with respect to partial releases, actions required by a divorce decree, assumptions, 25 31 or as otherwise permitted under Applicable Requirements, (a) the terms of each Mortgage Note and Mortgage have not been modified by Seller, (b) no party thereto has been released in whole or in part by Seller and (c) no part of the Mortgaged Property has been released by Seller. 4.7 MORTGAGE INSURANCE. As required by the applicable Investor, the Mortgage Loans are validly insured by mortgage insurance, and all premiums or other charges due in connection with such insurance have been paid. To the Knowledge of Seller, there has been no act or omission which would or may invalidate any such insurance with respect to Purchaser. There are no defenses, counterclaims or rights of setoff against Purchaser affecting the validity or enforceability of any mortgage insurance with respect to a Mortgage Loan. 4.8 HAZARD INSURANCE. There is in force with respect to each Mortgaged Property a hazard insurance policy that provides, at a minimum, for fire and extended coverage in an amount which is the lesser of (i) the outstanding principal balance of the Mortgage Loan or (ii) the full insurable value of improvements, but in no event less than the amount required under Applicable Requirements. If required by the Flood Disaster Protection Act of 1973, as amended, or by the Investor, each Mortgaged Property is and will be covered by a flood insurance policy in an amount not less than the lesser of (i) the outstanding principal balance of the applicable Mortgage Loan, or (ii) the maximum amount of insurance that is available under the Flood Disaster Protection Act of 1973, as amended. 4.9 CONDITION OF MORTGAGED PROPERTY; CASUALTIES. (a) To the Knowledge of Seller, there exists no damage to any Mortgaged Property from fire, windstorm, earthquake, other casualty, environmental hazard, or any other circumstances or conditions that would cause the related Mortgage Loan to become delinquent or otherwise materially and adversely affect the value or marketability of such Mortgage Loan or related Mortgaged Property. Notwithstanding anything to the contrary contained in this Section, to the extent that timely repairs are presently being undertaken utilizing casualty insurance proceeds pursuant to an insurance claim which is being timely processed with the insurance company, such repairs shall not constitute a breach of this warranty provided, however, that upon completion of such repairs, the collateral value of the repaired Mortgaged Property shall not be diminished materially from its value prior to such casualty loss. (b) To the Knowledge of Seller, there are (i) no uninsured casualty losses and (ii) no insured casualty losses relating to any Mortgaged Property where coinsurance has been, or Seller has reason to believe it will be, claimed by the insurance company or where the loss, exclusive of contents, is greater than the net recovery from the fire insurance carrier. To the Knowledge of Seller, casualty insurance proceeds paid with respect to a Mortgage Loan have been used either to reduce the Mortgage Loan balance or for the purpose of making repairs to the Mortgaged Property. To the Knowledge of Seller, unless such insurance proceeds have been used to reduce the Mortgage Loan balance, all damage with respect to which casualty insurance proceeds have 26 32 been received by or through Seller has been properly repaired or is in the process of being repaired with such proceeds. (c) To the Knowledge of Seller, (i) neither Seller nor any prior servicer is or has engaged in any activity that involves or involved the generation, use, manufacture, treatment, transportation, storage in tanks or otherwise, or disposal of Hazardous Material on or from any Mortgaged Property and (ii) no presence, release, Threatened release, discharge, spillage or migration of Hazardous Material in violation of existing Applicable Requirements, is occurring or has occurred on or from any such Mortgaged Property. 4.10 LIEN PRIORITY; TITLE INSURANCE. If required by Applicable Requirements, a title policy or attorney's opinion as to title, as the case may be, has been issued and is currently in effect for each Mortgage Loan insuring that the related Mortgage is a valid first lien on the Mortgaged Property which has not been modified, and that such Mortgaged Property is free and clear of all encumbrances and liens having priority over the first lien of the Mortgage, except for liens for real estate taxes and special assessments not yet due and payable and except for easements and restrictions of record identified in such title policy. 4.11 CONDEMNATION; FORFEITURE. Except as disclosed in Schedule 4.11 hereto, to the Knowledge of Seller, no Mortgaged Property has been or will be subject to an action seeking condemnation or forfeiture of such Mortgaged Property. 4.12 CUSTODIAL FILES. Except as disclosed in Schedule 4.12 hereto, the Custodial Files for each Mortgage Loan contain all items required by the applicable Investor to be contained therein, including in the case of FNMA Mortgage Loans and FHLMC Mortgage Loans, if applicable, all items required for the certification of the related Pool. Except as disclosed in Schedule 4.12 hereto, all Pools relating to FNMA Mortgage Loans or FHLMC Mortgage Loans have been certified in accordance with, and the securities backed by such Pools are issued on uniform documents promulgated in, the applicable FNMA or FHLMC Guide without any material deviation therefrom. Except as disclosed in Schedule 4.12 hereto, Pools shall be, as of the related Investor Transfer Date, eligible for recertification by Custodian, and Seller will be responsible for costs incurred with respect to the cure of any deficiencies, existing as of such related Investor Transfer Date, necessary for recertification. Pool balances relating to FNMA Mortgage Loans or FHLMC Mortgage Loans have been reconciled. The principal balances outstanding and owing on the Mortgage Loans in each Pool relating to FNMA Mortgage Loans or FHLMC Mortgage Loans equal or exceed the amounts owing to the security holders of such Pool. 4.13 FHLMC NOTES. Subject to Applicable Requirements, original FHLMC Mortgage Notes are held by 27 33 FHLMC or Seller's custodian. 4.14 EXCEPTION LOANS. Except as disclosed in Schedule 4.14 hereto, no Mortgage Loan is (a) a VA guaranteed loan, (b) insured under the National Housing Act, (c) subject to a bi-weekly payment plan, (d) secured by manufactured housing that is not affixed to a permanent structure, (e) a reverse mortgage loan, (f) a graduated payment loan that is still in the adjustment period of loan, (g) a housing authority loan, or (h) an FmHA loan. 4.15 INVESTOR REPURCHASE AND INDEMNIFICATION. Except as disclosed in Schedule 4.15 hereto, no Mortgage Loan is subject to (a) a pending or potential request (including initial inquiries) for either repurchase or indemnification by an Investor; (b) an Investor indemnification agreement, and/or (c) an Investor determination of Significant Underwriting Deficiency. 4.16 FRAUD. To the Knowledge of Seller, no fraudulent action, error, omission, misrepresentation, negligence, or similar occurrence with respect to a Mortgage Loan has taken place on the part of any person, including without limitation the Mortgagor, any appraiser, any builder or developer or any other party involved in (a) the origination of the Mortgage Loan or (b) the application of any insurance proceeds with respect to a Mortgage Loan, Mortgaged Property or REO Property. 4.17 SOLDIERS AND SAILORS. Except as disclosed in Schedule 4.17 hereto, Seller has not received notice from any Mortgagor or other party with respect to a Mortgage Loan of a request for relief pursuant to or invoking any of the provisions of the Soldiers and Sailors Relief Act of 1940 or any similar law which would have the effect of suspending or reducing the Mortgagor's payment obligations under a Mortgage Loan or which would prevent such loan from going into foreclosure. 4.18 TAX SERVICE CONTRACTS. Each Mortgage Loan is currently covered by a tax service contract and the applicable tax service has a valid tax identification/parcel number therefor. 28 34 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER As an inducement to Seller to enter into this Agreement, Purchaser represents and warrants, as of the Closing Date and as of each Investor Transfer Date, as follows: 5.1 ORGANIZATION. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. 5.2 GOOD STANDING. To the extent required by applicable law, Purchaser is qualified to transact business and is in good standing as a foreign corporation in all appropriate jurisdictions and to conduct all activities to be performed with respect to the servicing of the Mortgage Loans. 5.3 VALIDITY OF AGREEMENT. Purchaser has full corporate power and authority to execute this Agreement and any applicable Related Agreement and to perform its obligations hereunder and thereunder. This Agreement constitutes, and any Related Agreement to which Purchaser is a party, when executed and delivered, will constitute the valid and binding obligation of Purchaser enforceable against it in accordance with its terms. The execution and delivery of this Agreement and any applicable Related Agreement by Purchaser, and the consummation of such transactions do not require the consent, approval or authorization of any other person, public authority or other entity, other than the Board of Directors of GMAC Mortgage Corporation, GMAC Mortgage Group, Inc., General Motors Acceptance Corporation, and General Motors Corporation and such as may be required under the HSR Act, subject to obtaining the approval of the applicable Investor to the transfer of the Servicing. 5.4 NO CONFLICT. The execution and delivery of this Agreement and any Related Agreement by Purchaser and the performance of its obligations hereunder and thereunder are not in violation or breach of, and will not conflict with or constitute a default under, any of the terms of its Articles of Incorporation or bylaws (each as amended to date) or any note, debt instrument, security agreement, lease, deed of trust or mortgage, license, franchise, permit or any other contract, agreement or commitment binding upon Purchaser or any of its assets or properties subject to obtaining the approval of the applicable Investor to the transfer of the Servicing; and will not result in the creation or imposition of any lien, encumbrance, equity or restriction in favor of any third party upon any of the assets or properties of Purchaser; or conflict with or violate any applicable law, rule, regulation, judgment, Order or decree of any government, governmental instrumentality or court having jurisdiction over Purchaser or its assets or properties of Purchaser. 29 35 5.5 BROKERS OR FINDERS. Purchaser has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders fees or agents commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby, except for fees to Countrywide Capital Markets, which fees shall be the sole responsibility of Purchaser. 5.6 QUALIFICATION AS LENDER. Purchaser is approved by the U.S. Department of Housing and Urban Development (HUD) as a lender and servicer of mortgage loans and meets all applicable HUD regulations so as to be entitled to originate and service mortgage loans sold to or insured by HUD. Purchaser is also an approved servicer of mortgage loans to the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA) and meets all applicable FHLMC and FNMA guidelines so as to be entitled to service mortgage loans sold to FHLMC and FNMA. In addition Purchaser is in good standing and eligible to sell mortgage loans to each of FHLMC and FNMA. 30 36 ARTICLE VI APPROVALS 6.1 SELLER'S OBLIGATIONS. (a) Seller shall request and shall do all things appropriate to secure the approval of the Investors to transfer the Servicing Rights to Purchaser on the Investor Transfer Date. (b) Seller shall satisfy all Investor requirements applicable to Seller to transfer effectively the Servicing Rights from Seller to Purchaser. (c) With respect to each Mortgage Loan, Seller will file for the period through and including the Cutoff Date all required reports including but not limited to reports to all governmental agencies having jurisdiction over the Servicing and all appropriate PMI companies. 6.2 PURCHASER'S OBLIGATIONS. Purchaser shall cooperate with and assist Seller in obtaining the approval of the Investors, and shall provide all financial and other information required by the Investors to be furnished by a transferee of servicing for approval of a transfer of servicing. 31 37 ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 7.1 CONDITIONS ON CLOSING DATE. The obligations of Purchaser hereunder on the Closing Date shall be subject to satisfaction of each of the following conditions, except as Purchaser may waive the same in writing in accordance with Section 11.6 of the Agreement: (a) Representations. The representations and warranties made by Seller in this Agreement shall continue to be true and correct in all material respects. (b) Compliance with this Agreement. All of the terms, covenants, and conditions of this Agreement required to be complied with and performed by Seller at or prior to the Closing Date shall have been duly complied with and performed in all material respects. (c) Additional Documentation. Purchaser and Seller shall have approved and accepted any and all documentation which may be reasonably required to effectuate the sale and assignment of Servicing to Purchaser. (d) Corporate Resolution. A Secretary's Certificate of Seller, together with a corporate resolution approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, in form and substance acceptable to Purchaser, shall be delivered to Purchaser no later than the Closing Date. (e)Opinion. An Opinion of Counsel of Seller in the form attached as Exhibit E to this Agreement, shall be delivered to Purchaser no later than the Closing Date. (f) Guaranty. A Guaranty executed by Capstead Holdings, Inc., a Delaware corporation and Capstead Mortgage Corporation, a Maryland corporation, in the form attached as Exhibit F to this Agreement, shall be delivered to Purchaser no later than the Closing Date. (g) Officer's Certificate. An Officer's Certificate of a senior officer of the Seller in the form attached as Exhibit G to this Agreement, shall be delivered to Purchaser no later than the Closing Date. (h) UCC Search Results. In the event any UCC financing statement obtained by Purchaser shows Seller (or any Affiliate of Seller) as Debtor and refers or relates to, in the opinion of Purchaser and its counsel, any of the Seller's Servicing Rights or Escrow Accounts, Seller shall obtain from the Secured Party shown on such UCC financing statements and deliver to Purchaser on or before the Closing Date (i) a release or termination of such UCC financing statements in a form acceptable to Purchaser and the applicable filing office or (ii) a written agreement, in form and substance acceptable to Purchaser, to the effect that such 32 38 Secured Party releases any right, title and interest it may have in the Servicing Rights and/or the Escrow Accounts. (i) Material Adverse Effect. From September 30, 1998 to the Closing Date, there shall have been no Material Adverse Effect with respect to the Business, and there shall not have been any occurrence, circumstance or combination thereof (whether arising heretofore or hereafter), including, without limitation, pending Proceedings or, to the Knowledge of Seller, Threatened Proceedings which could have a Material Adverse Effect with respect to the Business either before or after the Closing Date. (j) No Proceedings. Immediately prior to the Closing Date, there shall (a) have been no Order issued or any other action taken by any Governmental Body, restraining, enjoining, otherwise prohibiting the transactions contemplated under this Agreement or the HomeComings Asset Purchase Agreement or that would prevent, delay, make illegal or otherwise materially interfere with or materially affect the ability of Seller to perform its obligations under this Agreement (including, without limitation, paying claims made under Article X); and (b) be no Proceeding pending or Threatened with respect to Seller or Purchaser, which, if decided adversely to such party would have a Material Adverse Effect with respect to Seller, the Business, any of the Purchased Assets or the right of Purchaser to purchase or retain the Purchased Assets or Seller's ability to continue the operations of the Business and which, in good faith judgment of Purchaser would make the consummation of this Agreement inadvisable; provided, however, that the foregoing condition shall not apply to the Capstead Litigation pending on the date of this Agreement so long as no further event shall have occurred with respect to such litigation after the date of this Agreement that would fall within the matters described in the preceding clauses (a) and (b). (k) Hart-Scott-Rodino. (i) Seller and its parent shall prepare and file, and shall in all respects cooperate with Purchaser and its parent in the preparation and filing of, any documents required in connection with providing notification to the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice of the transactions contemplated hereunder, and shall respond, or cooperate in responding, to any inquiry made by either with respect to such transactions; and (ii) Any waiting period following such a filing shall have expired without governmental action or shall be the subject of early termination by FTC. 33 39 (l) Limited Power of Attorney. A Limited Power of Attorney executed by Seller, in the form attached as Exhibit H to this Agreement, shall be delivered to Purchaser no later than the Closing Date. (m) [RESERVED] (n) Right of First Refusal. Any and all rights of first refusal or similar rights pertaining to any or all of the Servicing Rights under any Assigned Contract or other agreement under which Seller is subject, shall have been terminated, released, refused, or, in some other fashion satisfactory to Purchaser, rendered of no further force or effect, at the cost of Seller. Notwithstanding anything to the contrary contained in this Agreement, non-satisfaction of the condition stated in this Section 7.1(o) shall result in exclusion from the sale and transfer of the affected Servicing, but shall not, by itself, constitute grounds for termination of the Agreement. (o) UCC-1 Financing Statement.Not later than the Closing Date, Seller shall deliver to Purchaser satisfactory evidence that a UCC-1 Financing Statement in form and substance acceptable to Purchaser has been filed in all requisite jurisdictions under applicable law, which Financing Statement shall have the effect of perfecting any security interest of Purchaser in general intangibles including without limitation the Servicing Rights. (p) FNMA/FHLMC Approvals. (i) Delivery by Seller to Purchaser of written approval from FNMA or FHLMC, as applicable, for the transfer of the applicable Servicing Rights from Seller to Purchaser prior to the Closing Date; and (ii) Acceptance by Purchaser of any and all conditions or restrictions which may be imposed by FNMA and/or FHLMC on the sale and assignment of Servicing Rights by Seller to Purchaser. 7.2 NON-SATISFACTION OF CONDITION. In the event any of the foregoing conditions have not been satisfied, or have become incapable of being satisfied by the Closing Date, Purchaser may, upon written notice to Seller, terminate this Agreement. 34 40 ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 8.1 CONDITIONS ON CLOSING DATE. The obligations of Seller hereunder on the Closing Date shall be subject to satisfaction of each of the following conditions, except as Seller may waive the same in writing in accordance with Section 11.6 of the Agreement: (a) Representations. The representations and warranties made by Purchaser in this Agreement shall continue to be true and correct in all material respects. (b) Compliance with this Agreement. All of the terms, covenants, and conditions of this Agreement required to be complied with and performed by Purchaser at or prior to the Closing Date shall have been duly complied with and performed in all material respects. (c) Additional Documentation. Purchaser and Seller shall have approved and accepted any and all documentation which may be reasonably required to effectuate the sale and assignment of Servicing to Purchaser. (d) Corporate Resolution. A Secretary's Certificate of Purchaser, together with a corporate resolution approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, in form and substance acceptable to Seller, shall be delivered to Seller no later than the Closing Date. (e) Opinion. An Opinion of Counsel of Purchaser in the form attached as Exhibit I to this Agreement, shall be delivered to Seller no later than the Closing Date. (f) No Proceedings. Immediately prior to the Closing Date, there shall have been no Order issued or any other action taken by any Governmental Body, restraining, enjoining, otherwise prohibiting the transactions contemplated under this Agreement or the HomeComings Asset Purchase Agreement or that would prevent, delay, make illegal or otherwise materially interfere with or materially affect the ability of Seller to perform its obligations under this Agreement (including, without limitation, paying claims made under Article X). (g) Hart-Scott-Rodino. (i) Purchaser and its parent shall prepare and file, and shall in all respects cooperate with Seller and its parent in the preparation and filing of, any documents required in connection with providing notification to the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice of the transactions 35 41 contemplated hereunder, and shall respond, or cooperate in responding, to any inquiry made by either with respect to such transactions; and (ii) Any waiting period following such a filing shall have expired without governmental action or shall be the subject of early termination by FTC. (h) FNMA/FHLMC Approvals. (i) Delivery by Seller to Purchaser of written approval from FNMA or FHLMC, as applicable, for the transfer of the applicable Servicing Rights from Seller to Purchaser prior to the Closing Date; and (ii) Acceptance by Seller of any and all conditions or restrictions which may be imposed by FNMA and/or FHLMC on the sale and assignment of Servicing Rights by Seller to Purchaser. 8.2 NON-SATISFACTION OF CONDITION. In the event any of the foregoing conditions have not been satisfied, or have been incapable of being satisfied by the Closing Date, Seller may, upon written notice to Purchaser, terminate this Agreement. 36 42 ARTICLE IX COVENANTS 9.1 MUTUAL COOPERATION. To the extent possible, each of the parties hereto shall cooperate and assist the other, as requested, in carrying out the other's covenants, agreements, duties and responsibilities under this Agreement and the Related Agreements, and in connection therewith, shall from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, all such additional instruments, assignments, endorsements, papers, documents and instruments as may be necessary and appropriate to further express the intention, or to facilitate the performance, of this Agreement during the term hereof. The parties agree to use commercially reasonable efforts to effectuate the transfer of Servicing contemplated herein and in the Subservicing Agreement in accordance with MBA-approved industry standards for servicing transfers, and with Investor requirements for the transfer of servicing. In addition, the parties will reasonably cooperate with each other to resolve issues which may arise in connection with the Mortgage Loans or related Servicing Rights after the Closing Date. Purchaser shall, in its reasonable discretion and at Seller's sole cost and expense, take such actions as Seller may reasonably request with respect to any Mortgage Loan which may become the subject of an Indemnifiable Claim. 9.2 [RESERVED.] 9.3 SUBSERVICING AGREEMENT. Purchaser and Seller shall, on the date of the Agreement, enter into the Subservicing Agreement. 9.4 TRANSFER COSTS. Purchaser or its Affiliate shall pay all costs associated with the transfer of the Servicing to Purchaser pursuant to the Agreement and the Subservicing Agreement, including without limitation, (a) costs of securing Investor approval, and of any transfer fees due Investors; (b) custodian fees for each Mortgage Loan for the period commencing with the day after the related Investor Transfer Date through the date the related Custodial File is transferred to Custodian; (c) costs related to preparing and recording assignments of Mortgage Loans in connection with the transfer of Servicing; (d) costs of transfer of each Custodial File to Custodian; (e) any costs associated with the Seller's obligation to complete the automated transfer of Servicing to Purchaser, including but not limited to Seller's data processing costs with respect to preparation of the Electronic Data File; (f) costs associated with the shipment and delivery of Mortgage Loan Files and information to Purchaser, and any conversions of image data with respect to the Mortgage Loans, and (g) costs associated with preparation and submission by Seller of transfer notifications to hazard/flood carriers, PMI carriers, Pool insurers, tax authorities and tax service 37 43 companies. Notwithstanding anything to the contrary contained in this Section 9.4, it is understood and agreed that, in the event that the transaction contemplated by the HomeComings Asset Purchase Agreement is not consummated by March 31, 1999 or such later date as may be specified in any written extension executed by Seller and HomeComings Financial Network, Inc., Seller shall bear, or reimburse Purchaser for, the costs described in subsections (a), (c), (d) to the extent that such transfer occurs within one year following the Cutoff Date, (e), (f) and (g) above. 9.5 [RESERVED] 9.6 FORM 1099, FORM 1098-PURCHASER'S OBLIGATION. Purchaser shall mail, on or before the date required by law, IRS Form No. 1099 to all parties entitled to receive interest on Escrow Accounts for all periods after the Closing Date, where applicable, as well as IRS Form No. 1098 to each Mortgagor for all periods after the Closing Date. Purchaser shall file all required reporting with the IRS, including without limitation IRS Form No. 1041 and IRS Form K-1 where applicable, on or before the date required by law, for all periods after the Closing Date. 9.7 REIMBURSEMENT OF ADVANCES. In the event that any advance included in the Purchased Assets is subsequently determined to be non-recoverable under Applicable Requirements, Seller shall reimburse Purchaser in the amount of such advance. 9.8 PAYMENT OF INTEREST. Seller shall be responsible through the Cutoff Date for (a) payment of any interest on Escrow Accounts, to the extent required by law, and for posting such payments to individual Mortgagors' accounts, and (b) payment of any interest shortfall between the amount of interest collected and the amount of interest required to be remitted to Investors, including without limitation interest payable on pay-offs and curtailments, where applicable. 9.9 FHLMC QUALITY CONTROL PROGRAM. Seller covenants and agrees that, on the Investor Transfer Date for the FHLMC Mortgage Loans, Seller shall provide Purchaser with records of any quality control findings, along with documentation of any corrective action taken, reported to FHLMC for any Mortgage Loans included in the transfer which were originated within three (3) years prior to the Closing Date. This requirement is pursuant to Sections 48.1-48.12 of the FHLMC Sellers' and Servicers' Guide (the "Guide"), as amended from time to time. 9.10 BULK TRANSFER LAWS COMPLIANCE. Seller shall comply with all requirements of applicable laws relating to the transfer of assets in bulk, including the Uniform Commercial Code-Bulk Transfers and any similar statutory 38 44 provisions in effect in any applicable jurisdiction, and shall provide any and all notices which may be required to ensure that the transfer of the Servicing to Purchaser hereunder is not subject to any defect by reason of non-compliance with any such requirements. 9.11 PRESS RELEASES. No party will issue or authorize to be issued any press release or similar announcement concerning this Agreement or any of the transactions contemplated hereby without the prior approval of the other party, which approval shall not be unreasonably withheld, and shall be given in Order to allow compliance with the disclosure requirements of applicable laws and regulators. 9.12 CERTAIN NOTIFICATIONS. Each party shall promptly notify the other in writing of the occurrence of any event which will or could reasonably be expected to result in the failure to satisfy any of the conditions to the obligations of such other party specified in Article VII or VIII of the Agreement, as applicable. 9.13 [RESERVED] 9.14. FORWARD DELIVERY PRICING ADJUSTMENT. With respect to any purchase of mortgage loan servicing pursuant to a Forward Delivery Agreement, for which the Sale Date under such Forward Delivery Agreement occurs subsequent to September 30, 1998 and during the original term of such Forward Delivery Agreement, Seller agrees to reimburse Purchaser for any price differential applicable to such purchase computed in accordance with Schedule 9.14. Such reimbursements shall be made monthly as follows: (a) For the time period commencing on the Closing Date and continuing through the term of the Subservicing Agreement, Seller shall, on or before the 10th Business Day of each month, submit to Purchaser loan-level data (in a format reasonably acceptable to Purchaser) with respect to each Sale Date Group (as defined below) that became a Settled Sale Date Group (as defined below) prior to the end of the preceding calendar month. Following the termination of the Subservicing Agreement, Purchaser shall generate such data or cause such data to be generated on or before the 10th Business Day of each month. Within ten (10) Business Days following its receipt of such loan-level data for each Sale Date Group (as defined below) that became a Settled Sale Date Group (as defined below) prior to the end of the preceding calendar month, Purchaser shall submit to Seller a statement of the amount of the price differential, computed in accordance with Schedule 9.14, on a Sale Date Group-by-Sale Date Group basis and on an aggregate basis. Such statement shall include supporting documentation setting forth in reasonable detail Purchaser's calculation of such price differential. Subject to the following paragraph, Seller shall have a period of ten (10) Business Days from the date such statement is delivered to Seller to review such statement. If Seller agrees with Purchaser as to the amount of the applicable price differential, then on the Business Day immediately following the end of such ten (10) Business Day Period (the "Planned Payment Date") (i) Seller and Purchaser shall submit joint instructions under the Escrow Agreement to withdraw the applicable amount payable from 39 45 the Reserved Funds and pay such amount to Purchaser, and (ii) to the extent the Reserved Funds are insufficient to make such payment, Seller shall remit to wire transfer to Purchaser the amount necessary to result in Purchaser receiving full payment of the applicable amount. (b) If Seller does not agree with the amount of the price differential set forth in a statement delivered by Purchaser pursuant to the preceding paragraph, Seller shall deliver to Purchaser, within the ten (10) Business Day period following Seller's receipt of the applicable statement from Purchaser referred to in the preceding paragraph, written notice containing specific objections (prepared in good faith) to the amount of such price differential as determined by Purchaser. If Seller and Purchaser cannot agree on the calculation of such price differential during the five (5) Business Day period following Purchaser's receipt of the notice from Seller referred to in the preceding sentence, to the extent that Seller and Purchaser have agreed as to any portion of such price differential, then (i) such amount which is not in dispute, together with interest thereon at the Interest Rate for the period commencing with the related Planned Payment Date through and including the date on which such payment is made, shall be paid in the manner set forth in the preceding paragraph, and (ii) Seller and Purchaser shall work in good faith during the next ten (10) Business Days towards resolving such disagreement. If a resolution is reached within such ten (10) Business Day period, then on the Business Day immediately following the end of such ten (10) Business Day period any remaining payment of the applicable price differential, together with interest thereon at the Interest Rate for the period commencing with the related Planned Payment Date through and including the date on which such payment is made, shall be paid in the manner set forth in the preceding paragraph. Unless a mutually agreeable resolution to such disagreement is reached, and the disputed amount is paid, within such ten (10) Business Day period, Purchaser and Seller shall act in accordance with the Arbitration Procedures. (c) In no event shall the aggregate amount of reimbursement payments made by Seller to Purchaser pursuant to this Section 9.14 exceed $4,500,000. (d) As used in this Section 9.14, (i) the term "Sale Date Group" has the meaning assigned to it in each Forward Delivery Agreement and (ii) the term "Settled Sale Date Group" means a Sale Date Group with respect to which both (A) the payment required to be made pursuant to Section 3.1(d) of the related Forward Delivery Agreement has been made and (B) with respect to which the amount required to be reimbursed by the "Seller" under such Forward Delivery Agreement with respect to mortgage loans that payoff within a specified period of time after the applicable "Sale Date" has been determined. Any amount payable by a "Seller" as referred to in clause (B) of the preceding sentence shall be taken into account in determining the price differential for the related Settled Sale Date Group. 9.15 ADDENDUM. Purchaser and Seller shall, on the date of the Agreement enter into the Addendum. 40 46 ARTICLE X INDEMNIFICATION AND REMEDIES 10.1 INDEMNIFICATION BY SELLER. Seller will and hereby does indemnify and hold Purchaser and any Affiliate of Purchaser and their respective officers, directors and employees harmless from and against any and all losses, damages, deficiencies, claims, liabilities, judgments, verdicts, causes of action, costs or expenses of any nature (including reasonable attorneys' fees and expenses) (collectively, "Losses") resulting or arising, directly or indirectly, from or in conjunction with: (a) any breach of any representation and/or warranty of Seller contained in this Agreement, in any Related Agreement, or in any exhibit, schedule, statement or certificate furnished by Seller pursuant to this Agreement. Seller shall indemnify Purchaser as set forth in this Section 10.1 for breaches of representations and warranties regardless of any qualifications as to or the Knowledge of Seller concerning the truth or accuracy of such representations and warranties when made. Seller's indemnity includes Losses arising out of or resulting from any acts or omissions or practices concerning administration of escrow accounts and ARM Loans; (b) the breach of any covenant or obligation of Seller contained in this Agreement or in any Related Agreement; provided, however, that Seller shall not be obligated to so indemnify Purchaser to the extent that such payments are attributable to a breach by Purchaser of any representation, warranty or covenant made by Purchaser contained in this Agreement (c) any Defect in any Mortgage Loan existing as of the Closing Date (including those Defects subsequently discovered), or as a result of any act or omission of Seller prior thereto; (d) any and all items listed as exceptions to Seller's representations and warranties on the Schedules attached to, or otherwise made a part of, or delivered by Seller to Purchaser pursuant to, this Agreement (including without limitation updated Schedules); (e) any litigation pending or Threatened against Purchaser arising out of events occurring on or prior to the Closing Date in connection with the Seller's servicing of the Mortgage Loans; or (f) the Capstead Litigation. 41 47 10.2 REPURCHASE; PURCHASER'S REMEDIES. (a) In the event of (1) an Investor repurchase demand or make-whole request with respect to a Mortgage Loan or (2) an Investor determination of Significant Underwriting Deficiency with respect to a Mortgage Loan, which in any event arises out of or results from the origination, delivery or servicing of the related Mortgage Loan prior to the Cutoff Date, the provisions of this Section 10.2 shall apply. (b) Purchaser shall use commercially reasonable efforts to provide Seller with written notice of any event described in Section 10.2(a)(1) or (2) (such notice, a "10.2 Notice"), within ten (10) Business Days following Purchaser's receipt of notice. Seller shall have an opportunity to cure the defect or condition giving rise to such request or determination and/or negotiate with the applicable Investor for a cure period to be calculated as the lesser of sixty (60) days from Seller's receipt of the 10.2 Notice, or such lesser period as may be required by the applicable Investor. Notwithstanding anything to the contrary contained in this section, any failure by Purchaser to provide a timely 10.2 Notice to Seller of any such denial, rescission, request or determination affecting a Mortgage Loan shall not in any event be construed to limit remedies available to Purchaser under Section 10.1 of the Agreement except to the extent that Seller is materially prejudiced by such failure to provide a timely 10.2 Notice. (c) If Purchaser provides a 10.2 Notice to Seller with respect to a Mortgage Loan which is not a Cutoff Date Refinanced Loan, a Post-Cutoff Date Refinanced Loan or a Post-Payoff Adjustment Date Refinanced Loan, Purchaser agrees that it will use commercially reasonable efforts to enforce any contractual remedies that may be available to it under the applicable Assigned Contract, provided, however, that should the applicable third-party seller refuse to perform its obligations of the indemnification or repurchase under such Assigned Contract in a timely fashion, then, upon expiration of any applicable cure period, Seller will perform such obligations in a timely fashion. In that event, Seller shall, at Purchaser's option, (i) repurchase the related Mortgage Loan for the Repurchase Price, (ii) in the case of an Investor make-whole request, pay to Purchaser the Repurchase Price, or (iii) in the case of a Significant Underwriting Deficiency, agree to provide the remedy described in subsection (i) above upon demand by Purchaser at such future time as Purchaser may, in its sole discretion, direct. (d) If, pursuant to Section 10.2(c), Seller is required to perform the obligations of a third-party seller pursuant to an Assigned Contract, Purchaser shall, upon Seller's request, seek recovery from the applicable third-party seller, on behalf of Seller and at Seller's cost and direction, of any losses, damages, deficiencies, claims, liabilities, judgments, verdicts, causes of action, costs or expenses of any nature incurred by Seller as a result of the third-party seller's failure to perform. (e) Upon repurchase of a Mortgage Loan or REO Property by Seller under sub-section (a) or (c) above, Purchaser shall use reasonable commercial efforts to sell such REO Property or Mortgage Loan, servicing released, for the account of Seller. Promptly following any such sale, Purchaser shall remit to Seller the proceeds from such sale, less Purchaser's reasonable expenses (including its direct internal costs) incurred in connection therewith. During 42 48 the applicable marketing period, Purchaser shall continue to service the applicable Mortgage loan or REO Property for the account of Seller. (f) In the event that Seller should fail to make any payment to Purchaser required to be made pursuant to this Article X within thirty (30) days following demand therefor, or within such other timeframe as may be specified under the applicable provisions of Section 10.1 or Section 10.2, interest shall accrue on such payment, to be compounded daily at the Interest Rate plus 200 basis points, from the date of demand (or, in the case of repurchase, the date on which repurchase funds are due Investor) until such payment is received by Purchaser. 10.3 NO EFFECT OF KNOWLEDGE. The obligations of Seller under this Agreement for the breach of any representation or warranty made by Seller hereunder shall not be affected in any manner or to any extent by any knowledge obtained by (or which could have been obtained by) Purchaser prior to the Closing Date, whether in the course of Purchaser's due diligence activities or otherwise. 10.4 INDEMNIFICATION BY PURCHASER. Purchaser will and hereby does indemnify and hold Seller and any Affiliate of Seller and their respective officers, directors and employees harmless from and against any and all losses, damages, deficiencies, claims, liabilities, judgments, verdicts, causes of action, costs or expenses of any nature (including reasonable attorneys' fees and expenses) (a) Resulting from or arising out of any breach of any representation and/or warranty of Purchaser contained in this Agreement, in any Related Agreement, or in any exhibit, schedule, statement or certificate furnished by Purchaser pursuant to this Agreement; or (b) Resulting from or arising out of the breach of any covenant or obligation of Purchaser contained in this Agreement or in any Related Agreement; provided, however, that Purchaser shall not be obligated to so indemnify Seller to the extent that such payments are attributable to a breach by Seller of any representation, warranty or covenant made by Seller contained in this Agreement. 10.5 NOTICE OF CLAIM. If any action is brought against any person entitled to indemnification pursuant to Section 10.1 or Section 10.4 (a "Claimant") in respect of a claim under Section 10.1 or Section 10.4, as applicable (an "Indemnifiable Claim"), the Claimant shall promptly notify Purchaser or Seller, as the case may be, in writing of the institution of such action (but the failure so to notify shall not relieve Seller or Purchaser, as the case may be (the "Indemnifying Party") from any liability the Indemnifying Party may have except to the extent such failure materially prejudices the Indemnifying Party). With the prior written consent of the Claimant, the Indemnifying Party may assume and direct the defense of such action, including the employment of counsel, and all fees, costs and expenses incurred in connection with defending or settling the Indemnifiable Claim shall be borne solely by the Indemnifying Party; provided, however, that the Indemnifying 43 49 Party shall not compromise any claim without the prior written consent of the Claimant, which consent shall not be unreasonably withheld; provided, further that notwithstanding the foregoing, Purchaser may assume the defense or prosecution of any such claim, suit, demand or Proceeding, at the cost of the Indemnifying Party, if it reasonably believes that such assumption is necessary or appropriate to assure that its right or ability to service a material portion of its mortgage loans and servicing rights (including the Mortgage Loans or Servicing Rights) or its method of doing business or its authority and approvals to service or its reputation, goodwill, financing condition or business are not materially impaired. Notwithstanding a request by the Indemnifying Party to assume the defense of such action or Proceeding, the Claimant shall have the right to employ separate counsel and to participate in the defense of such action or Proceeding, and the Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses at least quarterly). 10.6 LIMITATION OF LIABILITY. (a) In no event will either Purchaser or Seller be liable to the other party to this Agreement for incidental or consequential damages, including, without limitation, loss of profit or loss of business or business opportunity, regardless of the form of action whether in contract, tort or otherwise. (b) Except as provided in Section 10.6(c) below, the obligations of the parties under this Article X shall be limited to the seven (7) year period following the Closing Date. (c) Notwithstanding anything to the contrary contained herein, the obligations of Seller under this Article X shall continue in full force and effect with respect to any Mortgage Loan which, on or before the seven-year anniversary of the Closing Date, becomes the subject of an agreement to indemnify the related Investor for losses, damages, costs and/or expenses occurring as a result of Defects in the origination, delivery and/or servicing (prior to the Closing Date) of such Mortgage Loan. Notwithstanding anything to the contrary contained in this Section 10.6(c), any obligation of Seller under this Article X which is extended beyond the seven-year anniversary of the Closing Date shall not in any event extend beyond the duration of Purchaser's obligation to indemnify the related Investor. 10.7 RIGHT OF OFFSET. In the event an Indemnifying Party is required to indemnify or make payments to any Claimant under any provision of this Agreement or any Related Agreement, in addition to any other right available to the Claimant hereunder, at law or in equity, the Claimant shall (only upon the exhaustion of the Reserved Funds, in any case where Purchaser, any of its Affiliates or any of their respective officers, directors or employees is the Claimant) be entitled to offset or recoup the amount of such required indemnity or any claim from any and all amounts owed by any Claimant, or any affiliate of a Claimant, to any Indemnifying Party or any affiliate of any Indemnifying Party, hereunder or otherwise. With respect to Indemnifiable Claims against Seller, Purchaser's right of offset or recoupment, as applicable, shall extend to the Reserved Funds. 44 50 ARTICLE XI MISCELLANEOUS 11.1 COSTS AND EXPENSES. Except as otherwise provided herein, each party shall be responsible for its accounting, legal and related costs and expenses incurred with respect to the transfer of Servicing, including without limitation costs and expenses incurred in compliance with the provisions of Section 7.1(k) or 8.1(g) hereof, as the case may be, whether or not the transaction contemplated by the Agreement is consummated. 11.2 CONFIDENTIALITY. All information which is not public knowledge (including without limitation Mortgagor or customer information of any kind, proprietary business procedures, servicing fees or prices, policies or business plans) disclosed heretofore or hereafter by any party to any other party (including its attorneys, accountants or other representatives) in connection with the transaction contemplated by this Agreement (including the existence of this Agreement and the terms hereof) shall be kept confidential by the other party and shall not be used by such other party other than for use as herein contemplated, except to the extent (a) it is or hereafter becomes public knowledge or becomes lawfully obtainable from other sources, including a third party who is under no obligation of confidentiality to the party disclosing such information or to whom information was released without restrictions, or (b) such other party is compelled to disclose such information by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, or (c) such duty as to confidentiality and non-use is waived by such disclosing party. In the event of termination of this Agreement, each party shall exercise all reasonable efforts to return, upon request, to the other party, all documents and reproductions thereof received from such other party (and, in the case of reproductions, all reproductions made by the receiving party) that include information not within the exceptions contained in the first sentence of this Section 11.2. 11.3 BROKER'S FEES. Seller shall be responsible for fees due Merrill Lynch & Co. and Cohane Rafferty Securities, Inc. ("Brokers"). Each party hereto represents and warrants to the other that it has made no agreement to pay any agent, finder, or broker or any other representative, any fee or commission in the nature of a finder's or originator's fee arising out of or in connection with the subject matter of this Agreement, except for such fees as may be payable to the Brokers by Seller, and both the parties hereto covenant with each other and agree to indemnify and hold each other harmless from and against any such obligation or liability and any expense incurred in investigation or defending (including reasonable attorneys' fees) any claim based upon the other party's actions in connection with such obligation. 45 51 11.4 NO SOLICITATION. (a) Seller agrees that, commencing on the Closing Date, without the prior written consent of Purchaser, neither Seller nor any Affiliate of Seller shall use information derived from the origination, sale or servicing of the Mortgage Loans to solicit, or assist in the solicitation of, for any purpose including without limitation refinance, home equity or insurance, any of the Mortgagors related to the Mortgage Loans. Seller shall not provide a listing of Mortgagors to any third party. (b) Seller further agrees to use its best efforts, including the exercise of any available contractual remedies, to cause any Affiliate and/or originator of the Mortgage Loans to refrain from taking any action which is prohibited under this section with respect to the Mortgage Loans and/or Mortgagors. Notwithstanding the foregoing, it is understood and agreed that promotions undertaken by Seller, any originator or any Affiliate of Seller which are directed to the general public at large, including without limitations mass mailings based on commercially acquired mailing lists, newspaper, radio and television advertisement, shall not constitute solicitations under this paragraph. (c) Seller agrees to refrain from engaging in any program to recover accrued late charges with respect to Mortgage Loans, other than in the normal course of servicing or customary past practices as disclosed to Purchaser prior to the Closing Date. 11.5 SURVIVAL. Except as otherwise provided herein, the representations and warranties, covenants and agreements contained in or made pursuant to this Agreement (including without limitation the rights of indemnification and other remedies provided in Article X of the Agreement), and in any document delivered or to be delivered pursuant hereto, shall survive the execution hereof, the Closing Date for a period of seven (7) years commencing on the Closing Date, except as otherwise provided in Section 10.6(c) of the Agreement. No representation or warranty contained herein shall be deemed to have been waived, affected or impaired by any investigation made by or knowledge of any party to this Agreement. 11.6 NOTICES. Any notice or other communication required or which may be given hereunder shall be in writing and either delivered personally to the addressee, telegraphed or faxed to the addressee or mailed, certified or registered mail, postage prepaid, and shall be deemed given when so delivered personally, telegraphed or by confirmed facsimile transmission, or if mailed, two days after the date of mailing, as follows: 46 52 (a) If to the Purchaser, to: GMAC Mortgage Corporation 100 Witmer Road Horsham, PA 19044-0963 Attention: Chief Financial Officer Fax: (215) 682-1467 with copies to: General Counsel GMAC Mortgage Corporation 100 Witmer Road Horsham, PA 19044-0963 Fax: (215) 682-1467 and GMAC Mortgage Corporation 3451 Hammond Avenue Waterloo, IA 50702 Attention: General Manager Fax: (319) 236-5175 (b) If to Seller, to: Capstead Inc. 2711 North Haskell Avenue, Suite 1000 Dallas, TX 75204 Attention: Mr. Ronn K. Lytle or to such other address as Purchaser or Seller shall have specified in writing to the other. 11.7 GOVERNING LAW. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania applicable to agreements made and to be performed entirely within such state. 11.8 ENTIRE AGREEMENT. This Agreement (including the Exhibits, Schedules and certifications hereto, all of which are incorporated herein by reference) and any Related Agreements contain the entire agreement between the parties with respect to the transactions contemplated hereby, and supersede all prior agreements and understandings relating to the subject matter of the Agreement. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AS TO THE SUBJECT MATTER OF 47 53 THE AGREEMENT, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES; AND THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 11.9 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 11.10 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto only. There shall be no third party beneficiaries hereof. 11.11 CONSTRUCTION. In construing the words of this Agreement, all pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural as the identify of the person or persons may require. The words "herein," "hereof," and other similar compounds of the word "here" shall mean and refer to this entire Agreement, not to any particular provision, section, or subsection of it. This Agreement constitutes a negotiated document. In case of any alleged ambiguity in any term of this Agreement, such term shall not be construed in favor of or against either party by reason of the participation of such party or its attorneys in the negotiation or drafting of this Agreement. 11.12 HEADINGS. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 11.13 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 11.14 ATTORNEYS' FEES. If any action of law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs from the other party. Such fees may be set by the Court in the trial of such action or may be enforced in a separate action brought for that purpose. Such fees shall be in addition to any other relief that may be awarded. 48 54 11.15 BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and their successors and permitted assigns, any rights, obligations, remedies or liabilities. 11.16 NO ASSIGNMENT. This Agreement is not assignable except by operation of law, except that Purchaser may assign its rights or obligations under this Agreement to any affiliate of Purchaser provided that Purchaser shall continue to be bound by this Agreement. 11.17 LOCATION OF CLOSING. On the Closing Date, the closing of this transaction shall take place at the respective offices of Purchaser and Seller via facsimile transmission between Purchaser and Seller. Original signed documents shall be exchanged between the two parties by overnight courier. 11.18 SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable form the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. 11.19 GRANT OF SECURITY INTEREST. Seller intends that the conveyance of Seller's right, title and interest in and to the Purchased Assets pursuant to this Agreement shall constitute a sale and not a pledge of security for a loan. If such conveyance is deemed to be a pledge of security for a loan, however, Seller intends that the rights and obligations of the parties to such loan shall be established pursuant to the terms of this Agreement. Seller also intends and agrees that, in such event, (a) Seller shall be deemed to have granted to Purchaser a first priority security interest in the Seller's entire right, title and interest in and to the Purchased Assets, and all of the Seller's right, title and interest in and to the proceeds of any title, hazard or other insurance policies related to the Purchased Assets, and (b) this Agreement shall constitute a security agreement under applicable law. Seller shall file or cause to be filed, as a precautionary filing, a Form UCC-1 in form and substance satisfactory to Purchaser in all appropriate locations promptly following the execution of this Agreement. 49 55 IN WITNESS WHEREOF, each of the undersigned parties to this Purchase and Sale Agreement has caused this Purchase and Sale Agreement to be duly executed in its corporate name by one of its duly authorized officers, all as of the date first above written. "PURCHASER" ATTEST: GMAC MORTGAGE CORPORATION /s/ JULIE KIEFER BY: /s/ KENNETH PERKINS - --------------------------- ----------------------------------- Julie Kiefer ITS: Vice President ---------------------------------- "SELLER" ATTEST: CAPSTEAD INC. TRICIA ZIMMERMAN BY: RONN K. LYTLE - --------------------------- ----------------------------------- Asst. Secretary ITS: Chairman and CEO ---------------------------------- 50 56 LIST OF SCHEDULES AND EXHIBITS Schedule 1.8 Schedule of Assigned Contracts Schedule 1.9 Schedule of Assumed Liabilities Schedule 1.37 Schedule of Forward Delivery Agreements Schedule 1.44 Schedule of Included Assets Schedule 1.73 Schedule of Purchase Price Calculation Schedule 1.74(a) Schedule of Purchase Price Percentage (Mortgage Loans other than Identified Forward Delivery Loans, Unidentified Forward Delivery Loans and Cutoff Date Refinanced Loans) Schedule 1.74(b) Schedule of Purchase Price Percentage (Identified Forward Delivery Loans Schedule 1.74(c) Schedule of Purchase Price Percentage (Unidentified Forward Delivery Loans) Schedule 1.74(d) Schedule of Purchase Price Percentage (Cutoff Date Refinanced Loans) Schedule 1.79 Schedule of Repurchase Price Calculation Schedule 2.8 Schedule of Hedging Instruments Schedule 3.2 States Seller Qualified in Schedule 3.4 Schedule of Permits, Authorizations and Consents Schedule 3.6 Schedule of Mortgage Loans/Servicing Pledged as Collateral Schedule 3.7 Schedule of Litigation Schedule 3.11 Schedule of Recourse Servicing Schedule 3.13(e) Schedule of Sales, Transfers or Assignments Schedule 4.1 Schedule of Documents Missing from Mortgage Loan Files Schedule 4.11 Schedule of Condemnation/Forfeiture Proceedings 51 57 LIST OF SCHEDULES AND EXHIBITS (CONTINUED) Schedule 4.12 Schedule of Missing Custodial File Documents and Uncertified Pools Schedule 4.14 Schedule of Exception Loans Schedule 4.15 Schedule of Investor Indemnification Agreements Schedule 4.17 Schedule of Soldier and Sailor Loans Schedule 9.14 Schedule of Forward Delivery Pricing Adjustments Exhibit A-1 Schedule of Mortgage Loans A-2 Schedule of Identified Forward Delivery Loans A-3 Schedule of Unidentified Forward Delivery Loans A-4 Schedule of Cutoff Date Refinanced Loans Exhibit B Form of Escrow Agreement Exhibit C Contents of Mortgage Loan Files Exhibit D [RESERVED] Exhibit E Form of Seller's Opinion of Counsel Exhibit F Form of Guaranty Exhibit G Form of Seller's Officer's Certificate Exhibit H Seller's Limited Power of Attorney Exhibit I Form of Purchaser's Opinion of Counsel Exhibit J Form of Addendum Exhibit K [RESERVED] Exhibit L Form of Subservicing Agreement Exhibit M Arbitration Procedures 52 -----END PRIVACY-ENHANCED MESSAGE-----