Exhibit 10.20
EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT
BY AND AMONG
RELIANCE HOLDINGS LLC,
TIPTREE OPERATING COMPANY, LLC,
TIPTREE FINANCIAL, INC.,
RELIANCE FIRST CAPITAL, LLC,
THE MEMBERS OF RELIANCE FIRST CAPITAL, LLC,
WEXFORD CAPITAL LP, AS WEXFORD SELLERS REPRESENTATIVE
AND
MARC MILLER, AS RELIANCE SELLERS REPRESENTATIVE
Dated as of November 24, 2014

 

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TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS
 
2
Section 1.01
 
Definitions
 
2
Section 1.02
 
Other Definitional and Interpretive Provisions
 
14
ARTICLE 2 PURCHASE AND SALE OF EQUITY INTERESTS; CLOSING
 
15
Section 2.01
 
Purchase and Sale of Equity Interests
 
15
Section 2.02
 
Purchase Price
 
15
Section 2.03
 
The Closing
 
16
Section 2.04
 
Closing Deliveries and Payments
 
16
Section 2.05
 
Purchase Price Adjustment
 
17
Section 2.06
 
Earnout Consideration
 
19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
22
Section 3.01
 
Organization
 
22
Section 3.02
 
Power and Authorization
 
22
Section 3.03
 
No Violation or Approval; Consents
 
22
Section 3.04
 
Capitalization of the Company
 
23
Section 3.05
 
Financial Matters
 
23
Section 3.06
 
Absence of Certain Developments
 
24
Section 3.07
 
Debt; Guarantees
 
24
Section 3.08
 
Assets
 
24
Section 3.09
 
Real Property
 
24
Section 3.10
 
Intellectual Property
 
25
Section 3.11
 
Tax Matters
 
25
Section 3.12
 
Employee Benefit Plans
 
27
Section 3.13
 
Environmental Matters
 
28
Section 3.14
 
Contracts
 
28
Section 3.15
 
Related Party Transactions
 
30
Section 3.16
 
Labor Matters
 
30
Section 3.17
 
Litigation; Governmental Orders
 
30
Section 3.18
 
Compliance with Laws
 
30
Section 3.19
 
Insurance
 
30
Section 3.20
 
Mortgage Loans
 
31
Section 3.21
 
Loan Documents
 
31
Section 3.22
 
Mortgage Loan Requirements; Filing of Reports
 
31
Section 3.23
 
Title Insurance
 
31
Section 3.24
 
Mortgage Loan Insurance
 
32
Section 3.25
 
Security Interests; Mortgage Loan Collateral
 
32
Section 3.26
 
No Recourse; No Repurchase
 
32
Section 3.27
 
Third-Party Mortgage Loan Purchasers
 
33

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TABLE OF CONTENTS
(continued)
Page

Section 3.28
 
Brokers
 
33
Section 3.29
 
Licenses and Permits
 
33
ARTICLE 4 INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS
 
33
Section 4.01
 
Power and Authorization
 
34
Section 4.02
 
Authorization of Governmental Authorities
 
34
Section 4.03
 
No Violation or Approval; Consents
 
34
Section 4.04
 
Title
 
34
Section 4.05
 
Investment Representation; Opportunity to Conduct Due Diligence; Securities Act
Law Restrictions
 
35
Section 4.06
 
Related Party Transactions
 
35
Section 4.07
 
No Brokers
 
35
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER, TIPTREE AND TFI
 
35
Section 5.01
 
Organization
 
35
Section 5.02
 
Power and Authorization
 
36
Section 5.03
 
No Violation or Approval; Consents
 
36
Section 5.04
 
Governmental Authorizations
 
36
Section 5.05
 
Adequacy of Funds
 
37
Section 5.06
 
No Brokers
 
37
Section 5.07
 
Investment Intent
 
37
Section 5.08
 
The TFI Shares
 
37
Section 5.09
 
SEC Filings
 
37
ARTICLE 6 COVENANTS
 
37
Section 6.01
 
Conduct of the Company
 
37
Section 6.02
 
Notice of Certain Events
 
39
Section 6.03
 
Subsequent Financial Statements
 
39
Section 6.04
 
Non-Solicitation
 
39
Section 6.05
 
Access
 
40
Section 6.06
 
Closing Efforts
 
40
Section 6.07
 
Public Announcements
 
41
Section 6.08
 
Tax Matters
 
41
Section 6.09
 
Confidentiality
 
43
Section 6.10
 
Conduct of Business During the Earnout
 
43
Section 6.11
 
Non-Solicitation
 
47
Section 6.12
 
Employment Agreements
 
47
Section 6.13
 
Registration of TFI Shares.
 
47
ARTICLE 7 CONDITIONS TO THE TRANSACTIONS
 
49
Section 7.01
 
Conditions to Obligations of the Parties
 
49
Section 7.02
 
Conditions to Obligations of Buyer
 
49
Section 7.03
 
Conditions to Obligation of the Sellers
 
50
Section 7.04
 
Frustration of Closing Conditions
 
50
ARTICLE 8 TERMINATION
 
50

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TABLE OF CONTENTS
(continued)
Page

Section 8.01
 
Termination
 
50
Section 8.02
 
Effect of Termination
 
51
ARTICLE 9 SURVIVAL; INDEMNIFICATION
 
52
Section 9.01
 
Survival
 
52
Section 9.02
 
Indemnification Obligation of the Parties
 
53
Section 9.03
 
Procedures
 
55
Section 9.04
 
Right of Setoff
 
56
Section 9.05
 
Exclusivity
 
56
Section 9.06
 
Purchase Price Adjustment
 
56
ARTICLE 10 MISCELLANEOUS
 
56
Section 10.01
 
Notices
 
56
Section 10.02
 
Amendments and Waivers
 
58
Section 10.03
 
Expenses
 
58
Section 10.04
 
Successors and Assigns
 
58
Section 10.05
 
Governing Law
 
59
Section 10.06
 
Jurisdiction
 
59
Section 10.07
 
WAIVER OF JURY TRIAL
 
59
Section 10.08
 
Specific Performance
 
60
Section 10.09
 
Further Assurances
 
60
Section 10.10
 
Counterparts
 
60
Section 10.11
 
Third Party Beneficiaries; No Recourse Against Third Parties
 
60
Section 10.12
 
Entire Agreement
 
60
Section 10.13
 
Severability
 
60
Section 10.14
 
Negotiation of Agreement
 
61
Section 10.15
 
Construction
 
61
Section 10.16
 
Seller Representatives.
 
61
Section 10.17
 
Attorney Services
 
63

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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (as amended, modified or supplemented from
time to time pursuant to the terms hereof, this “Agreement”), dated as of
November 24, 2014, among Reliance Holdings LLC, a Delaware limited liability
company (“Buyer”), Tiptree Operating Company, LLC, a Delaware limited liability
company (“Tiptree”), Tiptree Financial Inc., a Maryland corporation (“TFI”),
Reliance First Capital LLC, a Delaware limited liability company (the
“Company”), Wexford Capital LP, a Delaware limited partnership (the “Wexford
Sellers Representative”), Mr. Marc Miller (the “Reliance Sellers Representative”
and together with the Wexford Sellers Representative, the “Seller
Representatives”), and the members of the Company set forth on the signature
pages of this Agreement under the caption “The Sellers” (collectively, the
“Sellers”). The Company, Buyer, Tiptree, TFI, Seller Representatives and each
Seller are referred to individually as a “Party” and collectively, as “Parties”.
RECITALS
WHEREAS, the Sellers own in the aggregate 100% of the issued and outstanding
membership interests of the Company (the “Equity Interests”); and
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers desire to
sell to Buyer, at the Closing (as defined below) all of the Equity Interests
upon the terms and subject to the conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Parties hereby agree as
follows:

DOC ID - 22091750.7

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ARTICLE 1

DEFINITIONS
Section 1.01    Definitions. The following terms shall have the following
meanings when used in this Agreement:
“Accounting Firm” has the meaning set forth in Section 2.05(e).
“Accounting Policies” means the Company’s accounting policies, principles,
practices and methodologies used in the preparation of the Financials, as
amended to the date hereof to reflect any changes to GAAP.
“Acquisition Proposal” means, other than the transactions contemplated by this
Agreement, any Third Party offer, proposal or inquiry relating to, or any Third
Party indication of interest in, any acquisition or purchase, direct or
indirect, whether by way of asset purchase, stock purchase, merger,
consolidation, share exchange, business combination or otherwise, of 20% or more
of the assets or equity of the Company or that would otherwise render the
Transactions impracticable or impossible.
“Adjusted Annual EBITDA” means the calculation of Annual EBITDA, as adjusted
pursuant to Section 6.10(d).
“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
A Person will be deemed to control another Person if such first Person
possesses, directly or indirectly, the power to direct, or cause the direction
of, the management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
“Agency” means the FHA, VA, HUD, Federal National Mortgage Association or state
agency, as applicable.
“Agreement” has the meaning set in forth in the first paragraph of this
Agreement.
“Annual Earnout Payment Period” has the meaning set forth in Section 2.06(a).
“Annual EBITDA” means, in respect of the applicable Annual Earnout Payment
Period, the Consolidated Net Income, plus the sum of interest on unsecured debt,
taxes, depreciation and amortization, non-recurring expenses of the Company and
its subsidiaries, any executive bonus payments above $1,100,000 in the aggregate
during the Earnout Period, and any severance payments under the Employment
Agreements, and all Excluded Items, calculated in accordance with Schedule 1.01.
“Annual EBITDA Calculation Amount” means, for the applicable Annual Earnout
Payment Period, the amount determined in accordance with the following table and
subject to Section 6.10(d):

 
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Adjusted Annual EBITDA
Annual EBITDA Calculation Amount
$0-$1,500,000
0
$1,500,001-$4,500,000
The product of (1) .75 multiplied by (2) the excess of (x) Adjusted Annual
EBITDA over (y) $1,500,000.
$4,500,001-$6,000,000
$2,250,000 plus the product of (1) 1.00 multiplied by (2) the excess of (x)
Adjusted Annual EBITDA over (y) $4,500,000.
$6,000,001-$7,500,000
$3,750,000 plus the product of (1) 1.25 multiplied by (2) the excess of (x)
Adjusted Annual EBITDA over (y) $6,000,000.
$7,500,001-$8,000,000
$5,625,000 plus the product of (1) 1.50 multiplied by (2) the excess of (x)
Adjusted Annual EBITDA over (y) $7,500,000.
$8,000,001 and above
$6,375,000 plus the product of (1) 2.00 multiplied by (2) the excess of (x)
Adjusted Annual EBITDA over (y) $8,000,000.

“Applicable Law” means, with respect to any Person, any federal, state, local or
foreign law, constitution, treaty, convention, ordinance, code, rule,
regulation, order, injunction, judgment, decree, ruling or other similar
requirement enacted, adopted, promulgated or applied by a Governmental Authority
that is binding upon or applicable to such Person.
“Assets” has the meaning set forth in Section 3.08.
“Audited Financials” has the meaning set forth in Section 3.05(a)(1).
“Business” means the business of the Company as such business is currently
conducted and as proposed to be conducted.
“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks are authorized or required to close in New York, New York.
“Buyer” has the meaning set forth in the Preamble.
“Buyer Indemnified Parties” has the meaning set forth in Section 9.02(a).
“Cash and Cash Equivalents” means cash in checking accounts, cash in
interest-bearing deposit accounts, deposits in transit, short-term investments
and money market investments, other than Restricted Cash.
“Claim” has the meaning set forth in Section 9.03(a).
“Claim Notice” has the meaning set forth in Section 9.03(a).
“Closing” has the meaning set forth in Section 2.03.

 
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“Closing Cash Balance” means the amount of all Cash and Cash Equivalents and
Restricted Cash that is held by the Company, determined on a consolidated basis,
at the close of business on the Business Day immediately preceding the Closing
Date.
“Closing Date” means the date on which the Closing actually occurs.
“Closing Debt Amount” means the aggregate amount of all unpaid Debt of the
Company at the close of business on the Business Day immediately preceding the
Closing Date, provided, however, that the calculation of the Closing Debt Amount
shall not include Debt incurred or arising under the Warehouse Credit
Facilities.
“Closing Transaction Expenses” means the aggregate amount of all reasonable,
documented out-of-pocket expenses relating to the Transactions incurred by the
Company and the fees and expenses of Thompson & Knight LLP, in each case,
incurred on or prior to the Closing that remain unpaid as at the close of
business on the Business Day immediately preceding the Closing Date.
“Closing Working Capital” means the amount that is equal to the sum of (i) Cash
and Cash Equivalents, (ii) the Fair Value of Mortgage Loans Held for Sale and
(iii) accounts receivable (including accrued interest receivable), less (x)
accounts payable (including accrued interest expense) and (y) borrowings under
the Warehouse Credit Facilities.
“Closing Working Capital Adjustment Amount” means the difference (which may be
positive or negative) between (a) Closing Working Capital and (b) Target Working
Capital.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the first paragraph of this Agreement.
“Company Disclosure Schedules” means the disclosure schedules to ARTICLE 3 and
ARTICLE 4 delivered by the Company and the Sellers to Buyer prior to the
execution and delivery of this Agreement.
“Company Intellectual Property” has the meaning set forth in Section 3.10(a).
“Company Plan” has the meaning set forth in Section 3.12(a).
“Competing Business” has the meaning set forth in Section 6.12.
“Confidentiality Agreement” means the confidentiality agreement entered into
between Buyer, Tiptree or an Affiliate thereof, on the one hand and the Company,
on the other hand, as applicable.
“Consideration Pro Rata Portion” has the meaning set forth in Section
2.04(a)(i).
“Consolidated Net Income” means consolidated revenues of the Company and its
subsidiaries minus the sum of total operating expenses plus taxes of the Company
and its subsidiaries, in each case determined in accordance with GAAP and the
Accounting Policies.

 
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“Contract” means, with respect to any Person, any written contract, agreement,
deed, mortgage, lease, license, indenture, note, bond, loan, insurance policy,
sales order, purchase order or other document or instrument (including any
document or instrument evidencing any Debt but excluding the Organizational
Documents of such Person) to which or by which such Person is legally bound,
other than a Company Plan.
“Damages” means, collectively, any damage, loss, liability, fines, penalties and
expense (including reasonable attorneys’ fees).
“Debt” means, with respect to the Company, all obligations (including all
obligations in respect of principal, accrued interest, penalties, fees and
premiums) of such Person (a) for borrowed money, (b) evidenced by notes, bonds,
debentures or similar instruments, (c) for capital lease obligations which by
their terms must be treated as debt (as determined in accordance with GAAP), (d)
in respect of amounts drawn under letters of credit and bankers’ acceptances,
and (e) in the nature of guarantees of, or assurances to a creditor against, a
loss with respect to the obligations described in clauses (a) through (d) above
of any other Person.
“Dispute Notice” has the meaning set forth in Section 2.05(e).
“Earnout Payments” has the meaning set forth in Section 2.06(a).
“Earnout Period” has the meaning set forth in Section 2.06(a).
“Earnout Pro Rata Portion” has the meaning set forth in Section 2.06(a).
“Earnout Statement” has the meaning set forth in Section 2.06(d).
“Employee Plan” means any written or oral plan, program, agreement, policy or
arrangement that is: (a) a welfare benefit plan as defined in Section 3(1) of
ERISA; (b) a pension benefit plan within the meaning of Section 3(2) of ERISA;
(c) a stock bonus, stock purchase, stock option, restricted stock, stock
appreciation right or similar equity-based plan; or (d) any other
deferred-compensation, retirement, welfare-benefit, bonus, incentive, severance,
change-in-control, employment, collective bargaining, employee loan or material
fringe benefit plan, policy, program, agreement or arrangement.
“Environmental Laws” means any and all applicable statutes, laws, regulations
and rules, in each case as in effect on the date of this Agreement, pertaining
to (i) the protection of air, groundwater, surface water, drinking water, land
or soil, surface or subsurface strata or medium, natural resources or other
environmental media, or (ii) the generation, treatment, manufacturing, use,
storage, handling, recycling, presence, release, disposal, transportation or
shipment of any Hazardous Substances.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Estimated Closing Cash Balance” has the meaning set forth in Section 2.05(a).
“Estimated Closing Debt Amount” has the meaning set forth in Section 2.05(a).

 
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“Estimated Closing Statement” has the meaning set forth in Section 2.05(a).
“Estimated Closing Transaction Expenses” has the meaning set forth in Section
2.05(a).
“Estimated Purchase Price” has the meaning set forth in Section 2.05(b).
“Estimated Working Capital” has the meaning set forth in Section 2.05(a).
“Equity Interests” has the meaning set forth in the first Recital to this
Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
“Exchange Act Filings” has the meaning set forth in Section 5.10.
“Excluded Items” means (i) all fees and expenses of the Company and the fees and
expenses of Thompson & Knight LLP (provided that such fees and expenses of
Thompson & Knight LLP shall not exceed the amount set forth on Section 1.01 of
the Buyer Disclosure Schedule) arising as a result or relating to the
Transactions (including but not limited to any fees or expenses in connection
with the calculation of any Earnout Payments and the preparation of the Earnout
Statements or any dispute hereunder, the determination of Net Working Capital
and the preparation of the Estimated Closing Statement, the Proposed Final
Closing Statement and the Final Closing Statement or any dispute thereunder), to
the extent such fees and expenses are paid by the Company or Sellers, as
applicable, (ii) all discounts to fair market value in intercompany
transactions, (iii) all expenses in respect of any losses as a result of changes
in the balance of the liability recorded in relation to Earn-Out Payments under
SFAS 141(R) - Business Combinations as of subsequent reporting periods, (iv) the
Earnout Payments, (v) all administrative and regulatory costs of the Company and
its subsidiaries related to being a subsidiary of a public company, (vi) all
corporate overhead (i.e., general and administrative expense) of Tiptree and its
Affiliates allocated to the Company, (vii) allocation of profit, loss or
expenses from Tiptree and its Affiliates to the Company and its subsidiaries
relating to any Damages which give rise to an indemnity obligation pursuant to
ARTICLE 9 hereof, (viii) any amounts recovered or recoverable by the Company and
its subsidiaries from insurance, to the extent, and only to the extent, the
Damages attributable to such insurance arose in the same period, (ix) any
relocation and transition expenses of the Company and its subsidiaries resulting
from the consummation of the Transactions, (x) any non-operating mortgage
related non-recurring items, to include, without limitation, (a) any non-cash
charges, such as goodwill write downs associated with an impairment (except
non-cash charges that are reserves for future cash charges), (b) litigation
expenses of the Company and its subsidiaries outside of the ordinary course, and
(c) severance costs of the Company and its subsidiaries (for clarity, operating
items such as (A) litigation-related expenses associated with mortgage claims,
(B) all mortgage-related settlement expenses of the Company and its subsidiaries
and (C) any paid claims of the Company and its subsidiaries to repurchase
mortgages will be considered ordinary expense items and not Excluded Items) and
(xi) any gain, loss, income or expense resulting from an adjustment or write-off
to any goodwill or intangibles related to the acquisition of the Company by
Buyer.

 
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“Fair Value of Mortgage Loans Held for Sale” means the fair value of Mortgage
Loans held for sale based on commitments received from third-party whole loan
investors pursuant to best efforts or mandatory delivery contracts, excluding
deferred origination costs and fees and the effects of hedge accounting.
“FHA” means the Federal Housing Administration of the Department of Housing and
Urban Development of the United States of America or any successor thereto.
“Final Closing Statement” has the meaning set forth in Section 2.05(e).
“Financials” has the meaning set forth in Section 3.05(a)(2).
“Former Seller” has the meaning set forth in Section 10.16.
“Fundamental Representations” means the representations and warranties set forth
in Section 3.02 (Power and Authorization), Section 3.04 (Capitalization of the
Company), Section 3.11 (Tax Matters), Section 3.12 (Employee Benefit Plans),
Section 3.28 (Brokers), Section 4.01 (Power and Authorization), Section 4.04
(Title) and Section 4.07 (No Brokers).
“Funded Debt Amount” means the Closing Debt Amount, excluding (a) capital lease
obligations and (b) guarantees, or assurances to a creditor against, a loss with
respect to the obligations described in clause (a).
“GAAP” means United States generally accepted accounting principles.
“Governmental Authority” means any federal, state or local governmental
authority, department, court, agency or official, including any political
subdivision thereof.
“Governmental Authorization” means any approval, waiver, consent, authorization,
certification, filing, notice, non-objection, registration, license,
application, permission or disclosure required to be obtained from or provided
to any Governmental Authority due to the negotiation or consummation of this
Agreement or the Transactions (i) which is required under any mortgage, banking
or similar Applicable Law or (ii) the absence of which would have a Material
Adverse Effect, prevent or materially delay the Closing or give rise to any
change or effect that is or would reasonably be expected to be materially
adverse to the Buyer’s operation of the Business upon or following the
consummation of the Transactions.
“Governmental Order” means any ruling, award, decision, injunction, judgment,
order, decree or subpoena entered, issued or made by any Governmental Authority.
“Governmental Requirements” means any approval, permit, license, authorization,
registration or certificate issued by, or otherwise granted by, any Governmental
Authority to which or by which the Company is subject or bound or to which or by
which any property, business, operation or right of the Company is subject or
bound.

 
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“Hazardous Substances” means any pollutant, contaminant or any toxic,
radioactive or otherwise hazardous substance, as such terms are defined in,
identified pursuant to or regulated by any Environmental Law.
“HUD” means the Department of Housing and Urban Development of the United States
of America or any successor thereto.
“In Bankruptcy” means a Mortgage Loan with respect to which the Mortgagor (i)
has made an assignment for the benefit of creditors or petitioned or applied to
any tribunal for the appointment of a custodian, receiver or trustee for a
substantial part of its assets, (ii) has commenced any proceedings under any
bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law
or statute or similar law of any jurisdiction, whether now or hereafter in
effect, or (iii) has pending against it any such petition, application or
proceeding.
“In Foreclosure” means a Mortgage Loan with respect to which the foreclosure
process has been initiated (including, without limitation, the referral to legal
counsel for institution of foreclosure) or is pending (whether by way of
judicial foreclosure, under power of sale, or otherwise), or should have been
instituted by the Company under its normal operating procedures, or the Mortgage
Loan Requirements, regardless of whether the matter has been referred to an
attorney, or a deed in lieu of foreclosure is pending.
“In Litigation” means a Mortgage Loan with respect to which any action, suit or
proceeding before a court, governmental agency or arbitrator has been instituted
and is pending.
“Indemnified Party” has the meaning set forth in Section 9.03(a).
“Indemnifying Party” has the meaning set forth in Section 9.03(a).
“Indemnified Taxes” means liabilities of the Company for Taxes of the Company
for any Pre-Closing Tax Period (including, for the avoidance of doubt, the
pre-Closing portion of any Straddle Period as determined pursuant to Section
6.08(c)).
“Insurer” means (i) a Person who insures or guarantees all or any portion of the
risk of loss upon borrower default on any Mortgage Loan, including without
limitation, the FHA, the VA, and any private mortgage insurer; and (ii)
providers of life, hazard, disability, title, or other insurance with respect to
any Mortgage Loan or Mortgage Loan Collateral.
“Intellectual Property” means all patents, patent applications, trademarks,
service marks and trade names, all goodwill associated therewith and all
registrations and applications therefor, copyrights, copyright registrations and
applications, internet domain names, software, trade secrets, and know how, in
each case, to the extent protectable by Applicable Law.
“Interim Balance Sheet” means the unaudited consolidated balance sheet of the
Company as of June 30, 2014.
“Interim Financials” has the meaning set forth in Section 3.05(a)(2).

 
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“Interest Rate Protection Agreement” means any interest rate swap agreement,
interest rate cap agreement, interest collar agreement, interest rate hedging
agreement or other similar agreement or arrangement.
“Investors’ Rights Agreement” means that certain Investors’ Rights Agreement,
dated as of May 8, 2008, by and among the Company, Reliance Investors LLC and
the other Holders (as such term is defined in the Investors’ Rights Agreement),
as amended, modified or supplemented.
“Leased Real Property” has the meaning set forth in Section 3.09(c).
“Licensed Intellectual Property” has the meaning set forth in Section 3.10(a).
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest or encumbrance in respect of such property or asset;
the term “Lien” will not be deemed to include any license of Intellectual
Property.
“Loan Documents” means all documents whether in hard copy, computer record or
any other format, evidencing or pertaining to a particular Mortgage Loan with
respect to the processing, origination, servicing, payment and foreclosure of
such Mortgage Loan, including, without limitation, the Mortgage Note, Mortgage,
ledger or other cards, tax bills, accrual records, insurance policies, payment
and remittance records and any documents required to be maintained under, or
that are necessary to comply with, applicable Mortgage Loan Requirements.
“Management Employee” has the meaning set forth in Section 6.12.
“Marketable Loan” means a Mortgage Loan that, as applicable: (i) is insured or
guaranteed by the FHA or the VA, or (ii) conforms to the underwriting standards
of the Purchaser and is deliverable for sale to the Purchaser in secondary
market transactions.
“Material Adverse Effect” means any change or effect that is or would reasonably
be expected to be materially adverse to the Business, Assets, financial
condition or results of operations of the Company; provided, however, that the
term “Material Adverse Effect” will not include any change or effect that is, or
that results from, any of the following: (i) circumstances, events, changes,
effects or occurrences, including changes in laws, regulations or accounting
principles generally applicable to or affecting the industry in which the
Company operates; (ii) general economic, business or securities market
conditions in the United States; (iii) hurricanes, tornadoes, earthquakes,
floods or other natural disasters or acts of terrorism or war (whether or not
declared); (iv) the loss of any employees, brokers, consultants, or customers
following the announcement of this Agreement or the transactions contemplated
hereby; or (v) acts or omissions of the Company carried out (or permitted to be
carried out) with the written consent of Buyer (so long as such changes or
conditions described in clause (i) do not disproportionately and adversely
affect the Company as compared to similarly situated businesses).
“Material Contracts” has the meaning set forth in Section 3.14(b).

 
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“Mortgage” means the mortgages, deeds of trust, security deeds and other
instruments creating a lien on real property with respect to the Mortgage Loans.
“Mortgage Loan” means a residential or commercial mortgage loan owned, in the
process of origination or serviced by the Company.
“Mortgage Loan Collateral” means the real property and all improvements thereon
securing a Mortgage Loan.
“Mortgage Loan Requirements” means the terms of (i) the Mortgage and Mortgage
Note related to each Mortgage Loan, (ii) all federal, state and local laws,
statutes, rules, regulations, requirements, administrative rulings or orders
binding on the Company and applicable to a Mortgage Loan, and (iii) all
requirements of or responsibilities and obligations of the Company to a
warehouse lender, Purchaser, Agency or Insurer with respect to the warehousing,
processing, underwriting, credit approval, origination, insuring, servicing,
purchase, sale or filing of claims, as applicable, relating to the Mortgage
Loans.
“Mortgage Note” means a written obligation to pay a sum of money at a stated
interest rate, which rate may be fixed or adjustable during the term of
obligation, executed by a Mortgagor and secured by a Mortgage.
“Mortgagor” means the obligor(s) on a Mortgage Note.
“Most Recent Balance Sheet” has the meaning set forth in Section 3.05(a)(1).
“Most Recent Balance Sheet Date” has the meaning set forth in Section
3.05(a)(1).
“Operating Agreement” means the Limited Liability Company Operating Agreement of
the Company, as amended through the date hereof and the Closing Date.
“Operating Principles” has the meaning set forth in Section 6.10.
“Organizational Documents” means, with respect to any Person (other than a
natural person), the certificate or articles of incorporation or organization of
such Person and any limited liability company, operating or partnership
agreement, by-laws or similar documents or agreements relating to the legal
organization of such Person.
“Other Hedging Agreements” shall mean any foreign exchange contracts, currency
swap agreements, commodity agreements, TBA forward contracts or other similar
arrangements, or arrangements designed to protect against fluctuations in
currency values or commodity prices.
“Owned Intellectual Property” has the meaning set forth in Section 3.10(a).
“Permitted Liens” means (i) statutory Liens for Taxes, special assessments or
other governmental and quasi-governmental charges not yet due and payable or the
amount or validity of which is being contested in good faith, (ii) landlords’,
warehousepersons’, mechanics’, materialmens’, carriers’, and other Liens to
secure claims for labor, material or supplies and other

 
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similar Liens that relate to obligations not due and payable and arise in the
ordinary course of business, (iii) Liens incurred or deposits or pledges made in
connection with, or to secure payment of, workers’ compensation, unemployment
insurance or other social security regulations, (iv) zoning, building,
entitlement and other land use regulations or restrictions, (v) the interests of
the lessors and sublessors of any leased properties, (vi) easements, rights of
way and other imperfections of title or encumbrances that do not significantly
interfere with the present use of the property related thereto, (vii)
restrictions on the ownership or transfer of securities arising under Applicable
Laws, or (viii) Liens to secure the Warehouse Credit Facilities.
“Person” means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
Governmental Authority.
“PMI” means the default insurance provided by private mortgage insurance
companies.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing
Date and the portion through the end of the Closing Date for any Tax period that
includes (but does not end on) the Closing Date.
“Principal” means the outstanding balance owed on a Mortgage Loan after the
application of the last payment made.
“Proposed Final Closing Statement” has the meaning set forth in Section 2.05(c).
“Purchase Price” has the meaning set forth in Section 2.02.
“Purchaser” means the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, or any public or private investor who has purchased
any of the Mortgage Loans from the Company or holds beneficial title conveyed or
assigned by the Company to the Mortgage Loans.
“Reliance Seller Representative” has the meaning set forth in the Preamble.
“Reliance Sellers” means, collectively, each Seller who is not a Wexford Seller.
“REO” means real property owned in fee simple by the Company as a result of
foreclosure proceedings (or proceedings in lieu of foreclosure).
“Representation Survival Date” has the meaning set forth in Section 9.01.
“Required Regulatory Approvals” has the meaning set forth in Section 6.06(b).
“Restricted Cash” means cash used to collateralize various letters of credit for
leases and surety bonds, and borrower rehabilitation escrow funds, as well as
borrower escrow funds for taxes and insurance.
“Sale of the Company” shall mean (a) any sale, conveyance, exchange, transfer or
disposition of all or substantially all of the assets of the Company to a
Person(s) Unaffiliated with Tiptree or

 
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its Affiliates, whether by merger, consolidation, reorganization, sale of assets
or otherwise; or (b) a transaction resulting in equity interests representing
(A) more than 50% of the economic or voting power of the Company being held by a
Person(s) Unaffiliated with Tiptree or its Affiliates, or (B) the right to
appoint the manager of the Company or similar governing body of the Company
being held by a Person(s) Unaffiliated with Tiptree or its Affiliates.

“Sale of Tiptree” shall mean (a) any sale, conveyance, exchange, transfer or
disposition of all or substantially all of the assets of Tiptree to a Person(s)
Unaffiliated with Tiptree and its Affiliates, whether by merger, consolidation,
reorganization, sale of assets or otherwise; or (b) a transaction resulting in
equity interests representing (A) more than 50% of the economic or voting power
of Tiptree being held by a Person(s) Unaffiliated with Tiptree and its
Affiliates, or (B) the right to appoint the Board of Directors of Tiptree or
similar governing body of Tiptree being held by a Person(s) Unaffiliated with
Tiptree and its Affiliates.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as the same may be amended from time to
time.
“Seller Response Notices” has the meaning set forth in Section 2.05(d).
“Seller Representatives” has the meaning set forth in the Preamble.
“Sellers” has the meaning set forth in the Preamble.
“Sellers’ Knowledge” or any other similar knowledge qualification in this
Agreement means the actual knowledge of Hugh Miller, Richard Blass and Marc E.
Miller, after due inquiry.
“Servicing Agreement” means, any Contract pursuant to which the Company is
obligated to a third party to administer, collect and remit payments of
principal and interest, to collect and forward payments of Taxes and insurance,
to administer escrow accounts, and to foreclose, repossess or liquidate
collateral after default, or serve as a subservicer to perform any of the
foregoing activities, for any Mortgage Loan.
"Side Letter" means that certain letter agreement, dated as of the date hereof,
by and among the Company, Buyer, Tiptree, TFI, Reliance Control LLC, Wexford
Spectrum Fund, L.P., Spectrum Intermediate Fund Limited and Lambda Investors
LLC.
“Straddle Period” has the meaning set forth in Section 6.08(c).
“Subservicing Agreement” means any Contract under which a third party services
and administers Mortgage Loans on behalf of the Company.
“Subsidiary” of any Person means, on any date, any Person of which securities or
other ownership interests representing more than fifty percent (50%) of the
equity or more than fifty percent (50%) of the ordinary voting power or, in the
case of a partnership, more than fifty percent (50%) of the general partnership
interests or more than fifty percent (50%) of the profits or losses

 
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of which are, as of such date, owned, controlled or held by the applicable
Person or one or more direct or indirect subsidiaries of such Person.
“Successor Seller” has the meaning set forth in Section 12.16.
“Target Working Capital” means $18.1 million.
“Tax” means all United States federal, state, local, foreign or other taxes,
customs and duties, and similar charges, fees, levies and assessments imposed by
a Governmental Authority, including, without limitation, income, gross receipts,
excise, real and personal property, profits, estimated, severance, occupation,
production, capital gains, capital stock, goods and services, environmental,
employment, withholding, stamp, value added, alternative or add-on minimum,
sales, transfer, use, license, payroll and franchise taxes and such term shall
include any interest, penalties , fines, related liabilities or additions to tax
attributable to the foregoing.
“Tax Claim” has the meaning set forth in Section 6.08(f).
“Tax Returns” means returns, reports, forms and information statements required
to be filed with a Taxing Authority reporting liability for Taxes, including any
schedules or attachments thereto and including any amendment thereof.
“Taxing Authority” means any Governmental Authority responsible for the
imposition, assessment or collection of any Tax.
“Termination Date” means February 24, 2016.
“TFI” has the meaning set forth in the Preamble.
“TFI Material Adverse Effect” means any change or effect that is or would
reasonably be expected to be materially adverse to the business, assets,
financial condition or results of operations of TFI determined on a consolidated
basis; provided, however, that the term “TFI Material Adverse Effect” will not
include any change or effect that is, or that results from, any of the
following: (i) circumstances, events, changes, effects or occurrences, including
changes in laws, regulations or accounting principles generally applicable to or
affecting the industry in which TFI or any of its businesses operate; (ii)
general economic, business or securities market conditions in the United States;
or (iii) hurricanes, tornadoes, earthquakes, floods or other natural disasters
or acts of terrorism or war (whether or not declared) (so long as such changes
or conditions described in clause (i) do not disproportionately and adversely
affect TFI as compared to similarly situated businesses).
“TFI Shares” has the meaning set forth in Section 2.02.
“Third Party” means any Person, other than the Parties or any of their
Affiliates.
“Third Party Claim” has the meaning set forth in Section 9.03(c).
“Tiptree” has the meaning set forth in the Preamble.

 
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“Transaction Documents” means this Agreement and any other agreements
contemplated hereby.
“Transactions” means the transactions contemplated by this Agreement.
“Unaffiliated” means any Person who is not (i) an Affiliate, (ii) a shareholder,
member, other equity holder or family member of such Person or (iii) an
Affiliate of a shareholder, member, other equity holder or family member of such
Person, in each case immediately prior to the relevant transaction.
“VA” means the United States Department of Veterans’ Affairs or any successor
thereto.
“Value Per Share” means, as of the date of a calculation, the most recent
publicly reported Economic Book Value per TFI Share (including Tiptree-level net
assets) reported in TFI’s filings with the SEC.
“Warehouse Credit Facilities” means, collectively, (1) that certain Amended and
Restated Master Repurchase Agreement, dated as of February 25, 2010, between the
Company as Seller and Direct Funding LLC as Buyer, as amended as of various
dates by Amendments Nos. 1 through 12, (2) that certain Master Repurchase
Agreement, dated as of December 12, 2012, between the Company as Seller and The
Royal Bank of Scotland PLC as Buyer, as amended as of various dates by
Amendments Number One through Three, (3) that certain Master Repurchase
Agreement, dated as of June 28, 2013, between the Company as Seller and
Citibank, N.A. as Buyer, as amended as of June 27, 2014 by Amendment Number One,
and (4) that certain Line of Credit Agreement and that certain Amended and
Restated Master Note, each dated August 22, 2014, between the Company as
Borrower and Citibank, N.A. as Bank.
“Wexford Sellers” means Reliance Control LLC, a Delaware limited liability
company and Reliance Investors LLC, a Delaware limited liability company.
“Wexford Sellers Representative” has the meaning set forth in the Preamble.
Section 1.02    Other Definitional and Interpretive Provisions. Except as
otherwise explicitly specified to the contrary herein:
(a)    the words “hereof,” “herein,” “hereunder” and words of similar import
refer to this Agreement as a whole and not to any particular section or
subsection of this Agreement and reference to a particular section of this
Agreement will include all subsections thereof,
(b)    references to a section, exhibit, annex or schedule means a section of,
or exhibit, annex or schedule to this Agreement, unless another agreement is
specified,
(c)    the captions herein are included for convenience of reference only and
will be ignored in the construction or interpretation hereof,
(d)    all exhibits and schedules annexed hereto or referred to herein are
hereby incorporated in (including in the definitions) and made a part of this
Agreement as if set forth in

 
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full herein, and any capitalized terms used in any exhibit or schedule but not
otherwise defined therein will have the meaning as defined in this Agreement,
(e)    definitions will be equally applicable to both the singular and plural
forms of the terms defined, and references to the masculine, feminine or neuter
gender will include each other gender,
(f)    the word “including” means including without limitation,
(g)    any reference to “$” or “dollars” means United States dollars,
(h)    unless the context clearly requires otherwise, when used herein “or”
shall not be exclusive (i.e., “or” shall mean “and/or”),
(i)    references to any agreement or contract are to that agreement or contract
as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof, and
(j)    references to a particular statute or regulation including all rules and
regulations thereunder and any predecessor or successor statute, rule, or
regulation, in each case as amended or otherwise modified from time to time.
ARTICLE 2    

PURCHASE AND SALE OF EQUITY INTERESTS; CLOSING
Section 2.01    Purchase and Sale of Equity Interests. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, each of
the Sellers shall sell, transfer and deliver to Buyer, free and clear of all
Liens, and Buyer shall purchase from each of the Sellers, all of the outstanding
Equity Interests held by the Sellers, which constitute all of the outstanding
equity securities of the Company.
Section 2.02    Purchase Price. The aggregate consideration for the purchase and
sale of the Equity Interests will be the sum of (i) an amount in cash (the “Cash
Consideration”) calculated as follows:
(a)    $7,500,000.00;
(b)    less the Closing Debt Amount;
(c)    plus the Closing Working Capital Adjustment Amount (if Closing Working
Capital is greater than the Target Working Capital);
or
(d)    less the Closing Working Capital Adjustment Amount (if Closing Working
Capital is less than the Target Working Capital);

 
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plus (ii) 1,625,000 shares of Class A common stock of TFI, par value $0.001 per
share, as adjusted for splits, stock dividends and recapitalizations (the “TFI
Shares”, and such consideration, the “Equity Consideration” and, together with
the Cash Consideration, the “Purchase Price”).
The Cash Consideration, and, if applicable, the Equity Consideration, shall be
subject to adjustment in accordance with Section 2.05. All payments to be made
by Buyer pursuant to this Agreement shall be made free and clear of any
withholding or deduction for or on account of Taxes, to the extent permitted by
Applicable Law. Each of the Parties agrees that it will be bound by such
allocation of the Purchase Price and will not take a position on any Tax Return
or in any judicial proceeding or other filing with any Governmental Authority
that is in any way inconsistent with such allocation. Any payments made pursuant
to this Agreement shall be treated as an adjustment to the Purchase Price by the
Parties for Tax purposes, unless otherwise required by Applicable Law.
Section 2.03    The Closing. The purchase and sale of the Equity Interests (the
“Closing”) will take place at 10:00 a.m. local time at the offices of Schulte
Roth & Zabel LLP at 919 Third Avenue, New York, NY, 10022, as promptly as
practicable, but in no event later than on the second Business Day following the
satisfaction or waiver of each of the conditions set forth in ARTICLE 7 hereof
(other than those conditions which can be satisfied only at the Closing, but
subject to the satisfaction or waiver of such conditions at Closing), or at such
other time and place as may be agreed to by the Parties. Subject to the
provisions of ARTICLE 8 of this Agreement, the failure to consummate the Closing
on the date and time determined pursuant to this Section 2.03 shall not result
in the termination of this Agreement and shall not relieve any Party of any
obligation under this Agreement.
Section 2.04    Closing Deliveries and Payments.
(a)    Buyer Closing Deliveries and Payments. Upon the terms and subject to the
conditions set forth in this Agreement, Buyer shall deliver or cause to be
delivered at the Closing the following:
(1)    to the Wexford Sellers Representative, on behalf of the Wexford Sellers,
and to the Reliance Sellers Representative, on behalf of the Reliance Sellers,
(x) an amount in cash equal to the Cash Consideration (estimated as provided in
Section 2.05(b) below), by wire transfer of immediately available funds, and (y)
the TFI Shares; the portion of the Cash Consideration and Equity Consideration
attributable to each Seller shall be as set forth on Section 2.04(a) of the
Company Disclosure Schedules (such portion attributable to each Seller, such
Seller’s “Consideration Pro Rata Portion”);
(2)    to each Person specified in the Estimated Closing Statement as a
recipient of payments in respect of the Funded Debt Amount, the amount payable
to such Person as specified in the Estimated Closing Statement by wire transfer
of immediately available funds to the account or accounts set forth in the
Estimated Closing Statement; and
(3)    evidence satisfactory to Sellers of the Required Regulatory Approvals.

 
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(b)    Sellers’ Closing Deliveries. Upon the terms and subject to the conditions
set forth in this Agreement, each Seller shall deliver or cause to be delivered
at the Closing to Buyer a duly executed certificate to the effect that such
Seller is not a foreign entity, substantially in the form set forth in Treasury
Regulation Section 1.1445-2(b)(2).
Section 2.05    Purchase Price Adjustment.
(a)    Estimated Closing Statement. The Company will prepare in good faith and
provide to Buyer no later than five (5) Business Days prior to the anticipated
Closing Date a written statement setting forth in reasonable detail its good
faith estimates of the Closing Working Capital (the “Estimated Working
Capital”), the Closing Cash Balance (the “Estimated Closing Cash Balance”), the
Closing Transaction Expenses (the “Estimated Closing Transaction Expenses”) and
the intended recipients thereof, the Closing Debt Amount (the “Estimated Closing
Debt Amount”) and the Funded Debt Amount (and the recipients of any portion
thereof, including any such recipient’s account information for purposes of
receiving a wire transfer in accordance with Section 2.04(a) for any such
portion thereof) (the “Estimated Closing Statement”), in each case prepared in
accordance with the definitions thereof and/or the Accounting Policies, as
applicable.
(b)    Estimated Purchase Price. The Purchase Price payable at Closing under
Section 2.04(a)(1) (the “Estimated Purchase Price”) shall be calculated using
the Estimated Closing Debt Amount and Estimated Working Capital set forth on the
Estimated Closing Statement.
(c)    Proposed Final Closing Statement. As promptly as possible and in any
event within seventy-five (75) calendar days after the Closing Date, Buyer shall
prepare or cause to be prepared, and will provide to the Sellers, a written
statement setting forth in reasonable detail its proposed final determination of
the Closing Working Capital, the Closing Cash Balance, the Closing Transaction
Expenses, the Closing Debt Amount and the Purchase Price (the “Proposed Final
Closing Statement”). The determination of the Closing Working Capital, the
Closing Cash Balance, the Closing Transaction Expenses and the Closing Debt
Amount reflected on the Proposed Final Closing Statement will be prepared in
accordance with the definitions thereof and/or the Accounting Policies, as
applicable. Buyer will afford, and cause the Company to afford, the Seller
Representatives and their respective advisors reasonable access (during normal
business hours) to the work papers and other books and records of Buyer and the
Company for purposes of assisting the Seller Representatives in their review of
the Proposed Final Closing Statement.
(d)    Sellers’ Response. The Proposed Final Closing Statement (and the proposed
final determinations of the Closing Working Capital, the Closing Cash Balance,
the Closing Transaction Expenses, the Closing Debt Amount and the Purchase Price
reflected thereon) will be final, conclusive and binding on the Parties for
purposes of this Section 2.05(d) unless the Wexford Sellers Representative
provides a written notice (a “Seller Response Notice”) to Buyer no later than
the twentieth (20th) Business Day after the delivery to the Sellers of the
Proposed Final Closing Statement. Any Seller Response Notice must set forth in
reasonable detail (i) any item on the Proposed Final Closing Statement which the
Sellers believe has not been prepared in accordance with this Agreement and the
correct amount of such item and (ii) the Sellers’ alternative calculation of the
Closing Working Capital, the Closing Cash Balance, the Closing Transaction
Expenses, the Closing Debt Amount and the Purchase Price, as applicable. Any
item or amount to which no

 
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dispute is raised in the Seller Response Notice will be final, conclusive and
binding on the Parties for purposes of this Section 2.05 after such twentieth
(20th) Business Day.
(e)    Resolution of Disputes. Buyer and the Sellers will attempt to promptly
resolve the matters raised in any Seller Response Notice in good faith.
Beginning twenty (20) Business Days after delivery of any Seller Response Notice
pursuant to Section 2.05(d), or any mutually-agreed extension thereof, either
Buyer or the Wexford Sellers Representative may provide written notice to the
other (the “Dispute Notice”) that it elects to submit the disputed items to a
nationally recognized independent accounting firm chosen jointly by Buyer and
the Sellers acting in good faith (the “Accounting Firm”). The Parties will
instruct the Accounting Firm to promptly (and in any event within thirty (30)
Business Days), in accordance with such procedures as it deems fair and
equitable, provided that each party will be afforded an opportunity to submit a
written statement in favor of its position and to advocate for its position
orally before the Accounting Firm, review only those unresolved items and
amounts specifically set forth and objected to in the Seller Response Notice.
The Accounting Firm will resolve the dispute by selecting either (i) the
Sellers’ calculation of Closing Working Capital, Closing Cash Balance, the
Closing Transaction Expenses, Closing Debt Amount or Purchase Price as set forth
on the Seller Response Notice (as modified following discussions with Buyer and
as submitted to the Accounting Firm at the outset of the dispute resolution
process with a copy to Buyer) or (ii) Buyer’s calculation of Closing Working
Capital, Closing Cash Balance, the Closing Transaction Expenses or Closing Debt
Amount or Purchase Price as set forth on the Proposed Final Closing Statement
(as modified following discussions with the Sellers and as submitted to the
Accounting Firm at the outset of the dispute resolution process with a copy to
the Sellers), based upon the submission which results in an adjustment to the
Closing Working Capital, the Closing Transaction Expenses, Closing Cash Balance,
Closing Debt Amount and Purchase Price that is closest to the correct adjustment
as determined by the Accounting Firm after resolution of the disputed items. In
any such case, a single partner of the Accounting Firm selected by such
Accounting Firm in accordance with its normal procedures and having expertise
with respect to settlement of such disputes and the industry in which the
Company operates will act for the Accounting Firm in the determination
proceeding, and the Accounting Firm will render a written decision with respect
to such disputed matter, including a statement in reasonable detail of the basis
for its decision. The fees and expenses of the Accounting Firm will be borne 50%
by the Buyer and 50% by the Sellers. The decision of the Accounting Firm with
respect to the disputed items of the Proposed Final Closing Statement submitted
to it will be final, conclusive and binding on the Parties for purposes of this
Section 2.05. As used herein, the Proposed Final Closing Statement, as adjusted
to reflect any changes agreed to by the Parties and/or the decision of the
Accounting Firm pursuant to this Section 2.05 is referred to herein as the
“Final Closing Statement”. Each of the Parties agrees to cooperate with the
Accounting Firm (including by executing a customary engagement letter reasonably
acceptable to it) and to cause the Accounting Firm to resolve any such dispute
as soon as practicable after the commencement of the Accounting Firm’s
engagement.
(f)    Purchase Price Adjustment. If the Closing Working Capital, the Closing
Debt Amount, the Closing Transaction Expenses or the Closing Cash Balance (as
finally determined pursuant to this Section 2.05 and as set forth in the Final
Closing Statement) differs from the estimated amounts thereof set forth in the
Estimated Closing Statement:

 
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(1)    Buyer will, no later than ten (10) Business Days after the final
determination referred to in paragraph (e) above is made, remit or cause to be
remitted to the Sellers an aggregate amount equal to the excess of the
recalculated Purchase Price over the Estimated Aggregate Purchase Price; or
(2)    Buyer shall have the option, by written notice to the Seller
Representatives, (x) to require Sellers, severally and not jointly and on a pro
rata basis in accordance with each Seller’s Consideration Pro Rata Portion, to
remit or cause to be remitted to Buyer an aggregate amount in cash equal to the
excess of the Estimated Aggregate Purchase Price over the recalculated Purchase
Price (the absolute value of such amount, the “Deficit Amount”) or (y) to deduct
the Deficit Amount from the Earnout Payments otherwise due to Sellers pursuant
to Section 2.06 below, such deduction to be made on a pro rata basis in
accordance with each Seller’s Consideration Pro Rata Portion. In the event the
Deficit Amount exceeds the amount of the Cash Consideration, then the entire
amount of the Cash Consideration shall be remitted to Buyer in accordance with
(x) or (y) above and Buyer shall have the option, by written notice to the
Seller Representatives, (a) to require Sellers, severally and not jointly and on
a pro rata basis in accordance with each Seller’s Consideration Pro Rata Portion
to surrender or cause to be surrendered to Buyer a number of TFI Shares with an
aggregate market value equal to the excess of the Deficit Amount over the amount
of the Cash Consideration or (b) to deduct a number of TFI Shares equal to such
excess from the Earnout Payments otherwise due to Sellers pursuant to Section
2.06 below, such deduction to be made on a pro rata basis in accordance with
each Seller’s Consideration Pro Rata Portion.
(g)    Working Capital. The Parties acknowledge that the sole purpose of the
working capital adjustment set forth in this Section 2.05 is to adjust for
changes in relative levels of working capital of the Company from March 31, 2014
to the Closing Date; and, accordingly, the Closing Working Capital will be
calculated using the Accounting Policies applied in a manner consistent with the
application of such Accounting Policies in the calculation of the Target Working
Capital and will not take into account any changes in accounting treatment that
would be required under GAAP from and after March 31, 2014.
Section 2.06    Earnout Consideration.
(a)    For the period beginning on the first day of the first quarter beginning
immediately following the Closing Date and ending on the date that is thirty-six
(36) months thereafter (the “Earnout Period”), Sellers shall be entitled to
annual earnout payments (the “Earnout Payments”) as and to the extent provided
for herein; the portion of the Earnout Payments attributable to each Seller
shall be as set forth on Section 2.06(a) of the Company Disclosure Schedules
(the portion attributable to each Seller, such Seller’s “Earnout Pro Rata
Portion”). Any Earnout Payments due hereunder shall be made no later than ninety
(90) calendar days following the end of the applicable annual twelve (12) month
period (the “Annual Earnout Payment Period”) to which such Earnout Payment
relates. Notwithstanding the foregoing, any Earnout Payments otherwise due and
payable hereunder shall be subject to the deductions and offsets in accordance
with Section 2.05(f)(2) and Section 9.04.

 
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(b)    Subject to Section 2.06(a), the aggregate payment in respect of any
Annual Earnout Payment Period shall be equal to the number of TFI Shares with an
aggregate Value Per Share (calculated as of the last day of the applicable
Annual Earnout Payment Period) equal to the difference between:
(1)    The Annual EBITDA Calculation Amount for such Annual Earnout Payment
Period; and
(2)    The greatest prior Annual EBITDA Calculation Amount.
(c)    In no event will the number of TFI Shares issued to Sellers as Earnout
Payments exceed 2,000,000 TFI Shares in the aggregate, as adjusted for splits,
stock dividends and recapitalizations, before taking into account any deductions
or offsets pursuant Section 2.05(f)(2) and Section 9.04.
(d)    With payment of each Earnout Payment during the Earnout Period, Buyer
shall deliver to the Seller Representatives a statement (an “Earnout Statement”)
that sets forth in reasonable detail its determination of the amount of the
Earnout Payment. The amount of Adjusted Annual EBITDA shall be (i) determined by
Buyer from books and records maintained for the Company by Tiptree and (ii)
calculated in accordance with the definition of Adjusted Annual EBITDA and the
Accounting Policies. Any dispute regarding any Earnout Statement or the amount
of any Earnout Payment or the total of the Earnout Payments shall be resolved in
accordance with the procedures set forth below. In connection with each Earnout
Statement, the Company’s chief financial officer shall deliver a certificate
substantially in the form attached hereto as Exhibit E (each, a “CFO Earnout
Certification”). Absent fraud, gross negligence or willful misconduct by the
chief financial officer, the Parties agree to hold the chief financial officer
harmless from any and all Damages actually incurred or suffered by any Party
arising out of any error or misstatement in such certificate or in the Earnout
Statement.
(e)    In the event that the Wexford Seller Representative objects to the
results set forth in the Earnout Statement, then within thirty-five (35) days
after the delivery to the Wexford Seller Representative of the Earnout Statement
(the “Response Period”), the Wexford Seller Representative shall deliver to the
Buyer a written notice (an “Objection Notice”) describing in reasonable detail
the Wexford Seller Representative’s objections to the Earnout Statement and
setting forth the results determined by the Wexford Seller Representative to be
correct. If the Wexford Seller Representative does not deliver an Objection
Notice to Buyer during the Response Period, then Buyer’s calculation of the
results shall be binding and conclusive on the Parties.
(f)    If the Wexford Seller Representative delivers an Objection Notice
objecting to the results during the Response Period in accordance with
subparagraph (e) above, and if the Wexford Seller Representative and Buyer are
unable to resolve such dispute within twenty (20) days after such Objection
Notice is delivered to the Buyer, then the dispute shall be finally settled by
an Accounting Firm (it being understood that, if requested by the Wexford Seller
Representative, such Accounting Firm may examine, among other things, the manner
in which the Buyer applied the Accounting Policies to any particular
transaction, taking into account all relevant factors (including, to the extent
that the Accounting Firm deems it to be appropriate, a comparison of the manner
in

 
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which Buyer applied the Accounting Policies (as required to be applied
hereunder) to such transaction to the manner in which companies substantially
comparable to Buyer apply GAAP to similar transactions). The determination by
the Accounting Firm of Adjusted Annual EBITDA and the applicable Earnout
Payments, if any, determined to be correct (the “Actual Earnout Amount”) shall
be conclusive and binding on the parties. The Buyer and the Wexford Sellers
shall each bear and pay 50% of the fees and other expenses of the independent
accounting firm in connection with the dispute resolution process set forth in
this section.
(g)    At reasonable times during normal business hours and upon reasonable
notice provided to Buyer, before and after the preparation of the Earnout
Statement, Buyer shall permit the Wexford Seller Representative and its legal,
accounting and financial advisors to examine the financial books and records of
the Company, to make such inspections and copies of such books and records as
they may reasonably require, and to discuss such matters with the appropriate
personnel of the Company and Buyer, each to the extent incident to the exercise
of the Wexford Seller Representative’s right to object to Buyer’s calculation of
the amounts set forth in the Earnout Statement. The Wexford Seller
Representative agrees that it shall hold (and shall cause its advisors referred
to in the preceding sentence to hold) all information acquired during such
examination in strict confidence and shall use (and shall cause its advisors
referred to in the preceding sentence to use) such information solely for
purposes of making calculations under this Section 2.06 and any disputes related
thereto.
(h)    In the event Tiptree, Buyer, TFI or any of their Affiliates breaches
Section 6.10, and such breach is incapable of being cured or is not cured, by
Tiptree, Buyer, TFI or any of their Affiliates, as applicable, within 60
calendar days following receipt of written notice of such breach by the Wexford
Sellers Representative, and such uncured breach would reasonably be expected to
result in a material diminution of the aggregate payment due Sellers pursuant to
Section 2.06(b) for an applicable Annual Earnout Payment Period as compared to
the aggregate payment due Sellers pursuant to Section 2.06(b) for such Annual
Earnout Payment Period if such breach of Section 6.10 had not taken place, the
Sellers shall receive, as liquidated damages and not as a penalty, 2,000,000 TFI
Shares, as adjusted for splits, stock dividends and recapitalizations, less (i)
any TFI Shares previously received as part of prior Earnout Payments and (ii)
any deductions or offset made in accordance with Section 2.05(f)(2) or Section
9.04 (collectively, the “Liquidated Damages”). Upon Sellers’ receipt of the
Liquidated Damages, the Earnout Period shall terminate.
(i)    Upon a Sale of the Company (other than in connection with a Sale of
Tiptree), the Sellers shall receive 2,000,000 TFI Shares, as adjusted for
splits, stock dividends and recapitalizations, less any TFI Shares previously
received as part of prior Earnout Payments and less any deductions or offset
made in accordance with Section 2.05(f)(2) or Section 9.04 (collectively, the
“Sale Payout”). Upon receipt Sellers’ receipt of the Sale Payout, the Earnout
Period shall terminate.
(j)    The Parties acknowledge that (i) there is no assurance that Adjusted
Annual EBITDA will exceed the Annual EBITDA Calculation Amount and result in
Earnout Payments and (ii) the Parties solely intend the express provisions of
this Agreement to govern their contractual relationship with respect to the
payment of Earnout Payments. Buyer, as of the date hereof, is not aware of any

 
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obligations of Buyer or its Affiliates, and, from and after the Closing, will
take no actions, in either case, that would prevent the payment on a timely
basis of an Earnout Payment, if any payments are then due, once such Earnout
Payment is finally determined in accordance with the provisions of this Section
2.06.
ARTICLE 3    

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Buyer to enter into and perform this Agreement and to
consummate the Transactions, the Company hereby represents and warrants to Buyer
as follows, in each case except as set forth in the Company Disclosure
Schedules:
Section 3.01    Organization. The Company is (a) duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and (b) duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the properties owned,
leased or licensed by it or the nature of its business makes such qualification,
licensing or good standing necessary, except where the failure to be so
qualified or licensed or in good standing would not reasonably be expected to
have a Material Adverse Effect. The Company has made available to Buyer true and
complete copies of the Organizational Documents of the Company, each as amended
and otherwise in effect.
Section 3.02    Power and Authorization. The Company has the limited liability
company power and authority to execute and deliver this Agreement and the other
Transaction Documents and to perform its obligations hereunder and thereunder.
The Company has taken all limited liability company actions or proceedings
required to be taken by or on the part of the Company to authorize and permit
the execution and delivery by the Company of this Agreement, the other
Transaction Documents and the instruments required to be executed and delivered
by it pursuant hereto and thereto, the performance by the Company of its
obligations hereunder and thereunder and the consummation by the Company of the
Transactions. Each of this Agreement and the other Transaction Documents has
been (or in the case of Transaction Documents to be entered into at or prior to
the Closing, will be) duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by each of the other parties
hereto or thereto, constitutes (or will constitute) the legal, valid and binding
obligation of the Company, enforceable against it in accordance with their
respective terms (except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and other similar
laws of general applicability relating to or affecting creditors’ rights and by
general equitable principles).
Section 3.03    No Violation or Approval; Consents. Except as set forth in
Section 3.03 of the Company Disclosure Schedules, neither the execution,
delivery and performance of this Agreement or the other Transaction Documents by
the Company nor its consummation of the Transactions will:
(a)    require any Governmental Authorizations on the part of the Company, other
than consents, waivers, approvals, orders, authorizations or filings that, if
not obtained or made would not reasonably be expected to have a Material Adverse
Effect;

 
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(b)    result in or give rise to the imposition of a material Lien (other than
Permitted Liens) on any of the Assets of the Company;
(c)    assuming the taking of each action related to Governmental Authorizations
required of the Company, result in a breach or violation of, or constitute a
default under, any Applicable Laws to which the Company, the Business or any
Assets are subject; or
(d)    result in a breach or violation of, or constitute a default under, or
result in termination of, or accelerate the performance required by, or require
any action by (including any authorization, consent or approval) or notice to
any Person under, any of the terms, conditions or provisions of (i) any Material
Contract, (ii) any Governmental Order to which the Company is subject or (iii)
the Organizational Documents of the Company.
Section 3.04    Capitalization of the Company.
(h)    The authorized and issued and outstanding equity interests of the Company
is as set forth in Section 3.04(a) of the Company Disclosure Schedules. All of
the outstanding equity interests of the Company have been duly authorized,
validly issued and are fully paid and non-assessable, and have not been issued
in violation of any preemptive rights.
(i)    There are no outstanding options, warrants or other rights of any Person
to acquire any equity securities of, or any equity interests in, the Company, or
securities exercisable or exchangeable for, or convertible into, equity
securities of, or equity interests in the Company.
(j)    The Company does not directly or indirectly own any equity securities of,
or interests in, any Person.
(k)    Except as contemplated by the Operating Agreement or the Investors’
Rights Agreement, (i) there are no preemptive rights or other similar rights in
respect of any equity interests in the Company, (ii) there are no Liens (other
than Permitted Liens) on, or Contracts entered into by the Company concerning,
the ownership, transfer or voting of, any equity interests in the Company, or
otherwise affecting the rights of any holder of the equity interests in the
Company, (iii) there is no Contract, or provision in the Organizational
Documents of the Company, which obligates the Company to purchase, redeem or
otherwise acquire, or make any payment (including any dividend or distribution)
in respect of, any equity interest in the Company and (iv) there are no existing
rights with respect to registration under the Securities Act of any equity
interests in the Company.
Section 3.05    Financial Matters.
(k)    Buyer has been furnished with each of the following:
(1)    the audited consolidated balance sheet of the Company as of December 31,
2013 (the “Most Recent Balance Sheet”, and the date thereof, the “Most Recent
Balance Sheet Date”) and the related audited statements of income, cash flows
and changes in members’ equity for the fiscal year then-ended, accompanied by
the notes thereto and the report of

 
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the Company’s independent accountants with respect thereto (collectively, the
“Audited Financials”); and
(2)    the unaudited consolidated balance sheet of the Company as of June 30,
2014 and the related unaudited consolidated statements of income, cash flows and
changes in members’ equity for the six (6) months then ended (the “Interim
Financials” and, together with the Audited Financials, the “Financials”).
(l)    The Financials (including any notes thereto) have been prepared in
accordance with GAAP, consistently applied, and fairly present, in all material
respects, the financial position and results of the operations of the Company
(subject, with respect to the Interim Financials, to the absence of footnotes
and to normal year-end and periodic reclassifications and adjustments).
(m)    The Company does not have any liabilities which are of a nature required
by GAAP to be reflected on a balance sheet or the notes thereto except for (i)
liabilities reflected or reserved against in the Financials and (ii) liabilities
incurred in the ordinary course of business since the Most Recent Balance Sheet
Date.
Section 3.06    Absence of Certain Developments. Except as set forth on Section
3.06 of the Company Disclosure Schedules, from the Most Recent Balance Sheet
Date through the date of this Agreement (a) there has not been any change or
effect that constitutes a Material Adverse Effect, (b) the Business has been
conducted in all material respects in the ordinary course of business and (c)
there have no material adverse changes to the Whole-Loan Sales Related Reserves
of the Company.
Section 3.07    Debt; Guarantees. Section 3.07 of the Company Disclosure
Schedules sets forth a list of all of the Company’s (i) Contracts governing Debt
and (ii) leasing or similar arrangements that, in accordance with GAAP, are
classified as capital leases, in each case as of the date of this Agreement. The
Company has no material liability in respect of a guarantee of any Debt or other
similar liability of any other Person.
Section 3.08    Assets. The Company has good title to, or in the case of leased
or licensed property and assets, have the right to use pursuant to a valid and
enforceable lease, license or similar Contract, all of their material tangible
properties, rights and assets, whether real or personal, including all assets
reflected in the Most Recent Balance Sheet or acquired after the Most Recent
Balance Sheet Date, except (a) to the extent the enforceability of any such
leases or other Contracts may be limited by general principles of equity
(whether considered in a proceeding at law or in equity) and (b) for assets that
have been sold or otherwise disposed of since the Most Recent Balance Sheet Date
in the ordinary course of business (collectively, the “Assets”). None of the
owned Assets is subject to any Lien other than a Permitted Lien. This Section
3.08 does not relate to real property or interests in real property, such items
being instead the subject of Section 3.09, or to Intellectual Property or
interests in Intellectual Property, such items being instead the subject of
Section 3.10.
Section 3.09    Real Property.

 
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(a)    The Company has valid leasehold interests in all Leased Real Property (as
defined in Section 3.09(c) below). None of the Leased Real Property is subject
to any Lien, except Permitted Liens.
(b)    The Company does not own any real property, except for real properties
the Company has acquired following default or foreclosure actions or proceedings
in the ordinary course of the Company’s Business as set forth on Section 3.09(b)
of the Company Disclosure Schedules (the “Owned Real Property”). The Company has
good, valid and marketable fee simple title to all Owned Real Property free and
clear of all Liens (other than Permitted Liens).
(c)    The leased real properties held by the Company are listed in Section
3.09(c)(i) of the Company Disclosure Schedules (the “Leased Real Property”). The
Company has made available to Buyer true and complete copies of the leases
relating to such Leased Real Property. With respect to each lease listed in
Section 3.09(c)(i) of the Company Disclosure Schedules, except as set forth in
Section 3.09(c)(ii) of the Company Disclosure Schedules, the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the lease.
(d)    There does not exist any actual, or to Sellers’ Knowledge, threatened or
contemplated condemnation or eminent domain proceeding that relates to any of
the Owned Real Property or Leased Real Property or any part thereof, and the
Company has not received any written, or to Sellers’ Knowledge, oral, notice of
the intention of any Governmental Authority or other Person to take or use any
part of the Owned Real Property or Leased Real Property.
Section 3.10    Intellectual Property.
(a)    Each item of material Intellectual Property used in the operation of the
Business (the “Company Intellectual Property”) is either (i) owned by the
Company (the “Owned Intellectual Property”) or (ii) to the Sellers’ Knowledge,
rightfully used and authorized for use by the Company pursuant to a valid and
enforceable Contract (the “Licensed Intellectual Property”). Section 3.10(a) of
the Company Disclosure Schedules sets forth a true, correct and complete list of
all material Owned Intellectual Property. Except as set forth on Section 3.10(a)
of the Company Disclosure Schedules, the Company owns and possesses all right,
title and interest in and to the Owned Intellectual Property set forth on
Section 3.10(a) free and clear of all Liens other than Permitted Liens.
(b)    Except as set forth on Section 3.10(b) of the Company Disclosure
Schedules, (i) the Company has not received any written notice from any third
party alleging that the conduct of the business of the Company infringes any
Intellectual Property or other proprietary rights of any other Person in any
material respect; (ii) there is no action pending or threatened in writing
alleging any such infringement or challenging the Company’s rights in or to any
Company Intellectual Property; and (iii) to the Sellers’ Knowledge, no Person is
infringing or otherwise violating any Owned Intellectual Property or any rights
of the Company in any Licensed Intellectual Property.
Section 3.11    Tax Matters.

 
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(a)    The Company has timely filed, or has caused to be timely filed on its
behalf (after giving effect to extensions), all material Tax Returns required to
have been filed by it. All such Tax Returns are true, correct and complete in
all material respects. All material Taxes owed by the Company that are due and
payable (whether or not shown to be due and payable on such Tax Returns) have
been paid in full. No representation is made as to the amount of net operating
loss carryforwards or similar tax attributes (e.g. tax credit carryforwards)
that may be available in a post-Closing Tax Period.
(b)    All material Taxes required to have been withheld by the Company in
connection with amounts paid by the Company to any employee, independent
contractor, or other third party have been withheld and all such withheld
amounts required to have been paid over to a Taxing Authority have been paid to
the appropriate Taxing Authority.
(c)    The Company has not received written notice of any claim or action by a
Taxing Authority concerning a material deficiency in Taxes of the Company that
has not been settled.
(d)    The Company has not agreed to any waiver of any statute of limitations in
respect of material Taxes that remains in effect.
(e)    The Company is and has been treated as a corporation for U.S. Federal
income and applicable state tax purposes since March 24, 2008.
(f)    The Company is not a party to or bound by any Tax sharing agreement
providing for the allocation of Taxes among members of an affiliated,
consolidated, combined or unitary group.
(g)    There are no Liens for Taxes on any assets of the Company other than
Permitted Liens.
(h)    The Company has not granted a power of attorney in respect of any Tax
matter that remains in effect, other than in connection with its utilization of
a third-party payroll service provider.
(i)    The Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (A) change in
method of accounting for a taxable period ending on or prior to the Closing
Date, (B) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state or local income Tax law) executed on
or prior to the Closing Date.
(j)    The Company (A) has never been a member of an affiliated group of
corporations filing a consolidated federal income Tax Return (other than a group
the common parent of which is the Company), or (B) has no liability for the
Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar
provision of any state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.

 
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(k)    The Company has not engaged in any “reportable transaction” within the
meaning of Treasury Regulations Section 1.6011-4 that was or is required to be
disclosed under Treasury Regulations Section 1.6011-4.
Section 3.12    Employee Benefit Plans.
(a)    Section 3.12(a) of the Company Disclosure Schedules lists each Employee
Plan that the Company sponsors or maintains, or to which the Company contributes
or is obligated to contribute, or which covers the Company’s current or former
employees, directors, officers or consultants and for which the Company has any
liability (each, a “Company Plan”). None of the Company or members of its
“Control Group” (defined as any organization which is a member of a controlled
group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of
the Code) maintains, has contributed to, or has any liability with respect to
any Employee Plan subject to Title IV of ERISA or a “multiemployer plan” (as
defined in Section 4011(a)(3) of ERISA). Each Company Plan has been established
and administered in compliance in all material respects in accordance with its
terms and all Applicable Laws.
(b)    With respect to each Company Plan, the Company has provided to Buyer a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) thereof and, to the extent applicable: (i) any related
trust agreement or other funding instrument; (ii) the most recent determination
letter, if applicable; (iii) any summary plan description and other written
communications (or a description of any oral communications) by the Company to
the employees of the Company concerning the extent of the benefits provided
under a Company Plan; (iv) a summary of any proposed amendments or changes
anticipated to be made to the Company Plans at any time within the twelve months
immediately following the date hereof; and (v) for the three (3) most recent
years (A) the Form 5500 and attached schedules, (B) audited financial statements
and (C) actuarial valuation reports, if any.
(c)    All required contributions, assessments and premium payments on account
of each Company Plan have been timely paid by the applicable due date or accrued
in accordance with GAAP.
(d)    With respect to each Company Plan, there are no existing (or, to the
Sellers’ Knowledge, threatened) claims or actions involving the Company (other
than routine claims for benefits).Each Company Plan intended to be qualified
within the meaning of Section 401(a) of the Code is so qualified and has
received a favorable determination letter to its qualification, and, to the
Sellers’ Knowledge, nothing has occurred, whether by action or failure to act,
that could reasonably be expected to cause the loss of such qualification.
(e)    Except as required under Section 601 et seq. of ERISA or Section 4980B of
the Code, no Company Plan provides medical, or life insurance benefits or
coverage following retirement or other termination of employment.
(f)    Except as described in Section 3.12(f) of the Company Disclosure
Schedules, no Company Plan exists that, as a result of the execution of this
Agreement or the consummation of the Transactions (whether alone or in
connection with any subsequent event(s)), could result in

 
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(i) severance pay or any increase in severance pay upon any termination of
employment after the date of this Agreement, (ii) accelerate the time of payment
or vesting or result in any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any of the Company Plans or
(iii) result in payments which would not be deductible under Section 280G of the
Code.
Section 3.13    Environmental Matters.(a) The Company is in material compliance
with all Environmental Laws applicable to it, (b) the Company has all permits,
authorizations and approvals required under applicable Environmental Laws to
conduct the Business, and is in compliance with the respective requirements of
such permits, authorizations and approvals, except to the extent the failure to
have or the failure to be in compliance with such permits, authorizations and
approvals has not had, and would not reasonably be expected to have a Material
Adverse Effect, (c) there is not now pending or, to the Sellers’ Knowledge,
threatened, any action against the Company in connection with any past or
present noncompliance with such Environmental Laws, (d) there has been no
release by the Company of any material amount of any Hazardous Substance on,
upon, into or from any site leased by the Company or the Owned Real Property,
except for any such releases that have not had, and would not reasonably be
expected to have, a Material Adverse Effect and (e) there has been no Hazardous
Substance generated by the Company that has been disposed of at any site that
has been included in any published U.S. federal, state or local “superfund” site
list or any other similar list of hazardous or toxic waste sites published by
any Governmental Authority in the United States.
Section 3.14    Contracts.
(a)    Section 3.14(a) of the Company Disclosure Schedules sets forth a list of
all Contracts of the Company of the types described below that are in effect on
the date of this Agreement and as of the Closing Date (the “Material
Contracts”):
(1)    any Contract (or group of related Contracts) for the provision of
services to a customer or for the purchase of products or services from a
supplier which will extend over a period of more than one year with revenues or
costs, as the case may be, in excess of $250,000 per year;
(2)    all partnership or joint venture agreements to which the Company is
party;
(3)    any Contract under which the Company has permitted any Asset to become
encumbered by a Lien (other than by a Permitted Lien);
(4)    any Contract material to the Company’s Business containing covenants
limiting the freedom of the Company to compete in any line of business or with
any other Person or covenant not to solicit or hire any Person;
(5)    any employment-related Contract, plan or program, other than any Company
Plan, pursuant to which payments are required upon the consummation of the
Transactions;

 
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(6)    any employment agreement of the Company;
(7)    any lease of real property or any capital lease;
(8)    any Servicing Agreement;
(9)    any Subservicing Agreement;
(10)    any Interest Rate Protection Agreement or Other Hedging Agreement to
which the Company is currently a party, together with a description of the
dollar amount, counterparty, collateral and maturity of any such agreement;
(11)    any Contract that prohibits the payment of dividends or distributions in
respect of the Equity Interests, prohibits the pledging of the Equity Interests
or prohibits the issuance of guarantees by the Company;
(12)    any Contract, including options, to sell or lease (as lessor) any
tangible property of the Company for an amount in excess of $250,000 over the
term of such Contract;
(13)    any Contract (other than purchase orders entered into in the ordinary
course of business) pursuant to which the Company has agreed to acquire or lease
any tangible property for an amount in excess of $250,000 over the term of such
Contract;
(14)    any Contract evidencing Debt in excess of $250,000;
(15)    any Contract under which marketing or lead expenses in excess of
$250,000 are incurred; and
(16)    any other Contract (or group of related Contracts), the performance of
which involves payment by or to the Company of consideration in excess of
$250,000 over the term of such Contract, other than (i) any Contract that is
terminable by the Company or the other party thereto without liability and on
notice of 90 days or fewer and (ii) purchase orders entered into in the ordinary
course of business.
(b)    The Company has made available to Buyer accurate and complete copies of
each of the Material Contracts and all exhibits, supplements and schedules
thereto, in each case, as amended or otherwise modified and in effect. As of the
date of this Agreement, (i) to the Sellers’ Knowledge, each Material Contract is
enforceable against each party to such Material Contract (except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws of general applicability
relating to or affecting creditors’ rights and by general equitable principles)
and, subject to obtaining any necessary consents disclosed in Section 3.03 of
the Company Disclosure Schedules, will continue to be so enforceable immediately
following the consummation of the Transactions, except as the enforceability
thereof may be limited by (A) applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors rights generally or (B) general principles of equity, whether
considered in a proceeding at law or in equity and (ii) the Company is not, and,
to the Sellers’ Knowledge, no other party to any Material Contract is, in
material breach or violation

 
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of, or default under, or has repudiated any material provision of, any Material
Contract. The Company has not received or given notice of any intent to
terminate, to seek to renegotiate, amend or modify, or to materially modify the
provision or use of any product or service that is the subject of, any Material
Contract.
Section 3.15    Related Party Transactions.
(a)    No Seller and no other Affiliate of the Company is a party to any
Contract or transaction with the Company other than with respect to the payment
of employee compensation, the Operating Agreement, the Investors’ Rights
Agreement or as set forth in Section 3.15(a) of the Company Disclosure
Schedules.
(b)    No Seller or any Affiliate thereof owns any interest in any property
(whether real, personal or mixed, and whether tangible or intangible), used in
connection with the Business.
Section 3.16    Labor Matters. There are no unfair labor practice charges,
grievances or complaints pending or, to the Sellers’ Knowledge, threatened to be
brought, before the National Labor Relations Board or any other organization.
There is no work slowdown, lockout, stoppage, picketing or strike pending, or to
the Sellers’ Knowledge, threatened, by or with respect to any employees of the
Company. The Company is not party to, or otherwise subject to, any collective
bargaining agreement or other similar contract with a labor union and none
pertain to any employees of the Company. There are no organization activities
involving the Company pending with any labor organization or group of employees
of the Company. To the Sellers’ Knowledge, there is no effort by or on behalf of
any labor union to organize any employees. No groups of employees of the Company
have made any demands for recognition or certification to the Company and no
petition has been filed or proceedings instituted by any labor union or other
labor organization with the National Labor Relations Board seeking recognition
or certification as the bargaining representative of any employee or group of
employees of the Company. To the Seller’s Knowledge, the Company is in material
compliance with all laws governing the employment of labor, including, but not
limited to, all such laws relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, workers’ compensation and the
collection and payment of withholding and/or Social Security taxes and similar
taxes. Any independent contractors who provide, or provided, services to the
Company are, or were, properly classified as independent contractors.
Section 3.17    Litigation; Governmental Orders. Except as set forth on Section
3.17 of the Company Disclosure Schedules, there is no material action pending
or, to the Sellers’ Knowledge, threatened, against the Company.
Section 3.18    Compliance with Laws. Except as set forth in Section 3.18 of the
Company Disclosure Schedules, the Company is in material compliance with all
Applicable Laws of any Governmental Authority applicable to its Business. Except
as set forth in Section 3.18 of the Company Disclosure Schedules, the Company
has not received a written notice from any Governmental Authority alleging
violation by them of any Applicable Law.
Section 3.19    Insurance. Section 3.19 of the Company Disclosure Schedules sets
forth a list of the insurance policies or binders of insurance covering the
operations of the Company as of

 
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the date hereof. The Company has made available to Buyer true and accurate
copies of all such policies or binders. Each such policy is in full force and
effect (or has been renewed in the ordinary course of business) and the Company
has not received written notice of a material default with respect to their
obligations under, or notice of cancellation or nonrenewal of, any of such
policies.
Section 3.20    Mortgage Loans. Set forth on Section 3.20 of the Company
Disclosure Schedules is a list of each Mortgage Loan owned by the Company as of
the date hereof and with respect to each such Mortgage Loan (i) the loan number
of the Mortgage Loan, (ii) the Principal of the Mortgage Loan, (iii) the last
installment paid date for the Mortgage Loan, (iv) the monthly principal and
interest payment for the Mortgage Loan, (v) the interest rate of the Mortgage
Loan, (vi) the state in which the Mortgage Loan Collateral for the Mortgage Loan
is located, (vii) whether such Mortgage Loan is delinquent (defined as more than
60 days past due), and (viii) whether such Mortgage Loan is In Bankruptcy, In
Foreclosure or In Litigation. Except as otherwise set forth on Section 3.20 of
the Company Disclosure Schedules, each Mortgage Loan set forth on Section 3.20
of the Company Disclosure Schedules is a Marketable Loan and the Company has
good title to, and is the sole legal and beneficial owner of, each such Mortgage
Loan free and clear of any lien, claim, pledge or other encumbrance of any
nature except for the security interests therein of the banks which have
provided financing with respect to the origination thereof. All Mortgage Loans
were fully disbursed and made or consummated in accordance with Applicable Law
covering the origination or consummation of such Mortgage Loans. All monies
received with respect to each Mortgage Loan have been properly accounted for and
applied in the course of settlement or servicing. To the Sellers’ Knowledge, the
Company has complied with all material contractual obligations which relate to
any of the Mortgage Loans.
Section 3.21    Loan Documents. Except as set forth on Section 3.21 of the
Company Disclosure Schedules, the Loan Documents were in compliance with all
Mortgage Loan Requirements upon origination and the Loan Document files and
records of the Company are complete in all respects including, without
limitation, with regard to origination and servicing activity in the ordinary
course of the Company’s Business, except for routine trailing documents from
originations that the Company is obtaining in the ordinary course of its
Business and servicing-related items over which the Company does not have
control. All tax identifications (if applicable) in the Loan Documents, to the
Sellers’ knowledge, are correct and all property descriptions contained in any
Loan Documents are legally sufficient or are covered by policies of title
insurance providing coverage for property descriptions.
Section 3.22    Mortgage Loan Requirements; Filing of Reports. Except as set
forth on Section 3.22 of the Company Disclosure Schedules, the Company has
complied in all material respects with all applicable Mortgage Loan Requirements
with respect to the servicing, origination and underwriting of Mortgage Loans.
The Company has timely filed all reports required by any Purchaser, any Insurer
and the Mortgage Loan Requirements.
Section 3.23    Title Insurance. Except as set forth on Section 3.23 of the
Company Disclosure Schedules, each Mortgage related to a Mortgage Loan is
covered by a mortgage title insurance policy issued by a title insurer qualified
to do business in the jurisdiction where the Mortgage Loan Collateral is located
(and both the policy and the title insurer were acceptable to

 
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the applicable Purchaser at the time of origination), or are covered by an
abstract of title and certification of attorney’s mortgage lien opinion insuring
the first or second priority lien, as applicable, of the Mortgage in the
original principal amount of the related Mortgage Note. If required by the
applicable Mortgage Loan Requirements, the appropriate Purchaser is the insured
under such title insurance policy.
Section 3.24    Mortgage Loan Insurance. Except as set forth on Section 3.24 of
the Company Disclosure Schedules, any Mortgage Loan purported to be insured by
the FHA or guaranteed by the VA complies or will comply with all FHA
requirements for FHA insurance or all VA requirements for VA guaranties, as the
case may be, and such Mortgage Loans are either in fact insured by the FHA or
guaranteed by the VA or are expected to be insured or guaranteed, as applicable,
within sixty (60) days of the funding of such Mortgage Loans, and as to Mortgage
Loans originated by and are serviced by the Company, said insurance or guaranty
payments or fees with respect to such Mortgage Loans have been or will be paid
in full (or are being paid monthly in accordance with the terms of such Mortgage
Loans and applicable Mortgage Loan Requirements and are current). Except as set
forth on Section 3.24 of the Company Disclosure Schedules, all such Mortgage
Loans purported to be insured or guaranteed by PMI comply or will comply with
all provisions of the contract with the provider of the PMI and such Mortgage
Loans are either in fact insured or guaranteed by such PMI or are expected to be
insured or guaranteed, within sixty (60) days of the funding of such Mortgage
Loans, in amounts complying with applicable Mortgage Loan Requirements. For
Mortgage Loans originated by the Company, the provider of the PMI was or will be
acceptable under applicable Mortgage Loan Requirements at all relevant times.
Except as set forth on Section 3.24 of the Company Disclosure Schedules, neither
the FHA, the VA nor any provider of the PMI has issued to the Company any notice
disclaiming liability on the insurance or guaranty of any Mortgage Loan
purported to be insured by the FHA, or the provider of the PMI or guaranteed by
the VA and to the Sellers’ Knowledge there exists no facts that would provide a
basis for rescission of any such insurance or guaranty. The Company has not
canceled PMI policies with respect to any of the Mortgage Loans that were
insured by providers of PMI at or subsequent to the time of the origination of
the Mortgage Loans without the prior approval of the applicable Agency or
Purchaser, unless such cancellation was permitted or required by applicable
Mortgage Loan Requirements.”
Section 3.25    Security Interests; Mortgage Loan Collateral. Except as set
forth on Section 3.25 of the Company Disclosure Schedules, neither the Mortgage
Loan Collateral nor any party to any related security agreement has been
released by the Company, with the exception of releases required by divorce
decrees, releases required by assumptions, and other releases effected in
accordance with Purchaser requirements. Section 3.25 of the Company Disclosure
Schedules identifies each REO by indicating its address, date of foreclosure or
acquisition in lieu of foreclosure and book value. To the Sellers’ Knowledge,
there exists no uninsured physical damage to the Mortgage Loan Collateral from
fire, wind, storm, earthquake or any other casualty, circumstance or condition,
which physical damage would cause any Mortgage Loan to become delinquent or
adversely affect the marketability of any Mortgage Loan or the Mortgage Loan
Collateral.
Section 3.26    No Recourse; No Repurchase.

 
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(a)    Except as set forth on Section 3.26(a) of the Company Disclosure
Schedules, the Company is not a party to (A) any agreement, arrangement or
obligation with or to any Person, including an Purchaser or Insurer, to
repurchase from any such Person any Mortgage Loan, or (B) any agreement,
arrangement or understanding to reimburse, indemnify or hold any such Person
harmless or otherwise assume liability with respect to any loss, cost or expense
suffered or incurred as a result of the foreclosure or sale of any such Mortgage
Loan or mortgaged property.
(b)    Except as set forth on Section 3.26(b) of the Company Disclosure
Schedules, no demand remains outstanding that has been made to the Company to
provide an indemnity payment in respect of a Mortgage Loan or to repurchase a
Mortgage Loan out of a Purchaser’s portfolio that could result in a loss to the
Company.
Section 3.27    Third-Party Mortgage Loan Purchasers. Set forth on Section 3.27
of the Company Disclosure Schedules is a true and correct list of the top ten
third-party Mortgage Loan purchasers of the Company for fiscal year 2013 and for
fiscal year 2014 through the date of this Agreement, together with the gross
dollar amount of sales made to each such purchaser for such period. Except as
set forth on Section 3.27 of the Company Disclosure Schedules, since January 1,
2013, no such purchaser has cancelled, or otherwise terminated or threatened to
cancel or otherwise terminate, its relationship with the Company, or has
materially decreased, or threatened to materially decrease or materially limit,
its relationship with the Company.
Section 3.28    Brokers. There are no brokerage commissions, finders’ fees or
similar compensation payable in connection with the Transactions based on any
arrangement or agreement made by or on behalf of the Sellers or the Company
other than fees (if any) that will (a) be paid as contemplated by this Agreement
or (b) otherwise be paid by the Sellers and their Affiliates and for which Buyer
and (after the Closing) the Company will have no responsibility to pay.
Section 3.29    Licenses and Permits. The Company has obtained all of the
material Governmental Requirements necessary to permit it to own, operate, use
and maintain its assets in the manner in which they are now operated and
maintained and to conduct the Business as currently conducted. The Company has
not received notice of non-compliance with Applicable Laws from any Governmental
Authority, other than matters raised in connection with regular examinations
and/or which have been resolved and/or which are not reasonably expected to have
a Material Adverse Effect and (i) to the Sellers’ knowledge, no event has
occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach or default in any
material respect under any such Governmental Requirements or which permits or,
after notice or lapse of time or both, would permit revocation or termination of
any such Governmental Requirement, or which would materially and adversely
affect the rights of the Company under any such Governmental Requirement and
(ii) each such Governmental Requirement is in full force and effect.
ARTICLE 4    

INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 
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Each Seller severally, and not jointly and severally, hereby represents and
warrants to Buyer, solely as to such Seller, in each case except as set forth in
the Company Disclosure Schedules, that:
Section 4.01    Power and Authorization. Each of this Agreement and the other
applicable Transaction Documents has been (or in the case of Transaction
Documents to be entered into at or prior to the Closing, will be) duly executed
and delivered by such Seller and, assuming the due authorization, execution and
delivery by each of the other parties hereto or thereto, is a legal, valid and
binding obligation of such Seller, enforceable against such Seller in accordance
with their respective terms.
Section 4.02    Authorization of Governmental Authorities. Except as disclosed
in Section 4.02 of the Company Disclosure Schedules, no action by (including any
authorization, consent or approval), or in respect of, or filing with, any
Governmental Authority is required for, or in connection with, the valid and
lawful (a) execution, delivery and performance by such Seller of this Agreement
and its obligations hereunder or (b) consummation of the Transactions by such
Seller. As of the date hereof, no Seller is aware of any reason why the
necessary Governmental Authorizations will not be received on a timely basis in
order to permit consummation of the Transactions.
Section 4.03    No Violation or Approval; Consents. Neither the execution,
delivery and performance of this Agreement or the other Transaction Documents by
such Seller nor such Seller’s the consummation of the Transactions will:
(l)    violate any provision of any Applicable Law with respect to such Seller;
or
(m)    conflict with or result in a breach or violation of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or require any action by (including any authorization, consent or
approval) or notice to any Person that has not been obtained or undertaken, or
result in the creation of any Lien upon any Equity Interests of the Company
owned by such Seller under, any of the terms, conditions or provisions of (i)
any Governmental Order applicable to or otherwise affecting such Seller or its
assets or properties or (ii) any Contract of such Seller that could affect the
consummation of the Transactions or result in any liability to Buyer or any of
its Affiliates or the Company.
Section 4.04    Title. Such Seller is the record and beneficial owner of the
Equity Interests of the Company set forth opposite such Seller’s name in Section
3.04(a) of the Company Disclosure Schedules, and such Seller has good and
marketable title to such Equity Interests, free and clear of all Liens, other
than Permitted Liens and any restrictions imposed by Applicable Law, the
Operating Agreement and the Investors’ Rights Agreement. Subject to the
Operating Agreement and the Investors’ Rights Agreement, such Seller has full
right, power and authority to transfer and deliver to Buyer valid title to the
Equity Interests of the Company held by such Seller, free and clear of all
Liens. Immediately following the Closing, Buyer will be the record and
beneficial owner of such Equity Interests, and have good and marketable title to
such Equity Interests, free and clear of all Liens except as are imposed by
Buyer and other than restrictions imposed by Applicable Law. Except pursuant to
this Agreement, there is no Contract pursuant to which such Seller has, directly

 
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or indirectly, granted any option, warrant or other right to any Person to
acquire any Equity Interests in the Company. Except for the Operating Agreement
and the Investors’ Rights Agreement, such Seller is not a party to, and the
Equity Interests in the Company set forth opposite such Seller’s name in Section
3.04(a) of the Company Disclosure Schedules are not subject to, any shareholders
agreement, voting agreement, voting trust, proxy or other Contract relating to
the transfer or voting of such Equity Interests. Any provisions of the Operating
Agreement or Investors’ Rights Agreement that may be deemed to prohibit or limit
the ability to consummate the Transactions have been waived by the parties
thereto.
Section 4.05    Investment Representation; Opportunity to Conduct Due Diligence;
Securities Act Law Restrictions.
(a)    Except as set forth on Section 4.05 of the Company Disclosure Schedules,
each Seller (i) is an “accredited investor”, as that term is defined in Rule
501(a) of Regulation D, and (ii) has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
its investment in the Equity Consideration contemplated by this Agreement.
(b)    Each Seller confirms that such Seller has been given the opportunity to
ask questions of Buyer and to acquire such additional information about the
business and financial condition of Buyer and its Affiliates as such Seller has
requested.
(c)    Each Seller acknowledges that the Equity Consideration being acquired
hereunder may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration under the Securities Act. The
Equity Consideration being acquired by each Seller hereunder is being acquired
for investment purposes only and not with a view to any public distribution
thereof.
Section 4.06    Related Party Transactions. Neither such Seller nor any
Affiliate of such Seller owns an equity interest or has a financial or profits
interest in, or otherwise has a business relationship with (as a lender, joint
venturer, board member, officer, employee, consultant, agent or otherwise), any
Person that competes with the Company with respect to any products or services
of the Company in any market served by the Company.
Section 4.07    No Brokers. Except as contemplated by Section 3.28 or as
disclosed in Section 4.07 of the Company Disclosure Schedules, such Seller has
no liability of any kind to any broker, finder or agent with respect to the
Transactions.
ARTICLE 5    

REPRESENTATIONS AND WARRANTIES OF BUYER, TIPTREE AND TFI
Section 5.01    Organization. Each of Buyer, Tiptree and TFI is (a) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and (b) duly qualified to do business and is in
good standing in each jurisdiction where the character of

 
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the properties owned, leased or licensed by it or the nature of its business
makes such qualification, licensing or good standing necessary, except where the
failure to be so qualified or licensed or in good standing has not and would not
reasonably be expected to prevent or materially impair or materially delay the
ability of Buyer, Tiptree or TFI to consummate the Transactions.
Section 5.02    Power and Authorization. Each of Buyer, Tiptree and TFI has the
limited liability company power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
perform its obligations hereunder and thereunder. Each of Buyer, Tiptree and TFI
has taken all corporate or limited liability company actions or proceedings
required to be taken by or on its part to authorize and permit the execution and
delivery by it of this Agreement, the other Transaction Documents to which it is
a party and the instruments required to be executed and delivered by it pursuant
hereto and thereto, the performance by it of its obligations hereunder and
thereunder and the consummation by it of the Transactions. Each of this
Agreement and the other Transaction Documents have been (or in the case of
Transaction Documents to be entered into at or prior to the Closing, will be)
duly executed and delivered by Buyer, Tiptree and TFI and, assuming the due
authorization, execution and delivery by each of the other parties hereto or
thereto, constitutes (or will constitute) the legal, valid and binding
obligation of each of Buyer, Tiptree and TFI, enforceable against it in
accordance with their respective terms.
Section 5.03    No Violation or Approval; Consents. Neither the execution,
delivery and performance of this Agreement or the other Transaction Documents to
which it is a party by Buyer, Tiptree and TFI, nor Buyer’s, Tiptree’s or TFI’s
consummation of the Transactions will:
(n)    require the consent, waiver, approval, order or authorization of, or
filing with, any Governmental Authority, by or on behalf of such parties, other
than consents, waivers, approvals, orders, authorizations or filings that, if
not obtained or made, would not reasonably be expected to prevent or materially
impair or materially delay the ability of such parties to consummate the
Transactions;
(o)    result in or give rise to the imposition of a Lien (other than Permitted
Liens) on any of the assets of Buyer, Tiptree or TFI;
(p)    assuming the taking of each action by (including the obtaining of each
necessary authorization, consent or approval), or in respect of, and the making
of all necessary filings with, Governmental Authorities, result in a breach or
violation of, or constitute a default under, any material Applicable Law; or
(q)    result in a breach or violation of, or constitute a default under, or
result in termination of, or accelerate the performance required by, or require
any action by (including any authorization, consent or approval) or notice to
any Person under, any of the terms, conditions or provisions of (i) any Contract
of Buyer, Tiptree or TFI, (ii) any Governmental Order to which Buyer, Tiptree or
TFI is subject or (iii) the Organizational Documents of Buyer, Tiptree or TFI.
Section 5.04    Governmental Authorizations. As of the date hereof, Buyer,
Tiptree and TFI are not aware of any reason why the necessary Governmental
Authorizations will not be received

 
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on a timely basis in order to permit consummation of the Transactions. None of
Buyer, Tiptree or TFI has received any written or oral notice alleging that
Buyer, Tiptree or TFI is in violation of Applicable Law in connection with their
affiliated existing mortgage and specialty finance business.
Section 5.05    Adequacy of Funds. Buyer will have as of the Closing immediately
available funds sufficient to make all payments contemplated by ARTICLE 2.
Section 5.06    No Brokers. There are no brokerage commissions, finders’ fees or
similar compensation payable in connection with the Transactions based on any
arrangement or agreement made by or on behalf of Buyer, Tiptree or TFI.
Section 5.07    Investment Intent. Buyer is buying the Equity Interests for
investment for its own account and not with a view to, or for sale in connection
with, any distribution of any part thereof. Buyer, Tiptree and TFI each
acknowledges that such Equity Interests and the sale thereof have not been
registered under any Applicable Laws.
Section 5.08    The TFI Shares. The TFI Shares to be issued to Sellers as part
of the Equity Consideration and the Earnout Payments will at issuance by duly
authorized, validly issued and outstanding, fully paid and nonassessable.
Immediately upon Closing, in respect of the Equity Consideration, and upon
issuance to Sellers in respect of the Earnout Payments, the TFI Shares will be
owned or record and beneficially by Sellers free and clear of any security
interest, pledge, restriction, option, voting trust or agreement, proxy,
encumbrance, claim or charge of any kind (except as has been or may be created
by a Seller or due to any action or inaction on the part of a Seller) other than
pursuant to Applicable Law or as set forth in the certificate of incorporation
and bylaws of TFI.
Section 5.09    SEC Filings. Since July 1, 2013, TFI has filed or furnished all
reports required to be filed with or furnished to the SEC pursuant to the
Exchange Act (the “Exchange Act Filings”). The Exchange Act Filings, as of their
respective filing dates (or, if amended prior to the date of this Agreement, as
amended), together with any Exchange Act Filings to be filed with or furnished
to the SEC between the date hereof and Closing, did not, and will not, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. As of the date hereof,
except as disclosed to the Sellers in writing, in materials filed by TFI
pursuant to the Securities Act or the Exchange Act, or as set forth in press
releases that have been made public by TFI (including but not limited to those
from time to time posted at or available through Nasdaq’s website at
http://www.nasdaq.com), there has been no TFI Material Adverse Effect since
September 30, 2014.
ARTICLE 6    

COVENANTS
Section 6.01    Conduct of the Company. From the date hereof until the Closing,
except (i) as disclosed in Section 6.01 of the Company Disclosure Schedules,
(ii) as required by Applicable Law or by the terms of this Agreement, or (iii)
with the consent of Buyer:

 
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(n)    Sellers shall conduct the Business of the Company in the ordinary course
of business consistent with past practices in all material respects and cause
the Company to maintain intact its business organizations, operations and
goodwill and preserve its relationships with customers, agents, brokers,
suppliers, employees and similar Persons with which it has material business
relationships; and
(o)    Sellers will not, and will not permit the Company to:
(1)    Make any payment outside of the ordinary course of business in
distribution to or redemption of any equity interest of the Company, other than
distributions to the members of the Company, which shall be permitted (and such
distributions of Cash and Cash Equivalents by the Company, for the avoidance of
doubt, shall reduce the amount of the Closing Cash Balance);
(2)    Issue or sell, or offer to issue or sell, any equity security or equity
interest in the Company, other than issuances or sales in the ordinary course of
business that have been approved by the Board of Directors of the Company, and
other than distributions of equity made to the members of the Company, which
shall be permitted;
(3)    Create, incur, assume or become responsible for the payment of any
indebtedness in excess of $1,000,000 in the aggregate, including any debt,
guarantees and other indebtedness, other than trade payables incurred in the
ordinary course that are not material in the aggregate or incurred under the
Warehouse Credit Facilities, or agree to the amendment of any existing
indebtedness, or incur any liability to a Subsidiary of the Company in
connection with the acquisition of any asset from such Subsidiary;
(4)    (A) Engage in any sale or series of related sales of any material assets
of the Company other than sales in the ordinary course of business or (B) sell
or agree to sell or otherwise dispose of all or substantially all of the assets
of the Company;
(5)    Incur, assume or suffer any lien upon or in respect of any of its
property or assets to secure any indebtedness, other than (A) municipal, tax,
association and similar liens on property owned by the Company typically imposed
on similar properties, (B) construction, workman’s or materialman’s liens on
property owned by the Company incurred in the ordinary course, or (C) Warehouse
lines of credit or repurchase facilities in connection with the operation of the
Business;
(6)    Consolidate or merge with any other entity or reorganize the Company;
(7)    Liquidate or dissolve the Company or file for bankruptcy protection;
(8)    Except as otherwise specifically set forth in this Agreement, or approved
by the Board of Directors of the Company, cause the Company to become a party to
any transaction or other arrangement with a member of the Board of Directors,
their family members or any entity owned or controlled by any of them;

 
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(9)    Adopt any change in the Organizational Documents of the Company or create
any Subsidiaries of the Company, other than any amendment to the Operating
Agreement necessary to issue additional Preferred Units to holders of Preferred
Units in lieu of cash payments equal to their Preferred Return (as such terms
are defined in the Operating Agreement); provided, that such issuance shall not
result in an increase of the Purchase Price; or
(10)    Pay, discharge, settle or satisfy any material suit, action or claim.
Section 6.02    Notice of Certain Events. From the date hereof until the
Closing, Sellers, on the one hand, and Buyer, on the other hand, shall promptly
notify each other in writing of: (a) any circumstance, event or action the
existence, occurrence or taking of which (i) has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(ii) has resulted in or would reasonably be expected to result in the failure of
any of the conditions set forth in Article 7 to be satisfied; (b) any notice or
other communication from any Person alleging that the consent of such Person is
or may be required in connection with the transactions contemplated by this
Agreement; (c) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement; and (d) any
material litigation commenced or, to the Sellers’ Knowledge, threatened against,
relating to or involving or otherwise affecting any Seller or the Company that,
if pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.17 or that relates to the consummation of the
Transactions.
Section 6.03    Subsequent Financial Statements. The Company shall promptly
deliver to Buyer following the preparation thereof (and, in any event, no later
than ninety (90) days after fiscal year end for annual statements, forty-five
(45) days after quarter end for quarterly statements and thirty (30) days after
month end for monthly statements) true, complete and correct copies of (x) all
annual audited and quarterly unaudited financial statements of the types
described in Section 3.05, and (y) monthly unaudited consolidated statements of
income, cash flows and changes in members’ equity for the month then ended,
between the date hereof and the Closing. All such financial statements shall be
in the form in which the Company currently prepares such financial statements.
The financial statements to be delivered to Buyer (including any notes thereto)
pursuant to this Section 6.03 shall be prepared in accordance with GAAP,
consistently applied, and shall fairly present, in all material respects, the
financial position and results of the operations of the Company (subject, with
respect to quarterly and monthly statements, to the absence of footnotes and to
normal year-end and periodic reclassifications and adjustments).
Section 6.04    Non-Solicitation. From the date hereof until the earlier of the
termination of this Agreement in accordance with ‎Article 8 and the Closing, the
Company and Sellers shall not, and shall cause their Affiliates and its and
their respective officers, directors, employees, investment bankers, attorneys,
accountants, consultants or other agents or advisors (each, a “Representative”)
not to, directly or indirectly: (i) take any action to solicit, initiate or
encourage the submission of any Acquisition Proposal; (ii) engage in any
discussions or negotiations with, furnish any information relating to the
Company or afford access to the properties, assets, books or records of the
Company to, otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by any Third Party that is
seeking to make, or has made, an Acquisition

 
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Proposal or a modification of a previously received Acquisition Proposal; or
(iii) enter into any Contract with respect to an Acquisition Proposal.
Section 6.05    Access. Buyer will, and agrees to cause the Company to, from and
after the Closing, afford promptly to each Seller Representative and their
respective counsel, financial advisors, auditors and other authorized
representatives reasonable access, upon reasonable prior written notice at a
mutually convenient time during normal business hours, to the Company’s
properties, books, records (including Tax records), Management Employees and
auditors to the extent necessary to permit the Seller Representatives to
determine any matter relating to the Sellers’ rights and obligations hereunder
or relating to any period ending at or before the Closing. Buyer and the Company
shall retain all books and records with respect to Taxes and Tax Returns of the
Company relating to any taxable period beginning before the Closing Date and
shall give the Sellers Representatives hereto reasonable written notice before
transferring, destroying or discarding such books and records and, on request of
a Seller Representative, allow such party to take possession of or make copies
of such books and records.
Section 6.06    Closing Efforts.
(e)    Subject to the terms and conditions of this Agreement, Buyer, TFI,
Tiptree and the Sellers will use their respective reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to cause all conditions to closing hereunder to be
satisfied and to consummate the Transactions. Each of Buyer, the Sellers and the
Company agrees to execute and deliver and file, submit or transmit all such
other documents, certificates, notices, applications, agreements and other
writings and to take all such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the Transactions or to comply
with Applicable Laws or requirements, guidelines, rules, decrees or mandates of
any Governmental Authority.
(f)    As applicable to such parties, Buyer and the Company will, and Sellers
shall cause the Company to, (a) use reasonable best efforts to obtain or
procure, as promptly as practicable, all Governmental Authorizations in
connection with the consummation of the Transactions, including as set forth on
Section 6.06 of the Company Disclosure Schedules (the “Required Regulatory
Approvals”), (b) provide such information, notices, applications, submissions
and communications with respect to applicable Governmental Authorizations that
are necessary in connection with the foregoing or in connection with Buyer and
Sellers, as applicable, obtaining any Governmental Authorizations or providing
notices to or making any filings, submissions or declarations in connection with
Governmental Authorizations or as Buyer or Sellers may reasonably request of the
other, and (c) cooperate in obtaining or taking other steps necessary to procure
or obtain applicable Governmental Authorizations that Buyer, on the one hand,
and Sellers and the Company, on the other hand, is required to obtain. To the
extent any Party requests from any other Party, its Affiliates or its
representatives information to respond to any requests or requirements from such
Governmental Authorities, such other Party shall use reasonable efforts to
promptly respond to any such request. Each Party shall bear all of their
respective costs in carrying out the covenants set forth in this Section 6.06,
it being understood that filing fees and expenses incurred by the Company due to
the requirements of Governmental Authorities shall be borne by Buyer.

 
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Section 6.07    Public Announcements. Without the prior written consent of the
Buyer and each Seller Representative, no Party will issue or make any report,
statement or release to the public (including employees not involved in the
Transactions, customers and suppliers of the Parties) with respect to this
Agreement or the Transactions, except for any filings required by Applicable Law
(provided, that the Party required to make any such filing will have afforded
the other Parties (through the Seller Representatives in the case of the
Sellers), for a reasonable period prior to the making of such filing, a
reasonable opportunity to review and comment upon the intended form and
substance of such filing).
Section 6.08    Tax Matters.
(l)    Buyer and Sellers shall each pay 50% of all securities transfer Taxes,
real property transfer, gains or mortgage Taxes, sales Taxes, documentary stamp
Taxes, recording charges and other similar Taxes, if any, arising from the
Transactions. Each of the Parties shall prepare and file, and shall fully
cooperate with the other Party with respect to the preparation and filing of,
any Tax Returns and other filings relating to any such Taxes or charges as may
be required.
(m)    Subject to Section 6.08(a), the Seller Representatives shall file or
cause to be filed when due, all Tax Returns that are required to be filed by or
with respect to the Company on or before the Closing Date and shall pay (or
cause to be paid by the Company) any Taxes due in respect of such Tax Returns.
Buyer shall accurately prepare and timely file (or cause to be so prepared and
filed) all Tax Returns that are required to be filed by or with respect to the
Company after the Closing Date and shall timely pay (or cause to be paid) any
Taxes due in respect of such Tax Returns subject to such indemnification as
Buyer is entitled under ARTICLE 9. Any Tax Return of the Company which is to be
prepared by Buyer but which (i) could reasonably be expected to result in an
indemnity obligation of any Seller or (ii) relates to a Straddle Period, shall
be provided to each Seller Representative for its review and comment at least
thirty (30) days prior to the due date of such Tax Return (or in the case of any
Tax Return due within thirty (30) days after the Closing Date, as soon as
reasonable practicable), along with a statement of the amount shown as due on
such Tax Return that is claimed to be indemnifiable by Sellers pursuant to
ARTICLE 9, which statement shall constitute a Claim for purposes of Section
9.03(a). Each Seller Representative shall provide comments or written consent no
fewer than ten (10) days prior to the due date of such Tax Return (or if later,
10 days after receipt of such Tax Return for review), or shall be deemed to have
accepted such Claim. Buyer shall in good faith consider any such comments. Any
dispute among the Parties regarding the manner of preparing such Tax Return or
the amount of the Claim related thereto shall be resolved under procedures
similar to Section 2.05(a). The amount of any Claim accepted by the Seller
Representatives or determined by the Accounting Firm in respect of each Tax
Return prepared under this Section 6.08 shall be paid not later than the latest
of five (5) Business Days (i) before the due date of such Tax Return, (ii) the
date such Claim is accepted by the Seller Representatives or determined by the
Accounting Firm, but in any case not early than two (2) Business Days before the
date such Tax is required to be paid under Applicable Law.
(n)    To the extent permitted or required by law or administrative practice,
any taxable year of the Company which includes the Closing Date shall be treated
as closing on the Closing Date. In the case of any Tax period that includes (but
does not end on) the Closing Date

 
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(a “Straddle Period”), the amount of any Taxes of the Company not based upon or
measured by income, events or similar items for the Pre-Closing Tax Period will
be deemed to be the amount of such Taxes for the entire Tax period multiplied by
a fraction, the numerator of which is the number of days in the Tax period
ending on the Closing Date and the denominator of which is the number of days in
such Straddle Period. The amount of any other Taxes for a Straddle Period that
relate to the Pre-Closing Tax Period will be determined based on an interim
closing of the books as of the close of business on the Closing Date; provided,
however, that any item determined on an annual or periodic basis (such as
deductions for depreciation or real estate Taxes) shall be apportioned on a
daily basis. For purposes of this Section 6.08(c), income taxes arising out of
any action taken by Buyer or its Affiliates (except actions contemplated by this
Agreement) on the Closing Date but after the Closing, other than in the ordinary
course of business, shall not be allocated to the Pre-Closing Tax Period.
(o)    Any overpayments of Taxes of the Company for any Pre-Closing Tax Period
to the extent refunded or credited against a Tax liability for a Tax period (or
portion thereof) beginning after the Closing Date will be for the benefit of the
Sellers, and Buyer or the Company will promptly notify the Sellers and pay to
them the amount of any such refunded or credited overpayments.
(p)    Buyer, the Company and the Sellers will, and will cause their respective
Affiliates to, provide each other with such cooperation and information as any
of them reasonably may request in connection with any Tax matters relating to
the Company. Such cooperation and information will include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents relating to rulings or other determinations by
Taxing Authorities and provision of appropriate powers of attorney. Buyer, the
Company and the Sellers shall use commercially reasonable efforts, at the cost
of the requesting party, to obtain or provide any certificate or other document
that, if obtained or provided by such party, would mitigate, reduce or eliminate
any Taxes that would otherwise be imposed on any party to this Agreement.
(q)    Buyer shall promptly notify the Sellers in writing of the commencement of
any audit or examination of any Tax Return of the Company for any Pre-Closing
Tax Period and any other proposed change or adjustment, claim, dispute,
arbitration or litigation that, if sustained, could reasonably be expected to
give rise to a claim for indemnification in respect of Taxes under this
Agreement (a “Tax Claim”) provided, that the failure to so notify the Sellers
will not relieve Sellers of their obligations hereunder, except to the extent
such failure will have adversely prejudiced Sellers. Such notice shall include
copies of any notices and other documents received from any Taxing Authority in
respect of any such Tax Claim. The Sellers shall have the right to control the
defense of any Tax Claim to the extent any Seller would be liable for the Taxes
relating to such Tax Claim (including by reason of indemnity obligations under
this Agreement); provided, however, that the Sellers shall inform Buyer of the
status and progress of such Tax Claim, Buyer will have the opportunity to
participate in such Tax Claim at its expense and Sellers may not settle any Tax
Claim (either at the audit or examination stage or thereafter) without first
obtaining Buyer’s consent (which consent shall not be unreasonably withheld)
provided, further, Buyer and Seller shall jointly control the defense of any Tax
Claim relating to a Straddle Period of the Company.

 
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(r)    Except in connection with a Tax Claim resolved pursuant to Section
6.08(f) (including consistent correlative adjustments to Tax Returns for
non-audited taxable periods) and except as otherwise required by Applicable Law,
Buyer and its Affiliates shall not amend or cause the amendment of a Tax Return
of the Company, file or amend any Tax election, or file a Tax Return after the
due date thereof, concerning any the Company, in each case, with respect to any
Pre-Closing Tax Period without the written consent of the Sellers, which consent
shall not be unreasonably withheld. Buyer shall, to the extent reasonably
requested by Sellers, cooperate in the preparation of and submission to the
proper Governmental Authority of any amended Tax Return with respect to the
Company for any Pre-Closing Tax Period that is correlative to the defense or
resolution of an Tax Matter arising under Section 6.08(f), or that otherwise
would not reasonably be expected to increase any Tax liability of Buyer or its
Affiliates.
Section 6.09    Confidentiality. Until the Closing, Buyer will treat, and will
cause its Affiliates, counsel, accountants and other advisors and
representatives to treat, all Confidential Information (as such term is defined
in the Confidentiality Agreement) obtained in connection with this Agreement and
the Transactions hereby as confidential in accordance with the terms of the
Confidentiality Agreement. The terms of the Confidentiality Agreement are hereby
incorporated by reference and will continue in full force and effect until the
Closing, at which time such Confidentiality Agreement will terminate. If this
Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement will continue in full force and effect as provided in
Section 8.02 of this Agreement in accordance with its terms. Notwithstanding the
foregoing, Buyer and the Company acknowledge and agree that certain information
regarding this Agreement and the Transactions will be required to be disclosed
to Governmental Authorities in connection with Governmental Authorizations and
to Agencies and the Federal Home Loan Mortgage Corporation, as applicable.
Section 6.10    Conduct of Business During the Earnout Period.
(a)    From and after the Closing until the expiration of the Earnout Period,
neither Buyer, Tiptree or TFI, shall, and each shall cause the Company not to,
take any action or fail to take any action with respect to the Business or
operation of the Company, with the intent of, or which could reasonably be
expected to have the effect of, preventing Earnout Payments from being paid to
Sellers or materially reducing the amount of Earnout Payments paid to Sellers.
In furtherance of the foregoing, Buyer and its Affiliates will take no action
which has the effect of subordinating the Earnout Payments to any senior
obligations.
(b)    Company Governance During Earn-Out Period. The Buyer, Tiptree and TFI
covenant and agree that from and after the Closing until the expiration of the
Earnout Period:
(17)    The Company shall have a Board of Directors (the “Board of Directors”)
comprised of the Chief Executive Officer of the Company, two individuals
designated by Buyer (the “Tiptree Designees”) and an individual designated by
the Wexford Sellers Representative (the “Wexford Designee”); provided, that at
Buyer’s option, Buyer may, in lieu of designating two individuals to the Board
of Directors, designate one individual who shall have two votes on the Board of
Directors. The Board of Directors shall have the authority to manage and control
the operations of the Company. The Board of Directors shall have the full power
and

 
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authority on behalf and in the name of the Company to take any action or make
any and all decisions on behalf of the Company (and/or direct the Company’s
Subsidiaries, if any, to take any action) and to perform all acts and enter into
and perform all contracts and other undertakings which it may deem necessary,
advisable or incidental in relation thereto. The Board of Directors may delegate
to and/or authorize any officer, employee or other agent of the Company or a
manager or officer to act for and on behalf of the Company and the Board of
Directors, directly or as nominee, with respect to any of the matters within its
power. The Board of Directors and the Buyer shall consult regularly (but in any
event at least quarterly) with each other to mutually agree on Annual EBITDA and
revenue goals.
(18)    On the condition that the Wexford Designee executes with Tiptree a
confidentiality agreement in the form attached hereto as Exhibit F, Buyer,
Tiptree and TFI shall permit the Wexford Designee full and complete access to
the Company’s management teams and the Company’s legal, accounting and financial
advisors, upon reasonable prior written notice at a mutually convenient time and
during normal business hours, to examine the financial books and records of the
Company to make such inspections and copies of such books and records as they
may reasonably require, and to discuss such matters as Wexford Designee desires
with the appropriate personnel of the Company.
(19)    The following actions with respect to the Company shall not be taken,
authorized, facilitated or permitted to occur without the consent of the Wexford
Sellers Representative, which such consent shall not be unreasonably withheld,
conditioned or delayed, and any objection by the Wexford Sellers Representative
to the taking of any of the following actions shall be based on the Wexford
Sellers Representative’s reasonable belief that the taking of such action will
have a material and adverse effect on the amount of the Earnout Payments
otherwise due Sellers (subsections (i)-(xiii) below, the “Operating
Principles”):
(i)    any amendment, supplement or waiver of any governing or organizational
document of the Company or any of its Subsidiaries;
(ii)    any redemption, repurchase, retirement or other acquisition of any
security (including equity-linked and derivative securities) of the Company or
any of its Subsidiaries (any such security, a “Company Securities” and
collectively, “Company Securities”); provided, however, that the foregoing
restrictions shall not apply to the redemption, repurchase, retirement or other
acquisition of securities of the Company pursuant to any equity incentive plan
of the Company;
(iii)    any declaration or payment of any dividend on or distribution with
respect to any Company Securities;
(iv)    any increase or decrease in the authorized number of any Company
Security;
(v)    any lease (including any capital or operating lease), license or other
sale, assignment, transfer or license of any assets of the Company or its
Subsidiaries, in a

 
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single transaction or a series of related transactions, that exceeds $250,000,
other than in the ordinary course of business;
(vi)    any license or other transfer of any material intellectual property of
the Company on any basis that restricts the use or licensing of such
intellectual property;
(vii)    (A) any admission by the Company or any of its Subsidiaries of its
inability to pay its debts as they become due; (B) a composition, moratorium,
assignment or similar arrangement between the Company or any of its Subsidiaries
with any of its creditors; (C) the liquidation, dissolution, winding up,
reorganization, adjustment, relief, administration (whether out of court or
otherwise) of the Company or any of its Subsidiaries, or the commencement of any
proceedings (in bankruptcy or otherwise) in respect of any of the foregoing; (D)
the consent by the Company or any of its Subsidiaries to the entry of an order
for relief in an involuntary case under bankruptcy law or other similar
proceeding under applicable law; or (E) any request by or on behalf of the
Company or any of its Subsidiaries for the appointment of, the giving of any
notice of its intention to appoint, or the application for or consent to the
appointment of a receiver, liquidator, assignee, custodian or trustee (or
similar official) of the Company or any of its Subsidiaries or a substantial
part of its assets;
(viii)    other than indebtedness incurred or arising under the Warehouse Credit
Facilities, as amended from time to time, any incurrence after the Closing Date
by the Company or any of its Subsidiaries of indebtedness (including by way of
an amendment, supplement or waiver of any instrument evidencing, securing or
otherwise relating to any Debt of the Company or any of its Subsidiaries or any
extension or refinancing of any such Debt), exceeding in each case at any time
$250,000;
(ix)    the Company or any of its Subsidiaries entering into any contract,
arrangement, understanding or other transaction with any person or entity that
is an Affiliate of the Company, the Buyer or TFI (a “Related Party
Transaction”), provided, that consent of the Wexford Sellers Representative
shall not be required if such Related Party Transaction is on terms no less
favorable to the Company than would be had with an unaffiliated third party on
an arms’ length basis;
(x)    changing the composition of the Board of Directors;
(xi)    entering into an agreement providing for the sale a substantial portion
of the Company but that involves less than all the assets or equity interests of
the Company;
(xii)    entering into any transaction or agreement to sell, transfer or license
the Company’s “Click and Close” origination software product; or
(xiii)    entering into an agreement, whether or not in writing, to do any of
the foregoing.
(20)    The following actions with respect to the Company shall not require the
consent of the Wexford Sellers Representative; provided, however, that the
effects of any of the

 
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following actions on the Company shall be excluded from the calculation of
Adjusted Annual EBITDA for any applicable Annual Earnout Payment Period:
(i)    any acquisition that is dilutive to the Company’s earnings (unless
provisions have been made to reflect the dilutive impact of any such acquisition
in the Earnout Payments), or, except as contemplated by Section 2.06(i), any
merger, consolidation, recapitalization, change of control, liquidation,
dissolution or sale of all or substantially all of the assets of the Company or
any of its Subsidiaries;
(ii)    the creation of any Subsidiary of the Company. unless all the equity
interests of such Subsidiary are owned by the Company, or by another Subsidiary
of the Company in which all the equity interests of such other Subsidiary are
owned directly or indirectly by the Company;
(iii)    engaging or entering into any new line of business or materially
modifying the Company’s business plan; or
(iv)    making any change in the Accounting Policies.
(c)    In connection with a Sale of Tiptree, the Person to which such Sale of
Tiptree is made (if such entity is creditworthy, or a creditworthy Affiliate
thereof if such entity is not creditworthy, in each case as reasonably
determined by the sellers of Tiptree and the Wexford Sellers Representative)
shall expressly assume the obligations of Buyer, Tiptree and TFI with respect to
Section 2.05 and the Earnout Payments and the provisions of Section 6.10.
(d)    The parties agree that Annual EBITDA and the Annual EBITDA Calculation
Amount shall be equitably adjusted to take into account extraordinary
transactions of the Company and its subsidiaries during the Earnout Period,
including, but not limited to, changes in GAAP from and after the date hereof
through the end of the Earnout Period, acquisitions of assets or businesses by
the Company and its subsidiaries or Buyer or its Affiliates or any additional
capital contribution to the Company and its subsidiaries or any consolidation of
one or more subsidiaries of Buyer with the Company or any of its subsidiaries,
with the amount of such adjustments to be mutually determined by the Tiptree
Designees and Wexford Designee negotiating in good faith and taking into account
such factors as may be reasonably appropriate, including, without limitation,
the relative financial and non-financial contributions of each of Tiptree and
the Wexford Sellers. The Reliance Sellers Representative shall designate an
individual who shall be permitted to participate in all discussions and
negotiation in connection with the determination to be made pursuant to this
Section 6.10(d). All information that is reasonably requested relating to such
extraordinary transactions and any related adjustments or other calculations
shall be provided to the chief financial officer of the Company, the Reliance
Sellers Representative and the Wexford Sellers Representative.
(e)    The definition of Annual EBITDA as well as the calculation of the Annual
EBITDA shall be identical to that used in the Employment Agreements during the
Earnout Period.

 
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(f)    For the avoidance of doubt, the determination of the Annual EBITDA
Calculation Amount is intended to be consistent with Section 2.06(d) hereof and
the Operating Principles.
(g)    From and after the Closing Date until the expiration of the Earnout
Period, the Wexford Sellers Representative shall, on the condition that it
executes a confidentiality agreement in the form attached hereto as Exhibit F,
(i) receive the same information (at the same time and in the same form) as
Tiptree provides to lenders under its credit facility and (ii) may participate
in a call with the management of Tiptree at least once per calendar quarter.
Section 6.11    Non-Solicitation.
(c)    From the Closing until the date that is the eighteen (18) months after
the Closing Date, the Wexford Sellers Representative shall not, and shall cause
its controlled Affiliates not to, directly or indirectly, solicit for employment
or hire any Person who is then a current, or within the prior eighteen (18)
month period has been, an employee of the Company; provided, however, that
nothing in this Section 6.11(a) shall prohibit the Wexford Sellers
Representative from making any general solicitation of employment (including via
search firm inquiry) not specifically directed towards employees of the Company,
so long as no Person who is then a current, or within the prior eighteen (18)
month period has been, an employee of the Company, is hired as a result of such
general solicitation; and provided further, that nothing in this Section 6.11(a)
shall prohibit the Wexford Sellers Representative and its Affiliates from
continuing to utilize the services of Morris Kutcher, Esq. pursuant to Section
10.17.
(d)    Buyer and the Wexford Sellers Representative agree that the duration and
area for which the covenants set forth in this Section 6.11 apply are
reasonable. In the event any court of competent jurisdiction determines that the
time period or the area or both are unreasonable and any such covenant is to
that extent unenforceable, Buyer and the Wexford Sellers Representative agree
that such covenant shall remain in full force and effect for the greatest time
period and in the greatest area that would not render it unenforceable and that
each covenant set forth in this Section 6.11 shall remain enforceable
notwithstanding a determination by a court of competent jurisdiction that
another covenant set forth in this Section 6.11 is unenforceable. The Parties
agree that damages may be an inadequate remedy for any breach of any covenant
set forth in this Section 6.11 and that Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to seek equitable relief in
the form of injunctions without bond or other security upon any breach of any
such covenant. No waiver of any breach of any of the foregoing covenants shall
be implied from the forbearance or failure of Buyer to take action thereon. The
Wexford Sellers Representative acknowledges and agrees that the consideration to
be paid pursuant to this Agreement for covenants set forth in this Section 6.11
is adequate.
Section 6.12    Employment Agreements. Upon Closing, Buyer will or will cause
the Company to enter into employment agreements in the forms attached hereto as
Exhibits A, B, C and D, to be between Buyer and Messrs Hugh Miller, Marc Miller,
Lee Miller and Richard Blass (each a “Management Employee”), respectively
(collectively, the “Employment Agreements”).
Section 6.13    Registration of TFI Shares.

 
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(a)    TFI shall, for the benefit of each Seller, at TFI’s expense, (i) use its
best efforts, subject to applicable “blackout” or suspension periods, to cause
to be filed with the SEC within 90 days after each issuance of TFI Shares
hereunder a resale registration statement on any appropriate form (such filing,
as may be amended or substituted from time to time, is sometimes referred to
herein as the “Registration Statement”) to register the TFI Shares held by the
Sellers, (ii) use its commercially reasonable efforts to cause such Registration
Statement to be declared effective under the Securities Act by the SEC as soon
as practicable and (iii) use its commercially reasonable efforts to keep such
Registration Statement effective until the TFI Shares registered thereunder may
be sold, without restrictions, pursuant to Rule 144 of the Securities Act. Each
Seller hereby agrees to furnish to TFI all information with respect to such
Seller necessary to make the disclosures in the Registration Statement with
respect to such Seller not materially misleading. TFI further agrees, if
necessary, to supplement or amend any Registration Statement, if required by the
rules, regulations or instructions applicable to the registration form used by
TFI for such Registration Statement or by the Securities Act or by any other
rules and regulations thereunder for resale registrations.
(b)    Notwithstanding the foregoing, each Seller agrees that, upon TFI’s notice
at any time or from time to time during the time a prospectus relating to the
TFI Shares proposed to be sold by such Seller is required to be delivered under
the Securities Act to the effect that sales of its stock under the Registration
Statement must be suspended, such Seller will forthwith discontinue such
Seller’s disposition of TFI Shares pursuant to the Registration Statement until
the time of effectiveness of an amendment thereto or a supplement to such
prospectus included therein as may be necessary so that, as thereafter delivered
to the purchasers of such TFI Shares, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. TFI covenants that the notice
described in the prior sentence shall only be made in the event of the happening
of any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
(c)    Indemnification by Sellers. In connection with any Registration
Statement, each Seller shall indemnify and hold harmless, to the full extent
permitted by law, TFI, its directors and officers, and each other Seller against
any losses, claims, damages, liabilities and expenses arising out of any untrue
or alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the Registration Statement
(or amendment (including any post-effective amendment) or supplement thereto),
including all documents incorporated by reference or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission was contained in any information so furnished
in writing by such Seller specifically for inclusion in such Registration
Statement (or amendment (including any post-effective amendment) or supplement
thereto). The liability of any Seller shall not exceed the dollar amount of the
net proceeds received by such Seller upon the sale of TFI Shares giving rise to
such indemnification obligation.

 
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(d)    Indemnification by TFI. TFI shall indemnify and hold harmless, to the
fullest extent permitted by law, each Seller, its officers, directors, partners
and employees and each person who controls such Seller (within the meaning of
the Securities Act) against all losses, claims, damages, liabilities and
expenses arising out of any untrue or alleged untrue statement of a material
fact contained in any Registration Statement (or amendment (including any
post‑effective amendment) or supplement thereto), including all documents
incorporated by reference, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to TFI by such Seller
expressly for use therein or by such Seller’s failure to deliver the prospectus
contained in the Registration Statement after TFI has furnished or made
available to such Seller a sufficient number of copies of the same.
ARTICLE 7    

CONDITIONS TO THE TRANSACTIONS
Section 7.01    Conditions to Obligations of the Parties. The obligations of
each of the Parties to consummate the Transactions are subject to the
satisfaction of the following conditions:
(r)    No provision of any Applicable Law shall prohibit the consummation of the
Transactions;
(s)    there shall not be pending any action by any Governmental Authority
seeking to prohibit the consummation of the Transactions; and
(t)    All Governmental Authorizations that are required to be obtained or given
prior to or upon the Closing Date, including the Required Regulatory Approvals,
shall have been obtained or given, and all applicable waiting periods with
respect thereto shall have expired.
Section 7.02    Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the Transactions is subject to the satisfaction of the following
further conditions (other than any such conditions that are waived by Buyer):
(d)    The representations and warranties of the Company set forth in ARTICLE 3
and the representations and warranties of the Sellers set forth in ARTICLE 4
(other than the Fundamental Representations), without taking into account any
materiality or material adverse effect qualifiers set forth therein, shall be
true and correct in all respects at and as of the date of this Agreement and at
and as of the Closing (except for such representations and warranties that are
made as of a specific date, which representations and warranties shall be true
and correct at and as of such specific date), except where the failure of such
representations and warranties to be true and correct in all respects has not
had and would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect, and each of the Fundamental
Representations shall be true and correct in all respects at and as of the date
of this Agreement and at and as of the Closing (except for Fundamental
Representations that are made as of a specific date, which Fundamental
Representations shall be true and correct at and as of such specific date),
except where the failure of such Fundamental Representations to be true and
correct is of a de minimis nature or amount;

 
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(e)    The Company and each of the Sellers shall have performed in all material
respects all of their respective obligations hereunder required to be performed
at or prior to the Closing;
(f)    Since the Most Recent Balance Sheet Date, there shall have been no
Material Adverse Effect;
(g)    Buyer shall have received a certificate signed by the Sellers to the
effect that the conditions in Section 7.02(a), Section 7.02(b) and Section
7.02(c) have been satisfied; and
(h)    The third-party consents set forth on Section 7.02(e) of the Company
Disclosure Schedules shall have been obtained.
Section 7.03    Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the Transactions is subject to the satisfaction of the
following further conditions (other than any such conditions that are waived by
the Sellers):
(a)    The representations and warranties of the Buyer, Tiptree and TFI set
forth in ARTICLE 5, without taking into account any materiality or material
adverse effect qualifiers set forth therein, shall be true and correct in all
respects at and as of the date of this Agreement and at and as of the Closing
(except for such representations and warranties that are made as of a specific
date, which representations and warranties shall be true and correct at and as
of such specific date), except where the failure of such representations and
warranties to be true and correct in all respects has not had and would not be
reasonably expected to have, individually or in the aggregate, a material
adverse effect on the ability of Buyer to consummate the Transactions or perform
its obligations hereunder;
(b)    Buyer, Tiptree and TFI shall have performed in all material respects all
of its obligations hereunder required to be performed at or prior to the
Closing; and
(c)    The Sellers shall have received a certificate signed by an appropriate
representative of Buyer, Tiptree and TFI to the effect that the conditions in
Section 7.03(a) and Section 7.03(b) have been satisfied.
Section 7.04    Frustration of Closing Conditions. None of the Buyer or the
Wexford Sellers Representative may rely on the failure of any condition set
forth in Section 7.01, Section 7.02 or Section 7.03, as the case may be, to be
satisfied if such failure was caused by such Party’s failure to use the standard
of effort required from such Party to consummate the Transactions, as required
by and subject to Section 6.06.
ARTICLE 8    

TERMINATION
Section 8.01    Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Closing only as provided
below:

 
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(i)    by mutual written agreement of the Wexford Sellers Representative and
Buyer;
(j)    by either the Wexford Sellers Representative or Buyer if the Transactions
have not been consummated on or before the Termination Date; provided, that the
right to terminate this Agreement pursuant to this Section 8.01(b) will not be
available to any Party hereto whose knowing or willful breach of any provision
of this Agreement results in the failure of the Transactions to be consummated
by such time;
(k)    by either the Wexford Sellers Representative or Buyer if consummation of
the Transactions would violate any non-appealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
(l)    by Buyer if either (i) there has been a breach of, or inaccuracy in, any
representation or warranty of the Company or the Sellers contained in ARTICLE 3
or ARTICLE 4 of this Agreement or (ii) the Company or a Seller has breached or
violated any covenant contained in this Agreement, in each case which breach,
inaccuracy or violation (A) would result in the failure to satisfy a condition
set forth in Section 7.01 or Section 7.02 and (B) cannot be or has not been
cured by the date which is twenty (20) days after Buyer notifies the Sellers of
such breach, inaccuracy or violation; or
(m)    by the Wexford Sellers Representative if either (i) there has been a
breach of, or inaccuracy in, any representation or warranty of any of Buyer,
Tiptree or TFI contained in ARTICLE 5 of this Agreement or (ii) any of Buyer,
Tiptree or TFI has breached or violated any covenant contained in this
Agreement, in each case which breach, inaccuracy or violation (A) would result
in the failure to satisfy a condition set forth in Section 7.01 or Section 7.03
and (B) cannot be or has not been cured by the date which is twenty (20) days
after such Wexford Sellers Representative notifies Buyer of such breach,
inaccuracy or violation.
The Party hereto desiring to terminate this Agreement pursuant to clauses (b),
(c), (d), or (e) above will give notice of such termination to the other
Parties.
Section 8.02    Effect of Termination. If this Agreement is terminated as
permitted by Section 8.01, the representations and warranties of the Parties
shall terminate, there shall be no liability of any Party hereto arising from or
relating to any breaches by such Party of its representations and warranties,
and termination shall be each Party’s exclusive remedy for any breach by another
party of its representations and warranties; provided, however:
(d)    that nothing herein is intended or shall be construed to limit the
liability of any Party hereto if such termination results from such Party’s
intentional (i) failure to fulfill a condition to the performance of the
obligations of the other Party or (ii) failure to perform a covenant under this
Agreement;
(e)    in the event of the termination of this Agreement, for a period of
eighteen (18) months from the date of such termination, Buyer, Tiptree and TFI
shall not, and shall cause their respective controlled Affiliates not to,
directly or indirectly, solicit for employment, hire or

 
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seek to hire any Person who is then a current, or within the prior eighteen (18)
month period has been, an employee of the Company, provided, however, that
nothing in this Section 8.02(b) shall prohibit Buyer, Tiptree or TFI from making
any general solicitation of employment (including via search firm inquiry) not
specifically directed towards employees of the Company, so long as no Person who
is then a current, or within the prior eighteen (18) month period has been, an
employee of the Company, is hired as a result of such general solicitation.
Buyer, Tiptree and TFI agree that the duration and area for which the covenants
set forth in this Section 8.02 apply are reasonable. In the event any court of
competent jurisdiction determines that the time period or the area or both are
unreasonable and any such covenant is to that extent unenforceable, Buyer,
Tiptree and TFI agree that such covenant shall remain in full force and effect
for the greatest time period and in the greatest area that would not render it
unenforceable and that each covenant set forth in this Section 8.02 shall remain
enforceable notwithstanding a determination by a court of competent jurisdiction
that another covenant set forth in this Section 8.02 is unenforceable. The
Parties agree that damages may be an inadequate remedy for any breach of any
covenant set forth in this Section 8.02 and that the Company shall, whether or
not it is pursuing any potential remedies at law, be entitled to seek equitable
relief in the form of injunctions without bond or other security upon any breach
of any such covenant. No waiver of any breach of any of the foregoing covenants
shall be implied from the forbearance or failure of the Company to take action
thereon.
(f)    that the rights and obligations of the Parties under Section 6.09, this
Section 8.02 and ARTICLE 10 will survive any termination hereof pursuant to
Section 8.01.
ARTICLE 9    

SURVIVAL; INDEMNIFICATION
Section 9.01    Survival. The representations and warranties of the Parties
(other than the Fundamental Representations) and the covenants and agreements of
the Parties to the extent they, by their terms, contemplate or provide for
performance prior to the Closing, in each case contained in this Agreement or in
any certificate or other writing delivered pursuant hereto or in connection
herewith, will survive the Closing until the date that is eighteen (18) months
after the Closing Date, after which no claim may be made or suit instituted
seeking indemnification pursuant to this ARTICLE 9, for any breach of any such
representation or warranty or covenant or agreement. The Fundamental
Representations set forth in Section 3.11 (Tax Matters) (the “Tax
Representations”) and Section 3.12 (Employee Benefit Plans) (the “Benefit Plan
Representations”) will survive the Closing until the date that is 30 days
following the expiration of the applicable statute of limitations. The
Fundamental Representations, other than the Tax Representations and the Benefit
Plan Representations, will survive the Closing indefinitely. The “Representation
Survival Date” shall refer to the applicable date in the preceding sentences
until which each of the representations and warranties of each the Parties
survives. The covenants and agreements of the Parties hereto contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or in
connection herewith which, by their terms, do not contemplate or provide for
performance prior to the Closing, shall survive the Closing indefinitely or for
the shorter period explicitly specified therein, except that for such covenants
and agreements that survive for such shorter period, breaches thereof shall
survive indefinitely or until the latest date permitted by law. Any breach of
representation, warranty,

 
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covenant or agreement in respect of which indemnity may be sought under this
Agreement will survive the time at which its survival would otherwise terminate
pursuant to the preceding sentence if notice delivered in accordance with this
Agreement of the inaccuracy or breach thereof giving rise to such right to seek
indemnity, stating in reasonable detail the nature of the inaccuracy or breach,
is given to the Party against whom such indemnity may be sought prior to such
time.
Section 9.02    Indemnification Obligation of the Parties.
(a)    Subject to Section 6.08 and any limitations provided in this ARTICLE 9,
from and after the Closing, each Seller shall severally, and not jointly and
severally, and in accordance with each Seller’s Consideration Pro Rata Portion
(or in the case of clauses (1), (3) and (4) below, severally and solely as to
itself), indemnify Buyer and its Affiliates and, without duplication, the
Company, and the respective successors and assigns of the foregoing
(collectively, the “Buyer Indemnified Parties”) against and agree to hold each
of them harmless from any and all Damages actually incurred or suffered by any
Buyer Indemnified Party arising out of any:
(1)    breach of any representation and warranty (other than any Fundamental
Representation) made by (A) the Company in ARTICLE 3 of this Agreement or in the
certificate contemplated by Section 7.02(d) or (B) such Seller in ARTICLE 4 of
this Agreement;
(2)    breach of any covenant or agreement that, by its terms, contemplates or
provides for performance by the Company prior to the Closing;
(3)    breach of any Fundamental Representation made by (A) the Company in
ARTICLE 3 of this Agreement or (B) a Seller in ARTICLE 4 of this Agreement;
(4)    breach of any covenant or agreement of such Seller that, by its terms,
contemplates or provides for performance by such Seller following the Closing;
or
(5)    Indemnified Taxes.
Notwithstanding anything to the contrary contained in this Agreement, no
indemnity is provided to Buyer Indemnified Parties arising out of the
unavailability of net operating losses or similar tax attributes in a
post-closing tax period (or portion thereof).
With respect to indemnification by Sellers pursuant to Section 9.02(a)(1) and
Section 9.02(a)(2), Buyer Indemnified Parties will not be entitled to make any
claim for Damages unless the aggregate amount of Damages arising out of such
claims exceeds $250,000, in which event Sellers shall be required to pay and
shall be liable for all Damages from the first dollar of such Damages, including
the first $250,000 of Damages; provided, however, that with respect to a breach
of a representation or warranty set forth in Section 3.18, Section 3.20, Section
3.21, Section 3.22, Section 3.23, Section 3.24, Section 3.25 or Section 3.26
with respect to sales of Mortgage Loans, Sellers shall only be required to pay
and shall only be liable for Damages arising from such breaches if the aggregate
amount of such Damages exceeds the sum of (i) the Company’s Whole-Loan Sales
Related Reserves set forth in the Financials at the Closing and (ii) $250,000,
in which event Sellers shall be required to pay and shall be liable for all such
Damages from the first dollar of such Damages exceeding the

 
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Company's Whole-Loan Sales Related Reserves. With respect to indemnification by
Sellers pursuant to Section 9.02(a)(1) and Section 9.02(a)(2), the Sellers’
maximum liability will not exceed $2,500,000. The liability of any Seller
pursuant to this Section 9.02 shall not exceed the net proceeds received by such
Seller hereunder.
(b)    From and after the Closing, Buyer and Tiptree hereby jointly and
severally indemnify each Seller and their respective successors and assigns
(collectively, the “Seller Indemnified Parties) against and agrees to hold each
of them harmless from any and all Damages actually incurred or suffered by such
Seller and their respective successors and assigns arising out of any (i) breach
of any representation and warranty made in ARTICLE 5 of this Agreement or in the
certificate contemplated by Section 7.03(c), (ii) breach of any covenant or
agreement made or to be performed by Buyer or Tiptree pursuant to this Agreement
and (iii) any liability for Taxes of the Company with respect to any
post-Closing Tax Period (including, for the avoidance of doubt, the post-Closing
portion of any Straddle Period).
(c)    From and after the Closing, TFI hereby indemnifies the Seller Indemnified
Parties against and agrees to hold each of them harmless from any and all
Damages actually incurred or suffered by such Seller and their respective
successors and assigns arising out of any (i) breach of any representation and
warranty made by TFI in ARTICLE 5 of this Agreement or in the certificate
contemplated by Section 7.03(c) and (ii) breach of any covenant or agreement
made or to be performed by TFI pursuant to this Agreement.
(d)    No Claim may be made or suit instituted seeking indemnification pursuant
to Section 9.02(a), Section 9.02(b), or Section 9.02(c) for any breach of, or
inaccuracy in, any representation or warranty, or any breach of any covenant or
agreement, in each case contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith, unless a
Claim Notice (as defined below) is provided to the Indemnifying Party in respect
of such breach or inaccuracy in accordance with Section 9.03(a) (i) with respect
to any claim for Damages pursuant to Section 9.02(a)(1), Section 9.02(a)(2),
Sections 9.02(b)(i) or Section 9.02(c)(i), at any time prior to the
Representation Survival Date, and (ii) with respect to any claim for Damages
pursuant to Section 9.02(a)(3), Section 9.02(a)(4), Section 9.02(a)(5), Section
9.02(b)(ii), Section 9.02(b)(iii) or Section 9.02(c)(ii), at any time prior to
the termination for the applicable survival period.
(e)    An Indemnified Party shall not be entitled to indemnification for any
consequential, special or punitive damages, except to the extent such damages
are actually paid to a Person (other than a Party hereto or Affiliate thereof)
pursuant to a Third Party Claim (as defined below). Any indemnification for
Damages hereunder shall be (i) reduced by any Tax benefit (calculated on a with
and without basis) actually realized in the taxable year in which the Damages
are accrued as a result of the deductibility of such Damages and (ii) increased
by any Tax detriment (calculated on a with and without basis) actually incurred
in the taxable year in which the indemnification payment is made as a result of
the indemnification payment in respect of such Damages.
(f)    Notwithstanding anything to the contrary in this Agreement, if Buyer or
Sellers, as applicable, are unable to deliver the certificate specified in
Section 7.02(d) or Section

 
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7.03(c), as applicable to Buyer or Sellers, respectively, with respect to any
matter specified in Section 7.02(a) or Section 7.03(a), as applicable, and Buyer
or Sellers waive such condition and determine to effect the Closing, then Buyer
or Sellers, as applicable, shall have no right to indemnification for Damages
with respect to the breach of the representation or warranty which is the
subject of the waiver.
Section 9.03    Procedures.
(g)    The party seeking indemnification under this ARTICLE 9 (the “Indemnified
Party”) agrees to give prompt notice to the party against whom indemnity is
sought (the “Indemnifying Party”) of the assertion of any claim, or the
commencement of any suit, action or proceeding (“Claim”) in respect of which
indemnity may be sought under this ARTICLE 9, stating in reasonable detail the
nature of the inaccuracy or breach (a “Claim Notice”). The failure to so notify
the Indemnifying Party will not relieve the Indemnifying Party of its
obligations hereunder, except to the extent such failure will have materially
prejudiced the Indemnifying Party.
(h)    If, at any time on or prior to the Representation Survival Date, Buyer
wishes to make a Claim on behalf of itself or any other Buyer Indemnified Party
under Section 9.02 for which it reasonably believes in good faith it is (or they
are) entitled to recovery under this ARTICLE 9, Buyer will deliver to the Seller
Representatives a Claim Notice. If, at any time on or prior to the
Representation Survival Date, any Seller Representative wishes to make a Claim
on behalf of itself or any other Seller Indemnified Party under Section 9.02 for
which it reasonably believes in good faith it is (or they are) entitled to
recovery under this ARTICLE 9, such Seller will deliver to the Buyer a Claim
Notice.
(i)    The Indemnifying Party will be entitled to participate in the defense of
any Claim asserted by any third party (“Third Party Claim”) and, subject to the
limitations set forth in this Section 9.03, will be entitled to control and
appoint lead counsel (with such lead counsel to be reasonably acceptable to the
Indemnified Party) for such defense, in each case at its expense. This Section
9.03(c) and Section 9.03(d) and Section 9.03(e) shall not apply to any Third
Party Claim related to Taxes, which shall be subject to Section 6.08.
(j)    If the Indemnifying Party will assume the control of the defense of any
Third Party Claim in accordance with the provisions of this Section 9.03, (i)
the Indemnifying Party will obtain the prior written consent of the Indemnified
Party before entering into any settlement or consenting to the entry of any
judgment arising from such Third Party Claim, if the settlement or judgment does
not unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such Third Party Claim, the settlement or judgment
imposes injunctive or other equitable relief against the Indemnified Party, the
settlement requires the Indemnified Party to acknowledge wrongdoing or take any
other action, or the settlement or judgment may reasonably be expected to have
an adverse effect on the business of the Indemnified Party and (ii) the
Indemnified Party will be entitled to participate in the defense of such Third
Party Claim and to employ separate counsel of its choice for such purpose. The
fees and expenses of such separate counsel will be paid by the Indemnified
Party.

 
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(k)    Each party will cooperate, and cause their respective Affiliates to
cooperate, in the defense or prosecution of any Third Party Claim and will
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.
(l)    Buyer acknowledges and agrees that no Seller will have any liability
under any provision of this Agreement for any Damage to the extent that such
Damage is caused by action or inaction by Buyer, the Company or any of their
respective Affiliates after the Closing.
Section 9.04    Right of Setoff. Tiptree (on its own behalf and on behalf of the
Buyer Indemnified Parties) may set off against any of the Earnout Payments any
amount which has been agreed among Tiptree and the Seller Representatives or has
been finally adjudicated to which it or they are entitled under the Side Letter
and this ARTICLE 9. If Tiptree seeks to exercise its right to make a setoff
hereunder, it shall deliver to the Seller Representatives a written notice
indicating its intention to exercise its right to make such a setoff, the amount
thereof and a reasonable description of the circumstances giving rise to
Tiptree’s entitlement to such setoff. Neither the exercise of nor the failure to
exercise such right of setoff will limit the Buyer Indemnified Parties in any
manner in the enforcement of any other remedies that may be available to them,
and Sellers shall promptly remit to the Buyer Indemnified Party in cash any
payment to which Buyer may be entitled under the Side Letter or this ARTICLE 9
which Tiptree does not set off against amounts otherwise payable under this
Agreement or which exceeds such amounts; provided, however, that in the case of
any such set off by Tiptree pursuant to this Section 9.04, Sellers’ obligation
to make such payment (or any portion thereof) shall be deemed satisfied and
discharged to the extent of such setoff.
Section 9.05    Exclusivity. From and after the Closing, the remedies set forth
in Section 2.05, Section 2.06, Section 9.02 and Section 10.08 will provide the
exclusive remedies for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the
Transactions.
Section 9.06    Purchase Price Adjustment. To the extent consistent with
Applicable Law, any amount paid under ARTICLE 9 will be treated as an adjustment
to the Purchase Price for Tax purposes.
ARTICLE 10    

MISCELLANEOUS
Section 10.01    Notices. Any notices or other communications required or
permitted hereunder will be deemed to have been properly given and delivered if
in writing by such Party or its legal representative and delivered personally or
sent by facsimile, electronic mail or nationally recognized overnight courier
service guaranteeing overnight delivery, addressed as follows:
if to Buyer, or, after the Closing, the Company, to:
Tiptree Financial, Inc.
780 Third Avenue, 21st Floor

 
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New York, New York 10017
Attention: Geoffrey Kauffman and Neil C. Rifkind, Esq.
Fax: (212) 446-1409
Email: gkauffman@tiptreefinancial.com and nrifkind@tiptreefinancial.com
with a copy (which will not constitute notice) to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attention: Michael R. Littenberg, Esq.
Fax: 212-593-5955
Email: michael.littenberg@srz.com
if to a Wexford Seller, to the address provided by such Seller to Buyer prior to
the Closing in writing, with a copy (which will not constitute notice) to:
Wexford Capital LP
411 West Putnam Avenue
Greenwich, CT 06830
Attention: Arthur Amron, Esq.
Fax: (203) 862-7312
Email: aamron@wexford.com
And a copy (which will not constitute notice) to:
Thompson & Knight LLP
900 Third Avenue
New York, NY 10022
Attention: Gregg Berman
Fax: (212) 751-3113
Email: gregg.berman@tklaw.com
If to a Reliance Seller, or the Company, prior to the Closing:
Marc E. Miller
EVP & General Counsel
Reliance First Capital, LLC
201 Old Country Road, Suite 205
Melville, New York 11747
Email: mmiller@reliancefirstcapital.com
And a copy (which will not constitute notice) to:

 
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Morrison & Foerster LLP
250 West 55th Street
New York, New York 10019
Attention: Anna T. Pinedo
Email: apinedo@mofo.com
Unless otherwise specified herein, such notices or other communications will be
deemed given (a) on the date delivered, if delivered personally, (b) one (1)
Business Day after being sent by a nationally recognized overnight courier
guaranteeing overnight delivery, and (c) on the date delivered, if delivered by
facsimile or electronic mail during business hours (or one (1) Business Day
after the date of delivery if delivered after 5:00 pm in the place of receipt).
Each of the Parties will be entitled to specify a different address by
delivering notice as aforesaid to each of the other Parties.
Section 10.02    Amendments and Waivers.
(m)    This Agreement may not be amended or modified in any manner nor may any
of its provisions be waived except by written amendment executed by the Parties.
A waiver or amendment shall only be effective if (a) it is in writing and signed
by the Parties, (b) it specifically refers to this Agreement and (c) it
specifically states that the applicable Party is waiving or amending its rights
hereunder. Any such amendment, modification or waiver shall be effective only in
the specific instance and for the purpose for which it was given.
(n)    No failure or delay by any Party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.
Section 10.03    Expenses. All reasonable, documented out-of-pocket costs and
expenses incurred on or prior to the Closing in connection with this Agreement
and the other Transaction Documents and the Transactions, including all fees and
expenses of (x) the Company’s counsel, accountants and other representatives and
(y) Thompson & Knight, counsel to Sellers (provided that the fees and expenses
of Thompson & Knight LLP to be paid by Buyer at Closing shall not exceed the
amount set forth on Section 1.01 of the Buyer Disclosure Schedule) will be paid
by the Buyer at Closing, provided, that if the Closing does not occur, each
Party shall pay its own costs and expenses incurred in connection with this
Agreement and the other Transaction Documents and the proposed Transactions,
including all fees and expenses of such Party’s counsel, accountants and other
representatives.
Section 10.04    Successors and Assigns. The provisions of this Agreement will
be binding upon and inure to the benefit of the Parties and their respective
successors and assigns; provided, that, no Party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of each other Party; provided, however, that Buyer, Tiptree and TFI
may assign in whole or in part its rights, obligations or liabilities hereunder
to (x) an Affiliate of Buyer prior to the Closing or (y) to any acquiror of all
or substantially all of the assets or equity

 
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interests of Tiptree or TFI (whether by asset purchase, stock purchase, merger,
consolidation or otherwise) (including its rights to seek indemnification
hereunder), provided, however, that such acquiror is of equal or greater
creditworthiness to Buyer, in either case, without the consent of any Seller or
the Company.
Section 10.05    Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice or conflict of law provision or rule that would cause the application
of the domestic substantive laws of any other jurisdiction.
Section 10.06    Jurisdiction. Except as otherwise expressly provided in this
Agreement, each Party, by its execution hereof, (a) hereby irrevocably submits
to the exclusive jurisdiction of the courts of the State of New York and the
U.S. federal courts located in the Borough of Manhattan, New York for the
purpose of any action, claim, cause of action or suit (in contract, tort or
otherwise), in any way arising out of or relating to this Agreement, its
negotiation or terms, or the Transactions, (b) hereby waives to the extent not
prohibited by Applicable Law, and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, that the venue is improper, or
that this Agreement or the subject matter hereof may not be enforced in or by
such court and (c) hereby agrees not to commence or prosecute any such action,
claim, cause of action or suit other than before one of the above-named courts,
nor to make any motion or take any other action seeking or intending to cause
the transfer or removal of any such action, claim, cause of action or suit to
any court other than one of the above-named courts, whether on the grounds of
inconvenient forum or otherwise. Each Party hereby consents to service of
process in any such proceeding in any manner permitted by New York law, and
further consents to service of process by nationally recognized overnight
courier service guaranteeing overnight delivery, or by registered or certified
mail, return receipt requested, at its address specified pursuant to Section
10.01. Notwithstanding the foregoing in this Section 10.06, a Party may commence
any action, claim, cause of action or suit in a court other than the above-named
courts solely for the purpose of enforcing an order or judgment issued by one of
the above-named courts.
Section 10.07    WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES
AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY ISSUE, ACTION, CLAIM,
CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), IN ANY WAY ARISING OUT
OF OR RELATED TO THIS AGREEMENT, ITS NEGOTIATION OR TERMS, OR THE TRANSACTIONS,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.07 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.

 
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Section 10.08    Specific Performance.The Parties hereby expressly recognize and
acknowledge that no adequate remedy at law would exist, and damages would be
difficult to determine in the event that any provision of this Agreement is not
performed in accordance with its specific terms or is otherwise breached.
Therefore, in addition to, and not in limitation of, any other remedy available
to any Party, a Party will be entitled to specific performance of the terms
hereof and immediate injunctive relief, without the necessity of proving the
inadequacy of money damages as a remedy and without bond or other security being
required. Such remedies, and any and all other remedies provided for in this
Agreement, will, however, be cumulative in nature and not exclusive and will be
in addition to any other remedies whatsoever which any Party may otherwise have.
Each of the Parties hereby acknowledges and agrees that it may be difficult to
prove damages with reasonable certainty, that it may be difficult to procure
suitable substitute performance, and that injunctive relief or specific
performance or both injunctive relief and specific performance will not cause an
undue hardship to the Parties. Each of the Parties hereby further acknowledges
that the existence of any other remedy contemplated by this Agreement does not
diminish the availability of specific performance of the obligations hereunder
or any other injunctive relief. Each Party hereby further agrees that in the
event of any action by any other Party for specific performance or injunctive
relief, it will not assert that a remedy at law or other remedy would be
adequate or that specific performance or injunctive relief in respect of such
breach or violation should not be available on the grounds that money damages
are adequate or any other grounds.
Section 10.09    Further Assurances. From and after the Closing, upon the
request of Buyer or the Sellers, each of the Parties will do, execute,
acknowledge and deliver all such further acts, assurances, deeds, assignments,
transfers, conveyances, and other instruments and papers as may be reasonably
required or appropriate to carry out the Transactions.
Section 10.10    Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed will be deemed to be an original and
all of which together will be deemed to be one and the same instrument binding
upon all of the Parties notwithstanding the fact that all Parties are not
signatory to the original or the same counterpart. For purposes of this
Agreement, facsimile and pdf signatures will be deemed originals.
Section 10.11    Third Party Beneficiaries; No Recourse Against Third Parties.
No provision of this Agreement is intended to confer upon any Person other than
the Parties any rights or remedies hereunder, except as contemplated by Section
9.02.
Section 10.12    Entire Agreement. This Agreement, the Confidentiality
Agreement, the Side Letter and the Employment Agreements constitute the entire
agreement between the Parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the Parties with respect to the subject matter of this
Agreement.
Section 10.13    Severability. If any term, provision, covenant or restriction
of this Agreement is held by any Governmental Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired or invalidated so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any Party. Upon such a

 
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determination, the Parties will negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible.
Section 10.14    Negotiation of Agreement. Each of the Parties acknowledges that
it has been represented or had the opportunity to be represented by independent
counsel of its choice throughout all negotiations that have preceded the
execution of this Agreement and that it has executed the same with consent and,
to the extent applicable, upon the advice of said independent counsel. Each
Party and its counsel cooperated in the drafting and preparation of this
Agreement and the documents referred to herein, and any and all drafts relating
thereto will be deemed the joint work product of the Parties and may not be
construed against any Party by reason of its preparation. Accordingly, any rule
of law or any legal decision that would require interpretation of any
ambiguities in this Agreement against the Party that drafted it is of no
application and is hereby expressly waived.
Section 10.15    Construction. The headings, if any, of the individual sections
of each of the Company Disclosure Schedules are inserted for convenience only
and will not be deemed to constitute a part thereof or a part of the Agreement.
The Company Disclosure Schedules are arranged in sections corresponding to those
contained in this Agreement merely for convenience, and the disclosure of an
item in one section of the Company Disclosure Schedules as an exception to any
particular covenant, representation or warranty will be deemed adequately
disclosed as an exception with respect to all other covenants, representations
or warranties, notwithstanding the presence or absence of an appropriate section
of the Company Disclosure Schedules with respect to such other covenants,
representations or warranties or an appropriate cross-reference thereto, to the
extent such disclosure is reasonably apparent on the face of such disclosure
that such disclosure is relevant to such other covenants, representations or
warranties.
Section 10.16    Seller Representatives.
(a)    The Wexford Sellers hereby irrevocably constitute and appoint the Wexford
Seller Representative as their Sellers Representative, and the Reliance Sellers
hereby irrevocably constitute and appoint the Reliance Seller Representative as
their Sellers Representative, in each case as the representative, agent, proxy
and attorney-in-fact for each such Seller for all purposes authorized under this
Agreement, including the full power and authority on such Sellers’ behalf: (i)
to consummate the transactions contemplated under this Agreement, including the
execution and delivery of the other Transaction Documents and the other
instruments and documents contemplated hereby and thereby; (ii) to receive and
forward notices and communications pursuant to this Agreement; (iii) to execute
and deliver any amendment or waiver to the Transaction Documents (without the
prior approval of such Sellers), so long as such amendment or waiver applies to
all such Sellers equally; (iv) (A) to dispute or refrain from disputing, on
behalf of each such Seller relative to any amounts to be received by such Seller
under this Agreement or any other Transaction Document, any claim made by Buyer
under this Agreement, any other Transaction Document or any other instrument or
document contemplated hereby or thereby, (B) to negotiate and compromise, on
behalf of each such Seller, any dispute that may arise under, and exercise or
refrain from exercising any remedies available under, the Transaction Documents
or any other instrument or document contemplated hereby or thereby and (C) to
execute, on behalf of each such Seller, any settlement

 
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agreement, release or other document with respect to such dispute or remedy,
except, in each case with respect to a dispute between such Seller on the one
hand and the respective Seller Representative on the other hand; (v) to engage
attorneys, accountants or consultants on behalf of such Sellers in connection
with the Transaction Documents and the Transactions and, for the account of such
Sellers (based on their respective pro rata ownership of the Equity Interests),
paying any fees, costs and expenses related thereto; and (vi) to take all other
actions which may be necessary, convenient or appropriate to be taken on behalf
of such Sellers in connection with the Transaction Documents or the
Transactions. In addition, such agency and proxy are coupled with an interest,
are therefore irrevocable without the consent of such Seller Representative and
shall survive the death, incapacity, bankruptcy, dissolution or liquidation of
any Seller. If any Seller dies or becomes incapacitated, disabled or incompetent
(such deceased, incapacitated, disabled or incompetent Seller being a “Former
Seller”) and, as a result, the agency and power of attorney conferred by this
Section 10.16 is revoked by operation of law, it shall not be a breach by such
Former Seller under this Agreement if the heirs, beneficiaries, estate,
administrator, executor, guardian, conservator or other legal representative of
such Former Seller (each a “Successor Seller”) confirms the appointment of the
applicable Seller Representative as agent and attorney-in-fact for such
Successor Seller. In addition, if the agency and power of attorney conferred by
this Section 10.16 is revoked by operation of law and thereafter not reconfirmed
by the Successor Seller prior to the Closing, such revocation shall not be
deemed a breach by the Successor Seller of any of the provisions of this
Agreement provided that the Equity Interests held by such Successor Seller are
delivered for transfer to Buyer at the Closing, and provided, further, that such
Successor Seller executes and delivers such other certificates, documents or
instruments that would have been delivered on its behalf by the applicable
Seller Representative had such Successor Seller reconfirmed the agency and power
of attorney conferred by this Section 10.16. All decisions and actions by the
applicable Seller Representative taken in accordance with this Agreement shall
be binding upon all of the Sellers represented by it, and no Seller shall have
the right to object to, dissent from, protest or otherwise contest such
decisions and actions. The Seller Representatives shall have no duties or
obligations hereunder except those forth herein and such duties and obligations
shall be determined solely by the express provisions of this Agreement.
(b)    Each Seller hereby severally (based on such Seller’s Consideration Pro
Rata Portion), for itself only and not jointly, agrees to indemnify and hold
harmless its Seller Representative against all fees, costs and expenses
(including reasonable attorneys’ fees), judgments, fines and amounts incurred by
such Seller Representative in connection with any action, suit or proceeding to
which the applicable Seller Representative is made a party by reason of the fact
it is or was acting as the Seller Representative pursuant to the terms of this
Agreement provided that the Seller Representative acted in good faith.
(c)    The Seller Representatives shall not be liable to Buyer or its
Affiliates, the Sellers or the Company in its capacity as a Seller
Representative for any liability of a Seller or otherwise or for any error of
judgment, any act done or omitted or step taken or omitted or for any mistake in
fact or law, in each case to the extent taken or omitted by it in good faith.
The Seller Representatives may seek the advice of legal counsel, at the expense
of the Sellers represented by it, in the event of any dispute or question as to
the construction of any of the provisions of this Agreement or its duties
hereunder, and it shall incur no liability in their capacity as Seller

 
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Representatives to Buyer or its Affiliates, the Sellers or the Company, and
shall be fully protected, with respect to any action taken or omitted to be
taken in good faith in accordance with the advice of such counsel. Without
limiting any of the other provisions of this Section 10.16, neither Seller
Representative shall, by reason of this Agreement, have a fiduciary relationship
in respect of any Seller, except in respect of amounts received on behalf of the
Sellers.
(d)    Buyer is entitled to rely on the acts and agreements of the Seller
Representatives in accordance with this Agreement as the acts and agreements of
the Sellers represented by each of them, respectively.
Section 10.17    Attorney Services. After the Closing, Wexford Capital LP and
the Company shall negotiate in good faith an agreement pursuant to which the
Company will make available to Wexford Capital LP the services of Morris
Kutcher, Esq. (“Kutcher”) and otherwise on terms and conditions set forth on
Section 10.17 of the Company Disclosure Schedules. This Section 10.17 shall not
apply to the extent Kutcher ceases to be employed by the Company prior to the
Closing.
[Remainder of page intentionally left blank. Signature pages follow]

 
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IN WITNESS WHEREOF, each of the undersigned has executed this Securities
Purchase Agreement as of the date first above written.

BUYER:
RELIANCE HOLDINGS LLC 

By: /s/ Geoffrey Kauffman
Name: Geoffrey Kauffman
Title: President and Chief Executive Officer

TIPTREE:
TIPTREE OPERATING COMPANY, LLC
 

By: /s/ Geoffrey Kauffman
Name: Geoffrey Kauffman
Title: President and Chief Executive Officer

TFI:
TIPTREE FINANCIAL, INC.

By: /s/ Geoffrey Kauffman
Name: Geoffrey Kauffman
Title: President and Chief Executive Officer

THE COMPANY:
RELIANCE FIRST CAPITAL LLC

 

 
By: /s/ Hugh Miller
Name: Hugh Miller
Title: President

WEXFORD SELLER REPRESENTATIVE:
WEXFORD CAPITAL LP
By: Wexford GP LLC, its General Partner
 

 
By: /s/ Arthur Amron
Name: Arthur Amron
Title: Vice President and Assistant Secretary

 
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RELIANCE SELLER
REPRESENTATIVE:
/s/ Marc Miller
Marc Miller

THE SELLERS:
RELIANCE INVESTORS LLC 

 
By: /s/ John C. Sites, Jr.
Name: John C. Sites, Jr.
Title: Manager

 
RELIANCE CONTROL LLC 

By: /s/ John C. Sites, Jr.
Name: John C. Sites, Jr.
Title: Manager

 
/s/ Hugh Miller
Hugh Miller

 
/s/ Richard Blass
Richard Blass

 
/s/ Lee Miller
Lee Miller

 
/s/ Marc Miller
Marc Miller

 
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