Exhibit 10.1


 


Execution Copy


 


 


OPTION AGREEMENT


 


by and among


 


CREDIT SUISSE FIRST BOSTON
(USA), INC.,


 


SPS HOLDING CORP.,


 


THE PMI GROUP, INC.,


 


FSA PORTFOLIO MANAGEMENT INC.


 


and


 


GREENRANGE PARTNERS LLC


 


dated as of


 


August 12, 2005


 





















 


TABLE OF
CONTENTS


 


	
  ARTICLE I

  	
   

  
	
  DEFINITIONS AND INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.2

  	
  Interpretation

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  THE
  OPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Grant of Option

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 2.2

  	
  Term of Option

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 2.3

  	
  The Exercise Price

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 2.4

  	
  Allocation of the Exercise
  Price

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  THE
  CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 3.1

  	
  Exercise of the Option and
  the Closing

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 3.2

  	
  Deliveries by Optionors

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 3.3

  	
  Deliveries and Payment by
  Optionee

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  REPRESENTATIONS AND
  WARRANTIES OF THE OPTIONORS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Share Ownership

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 4.2

  	
  Legal Power; Organization;
  Qualification of Optionors

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 4.3

  	
  Binding Agreement

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 4.4

  	
  No Conflict or Default

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 4.5

  	
  Ownership and Possession of
  Option Shares

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 4.6

  	
  Good Title Conveyed

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  REPRESENTATIONS AND
  WARRANTIES OF THE COMPANY

  	
   

  
	
   

  	
   

  
	
  Section 5.1

  	
  Authorization; Validity of
  Agreement; Company Action

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 5.2

  	
  Other Board Approvals
  Regarding Transactions

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 5.3

  	
  Capitalization

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 5.4

  	
  Organization; Qualification
  of Company

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 5.5

  	
  Subsidiaries and Affiliates

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 5.6

  	
  Consents and Approvals; No
  Violations

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 5.7

  	
  Financial Statements

  	
  23

  



 


i





















 


	
  Section 5.8

  	
  No Undisclosed Liabilities

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 5.9

  	
  Absence of Certain Changes

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 5.10

  	
  Title to Properties; Liens

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 5.11

  	
  Real Property

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 5.12

  	
  Leases

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 5.13

  	
  Environmental Matters

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 5.14

  	
  Contracts and Commitments

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 5.15

  	
  Litigation

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 5.16

  	
  Compliance with Laws;
  Consent Orders

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 5.17

  	
  Permits

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 5.18

  	
  Employee Benefit Plans

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 5.19

  	
  Tax Matters

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 5.20

  	
  Intellectual
  Property

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 5.21

  	
  Labor Matters

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 5.22

  	
  Personnel

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 5.23

  	
  Potential
  Conflict of Interest

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 5.24

  	
  Propriety
  of Past Payments

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 5.25

  	
  Brokers or
  Finders

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 5.26

  	
  Consumer
  Complaints

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 5.27

  	
  Insurance

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES OF OPTIONEE

  	
   

  
	
   

  	
   

  
	
  Section 6.1

  	
  Organization

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.2

  	
  Authorization;
  Validity of Agreement

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.3

  	
  Consents
  and Approvals; No Violations

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 6.4

  	
  Investment
  Representation

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 6.5

  	
  Sufficient
  Funds

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 6.6

  	
  Brokers or
  Finders

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
  Interim
  Operations of the Company

  	
  37

  



 


ii





















 


	
  Section 7.2

  	
  Access;
  Confidentiality

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 7.3

  	
  Efforts and
  Actions to Cause Closing to Occur

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 7.4

  	
  Notification
  of Certain Matters

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 7.5

  	
  No
  Solicitation of Competing Transaction

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section 7.6

  	
  Transfer of
  Optionors’ Shares

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 7.7

  	
  Waiver
  Pursuant to and Termination of Shareholders Agreement

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 7.8

  	
  Subsequent
  Actions

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 7.9

  	
  FIRPTA
  Certificates

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 7.10

  	
  Limitation
  on Certain Actions

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  TAX MATTERS

  	
   

  
	
   

  	
   

  
	
  Section 8.1

  	
  Transfer
  Taxes

  	
  46

  
	
   

  	
   

  	
   

  
	
  Section 8.2

  	
  Tax Return
  Filings

  	
  46

  
	
   

  	
   

  	
   

  
	
  Section 8.3

  	
  Tax
  Indemnification

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 8.4

  	
  Cooperation

  	
  49

  
	
   

  	
   

  	
   

  
	
  Section 8.5

  	
  Refunds and
  Credits

  	
  49

  
	
   

  	
   

  	
   

  
	
  Section 8.6

  	
  Calculation
  of Losses

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 8.7

  	
  Procedures
  Relating to Indemnification of Tax Claims

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 8.8

  	
  Tax Sharing
  Agreements

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 8.9

  	
  Miscellaneous

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
  CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
  Conditions
  to Each Party’s Obligation to Effect the Closing

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 9.2

  	
  Conditions
  to Obligations of Optionee to Effect the Closing

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 9.3

  	
  Conditions
  to Obligations of Optionors to Effect the Closing

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  
	
  TERMINATION

  	
   

  
	
   

  	
   

  
	
  Section 10.1

  	
  Termination

  	
  54

  
	
   

  	
   

  	
   

  
	
  Section 10.2

  	
  Effect of
  Termination

  	
  55

  



 


iii





















 


	
  ARTICLE XI

  	
   

  
	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 11.1

  	
  Survival of
  Representations and Warranties; Time Limitations

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 11.2

  	
  Indemnification;
  Remedies

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 11.3

  	
  Notice of
  Claim; Defense

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 11.4

  	
  Tax
  Treatment of Indemnification Payments

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 12.1

  	
  Fees and
  Expenses

  	
  61

  
	
   

  	
   

  	
   

  
	
  Section 12.2

  	
  Amendment
  and Modification

  	
  61

  
	
   

  	
   

  	
   

  
	
  Section 12.3

  	
  Publicity

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 12.4

  	
  Notices

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 12.5

  	
  Counterparts

  	
  64

  
	
   

  	
   

  	
   

  
	
  Section 12.6

  	
  Entire
  Agreement; No Third Party Beneficiaries

  	
  64

  
	
   

  	
   

  	
   

  
	
  Section 12.7

  	
  Severability

  	
  64

  
	
   

  	
   

  	
   

  
	
  Section 12.8

  	
  Governing
  Law

  	
  64

  
	
   

  	
   

  	
   

  
	
  Section 12.9

  	
  Enforcement;
  Venue

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.10

  	
  Waiver of
  Jury Trial

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.11

  	
  Time of
  Essence

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.12

  	
  Extension;
  Waiver

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.13

  	
  No Other
  Representations

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.14

  	
  Sole and
  Exclusive Remedy

  	
  65

  
	
   

  	
   

  	
   

  
	
  Section 12.15

  	
  No
  Consequential Damages

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.16

  	
  No Set-Off

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.17

  	
  Assignment

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.18

  	
  Documentation

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.19

  	
  No Disparagement

  	
  66

  
	
   

  	
   

  	
   

  
	
  Section 12.20

  	
  No
  Solicitation of Company Employees

  	
  67

  



 


iv





















 


	
  Annexes and Exhibits to this Agreement

  	
   

  
	
  Annex A

  	
  Contingent Payment Agreement

  	
   

  
	
  Exhibit A

  	
  Optionor Data

  	
   

  
	
  Exhibit B

  	
  Signing Date Fee Matrix

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedules to this Agreement

  	
   

  
	
  Schedule 1.1(a)

  	
  Schedule of Key Employees

  	
   

  
	
  Schedule 1.1(b)

  	
  Schedule of Key Employee Contracts

  	
   

  
	
  Schedule 1.1(c)

  	
  Schedule of Specified Disputes

  	
   

  
	
   

  	
   

  	
   

  
	
  Disclosure Schedules (delivered
  simultaneously with the execution hereof)

  	
   

  
	
  Schedule 5.3(a)

  	
  Capitalization – Holders of Company Options

  	
   

  
	
  Schedule 5.3(b)

  	
  Capitalization - Voting Trusts and Agreements (other than Shareholder
  Documents)

  	
   

  
	
  Schedule 5.3(c)

  	
  Capitalization - Exercise Right of Certain Holders of Company Options
  Following the Closing Date

  	
   

  
	
  Schedule 5.5

  	
  Company Subsidiaries

  	
   

  
	
  Schedule 5.6

  	
  Consents and Approvals

  	
   

  
	
  Schedule 5.8

  	
  Undisclosed Liabilities

  	
   

  
	
  Schedule 5.9(a)

  	
  Potentially Adverse Changes

  	
   

  
	
  Schedule 5.9(b)

  	
  Incurred Liabilities and Obligations

  	
   

  
	
  Schedule 5.9(e)

  	
  Mortgage Servicing Rights Rollforward

  	
   

  
	
  Schedule 5.9(g)

  	
  Sale or Transfer of Properties or Assets

  	
   

  
	
  Schedule 5.9(i)

  	
  Disposal or Lapse of Intellectual Property

  	
   

  
	
  Schedule 5.9(j)

  	
  Increases in Compensation

  	
   

  
	
  Schedule 5.9(l)

  	
  Capital Additions

  	
   

  
	
  Schedule 5.9(m)

  	
  Capital Stock Distribution & Redemptions Since
  January 1, 2005

  	
   

  
	
  Schedule 5.11(a)

  	
  Real Property

  	
   

  
	
  Schedule 5.12

  	
  Leases

  	
   

  
	
  Schedule 5.13

  	
  Environmental Matters

  	
   

  
	
  Schedule 5.14(i)

  	
  Material Vendor Contracts

  	
   

  
	
  Schedule 5.14(ii)

  	
  Credit Facilities

  	
   

  
	
  Schedule 5.14(iii)

  	
  Mortgage Loan Servicing Agreements

  	
   

  
	
  Schedule 5.14(iv)

  	
  Consumer Group Agreements

  	
   

  
	
  Schedule 5.14(v)

  	
  Miscellaneous Agreements

  	
   

  
	
  Schedule 5.14(vi)

  	
  Agreements with Employees Containing Liabilities or Obligations Surviving
  Severance or Termination

  	
   

  
	
  Schedule 5.14(vii)

  	
  Highly Compensated Employees

  	
   

  
	
  Schedule 5.14(b)

  	
  Alleged Material Breaches of Contract

  	
   

  
	
  Schedule 5.15

  	
  Litigation

  	
   

  
	
  Schedule 5.16

  	
  Compliance with Laws

  	
   

  
	
  Schedule 5.17

  	
  Company Permits

  	
   

  
	
  Schedule 5.18

  	
  Compensation and Benefit Programs

  	
   

  
	
  Schedule 5.18(e)

  	
  Accelerated Vesting of Company Options on the Closing Date

  	
   

  



 


v





















 


	
  Schedule 5.18(f)

  	
  Claims under Plans

  	
   

  
	
  Schedule 5.19(e)

  	
  Tax Audits & Examinations

  	
   

  
	
  Schedule 5.19(f)

  	
  Timing of Certain Tax Issues

  	
   

  
	
  Schedule 5.19(j)

  	
  Extensions of Statutes of Limitations for Tax Audits &
  Examinations

  	
   

  
	
  Schedule 5.19(k)

  	
  Withholding Deficiencies

  	
   

  
	
  Schedule 5.19(n)

  	
  List of Income Tax Return Jurisdictions

  	
   

  
	
  Schedule 5.20

  	
  Trademark & Service Mark Registrations and
  Applications & Domain Names

  	
   

  
	
  Schedule 5.21

  	
  Labor Matters

  	
   

  
	
  Schedule 5.22

  	
  List of Officers and Directors

  	
   

  
	
  Schedule 5.24

  	
  Propriety of Past Payments

  	
   

  
	
  Schedule 5.26

  	
  Consumer Complaints – General

  	
   

  
	
  Schedule 5.26(b)

  	
  Consumer Complaints – Housing Discrimination

  	
   

  
	
  Schedule 5.27

  	
  Insurance Coverage

  	
   

  



 


vi





















 


OPTION
AGREEMENT


 


Option Agreement, dated as of August 12, 2005, by and among Credit
Suisse First Boston (USA), Inc., a Delaware corporation (the “Optionee”), SPS Holding Corp., a Delaware
corporation (the “Company”), The PMI
Group, Inc., a Delaware corporation (“PMI”),
FSA Portfolio Management Inc., a New York corporation (“FSA”), and Greenrange Partners LLC, a
Connecticut limited liability company (“Greenrange”) (each of
Greenrange, PMI and FSA, individually an “Optionor”
and collectively the “Optionors”).  Certain capitalized terms used in this
Agreement have the meanings assigned to them in Article I.


 


WHEREAS, the Optionors are the record and beneficial owners in the
aggregate of 8,396,455 shares of common stock, par value $0.01 per share, of
the Company and 1,883,999 shares of Series C Preferred Stock, par value
$0.01 per share, of the Company (such common stock and preferred stock,
collectively, the “Option Shares”);


 


WHEREAS, as a condition and inducement to the willingness of Optionee’s
affiliate, DLJ Mortgage Capital, Inc., a Delaware corporation (“DLJ”), to enter into the Flow Servicing Rights
Purchase Agreement, dated as of January 28, 2005 (the “Purchase
Agreement”), between DLJ and Select Portfolio Servicing, Inc., a Utah
corporation (the “Servicer”), Optionee has requested, and Optionors have
agreed, to grant Optionee the Option; and


 


WHEREAS, the board of directors of the Company has approved, and deems
it advisable and in the best interests of the Company and its stockholders to
consummate, the acquisition of all outstanding shares of capital stock of the
Company by Optionee upon the exercise of the Option, which acquisition is to be
effected by the purchase of all the outstanding capital stock of the Company by
Optionee upon the terms and subject to the conditions set forth herein;


 


NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:


 


ARTICLE I




DEFINITIONS AND
INTERPRETATION


 


Section 1.1             Definitions. 
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context clearly requires otherwise:


 


“Accountants” shall have the meaning set forth in Section 3.3(c)(iv).


 


“Acquisition Proposal” shall
mean any proposal or offer made by any Person other than Optionee or any
Subsidiary of Optionee to acquire all or a substantial part of the business or
properties of the Company or any Company Subsidiary or capital stock of the
Company or any Company Subsidiary, whether by merger, tender offer, exchange
offer, sale of assets or similar transactions involving the Company or any
Subsidiary, division or operating or principal business unit of the Company; provided,
however, that an Acquisition Proposal shall not include


 





















 


any proposal
or offer by the Company or any Subsidiary of the Company to acquire outstanding
shares of Common Stock or Company Options not currently owned by an Optionor.


 


“Actual Closing Balance Sheet” 
shall mean the balance sheet referred to in Section 3.3(c).


 


“Affiliate” shall mean a Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified.  For purposes of this definition, the term “control”
of a Person means the possession, direct or indirect, of the power to (i) vote
50% or more of the voting securities of such Person or (ii) direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise, and the terms and phrases “controlling”, “controlled by”
and “under common control with” have correlative meanings.


 


“Agreement” or “this Agreement” shall mean this Option
Agreement, together with the Exhibits, Schedules and Appendices hereto and the
Disclosure Schedule.


 


“Associate” shall have the
meaning set forth in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended.


 


“Balance Sheet” shall mean the
most recent audited balance sheet of the Company and the Company Subsidiaries
included in the Financial Statements.


 


“Balance Sheet Date” shall mean
the date of the Balance Sheet.


 


“Budget” shall mean the most recent budget of the Company
delivered to the Optionee prior to the execution of this Agreement.


 


“Business Day” shall mean a day
other than Saturday, Sunday or any day on which banks located in the State of
New York are authorized or obligated to close.


 


“Cash Payment” shall mean the payment referred to in Section 3.3(c)(v).


 


“Certificate of Incorporation” shall mean the Amended and
Restated Certificate of Incorporation of SPS Holding Corp. as filed on September 30,
2004, with the Secretary of State of the State of Delaware.


 


“Closing” shall mean the closing
referred to in Section 3.1.


 


“Closing Balance Sheet” shall
mean the balance sheet referred to in Section 3.3(c)(v).


 


“Closing Cash Payment” shall
mean the payment referred to in Section 3.3(c)(i).


 


“Closing Date” shall have the
meaning set forth in Section 3.1.


 


“Code” shall mean the Internal
Revenue Code of 1986, as amended.


 


“Common Stock” shall mean the
common stock, par value $0.01, of the Company.


 


2





















 


“Company” shall mean SPS Holding
Corp., a Delaware corporation.


 


“Company Board of Directors”
shall mean the board of directors of the Company.


 


“Company Group” means any
combined, unitary, consolidated or other affiliated group within the meaning of
Section 1504 of the Code or otherwise, of which the Company or any Company
Subsidiary is or has been a member for federal, state or foreign tax purposes.


 


“Company Intellectual Property”
shall mean all Intellectual Property that is currently used in the business of
the Company or any Company Subsidiary or that is necessary to conduct the
business of the Company or the Company Subsidiaries as presently conducted or
as currently proposed to be conducted by the Company.


 


“Company Option” shall mean an
option to purchase any shares of the capital stock of the Company which has
been granted by the Company to any Person.


 


“Company Permits” shall mean all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are
necessary for the operation of the businesses of the Company and the Company
Subsidiaries, taken as a whole.


 


“Company Subsidiary” shall mean
each Person which is a Subsidiary of the Company.


 


“Computer Software” shall mean
computer software programs, other than pre-packaged or off-the-shelf software,
databases and all documentation related thereto.


 


“Consent Orders” shall mean, collectively, those federal and
state consent orders and class action settlements set forth on Schedule 5.6
of the Disclosure Schedule.


 


“Contingent Payment Agreement” shall mean that certain
Contingent Payment Agreement, dated as of the date hereof, by and among the
Servicer, the Optionee, Greenrange, PMI and FSA, a copy of which has been
attached hereto as Annex A.


 


“Copyrights” shall mean U.S. and
foreign registered and unregistered copyrights (including those in computer
software and databases), rights of publicity and all registrations and
applications to register the same.


 


“Credit Facility” shall have the meaning set forth in Schedule 5.14(a)(ii) of
the Disclosure Schedule.


 


“Customer Accommodation” shall have the meaning ascribed to such
term in the Contingent Payment Agreement.


 


“Designated Litigation Expenses” shall have the meaning ascribed
to such term in the Contingent Payment Agreement.


 


“Disclosure Schedule” shall mean
the disclosure schedule of even date herewith prepared and signed by the
Company and delivered to Optionee simultaneously with the execution hereof,
together with all Disclosure Schedule Supplements.


 


3





















 


“Disclosure Schedule Supplement” shall have the meaning set
forth in Section 7.4.


 


“DLJ” shall mean DLJ Mortgage Capital, Inc., a Delaware
corporation.


 


“DOJ” shall mean the Antitrust
Division of the United States Department of Justice.


 


“Encumbrances” shall mean any
and all Liens, options, claims, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever, other than restrictions on transfer arising
under applicable securities laws.


 


“Environmental Claim” shall mean
any claim, action, cause of action, investigation or notice (written or oral)
by any Person alleging actual or potential liability for investigatory, cleanup
or governmental response costs, compliance actions or costs, damages,
including, without limitation, natural resources injury or property damages, or
personal injuries, attorney’s fees or penalties relating to (i) the
presence, or release into the environment, of any Materials of Environmental
Concern at any location owned or operated by the Company or any Company
Subsidiary, or at any other location as the result of the operation of any
Company or Company Subsidiary business, now or in the past, or (ii) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.


 


“Environmental Law” shall mean
each federal, state, local and foreign law and regulation relating to
pollution, protection or preservation of human health or the environment
including ambient air, surface water, ground water, land surface or subsurface
strata, and natural resources, and including each law and regulation relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacturing, processing,
distribution, use, treatment, generation, storage, containment (whether above
ground or underground), disposal, transport or handling of Materials of
Environmental Concern, or the preservation of the environment or mitigation of
adverse effects thereon and each law and regulation with regard to record keeping,
notification, disclosure and reporting requirements respecting Materials of
Environmental Concern.


 


“ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended.


 


“ERISA Affiliate” shall mean any
trade or business, whether or not incorporated, that together with the Company
would be deemed a “single employer” within the meaning of Section 4001(b) of
ERISA.


 


“Estimated Cash Payment” shall mean the payment referred to in Section 3.3(b).


 


“Estimated Closing Balance Sheet” shall mean the balance sheet
referred to in Section 3.3(a).


 


“Exercise Date” shall mean the date any Optionor first receives
the Exercise Notice.


 


“Exercise Notice” shall have the meaning set forth in Section 3.1.


 


4





















 


“Exercise Price” shall have the meaning set forth in Section 2.3.


 


“Expiration Time” shall mean 5:00 p.m., Salt Lake City
time, on August 12, 2005.


 


“Federal Income Tax” means any
Tax imposed under Subtitle A of the Code.


 


“Fee Matrix” shall have the meaning set forth in Section 9.2(l).


 


“Final Determination” means (i) with
respect to Federal Income Taxes, a “determination” as defined in Section 1313(a) of
the Code or execution of an Internal Revenue Service Form 870-AD and, (ii) with
respect to Taxes other than Federal Income Taxes, any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period for the
filing of claims for refunds, amended returns or appeals from adverse
determinations).


 


“Financial Statements” shall
mean (a) the consolidated balance sheets of the Company and the Company
Subsidiaries as of December 31, 2004, 2003 and 2002, together with
consolidated statements of income, shareholders’ equity and cash flows for each
of the years then ended, all certified by Ernst & Young LLP,
independent certified public accountants, whose reports thereon are included
therein, and (b) an unaudited consolidated balance sheet of the Company
and the Company Subsidiaries as of June 30, 2005 and unaudited
consolidated statements of income, shareholders’ equity and cash flows for the
six month period then ended.


 


“Final Payment Amount” shall have the meaning ascribed to such
term in the Contingent Payment Agreement.


 


“FSA” shall mean FSA Portfolio Management Inc., a New York
corporation.


 


“FSA Additional Accretion Amount” shall mean an amount equal to
the sum of (i) $92,666.81 times the
number of calendar months during the period commencing on and including August 1,
2005, and ending on and including the Measurement Date and (ii) $3,088.89 times the number of calendar days during the period
commencing on and including the first day after the Measurement Date and ending
on and including the Closing Date.


 


“FTC” shall mean the United
States Federal Trade Commission.


 


“GAAP” shall mean United States
generally accepted accounting principles, applied on a consistent basis.


 


“Governmental Entity” shall mean
any supranational, national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or commission or
other authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, importing or other governmental or quasi-governmental
authority.


 


“Greenrange” shall mean Greenrange Partners LLC, a Connecticut
limited liability company.


 


5





















 


“HSR Act” shall mean the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.


 


“Indebtedness” shall mean (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (ii) any
other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations under financing leases, (iv) all
obligations in respect of acceptances issued or created, (v) all
liabilities secured by any lien on any property and (vi) all guarantee
obligations.


 


“Indemnification Threshold” shall have the meaning set forth in Section 11.2(f).


 


“Intellectual Property” shall
mean all of the following:  Trademarks,
Patents, Copyrights, Trade Secrets and Licenses.


 


“Key Employee” shall mean any executive officer of the Company
set forth on Schedule 1.1(a) hereto.


 


“Key Employee Contracts” shall mean the employment agreements,
sale agreements or offer letters between the Company, on the one hand, and a
Key Employee, on the other hand, set forth on Schedule 1.1(b) hereto.


 


“Knowledge of the Company”
concerning a particular subject, area or aspect of the Company’s or the Company
Subsidiary’s business or affairs and/or the business or affairs of a relevant
Company Subsidiary, shall mean (i) the actual knowledge of Matt
Hollingsworth after making a reasonable inquiry of the Key Employees, Kim
Stevenson, Michelle Simon and Greg Harmer as to the accuracy of the
representation and warranty in question and (ii) the actual knowledge,
without inquiry, of Bryan Marshall, John Pataky, Tim O’Brien, Brent Rasmussen,
Robert Holz, Craig Bullock, Kim Stevenson and Michelle Simon.


 


“Lease” shall mean each lease
pursuant to which the Company or any Company Subsidiary leases any real or
personal property, either as lessor or lessee (excluding leases relating solely
to personal property calling for rental or similar periodic payments not
exceeding $10,000 per annum), each of which is set forth on Schedule 5.12
of the Disclosure Schedule.


 


“Licenses” shall mean all
licenses and agreements pursuant to which the Company has acquired rights in or
to any Trademarks, Patents or Copyrights, or licenses and agreements pursuant
to which the Company has licensed or transferred the right to use any of the
foregoing.


 


“Lien” means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any kind
or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially the
same economic effect as any of the foregoing).


 


“Long-Term Incentive Plan” shall mean the Company’s Amended 1998
Long-Term Incentive Plan, as amended to date.


 


6





















 


“Losses” shall mean, without
duplication, any and all actual losses, costs, obligations, liabilities,
damages, settlement payments, awards, judgments, fines, penalties, damages,
deficiencies or other charges (including without limitation reasonable
attorneys’ fees and expenses and reasonable accountants’ fees and expenses); provided,
however, that notwithstanding anything in this Agreement to the
contrary, the term “Losses” shall not include any losses, costs, obligations,
liabilities, damages, settlement payments, awards, judgments, fines, penalties,
damages, deficiencies or other charges to the extent that such losses, costs,
obligations, liabilities, damages, settlement payments, awards, judgments, fines,
penalties, damages, deficiencies or other charges are reflected in or reserved
against in the Closing Balance Sheet (other than the Specified Reserves and the
Litigation Reserve Amount (as such term is defined in the Contingent Payment
Agreement)); provided, further, that such reserve amount has not
been reduced to zero as a result of prior losses, costs, obligations,
liabilities, damages, settlement payments, awards, judgments, fines, penalties,
damages, deficiencies or other charges that would be “Losses” hereunder but for
the first proviso of this definition.


 


“Material Adverse Effect” or “Material Adverse Change” shall mean any change
or changes, effect or effects, event or events, or circumstance or
circumstances, that individually or in the aggregate are or may reasonably be
expected to be materially adverse to (i) the assets, properties, business,
operations, income, or condition (financial or otherwise) of the Company and
the Company Subsidiaries, taken as a whole, other than any change, effect,
event, occurrence or state of facts relating to (a) the economy or the
financial markets in general, (b) the industry in which the Company and
its Subsidiaries operate in general and not specifically relating to the
Company and its Subsidiaries, (c) the announcement of this Agreement or
the transactions contemplated hereby or the identity of Optionee, (d) failure
of the Company or any Company Subsidiary to take any action that is restricted
by Section 7.1 and as to which Optionee does not consent; (e) changes
in applicable Laws or regulations after the date hereof, or (f) changes in
GAAP or regulatory accounting principles after the date hereof, or (ii) the
ability of the Company or the Optionors to perform their respective obligations
under this Agreement.


 


“Material Contract” shall have the meaning set forth in Section 5.14(b) hereof.


 


“Material Vendor Contract” shall have the meaning set forth in Section 5.14(a)(i) hereof.


 


“Materials of Environmental Concern”
shall mean chemicals; pollutants; contaminants; wastes; toxic or hazardous
substances, materials and wastes; petroleum and petroleum products; asbestos
and asbestos-containing materials; polychlorinated biphenyls; lead and
lead-based paints and materials; and radon.


 


“Measurement Date” shall have the meaning set forth in Section 3.1.


 


“Monthly Contingent Payment” shall have the meaning ascribed to
such term in the Contingent Payment Agreement.


 


“Mortgage Loans” shall have the meaning ascribed to such term in
the Contingent Payment Agreement.


 


“Mortgage Loan Servicing Error” shall have the meaning ascribed
to such term in the Contingent Payment Agreement.


 


7





















 


“MSRs” shall mean mortgage servicing rights.


 


“MSR Seller” shall mean Optionee’s
Affiliates that are licensed to purchase and sell subprime residential mortgage
loans, including DLJ.


 


“Multiemployer Plan” shall mean any “multiemployer plan,” as
defined in Section 4001(a)(3) of ERISA, which is maintained for
employees of the Company or any ERISA Affiliate.


 


“Objection” shall have the meaning set forth in Section 3.3(c)(iii).


 


“Option” shall have the meaning
set forth in Section 2.1.


 


“Optionee” shall mean Credit
Suisse First Boston (USA), Inc., a Delaware corporation.


 


“Optionee’s Environmental Expenditures” shall mean the lesser of
(i) $250,000 and (ii) the aggregate amount of Optionee’s Losses
arising from claims under Section 11.2(c) (exclusive of legal fees
incurred in connection with pursuing such claims).


 


“Optionee Indemnified Persons”
shall mean, from and after the Closing Date, (i) Optionee and each of its
Affiliates, and their respective officers, directors, employees, agents,
successors and assigns and (ii) the Company.


 


“Optionor” shall mean each of Greenrange, PMI and FSA.


 


“Option Shares” shall mean the 8,396,455 shares of Common Stock
and 1,883,999 shares of Series C Preferred Stock held in the aggregate by
the Optionors.


 


“Ozanne Agreement” shall mean the Agreement, dated as of September 8,
2004, between James Ozanne, PMI and FSA concerning certain rights of first
refusal, tag-along/bring-along rights and other matters relating to the capital
stock of the Company.


 


“Patents” shall mean issued U.S.
and foreign patents and pending patent applications, patent disclosures, and
any and all divisions, continuations, continuations-in-part, reissues,
reexaminations, and extensions thereof, any counterparts claiming priority
therefrom, utility models, patents of importation/confirmation, certificates of
invention and like statutory rights.


 


“Percentage Interest” shall mean (i) for PMI, 61.36500%; (ii) for
FSA, 37.40412%; and (iii) for Greenrange, 1.23088%.


 


“Permitted Liens” shall mean (a) mechanics’, carrier’s,
workmen’s, landlord’s, repairmen’s or other like Liens arising or incurred in
the ordinary course of business for sums not yet due and payable, (b) Liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business,
including Liens under Leases for personal property, (c) Liens arising
under a Credit Facility, (d) Liens for Taxes and other governmental
charges which are not due and payable or which may thereafter be paid without
penalty or which are being contested through appropriate administrative or judicial
proceeding, and (e) other imperfections of title, restrictions or
encumbrances, if any, which


 


8





















 


Liens,
imperfections of title, restrictions or encumbrances do not materially impair
the continued use and operation of the specific asset to which they relate.


 


“Person” shall mean a natural
person, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Entity or other entity or organization.


 


“Plan” shall mean each deferred
compensation and each incentive compensation, stock purchase, stock option and
other equity compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other “welfare” plan, fund or program (within the meaning of Section 3(1) of
ERISA); each profit-sharing, stock bonus or other “pension” plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company or by any
ERISA Affiliate, or to which the Company or an ERISA Affiliate is party,
whether written or oral, for the benefit of any director, employee or former
employee of the Company or any Company Subsidiary.


 


“PMI” shall mean The PMI Group, Inc., a Delaware
corporation.


 


“PMI Additional Accretion Amount” shall mean an amount equal to
the sum of (i) $390,500.19 times the
number of calendar months during the period commencing on and including August 1,
2005, and ending on and including the Measurement Date and (ii) $13,016.67
times the number of calendar days during
the period commencing on and including the first day after the Measurement Date
and ending on and including the Closing Date.


 


“Post-Closing Tax Period” means
any taxable period (or portion thereof) beginning after the close of business
on the Closing Date.


 


“Pre-Closing Tax Period” means
any taxable period (or portion thereof) ending on or before the close of
business on the Closing Date.


 


“Private Litigation” shall have the meaning ascribed to such
term in the Contingent Payment Agreement.


 


“Promissory Notes”
means the Promissory Note to PMI and the Promissory Note to Dexia.


 


“Promissory Note to Dexia” means the Subordinated Promissory
Note, dated as of September 30, 2004, issued by the Servicer to Dexia
Holdings, Inc.


 


“Promissory Note to PMI” means the Subordinated Promissory Note,
dated as of September 30, 2004, issued by the Servicer to PMI.


 


“Property Taxes” shall mean any real, personal and intangible
property Taxes.


 


9





















 


“Purchase Agreement” shall mean the Flow Servicing Purchase
Rights Agreement, dated as of January 28, 2005, between DLJ and the
Servicer.


 


“Real Property” shall mean all
real property that is owned or leased by the Company or any Company Subsidiary
or that is reflected as an asset of the Company or any Company Subsidiary on
the Balance Sheet, other than REO Property.


 


“Registration Rights Agreement” shall mean the Registration
Rights Agreement, dated as of March 31, 2000, in respect of the capital
stock of the Company.


 


“Regulatory Action” shall mean any action, suit or proceeding
brought against the Servicer by any Governmental Entity based, in whole or in
part, upon (i) a Mortgage Loan Servicing Error occurring prior to the
Closing Date, (ii) a failure by the Servicer to maintain prior to the
Closing Date any state or federal license required for the lawful operation of
its mortgage loan servicing business prior to the Closing Date or (iii) a
failure of the Servicer to maintain a physical presence in the State of
Pennsylvania prior to the Closing Date.


 


“Regulatory Payment”
shall mean (i) to the extent the Mortgage Loan Servicing Errors giving
rise to the Regulatory Action occurs (A) before the Closing Date or (B) both
before the Closing Date and during the 180-day period immediately after the
Closing Date, 100% of all Losses (which shall include, for purposes of this
definition, any reverse and reimbursement payments made by the Servicer of fees
or other charges) based upon such Mortgage Loan Servicing Errors paid by the
Servicer arising out of such Regulatory Action; (ii) to the extent the
Mortgage Loan Servicing Errors giving rise to the Regulatory Action occurs both
before the Closing Date and after the 180-day period immediately after the
Closing Date, 50% of all Losses (which shall include, for purposes of this
definition, any reverse and reimbursement payments made by the Servicer of fees
or other charges) based upon such Mortgage Loan Servicing Errors paid by the
Servicer arising out of such Regulatory Action; (iii) to the extent that a
failure by the Servicer to maintain prior to the Closing Date any state or
federal license required for the lawful operation of its mortgage loan
servicing business prior to the Closing Date gives rise to the Regulatory
Action, 100% of all Losses based upon such failure paid by the Servicer arising
out of such Regulatory Action; and (iv) to the extent that a failure of
the Servicer to maintain a physical presence in the State of Pennsylvania prior
to the Closing Date gives rise to the Regulatory Action, 100% of all Losses
based upon such failure paid by the Servicer arising out of such Regulatory
Action;  provided, however,
that Regulatory Payments shall not include any Losses that arise out of any
Customer Accommodation, Customer Reversal or Private Litigation.


 


“REO Property” shall mean that real property owned by the
Company or any Company Subsidiary that was acquired through foreclosure.


 


“Revocation Notice” shall have the meaning set forth in Section 3.1(b).


 


“Securities Act” shall mean the
Securities Act of 1933, as amended.


 


“Series C Preferred Stock”
shall mean the Series C Convertible Preferred Stock, par value $0.01 per
share, of the Company.


 


“Servicer” shall mean Select
Portfolio Servicing, Inc., a Utah corporation.


 


10





















 


“Servicing Agreement” shall have the meaning ascribed to such
term in the Contingent Payment Agreement.


 


“Shareholders Agreement” shall mean the Fourth Amended and
Restated FCH Shareholders Agreement, dated as of March 31, 2000, by and
among Thomas D. Basmajian, Kim A. Stevenson, TATS, GE Capital Equity
Investments, Inc., FGIC Services, Inc., PMI Mortgage Insurance Co.,
FSA, Nomura Principal Capital Holding Trust and the Company, as amended on June 27,
2002, July 29, 2003 and August 23, 2004.


 


“Shareholder Documents” shall mean the (i) Shareholders
Agreement, (ii) the Registration Rights Agreement and (iii) the
Ozanne Agreement.


 


“Signing Date Fee Matrix” shall mean the Fee Matrix of the Servicer
as it exists on the date hereof, a copy of which is attached hereto as Exhibit B.


 


“Specified Disputes” shall mean the matters set forth in Schedule 1.1(c) hereto.


 


“Specified Indemnification Obligations” shall have the meaning
set forth in Section 11.2(b).


 


“Specified Private Litigation Matter” shall mean a Private
Litigation that is initially filed during 2006 or 2007 by or on behalf of a
consumer in a court of competent jurisdiction and for which written notice of
such Private Litigation (together with a copy of the consumer’s complaint) is
delivered to the Optionors prior to or on December 31, 2007 in accordance
with Section 12.4.


 


“Specified Real Property” shall mean (i) 3815 South West
Temple, Salt Lake City, Utah, (ii) 92 West 3900 South, Salt Lake City,
Utah, (iii) 3839 South West Temple, Salt Lake City, Utah, (iv) 3902
S. State Street, Salt Lake City, Utah and (v) 330 South Warminster Rd.,
Hatboro, Pennsylvania.


 


“Specified Reserves” shall mean an amount (expressed as a
positive number) equal to the reserves reflected in the Estimated Closing
Balance Sheet for (i) the Specified Disputes, (ii) the Specified Tax
Matters and (iii) possible Regulatory Actions.  As of June 30, 2005, the reserves
reflected in the balance sheet of the Company for (i) the Specified
Disputes was $1,835,000, (ii) the Specified Tax Matters was $1,775,000 and
(iii) possible Regulatory Actions was $579,000.  The parties agree that the reserves for the
Specified Disputes, the Specified Tax Matters and Regulatory Actions reflected
in the Actual Closing Balance Sheet and the Closing Balance Sheet shall be the
same amounts as reflected in the Estimated Closing Balance Sheet.


 


“Specified Tax Matters” shall mean the matters set forth in
Sections 8.3(b)(i) and (ii) of this Agreement.


 


“Specified Tax Reserve” shall mean an amount equal to the
reserves reflected in the Estimated Closing Balance Sheet for the Specified Tax
Matters.


 


“Straddle Period” shall mean any taxable period that includes
(but does not end on) the Closing Date.


 


11





















 


“Subsequent Designated Agreement” shall have the meaning
ascribed to such term in the Contingent Payment Agreement.


 


“Subsidiary” shall mean, with
respect to any Person, any corporation or other organization, whether
incorporated or unincorporated, of which (a) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person and/or by any one or more of its
Subsidiaries, or (b) such Person or any other Subsidiary of such Person is
a general partner (excluding any such partnership where such Person or any
Subsidiary of such Person does not have a majority of the voting interest in
such partnership).


 


“Tax” or “Taxes” shall mean all taxes, charges, fees,
duties, levies, penalties or other assessments imposed by any federal, state, local
or foreign governmental authority, including income, gross receipts, excise,
property, sales, gain, use, license, custom duty, unemployment, capital stock,
transfer, franchise, payroll, withholding, social security, minimum estimated,
profit, gift, severance, value added, disability, premium, recapture, credit,
occupation, service, leasing, employment, stamp and other taxes, and shall
include interest, penalties or additions attributable thereto or attributable
to any failure to comply with any requirement regarding Tax Returns.


 


“Tax Benefit” with respect to
any event or adjustment for any Person means the positive excess, if any, of
the Tax liability of such Person without regard to such event or adjustment
over the Tax liability of such Person taking into account such event or
adjustment, with all other circumstances remaining unchanged.


 


“Tax Claim” shall have the
meaning set forth in Section 8.7.


 


“Tax Cost” with respect to any
event or adjustment for any Person means the positive excess, if any, of the
Tax liability of such Person taking such event or adjustment into account over
the Tax liability of such Person without regard to such event or adjustment,
with all other circumstances remaining unchanged.


 


“Tax Return” shall mean any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any such document prepared on a
consolidated, combined or unitary basis and also including any schedule or
attachment thereto, and including any amendment thereof.


 


“Taxing Authority” means any
governmental or regulatory authority, body or instrumentality exercising any
authority to impose, regulate or administer the imposition of Taxes.


 


“Title IV Plan” shall mean a
Plan that is subject to Section 302 or Title IV of ERISA or Section 412
of the Code.


 


“Trademarks” shall mean U.S. and
foreign registered and unregistered trademarks, trade dress, service marks,
logos, trade names, corporate names and all registrations and applications to
register the same.


 


12





















 


“Trade Secrets” shall mean all
categories of trade secrets as defined in the Uniform Trade Secrets Act
including business information.


 


“Transactions” shall mean all
the transactions provided for or contemplated by this Agreement or the
Contingent Payment Agreement.


 


“Transfer Tax” or “Transfer Taxes” means any federal, state,
county, local, foreign and other sales, use, transfer, conveyance, documentary
transfer, recording or other similar tax, fee or charge imposed upon the sale,
transfer or assignment of property or any interest therein or the recording
thereof, and any penalty, addition to Tax or interest with respect thereto.


 


“Voting Debt” of any Person
shall mean indebtedness having the right to vote in the election of the Board
of Directors (or comparable body) of such Person and debt convertible into
securities having such rights.


 


Section 1.2             Interpretation. 
When a reference is made in this Agreement to a section or article,
such reference shall be to a section or article of this Agreement
unless otherwise clearly indicated to the contrary.


 


(a)         Whenever
the words “include” “includes” or “including” are used in this Agreement they
shall be deemed to be followed by the words “without limitation.”


 


(b)        The
words “hereof”, “herein” and “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise
specified.


 


(c)         The
meaning assigned to each term defined herein shall be equally applicable to
both the singular and the plural forms of such term, and words denoting any
gender shall include all genders.  Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.


 


(d)        A
reference to any party to this Agreement or any other agreement or document
shall include such party’s successors and permitted assigns.


 


(e)         A
reference to any legislation or to any provision of any legislation shall
include any amendment to, and any modification or reenactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.


 


ARTICLE II




THE OPTION


 


Section 2.1             Grant of Option. 
Subject to the terms and conditions of this Agreement, each of the
Optionors, severally and not jointly, hereby grants to Optionee an exclusive,
irrevocable and nontransferable option (collectively, the “Option”) to purchase all, but not less


 


13





















 


than all, of
the shares of Common Stock and Series C Preferred Stock set forth opposite
such Optionor’s name on Exhibit A hereto free and clear of all
Encumbrances.


 


Section 2.2             Term of Option. 
Optionee may exercise the Option, in whole but not in part, at any time
prior to the Expiration Time.  If the
Option is not validly exercised prior to the Expiration Time, the Option shall
terminate and be of no further force and effect without the need for any party
hereto to take any other or further action.


 


Section 2.3             The Exercise Price.  The aggregate purchase price for the Option
Shares (the “Exercise Price”) shall be the sum of (a) the Cash
Payment, which shall be paid by the Optionee to the Optionors in accordance
with Sections 2.4 and 3.3 hereof, plus (b) the Monthly Contingent
Payments, which shall be paid by the Optionee (or the Servicer on behalf of the
Optionee) to the Optionors in accordance with Section 2.4 hereof and the
terms of the Contingent Payment Agreement, plus (c) the Final Payment
Amount, which shall be paid by the Optionee (or the Servicer on behalf of the Optionee)
to the Optionors in accordance with Section 2.4 hereof and the terms of
the Contingent Payment Agreement.


 


Section 2.4             Allocation of the Exercise Price.  Optionee shall pay (or cause the Servicer to
pay on the Optionee’s behalf) the Exercise Price to the Optionors as set forth
below:


 


(a)           First, before any payment shall be made pursuant to Section 2.4(b),
(i) PMI shall be paid an amount equal to the sum of (A) $38,779,551
and (B) the PMI Additional Accretion Amount and (ii) FSA shall be
paid an amount equal to the sum of (A) $9,202,499 and (B) the FSA
Additional Accretion Amount.  Each of the
Optionors and the Company agree that Section 6(c) of the Certificate
of Incorporation shall be deemed to be satisfied upon the receipt by PMI and
FSA of the payments required by this Section 2.4(a).


 


(b)           Second, after the payment in full of all amounts required
to be paid pursuant to Section 2.4(a), the Optionors shall be paid the
balance of the Exercise Price in proportion to such Optionor’s Percentage
Interest.


 


ARTICLE III




THE CLOSING


 


Section 3.1             Exercise of the Option and the Closing.  (a) The Optionee shall exercise the
Option by providing each Optionor and the Company with a written notice of such
election prior to the Expiration Time (the “Exercise Notice”), which
notice shall specify the date, which shall be a month end for the Company, on
which calculations for the Cash Payment shall be based (the “Measurement
Date”); provided, however, that the date so specified must be
no later than September 30, 2005. 
The Exercise Notice shall be provided to the Optionors not less than ten
(10) Business Days prior to the Measurement Date.  If
the Optionee provides the Exercise Notice to the Optionors, then, except as set
forth in Section 3.1(b), such notice shall constitute an irrevocable
commitment by the Optionee to purchase the Option Shares for the Exercise Price
in accordance with the terms of this Agreement, subject only to the
satisfaction or waiver of the conditions to Closing set forth in Article IX.  The Closing shall take place on the
Business Day immediately following the Measurement Date.  If the conditions to Closing set forth in Article
IX


 


14





















 


have not been
satisfied or waived on the Business Day immediately following such Measurement
Date, then the Measurement Date shall be changed to the next following month
end for the Company and the Closing shall take place on the Business Day
immediately following such new Measurement Date.  The closing of the sale of the Option Shares
by the Optionors to Optionee (the “Closing”)
shall take place at the offices of Cadwalader, Wickersham & Taft LLP,
One World Financial Center, New York, New York 10281 at 10:00 a.m., New
York City time, on the Business Day immediately following the Measurement Date
unless another date or place is agreed upon in writing by each of the parties
hereto.  The date upon which the Closing
occurs is referred to as the “Closing Date”.


 


(b)        Notwithstanding
the provisions of Section 3.1(a), in the event that the Company delivers
to the Optionee a Disclosure Schedule Supplement at any time after the
Optionee has delivered an Exercise Notice, then the Optionee may, at any time
prior to 5:00 p.m., Salt Lake City time, on the fifth (5th)
Business Day following the date of delivery to the Optionee of such Disclosure Schedule Supplement
(“Revocation Expiration Time”), revoke such Exercise Notice by
delivering to each of PMI and FSA a written notice (a “Revocation Notice”)
prior to the Revocation Expiration Time stating that the Optionee has elected
to revoke such Exercise Notice pursuant to this Section 3.1(b).  In addition, a copy of the Revocation Notice
shall be sent by email to counsel to PMI and FSA at the email addresses set
forth in Section 12.4 prior to the Revocation Expiration Time.  If the Optionee provides the Revocation
Notice to the Optionors and their counsel in accordance with this Section 3.1(b),
any previously delivered Exercise Notice shall be void and shall have no
further force or effect.  The delivery of
a Revocation Notice shall not terminate this Agreement, and the Optionee shall
have the right to deliver a new Exercise Notice in accordance with Section 3.1(a) at
any time prior to the Expiration Time.


 


Section 3.2             Deliveries by Optionors.  At the Closing, each Optionor shall deliver
to Optionee:


 


(a)         certificates
representing the number of shares of Common Stock and Series C Preferred
Stock set forth opposite such Optionor’s name on Exhibit A, each such
certificate to be accompanied by a separate stock power endorsed in blank and
duly and validly executed by such Optionor;


 


(b)        executed
copies of the consents referred to in Section 7.3(c) hereof;


 


(c)         the
officers’ certificates referred to in Sections 9.2(b) and 9.2(c) hereof;
and


 


(d)        any
other certifications which may be reasonably required under applicable law
stating that no Taxes are due to any taxing authority for which Optionee could
have liability to withhold and pay with respect to the transfer of Option
Shares to Optionee pursuant to this Agreement.


 


Section 3.3             Deliveries and Payment by Optionee.


 


(a)         Estimated
Closing Balance Sheet.  At least ten (10) days
prior to the Closing, the Company shall deliver to the Optionee and each
Optionor an estimated consolidated balance sheet of the Company as of the close
of business on the Measurement Date with the estimated


 


15





















 


consolidated
book value of the Company reflected therein (“Estimated Closing Balance
Sheet”).  The Company shall prepare
the Estimated Closing Balance Sheet in the same manner as the consolidated
balance sheet comprising part of the financial statements issued by the Company
and audited by Ernst & Young LLP as of December 31, 2004.


 


(b)        Estimated
Cash Payment.


 


(i)            At
the Closing, Optionee shall deliver to each Optionor an amount equal to such
Optionor’s allocable portion of the Estimated Cash Payment (which shall be
allocated in accordance with Section 2.4 hereof) by transfer of
immediately available funds to such account at such bank as such Optionor shall
direct, which amount is subject to adjustment as provided in Section 3.3(c).


 


(ii)           The “Estimated
Cash Payment” shall be an amount equal to (A) the consolidated book value
of the Company on the Measurement Date, as reflected in the Estimated Closing
Balance Sheet, minus (B) the consolidated book
value, as of the Measurement Date, of all MSRs (including servicing assets and
servicing liabilities) under Servicing Agreements and Subsequent Designated
Agreements, minus (C) $62,500 (representing one-half
of the fee paid by the Optionee to the Federal Trade Commission in connection
with the pre-merger notice filing required by the HSR Act), plus (D) $15,500,000, plus (E) the
Specified Reserves.  No MSRs delivered by
the MSR Seller after November 30, 2004 shall be considered MSRs under Servicing
Agreements or Subsequent Designated Agreements.


 


(c)         Actual
Closing Balance Sheet and Closing Cash Payment.


 


(i)            The
“Closing Cash Payment” shall be an amount
equal to (A) the consolidated book value of the Company on the Measurement
Date, as reflected in the Actual Closing Balance Sheet, minus
(B) the consolidated book value, as of the Measurement Date, of all MSRs
(including servicing assets and servicing liabilities) under Servicing Agreements
and Subsequent Designated Agreements, minus (C) $62,500
(representing one-half of the fee paid by the Optionee to the Federal Trade
Commission in connection with the pre-merger notice filing required by the HSR
Act), plus (D) $15,500,000, plus (E) the Specified Reserves.  No MSRs delivered by the MSR Seller after November 30,
2004 shall be considered MSRs under Servicing Agreements or Subsequent
Designated Agreements.


 


(ii)           As
soon as practicable after the Closing Date but in no event later than 30 days
thereafter, the Optionee shall deliver to each Optionor the proposed actual
consolidated balance sheet of the Company as of the close of business on the
Measurement Date (“Actual Closing Balance Sheet”), with the actual
consolidated book value of the Company as of the Measurement Date reflected
therein, together with a computation of the proposed Closing Cash Payment and a
certificate of the Chief Financial Officer of the Company stating that such
Actual Closing Balance Sheet and Closing Cash Payment are true and correct and
prepared on the basis described herein. 
The Optionee shall prepare the Actual Closing Balance Sheet in the same
manner as the


 


16





















 


consolidated balance sheet comprising part of
the financial statements issued by the Company and audited by Ernst &
Young LLP as of December 31, 2004.


 


(iii)          The
Optionors and their respective counsel, accountants and other representatives
shall have full access to all relevant accounting, financial and other records
of the Company and the Company Subsidiaries reasonably requested in connection
with the preparation, confirmation or review of the Actual Closing Balance
Sheet and the calculation of the Closing Cash Payment.  The Company and the Optionee shall make
available to the Optionors, and their respective counsel, accountants and other
representatives, such of their personnel as any of the Optionors may reasonably
request in connection with the preparation, confirmation or review of the
Actual Closing Balance Sheet and calculation of the Closing Cash Payment.


 


(iv)          In
the event that either PMI or FSA does not agree with the amount of the proposed
Closing Cash Payment, such Optionor may deliver to Optionee (with a copy to
each other Optionor) a notice objecting to the amount of such payment (an “Objection”)
not later than thirty (30) days after the date the Optionee delivers the Actual
Closing Balance Sheet to the Optionors. 
If either PMI or FSA delivers an Objection to Optionee in accordance
with time limits set forth in the preceding sentence, PMI, FSA and the Optionee
shall negotiate in good faith with a view to resolving the dispute and arriving
at a mutually agreed amount for the Closing Cash Payment.  If such negotiations fail to resolve the
dispute within thirty (30) days after the date the Objection was delivered to
Optionee, the dispute shall be submitted to Ernst & Young LLP (or such
other “Big Four” accounting firm as is mutually agreed to by the Optionee, PMI
and FSA) (the “Accountants”) for final and exclusive resolution.  The Company and the Optionee shall cooperate
in good faith with the Accountants and shall afford the Accountants and their
representatives full access to all relevant accounting, financial and other
records of the Company and the Company Subsidiaries reasonably requested in
connection with the preparation, confirmation or review of the Actual Closing
Balance Sheet and the calculation of the Closing Cash Payment.  The Company and the Optionee shall make
available to the Accountants and their representatives such of their personnel
as the Accountants may reasonably request in connection with the preparation,
confirmation or review of the Actual Closing Balance Sheet and calculation of
the Closing Cash Payment.  The
Accountants shall afford each of PMI, FSA and the Optionee and their respective
representatives the opportunity to present their positions as to the dispute
and the calculation of the Closing Cash Payment (which opportunity shall not
extend for more than thirty (30) days after the expiration of the thirty (30)
day period described in the third sentence of this Section 3.3(c)(iv)).  Each presentation shall include a statement
of the Closing Cash Payment proposed by such party and shall be accompanied by
reasonably detailed supporting documentation. 
No later than ten (10) days after the completion of the
presentations to the Accountants by PMI, FSA and the Optionee of their
respective positions on the Closing Cash Payment, the Accountants shall deliver
their decision with respect to the actual Closing Cash Payment (which shall
not, under any circumstances, be less than the amount that was originally
proposed by the Optionee nor more than the largest amount that was proposed by
any of the Optionors), which decision shall be in writing and shall include a
reasonably detailed description of the basis for such determination.  The Accountants’ determination of the actual
Closing Cash


 


17





















 


Payment shall be final and binding upon all
parties hereto.  The fees, costs and
expenses of the Accountants in connection with any such determination shall be
borne by the Optionee if the Closing Cash Payment adopted by the Accountants is
greater than the Optionee’s originally proposed Closing Cash Payment by
$250,000 or more and shall otherwise be borne by the Optionors in proportion to
such Optionor’s Percentage Interest.  The
Accountants’ decision may be enforced in any state or federal court of
competent jurisdiction.


 


(v)           If
neither PMI nor FSA delivers an Objection to the Optionee in accordance with Section 3.3(c)(iv),
then the Closing Cash Payment proposed by the Optionee shall be deemed agreed
to by the Optionors.  The Closing Cash
Payment, either as agreed to or determined pursuant to this Section 3(c),
shall be referred to as the “Cash Payment” and the Actual Closing
Balance Sheet, either as agreed to or determined pursuant to this Section 3(c),
shall be referred to as the “Closing Balance Sheet.”  If the Cash Payment:


 


(A)          is less than the Estimated
Cash Payment, Optionors shall pay the amount of such shortfall to the Optionee
in proportion to such Optionor’s Percentage Interest, and


 


(B)           is more than the
Estimated Cash Payment, the Optionee shall pay the amount of such excess to
Optionors in proportion to such Optionor’s Percentage Interest


 


not later than the earlier of (I) the fifth Business Day following the
agreement or determination of the Cash Payment or (II) thirty (30) days
after the date the Optionee delivers the Actual Closing Balance Sheet to the
Optionors if no Objection is delivered to the Optionee, together with interest
on such shortfall or excess from the Closing Date to but not including the date
of payment calculated at the U.S. Prime Rate as published by The Wall Street Journal on the Closing Date.  Payments pursuant to this paragraph shall be
made by wire transfer of immediately available funds to the accounts designated
by the Optionee or Optionors, as the case may be.


 


(d)        At
the Closing, the Servicer shall pay, and the Optionee and the Company shall
cause to be paid, to (i) PMI all amounts outstanding under the Promissory
Note to PMI as of the Closing Date and (ii) Dexia Holdings, Inc. all
amounts outstanding under the Promissory Note to Dexia as of the Closing Date,
in each case by transfer of immediately available funds to such account of such
bank as PMI and Dexia Holdings, Inc., as the case may be, shall direct.


 


ARTICLE IV




REPRESENTATIONS
AND WARRANTIES OF THE OPTIONORS


 


Each Optionor, severally and not jointly, represents and warrants to
Optionee that all of the statements contained in this Article IV, solely
insofar as such statements relate to such Optionor, are true and correct as of
the date of this Agreement (or, if made as of a specified date, 


 


18





















 


as of such
date) and will be true and correct as of the Closing Date as though made on the
Closing Date.


 


Section 4.1             Share Ownership. 
Such Optionor is the record and beneficial owner of the number of shares
of Common Stock and Series C Preferred Stock set forth opposite such
Optionor’s name on Exhibit A hereto. 
Except for the Promissory Notes, such Optionor owns no securities issued
by, or other obligations of, the Company or any Company Subsidiary which are
not listed on Exhibit A hereto. 
Except for the Shareholder Documents to which such Optionor is a party,
such Optionor is not a party to any voting trust or other voting agreement or
understanding with respect to the voting of capital stock of the Company.


 


Section 4.2             Legal Power; Organization; Qualification of Optionors.  Such Optionor is a legal entity of the type
set forth opposite such Optionor’s name on Exhibit A hereto.  Such Optionor has been duly organized, and is
validly existing and in good standing, under the laws of its jurisdiction of
formation, has all requisite power and authority to execute and deliver this
Agreement and to consummate the Transactions, and has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of this Agreement.


 


Section 4.3             Binding Agreement.  This Agreement has been duly executed and
delivered by such Optionor and, assuming due and valid authorization, execution
and delivery by the Company and the Optionee, this Agreement constitutes a legal,
valid and binding obligation of such Optionor, enforceable against such
Optionor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of creditors’
rights generally and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.


 


Section 4.4             No Conflict or Default.  Neither the execution and delivery of this
Agreement nor the consummation by such Optionor of any of the Transactions will
result in a violation of, or a default under, or conflict with, or require any
consent, approval or notice under, any contract, trust, commitment, agreement,
obligation, understanding, arrangement or restriction of any kind to which such
Optionor is a party or by which such Optionor is bound or to which the Option
Shares owned by such Optionor are subject, except as provided in the
Shareholder Documents and the Certificate of Incorporation.  Consummation by such Optionor of the
Transactions will not violate, or require any consent, approval or notice
under, any provision of any judgment, order, decree, statute, law, rule or
regulation applicable to such Optionor or the Option Shares owned by such
Optionor, except for any necessary filing under the HSR Act and any filing with or notice to the Federal Reserve Board.


 


Section 4.5             Ownership and Possession of Option Shares.  The Option Shares owned by such Optionor and
the certificates representing such Option Shares are now, and at all times
during the term hereof shall be, owned by such Optionor and held by such
Optionor, or by a nominee or custodian for the sole and exclusive benefit of
such Optionor, free and clear of all Encumbrances whatsoever.


 


19





















 


Section 4.6             Good Title Conveyed.  The stock powers, endorsements, assignments
and other instruments to be executed and delivered by such Optionor to Optionee
at the Closing will be valid and binding obligations of such Optionor,
enforceable in accordance with their respective terms, and will effectively
vest in Optionee good, valid and marketable title to all the Option Shares to
be transferred to Optionee by such Optionor pursuant to and as contemplated by
this Agreement, free and clear of all Encumbrances.


 


ARTICLE V


 


REPRESENTATIONS
AND WARRANTIES OF THE COMPANY


 


Except as specifically set forth in the
Disclosure Schedule prepared and signed by the Company and delivered to
Optionee simultaneously with the execution hereof, the Company represents and
warrants to Optionee that the statements contained in this Article V are
true and correct as of the date of this Agreement (or, if made as of a
specified date, as of such date), and will be true and correct as of the
Closing Date as though made on the Closing Date.  Each exception set forth in the Disclosure Schedule and
each other response to this Agreement set forth in the Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual section of this Agreement and, except as otherwise specifically
stated with respect to such exception, relates only to such section; provided,
however, that any fact, matter or condition disclosed in any section of
such Disclosure Schedule in such a way as to make its relevance to a
representation, warranty or covenant or representations, warranties or
covenants made elsewhere in this Agreement or information called for by another
section of such Disclosure Schedule reasonably apparent shall be
deemed to be an exception to such representation, warranty or covenant or
representations, warranties or covenants or to be disclosed on such other section of
such Disclosure Schedule notwithstanding the omission of a reference or
cross reference thereto.


 


Section 5.1             Authorization; Validity of Agreement; Company Action.  The Company has full corporate power and
authority to execute and deliver this Agreement and the Contingent Payment
Agreement, and to consummate the Transactions. 
The execution, delivery and performance by the Company of this Agreement
and the Contingent Payment Agreement and the consummation of the Transactions
have been duly authorized by the Company Board of Directors, and no other
corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement or the Contingent
Payment Agreement or the consummation of the Transactions.  No vote of, or consent by, the holders of any
class or series of capital stock issued by the Company is necessary to
authorize the execution and delivery by the Company of this Agreement or the
Contingent Payment Agreement or the consummation of the Transactions.  This Agreement has been duly executed and
delivered by the Company and, assuming due and valid authorization, execution and
delivery hereof by the Optionors and the Optionee, this Agreement is a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforcement of creditors’ rights
generally and (ii) the availability of the remedy of specific performance
or injunctive or other forms of equitable relief


 


20





















 


may be subject
to equitable defenses and would be subject to the discretion of the court
before which any proceeding therefor may be brought.


 


Section 5.2             Other Board Approvals Regarding Transactions.  The Company Board of Directors has (i) authorized
the Company’s officers to waive any rights the Company may have under any
agreement or otherwise to object to the granting of the Option to Optionee and
the transfer to Optionee of any Option Shares held by the Optionors and (ii) consented
to the granting of the Option to Optionee and the transfer to Optionee of all
such Option Shares, and none of the aforesaid actions by the Company Board of
Directors has been amended, rescinded or modified.  No state takeover statute is applicable to
the Transactions.


 


Section 5.3             Capitalization. 
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par
value $0.01 per share.  As of the date
hereof, (i)  8,396,455 shares of Common Stock are issued and outstanding
(excluding shares held in the treasury of the Company), (ii) 1,883,999
shares of Series C Preferred Stock are issued and outstanding, (iii) no
shares of Common Stock or Series C Preferred Stock are owned of record by
any Person who is not an Optionor, (iv) 1,228,284 shares of Common Stock
or Series C Preferred Stock are issued and held in the treasury of the
Company, (v) other than the Series C Preferred Stock, no shares of
preferred stock are issued or outstanding, and (vi) 760,000 shares of
Common Stock are reserved for issuance upon exercise of Company Options under
the Long-Term Incentive Plan.  As of the
date hereof, there are outstanding Company Options to purchase 299,737 shares
of Common Stock.  All the outstanding
shares of the Company’s capital stock are, and all shares of Common Stock which
may be issued pursuant to the exercise of outstanding Company Options will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. 
There is no Voting Debt of the Company or any Company Subsidiary issued
and outstanding.  Except as set forth
above, as of the date hereof, (i) there are no shares of capital stock of
the Company authorized, issued or outstanding; (ii) there are no existing
options, warrants, calls, pre emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any Company Subsidiary,
obligating the Company or any Company Subsidiary to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity or debt interest in, the Company or any Company
Subsidiary or securities convertible into or exchangeable for such shares or
equity interests, or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment and (iii) there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Common Stock, or other
capital stock of the Company, or any Company Subsidiary or Affiliate of the
Company or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Company Subsidiary or any other
entity.  Except as set forth above,
during the period from the date hereof to the Closing Date, the Company has not
issued or committed to issue any shares of Common Stock or Series C
Preferred Stock or any options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any Company Subsidiary, obligating the Company or any Company Subsidiary to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity or debt


 


21





















 


interest in,
the Company or any Company Subsidiary or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any Company Subsidiary to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment.


 


(b)        Other
than the Shareholder Documents, there are no voting trusts or other agreements
or understandings to which any Optionor, the Company or any Company Subsidiary
is a party with respect to the voting of the capital stock of the Company or
any of the Company Subsidiaries.


 


(c)         Following
the Closing Date, no holder of Company Options will have any right to receive
shares of capital stock or other securities issued by the Company or any
Company Subsidiary upon the exercise of Company Options.


 


Section 5.4             Organization; Qualification of Company.  The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation; (ii) has full corporate power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns; and (iii) is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction in which such
qualification is required.  The Company
has heretofore delivered to Optionee complete and correct copies of the
certificate of incorporation and by-laws of the Company as presently in effect.


 


Section 5.5             Subsidiaries and Affiliates.  The Disclosure Schedule sets forth the
name and jurisdiction of incorporation of each Company Subsidiary.  The Company does not own, directly or
indirectly, any capital stock or other equity securities of any corporation
other than Company Subsidiaries or have any direct or indirect equity or
ownership interest in any business other than in the Company Subsidiaries or in
publicly traded securities constituting less than five percent of the
outstanding equity of the issuing entity or subordinated or residual interests
in pools of mortgage-backed securities. 
All the outstanding capital stock of each Company Subsidiary is owned
directly or indirectly by the Company free and clear of all Encumbrances and
all material claims or charges of any kind, and is validly issued, fully paid
and nonassessable.  Each Company
Subsidiary (i) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or formation; (ii) has full
corporate, limited liability company or partnership power and authority to
carry on its business substantially as it is now being conducted and to own the
properties and assets it now owns; and (iii) is duly qualified or licensed
to do business as a foreign corporation, limited liability company or limited
partnership in good standing in every jurisdiction in which such qualification
is required, except where such failure to be duly qualified or licensed would
not have a Material Adverse Effect.  The
Company has heretofore delivered to Optionee complete and correct copies of the
certificate of incorporation and by-laws of each Company Subsidiary, as
presently in effect.


 


Section 5.6             Consents and Approvals; No Violations.  Except for the Consent Orders and otherwise
as set forth on Schedule 5.6 of the Disclosure Schedule and for the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the HSR Act, state securities or
blue sky laws and state mortgage banking or


 


22





















 


collection
agency laws, none of the execution, delivery or performance of this Agreement
or the Contingent Payment Agreement by the Company, the consummation by the
Company of any of the Transactions or compliance by the Company with any of the
provisions hereof or thereof will (i) conflict with or result in any
breach of any provision of the certificate of incorporation, the by-laws or
similar organizational documents of the Company or any Company Subsidiary, (ii) require
the Company or any Company Subsidiary to make any filing with, or obtain any
permit, authorization, consent or approval of, any Governmental Entity or other
Person (including consents from parties to loans, contracts, leases and other
agreements to which the Company or any Company Subsidiary is a party), (iii) require
any consent, approval or notice under, or result in a violation or breach of,
or constitute (with or without due notice or the passage of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any Material Contract or restriction of any kind by which
the Company is bound, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any Company
Subsidiary or any of their properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, impair in any
material respect the ability of Company or any Company’s Subsidiary to
consummate the Transactions or which arise from the regulatory status of the
Optionee or any of its Affiilates.


 


Section 5.7             Financial Statements.  The Company has delivered to the Optionee
true and correct copies of the Financial Statements.  The Financial Statements have been prepared
from the books and records of the Company and the Company Subsidiaries, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be stated in the notes thereto), and fairly
present the consolidated financial position and the consolidated results of
operations and cash flows of the Company and the Company Subsidiaries as of the
times and for the periods referred to therein (subject, in the case of
unaudited statements, to normally recurring year-end audit adjustments which
are not material either individually or in the aggregate).


 


Section 5.8             No Undisclosed Liabilities.  To the Knowledge of the Company, except (a) as
disclosed or reflected in the Financial Statements and (b) for liabilities
and obligations incurred in the ordinary course of business and consistent with
past practice, since the Balance Sheet Date neither the Company nor any Company
Subsidiary has any liability or obligation of any nature in excess of $250,000,
whether or not accrued, contingent or otherwise.


 


Section 5.9             Absence of Certain Changes.  Except as contemplated by this Agreement or
the Budget and except as disclosed or reflected in the Financial Statements,
since the Balance Sheet Date, the Company and each Company Subsidiary has
conducted its respective business only in the ordinary course and consistent
with past practice, and neither the Company nor any Company Subsidiary has:


 


(a)         suffered
any Material Adverse Effect;


 


(b)        incurred
any liability or obligation (absolute, accrued, contingent or otherwise) except
items incurred in the ordinary course of business and consistent with past practice,
none of which exceeds $250,000 (counting obligations or liabilities arising
from one transaction or a


 


23





















 


series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability);


 


(c)         paid,
discharged or satisfied any claim, liability or obligation (whether absolute,
accrued, contingent or otherwise) in excess of $250,000 other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with past practice of liabilities and obligations reflected or reserved against
in the Balance Sheet or incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date;


 


(d)        permitted
or allowed any of its property or assets (real, personal or mixed, tangible or
intangible) to be subjected to any Lien except for Permitted Liens;


 


(e)         written
down the value of any MSRs (other than those associated with Mortgage Loans) or
written off as uncollectible any notes or accounts receivable, except for write-downs
and write-offs in the ordinary course of business and consistent with past
practice;


 


(f)         cancelled
any debts owed to the Company by third parties or waived any claims or rights
of the Company against third parties, in either case in excess of $250,000;


 


(g)        sold,
transferred, or otherwise disposed of any material amount of its properties or
assets (real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with past practice;


 


(h)        terminated
or permitted to lapse any material Company Permit (as defined in Section 5.17
below);


 


(i)          disposed
of or permitted to lapse any rights to the use of any material Intellectual
Property, or disposed of or disclosed to any Person other than representatives
of Optionee or for a legitimate business purpose any Trade Secret not
theretofore a matter of public knowledge;


 


(j)          granted
any general increase in the compensation of officers or employees (including
any such increase pursuant to any bonus, pension, profit sharing or other plan
or commitment) not in the ordinary course of business;


 


(k)         hired
or fired any Key Employee;


 


(l)          made
any single capital expenditure or commitment in excess of $100,000 for
additions to property, plant, equipment or intangible capital assets or made
aggregate capital expenditures and commitments in excess of $250,000 for
additions to property, plant, equipment or intangible capital assets;


 


(m)        declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company,
except for the redemption, purchase or other acquisition of shares of Common
Stock or Company Options not currently owned by an Optionor;


 


24





















 


(n)        made
any change in any method of accounting or accounting practice except as
required by GAAP;


 


(o)        other
than as required by any Key Employee Contract, paid or loaned any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers or directors or any Affiliate or Associate of any of its
officers or directors except for directors’ fees and compensation of officers
in the ordinary course of business; or


 


(p)        agreed,
whether in writing or otherwise, to take any action described in this section.


 


Section 5.10           Title to Properties; Liens.  Each of the Company and each Company
Subsidiary has good, valid and marketable title to all the properties and
assets that it purports to own (tangible and intangible) free and clear of all
Liens, other than Permitted Liens, including all the properties and assets
reflected in the Balance Sheet and not subsequently disposed of and all such
properties and assets purchased by the Company or any Company Subsidiary since
the date of the Balance Sheet except as set forth in the Financial
Statements.  The rights, properties and
other assets presently owned, leased or licensed by the Company or the Company
Subsidiaries include all such rights, properties and other assets necessary to
permit the Company and the Company Subsidiaries to conduct their respective
businesses in all material respects in the same manner as such businesses have
been conducted prior to the date hereof.


 


Section 5.11           Real
Property.


 


(a)         The
Disclosure Schedule sets forth a complete list and the location of all
Real Property.  There are no proceedings,
claims, or disputes affecting any Real Property that might materially curtail
or interfere with the Company’s use of such property.  Neither the whole nor any material portion of
the Real Property nor any other assets of the Company or any Company Subsidiary
is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed to the Company.  Neither the Company nor any Company
Subsidiary is a party to any lease, assignment or similar arrangement under
which the Company or any Company Subsidiary is a lessor, assignor or otherwise
makes available for use by any third party any portion of the Real Property,
other than pursuant to a Lease.


 


(b)        Each
of the Company and each Company Subsidiary has obtained all appropriate
certificates of occupancy, licenses, easements and rights of way, including
proofs of dedication, required to use and operate the Real Property in the
manner in which the Real Property is currently being used and operated and
where the failure to have any such license would materially interfere with the
use of such property.  True and correct
copies of all such certificates, permits and licenses have heretofore been
furnished to Optionee.  Each of the
Company and each Company Subsidiary has all approvals, permits and licenses
(including any and all environmental permits) necessary to own or operate the
Real Property as currently owned and operated; and no such approvals, permits
or licenses will be required, as a result of the Transactions, to be issued
after the date hereof in order to permit the Company and the


 


25





















 


Company
Subsidiaries, following the Closing, to continue to own or operate the Real
Property in the same manner as heretofore, other than any such approvals,
permits or licenses that are ministerial in nature and are normally issued in
due course upon application therefore without further action by the applicant.


 


Section 5.12           Leases.  The
Disclosure Schedule contains an accurate and complete listing of the
Leases and the subleases to such Leases. 
A true and complete copy of each Lease has heretofore been delivered to
Optionee.  Each Lease is in full force
and effect.  The leasehold estate created
by each Lease is free and clear of all Liens other than as created by or
pursuant to such Lease or a sublease to such Lease.  There are no existing defaults by the Company
or any Company Subsidiary under any of the Leases.  No event has occurred that (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default under any Lease by the Company or any Company
Subsidiary.  Neither the Company nor any
Company Subsidiary has received notice, that any lessor under any Lease will
not consent (where such consent is necessary) to the consummation of the
Transactions without requiring any modification of the rights or obligations of
the lessee thereunder.


 


Section 5.13           Environmental Matters.


 


(a)         Each
of the Company and the Company Subsidiaries is in compliance in all material
respects with all Environmental Laws. 
Such compliance includes, but is not limited to, the possession by the
Company and each of the Company Subsidiaries of all material permits and other
governmental authorizations required under all applicable Environmental Laws,
and compliance in all material respects with the terms and conditions thereof.


 


(b)        There
is no Environmental Claim by any Person that is pending or, to the Knowledge of
the Company, threatened against the Company or any Company Subsidiary, or
against any Person whose liability for any Environmental Claim the Company or
any Company Subsidiary has retained or assumed either contractually or by
operation of law, except as would not cause a Material Adverse Effect.


 


(c)         There
are no past or present actions, activities, circumstances, conditions, events
or incidents, including the release, emission, discharge, presence or disposal
of any Materials of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or any Company Subsidiary or against
any Person whose liability for any Environmental Claim the Company or any
Company Subsidiary has retained or assumed either contractually or by operation
of law, except as would not cause a Material Adverse Effect.


 


(d)        Except
in accordance with applicable Environmental Laws and as would not cause a
Material Adverse Effect, and so as not to give rise to an Environmental Claim (i) Materials
of Environmental Concern have not been generated, used, treated or stored on,
transported to or from, or released on, at or from, any past or present
facilities, properties or operations of the Company or any Company Subsidiary
and (ii) Materials of Environmental Concern have not been disposed of on
any past or present facilities, properties or operations of the Company or any
Company Subsidiary.


 


26





















 


(e)         The
Company has provided to Optionee a copy of each assessment, report, datum,
result of investigations or audit, that is in the possession of the Company or
any Company Subsidiary regarding environmental matters pertaining to the
compliance (or noncompliance) by the Company or any Company Subsidiary with any
Environmental Laws.


 


Section 5.14           Contracts and Commitments.  (a) Except as set forth in the
Disclosure Schedule:


 


(i)            Neither
the Company nor any Company Subsidiary has any agreement, contract or
commitment that provides for the payment to or by the Company in an aggregate
amount in excess of $250,000 during a twelve-month period (each, a “Material
Vendor Contract”).


 


(ii)           Neither
the Company nor any Company Subsidiary has any loan agreement or asset funding
agreement pursuant to which it receives credit or funding from a third party
(each, a “Credit Facility”).


 


(iii)          Neither
the Company nor any Company Subsidiary is a party to a servicing agreement,
subservicing agreement, sale and servicing agreement, pooling and servicing
agreement or similar agreement pursuant to which the Company or any Company
Subsidiary services mortgage loans or REO Property for third parties.


 


(iv)          Other
than Material Vendor Contracts, there exist no purchase or sales contracts, or
commitments or proposals of the Company or any Company Subsidiary.


 


(v)           Other
than the Key Employee Contracts, neither the Company nor any Company Subsidiary
has any outstanding contracts with directors, officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors or dealers
that are not cancelable by it on notice of not longer than 90 days and without
liability, penalty or premium.


 


(vi)          Other
than the Key Employee Contracts, neither the Company nor any Company Subsidiary
is a party to or bound by any employment agreement or any other agreement that
contains any severance or termination pay liabilities or obligations.


 


(vii)         Other
than pursuant to the Key Employee Contracts, neither the Company nor any
Company Subsidiary has any employee to whom it is paying compensation at the
annual rate of more than $250,000 for services rendered.


 


(viii)        Neither
the Company nor any Company Subsidiary is restricted by agreement from carrying
on its business anywhere in the world.


 


(ix)           Neither
the Company nor any Company Subsidiary has outstanding any agreement to acquire
any debt obligations of others, other than acquisitions of delinquent and
defaulted receivables in the ordinary course of business.


 


(x)            Neither
the Company nor any Company Subsidiary has any outstanding loan to any Person,
it being understood that obligations to reimburse employees for


 


27





















 


reasonable travel, entertainment or similar
expenses incurred in the ordinary course of business shall not be deemed loans
for such purposes.


 


(xi)           Except
as in the ordinary course of business, neither the Company nor any Company
Subsidiary has any power of attorney outstanding or any obligations or
liabilities (whether absolute, accrued, contingent or otherwise), as guarantor,
surety, co signer, endorser, co maker, indemnitor or otherwise in respect of
the obligation of any Person, corporation, partnership, joint venture,
association, organization or other entity.


 


(xii)          Other
than as provided in clauses (i)–(xi) above, neither the Company nor any Company
Subsidiary has any agreement, contract or commitment the termination of which
would result in a Material Adverse Effect or that otherwise is material to its
business, operations or prospects.


 


(b)        Each
contract, agreement, arrangement and commitment set forth on Schedule 5.14
of the Disclosure Schedule, and each Lease, shall constitute a “Material
Contract.”  Neither the Company nor any
Company Subsidiary is in material default under or in violation of any Material
Contract, nor, to the Knowledge of the Company, is there any valid basis for
any claim of material default under or violation of any Material Contract.


 


Section 5.15           Litigation. 
Except for the Specified Disputes, there is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or, to the Knowledge
of the Company, threatened against or involving the Company or any Company
Subsidiary that could reasonably be expected to result in a loss to the Company
or any Company Subsidiary in excess of $50,000 (excluding any legal fees and
expenses relating thereto that have been or may be incurred by the Company or a
Company Subsidiary), or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the Company or any Company
Subsidiary pursuant to this Agreement or in connection with the
Transactions.  Neither the Company nor
any Company Subsidiary is subject to any judgment, order or decree which may
have a material adverse effect on its business practices or on its ability to
acquire any property or conduct its business.


 


Section 5.16           Compliance with Laws; Consent Orders.  The Company and the Company Subsidiaries are
in compliance in all material respects with each Consent Order, with all laws, rules and
regulations, ordinances, judgments, decrees, orders, writs and injunctions of
all Governmental Entities that affect the business, properties or assets of the
Company or any Company Subsidiary, and no notice, charge, claim, action or
assertion has been received by the Company or any Company Subsidiary or has
been filed, commenced or, to the Knowledge of the Company, threatened against
the Company or any Company Subsidiary alleging any material violation of any of
the foregoing, that, if determined adversely to the Company or any Company
Subsidiary, could reasonably be expected to have a material adverse effect on
its business practices or on its ability to acquire any property or conduct its
business.  The Company and each Company
Subsidiary have in place policies and procedures to enable them to comply with
the material terms of each Consent Order; to the Knowledge of the Company, no
events have occurred that would preclude the Company and the Company
Subsidiaries from being able to comply with the material terms of each Consent
Order.


 


28





















 


Section 5.17           Permits.  The
Company and the Company Subsidiaries hold all Company Permits, and no Company
Permit is subject to any pending proceeding seeking revocation or forfeiture.  The Company and the Company Subsidiaries are
in compliance in all material respects with the terms of the Company Permits.


 


Section 5.18           Employee Benefit Plans.


 


(a)         The
Disclosure Schedule contains a true and complete list of all Plans
maintained by the Company and any ERISA Affiliate.  Neither the Company nor any ERISA Affiliate
has any commitment or formal plan, whether legally binding or not, to create
any additional employee benefit plan or modify or change any existing Plan that
would affect any employee or former employee of the Company or any Company
Subsidiary.  Neither the Company nor any
ERISA Affiliate has ever maintained any Title IV Plans.  Neither the Company nor any ERISA Affiliate
is an employer under a Multiemployer Plan.


 


(b)        Neither
the Company or any Company Subsidiary, any Plan, any trust created thereunder,
nor, the Knowledge of the Company, any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any Company
Subsidiary, any Plan, any such trust, or any trustee or administrator thereof,
or any party dealing with any Plan or any such trust could be subject to either
a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975 or 4976 of the Code.


 


(c)         Each
Plan has been operated and administered in all material respects in accordance
with its terms and applicable law, including but not limited to ERISA and the
Code.


 


(d)        Each
Plan intended to be “qualified” within the meaning of Section 401(a) of
the Code is the subject of a favorable determination letter from the Internal
Revenue Service, and nothing has occurred since the date of such letter which
resulted or is likely to result in the revocation of such determination, and
the trusts maintained thereunder are exempt from taxation under Section 501(a) of
the Code.  Each Plan intended to satisfy
the requirements of Section 501(c)(9) has satisfied such
requirements.


 


(e)         The
consummation of the Transactions will not, either alone or in combination with
another event, (i) except as provided in any Key Employee Contract and set
forth on Schedule 5.18 of the Disclosure Schedule, entitle any current or
former employee, director or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, director or officer.


 


(f)         Except
for routine claims for benefits, there are no pending, anticipated or, to the
Knowledge of the Company, threatened claims by or on behalf of any Plan, by any
employee or beneficiary covered under any such Plan, or otherwise involving any
such Plan.


 


(g)        No
amounts payable under the Plans will fail to be deductible for federal income
tax purposes by virtue of Section 280G of the Code.


 


29





















 


Section 5.19                                Tax Matters.


 


(a)                                  (i) The
Company, each Company Subsidiary, and each Company Group has timely filed or
caused to be timely filed, and with respect to Tax Returns due between the date
of this Agreement and the Closing Date will timely file (taking into account
any applicable extensions), all material Tax Returns required to be filed by
the Code or by applicable state, local or foreign Tax laws, (ii) all such
Tax Returns are, or in the case of such Tax Returns not yet filed, will be,
true, complete and correct in all material respects, and (iii) all Taxes
shown on such Tax Returns or otherwise owed have been timely paid, or in the
case of Taxes due between the date of this Agreement and the Closing Date, will
be timely paid.


 


(b)                                 The
most recent audited financial statements for the Company reflect an adequate
reserve for all Taxes payable by the Company and each Company Subsidiary for
all taxable periods and portions thereof through the date of such financial
statements, and, in the case of Taxes owed as of the date hereof, an adequate
reserve is (and until the Closing Date will continue to be) reflected in the
accruals for Taxes payable on the June 30, 2005 balance sheet, in each
case in addition to any accruals established to reflect timing differences and
any accruals reflected only in the notes thereto.


 


(c)                                  There
are no liens for Taxes upon the Company’s assets except liens for current Taxes
not yet due and payable and immaterial liens.


 


(d)                                 Neither
the Company nor any of its Subsidiaries is a “United States real property
holding corporation” within the meaning of Section 897(c)(2) of the
Code, and none of the Optionors is a “foreign person” within the meaning of Section 1445
of the Code.


 


(e)                                  Except
as set forth on Schedule 5.19(e) of the Disclosure Schedule, (i) no
Tax Return of the Company, any Company Subsidiary or any Company Group is under
audit or examination by the Internal Revenue Service, (ii) no material Tax
Return of the Company, any Company Subsidiary or any Company Group is under audit
or examination by any other Taxing Authority, and (iii) no notice of such
an audit or examination has been received by the Company or any Company
Subsidiary.


 


(f)                                    Each
deficiency resulting from any audit or examination relating to Taxes by any
Taxing Authority has been timely paid. 
No issues relating to Taxes were raised by the relevant Taxing Authority
in any completed audit or examination that can reasonably be expected to recur
in a later taxable period.  The relevant
statute of limitations is closed with respect to the Federal, foreign and
material state and local Tax Returns of the Company, each Company Subsidiary
and each Company Group for all years through June 30, 2000.


 


(g)                                 Other
than this Agreement, none of the Company, any Company Subsidiary or any Company
Group is a party to or is bound by any Tax sharing agreement, Tax indemnity
obligation or similar agreement, arrangement or practice with respect to Taxes
(including, without limitation, any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any Taxing Authority).


 


(h)                                 Neither
the Company nor any Company Subsidiary will be required to include in a taxable
period ending after the Closing Date any taxable income attributable to income
that


 


30





















 


accrued, but was not recognized, in a
Pre-Closing Tax Period, as a result of an adjustment under Section 481 of
the Code, the installment method of accounting, the long-term contract method
of accounting, the cash method of accounting, any comparable provision of
state, local, or foreign Tax law, or for any other reason.


 


(i)                                     No
consent under Section 341 of the Code has been made with respect to the
Company or any Company Subsidiary, or any property held by the Company or any
Company Subsidiary, (ii) no property of the Company or any Company
Subsidiary is “tax exempt use property” within the meaning of Section 168(h) of
the Code, and (iii) none of the assets of the Company or any Company
Subsidiary is subject to a lease under Section 7701(h) of the Code or
under any predecessor section thereof.


 


(j)                                     Except
as set forth on Schedule 5.19(j) of the Disclosure Schedule, there are no
outstanding agreements or waivers extending, or having the effect of extending,
the statutory period of limitation applicable to any Tax Returns required to be
filed with respect to the Company, any Company Subsidiary or any Company Group
and none of the Company, any Company Subsidiary or any Company Group has
requested any extension of time within which to file any Tax Return, which
return has not yet been filed.


 


(k)                                  Except
as set forth on Schedule 5.19(k) of the Disclosure Schedule, the Company
and each Company Subsidiary have complied in all respects with all applicable
laws relating to the payment and withholding of Taxes (including withholding of
Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any
comparable provision of any state, local or foreign laws) and have, within the
time and in the manner prescribed by applicable law, withheld from and paid
over to the proper Taxing Authorities all amounts required to be so withheld
and paid over under such laws.


 


(l)                                     The
Company has made available to the Optionee for inspection (i) complete and
correct copies of all material Tax Returns of the Company, each Company
Subsidiary and each Company Group (but, in the case of any Company Group, only
the portions of such Tax Returns relating to the Company or any Company
Subsidiary) relating to Taxes for all taxable periods for which the applicable
statute of limitations has not yet expired and (ii) complete and correct
copies of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending ruling
requests, and any similar documents, submitted by, received by or agreed to by
or on behalf of the Company or any Company Subsidiary, or, to the extent
related to the income, business, assets, operations, activities or status of
the Company or any Company Subsidiary, submitted by, received by or agreed to
by or on behalf of any Company Group, and relating to Taxes for all taxable
periods for which the statute of limitations has not yet expired.


 


(m)                               Neither
the Company nor any Company Subsidiary has been a party to any distribution
occurring during the last three (3) years that was treated by the parties
as a tax-free distribution under Section 355 of the Code.


 


(n)                                 Neither
the Company nor any Company Subsidiary is a party to any “listed transaction”
as defined in Treasury Regulation Section 1.6011-4(b)(2).


 


31





















 


(o)                                 The
Disclosure Schedule sets forth each state, county, local, municipal or
foreign jurisdiction in which the Company or any Company Subsidiary files a Tax
Return relating to state and local income, franchise, license, excise, net
worth, property or sales and use taxes.


 


(p)                                 Neither
the Company nor any Company Subsidiary has ever (i) made an election under
Section 1362 of the Code to be treated as an S corporation for Federal
Income Tax purposes or (ii) made any similar election under any comparable
provision of any state, local or foreign tax law.


 


(q)                                 The
Company and each Company Subsidiary have properly and in a timely manner
documented their transfer pricing methodology in compliance with Section 482
(and any related sections) of the Code, the Treasury regulations promulgated
thereunder and any comparable provisions of state, local, domestic or foreign
tax law.


 


Section 5.20                                Intellectual
Property.


 


(a)                                  The
Disclosure Schedule sets forth a true and complete list (including
expiration dates) of all patents and patent applications, trademark
registrations and applications, service mark registrations and applications,
Computer Software, Copyright registrations and applications, material
unregistered trademarks, service marks, and Copyrights, and Internet domain
names, together with all licenses related to the foregoing, whether the Company
or any Company Subsidiary is the licensee or licensor thereunder, that are used
in and are material to the business of the Company or any Company Subsidiary.


 


(b)                                 The
Company or the Company Subsidiaries have title to, or hold valid licensees to,
all Company Intellectual Property, free and clear of all Encumbrances (other
than restrictions on assignment or transfer).


 


(c)                                  All
registrations and applications for Intellectual Property that are owned by the
Company or any Company Subsidiary and that are used in and are material to the
conduct of the businesses of the Company or the Company Subsidiaries as
currently conducted are, (i) to the Knowledge of the Company, valid and
enforceable, (ii) subsisting, in proper form and have been duly
maintained, including the submission of all necessary filings and fees in
accordance with the legal and administrative requirements of the appropriate
jurisdictions, and (iii) have not lapsed, expired or been abandoned, and
no patent, registration or application therefore is the subject of any opposition,
interference, cancellation proceeding or other legal or governmental proceeding
before any Governmental Entity in any jurisdiction.


 


(d)                                 With
respect to the Intellectual Property used in and material to the business of
the Company or any Company Subsidiary as conducted on the Exercise Date:  (i) the Company and each such Company
Subsidiary owns and possesses all right, title and interest in and to, or has
taken commercially reasonable steps to ensure that it has a valid and
enforceable license to use, such Intellectual Property; (ii) no claim by
any third party contesting the validity, enforceability, use or ownership of
any of the Intellectual Property has been made or, to the Knowledge of the
Company, is threatened; (iii) neither the Company nor any such Company
Subsidiary has received any notices of any infringement or misappropriation by
any third party with respect to the Intellectual Property; (iv) to the
Knowledge of the Company, none of the


 


32





















 


Company or any Company Subsidiary has
infringed, misappropriated or otherwise conflicted with any proprietary rights
of any third parties; and (v) all such Intellectual Property will be owned
or available for use by any of the Company and the Company Subsidiaries
immediately after the Closing.


 


(e)                                  The
Computer Software used in and material to the business of the Company or any
Company Subsidiary was either:  (i) developed
by employees of the Company or such Company Subsidiary within the scope of
their employment or (ii) developed on behalf of the Company or any Company
Subsidiary by a third party, and all ownership rights therein have been
assigned or otherwise transferred to or vested in the Company or such Company
Subsidiary, as the case may be, pursuant to written agreements or the Company
or such Company Subsidiary has taken commercially reasonable steps to ensure
that it has licensed or acquired from a third party pursuant to a written
license, assignment, or other contract that is in full force and effect and of
which neither the Company nor any Company Subsidiary (as applicable) is in
material breach.


 


(f)                                    Neither
the Company nor any Company Subsidiary is, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any material license, sublicense or other
agreement relating to the Company Intellectual Property.


 


Section 5.21                                Labor Matters.


 


(a)                                  There
is no labor strike, dispute, corporate campaign, slowdown, stoppage or
lockout actually pending, or to the Knowledge of the Company, threatened
against or affecting the Company or any Company Subsidiary and during the past
five years there has not been any such action. 
To the Knowledge of the Company, no representation question exists
respecting the employees of the Company or any Company Subsidiary.


 


(b)                                 None
of the employees of the Company or any Company Subsidiary is represented by any
labor organization and, to the Knowledge of the Company, there have been no
union organizing activities among the employees of the Company or any Company
Subsidiary within the past five years, nor does any question concerning
representation exist concerning such employees.


 


(c)                                  (i) Each
of the Company and each of the Company Subsidiaries is and has been in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, immigration, the payment of social security and similar taxes,
occupational safety and health and plant closing, and is not and has not
engaged in any unfair labor practice that could reasonably be expected to
result in a loss to the Company or any Company Subsidiary in excess of
$250,000; (ii) no unfair labor practice complaint against the Company or
any of the Company Subsidiaries is pending before the National Labor Relations
Board; (iii) no employee grievance exists which could reasonably be
expected to have a Material Adverse Effect; (iv) no arbitration proceeding
arising out of or under any collective bargaining agreement is pending and no
claim therefor has been asserted; and (v) no collective bargaining
agreement is currently being negotiated by the Company or any of the Company
Subsidiaries.


 


33





















 


(d)                                 To
the Knowledge of the Company, no charge with respect to or relating to the
Company or any Company Subsidiary is pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices.


 


Section 5.22                                Personnel.  The Disclosure Schedule sets forth a
true and complete list of (i) the names and current salaries of all
directors and elected and appointed officers of each of the Company and the
Company Subsidiaries; (ii) the names and wage rates for non-salaried and
non-executive salaried employees of each of the Company and the Company
Subsidiaries by classification and (iii) all group insurance programs in
effect for employees of each of the Company and the Company Subsidiaries.  Neither the Company nor any Company
Subsidiary is in default with respect to any of the obligations referred to in
the preceding sentence.  Except as set
forth on Schedule 5.22 of the Disclosure Schedule, to the Knowledge of the
Company, no Key Employee or group of employees responsible for a business
segment of the Company or any Company Subsidiary has provided written
notification to the Company or any Company Subsidiary of an intention to
terminate employment with the Company or any Company Subsidiary as a result of
the Transactions.


 


Section 5.23                                Potential
Conflict of Interest.  No Key
Employee (a) owns or holds, directly or indirectly, in whole or in part,
any Company Intellectual Property, (b) has any material claim, charge,
action or cause of action against the Company or any Company Subsidiary, except
for claims for compensation, reasonable unreimbursed travel or entertainment
expenses, accrued vacation pay or accrued benefits under any employee benefit
plan existing on the date hereof, (c) has made, on behalf of the Company
or any Company Subsidiary, any material payment or commitment to pay any
material commission, fee or other amount to, or to purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any other
Person of which any Key Employee (or, to the Knowledge of the Company, a
relative of any Key Employee) is a partner or shareholder (except holdings
solely for passive investment purposes of securities of publicly held and
traded entities constituting less than 5% of the equity of any such entity), (d) owes
any money to the Company or any Company Subsidiary or (e) has any material
interest in any property, real or personal, tangible or intangible, used in or
pertaining to the business of the Company or any Company Subsidiary.


 


Section 5.24                                Propriety
of Past Payments.  (a) No
unrecorded fund of the Company or any Company Subsidiary has been established
for any purpose, (b) no accumulation or use of corporate funds of the
Company or any Company Subsidiary has been made without being properly
accounted for in the books and records of the Company or such Company
Subsidiary, (c) no payment has been made by or on behalf of the Company or
any Company Subsidiary with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents
supporting such payment and (d) none of the Company, any Company
Subsidiary, any director, officer, employee or agent of the Company or any
Company Subsidiary or any other Person associated with or acting for or on
behalf of the Company or any Company Subsidiary has, directly or indirectly,
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback
or other payment to any Person, private or public, regardless of form, whether
in money, property or services that is illegal, (i) to obtain favorable
treatment for the Company, any Company Subsidiary or any Affiliate of the
Company in securing business, (ii) to pay for favorable treatment for
business secured for the Company, any Company


 


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Subsidiary or any Affiliate of the Company, (iii) to
obtain special concessions, or for special concessions already obtained, for or
in respect of the Company or any Company Subsidiary.  To the Knowledge of the Company, neither the
Company nor any Company Subsidiary nor any current director, officer or
employee of the Company or any Company Subsidiary nor any other Person acting
on behalf of the Company or any Company Subsidiary, has accepted or received
any unlawful contribution, payment, gift, kickback, expenditure or other item
of value in connection with the business of the Company or any Company
Subsidiary.


 


Section 5.25                                Brokers
or Finders.  No agent, broker,
investment banker, financial advisor or other firm or Person is or will be
entitled to any brokers’ or finder’s fee or any other commission or similar fee
in connection with any of the Transactions as a result of any action taken by
the Company.


 


Section 5.26                                Consumer
Complaints.  The Company and the
Company Subsidiaries have no open consumer complaints that have not been
responded to within the time limitations set forth in the Real Estate
Settlement Procedures Act of 1974, as amended.


 


Section 5.27                                Insurance.  Schedule 5.27 of the Disclosure Schedule sets
forth a true and complete list of all insurance policies, other insurance
arrangements and other contracts or arrangements for the transfer or sharing of
insurance risks by the Company or any Company Subsidiary in force on the date
hereof with respect to the business or assets of the Company or any Company
Subsidiary.  All such policies are in
full force and effect, all premiums due thereon have been paid by the Company
and the Company Subsidiary (as applicable) and the Company and each Company
Subsidiary is otherwise in compliance in all material respects with the terms
and provisions of such policies (other than the policies set forth on Schedule 5.27
of the Disclosure Schedules which will terminate at the Closing as a result of
the sale of the Option Shares to the Optionee). 
Furthermore, (a) neither the Company nor any Company Subsidiary has
received any written notice of cancellation or non-renewal of any such policy
or arrangement nor, to the Company’s knowledge, is the termination of any such
policies or arrangements threatened (except that certain policies will
terminate at the Closing as a result of the sale of the Option Shares to the
Optionee), (b) there is no material claim of the Company or any Company
Subsidiary pending under any of such policies or arrangements as to which the
Company or any Company Subsidiary has received written notice from any of its
insurance carriers stating that such insurance carrier is denying liability of
such claim or defending such claim under a reservation of rights clause, (c) neither
the Company nor any Company Subsidiary has received any written notice from any
of its insurance carriers that any insurance premiums will be increased
materially in the future or that any insurance coverage presently provided for
will not be available to the Company or any Company Subsidiary in the future,
and (d) neither the Company nor any Company Subsidiary has knowingly made
any material misstatement, omission or misrepresentation for the purpose of
obtaining any such policy or arrangement that is reasonably likely to result in
a loss of coverage under such policy or arrangement.  Except as set forth on Schedule 5.27 of
the Disclosure Schedule, no such policy or arrangement will terminate at the Closing
as a result of the sale of the Option Shares to the Optionee and, to the
Knowledge of the Company, no event has occurred that is reasonably likely to
result in any claims by the Company’s directors or officers under the Company’s
D&O Insurance.


 


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ARTICLE VI


 


REPRESENTATIONS
AND WARRANTIES OF OPTIONEE


 


Optionee represents and warrants to each Optionor and the Company that:


 


Section 6.1                                      Organization.  Optionee is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has all
requisite corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be in good standing or to
have such power, authority, and governmental approvals would not adversely
effect Optionee’s ability to consummate the Transactions.


 


Section 6.2                                      Authorization;
Validity of Agreement.  Optionee has
full corporate power and authority to execute and deliver this Agreement and
the Contingent Payment Agreement and to consummate the Transactions.  The execution, delivery and performance by
Optionee of this Agreement and the Contingent Payment Agreement and the consummation
of the Transactions have been duly authorized by the board of directors of
Optionee, and no other corporate action on the part of Optionee is necessary to
authorize the execution and delivery by Optionee of this Agreement or the
Contingent Payment Agreement or the consummation of the Transactions.  No vote of, or consent by, the holders of any
class or series of stock or Voting Debt issued by Optionee is necessary to
authorize the execution and delivery by Optionee of this Agreement or the Contingent
Payment Agreement or the consummation by it of the Transactions.  Each of this Agreement and the Contingent
Payment Agreement has been duly executed and delivered by Optionee, and,
assuming due and valid authorization, execution and delivery hereof and thereof
by each other party thereto, is a valid and binding obligation of Optionee,
enforceable against Optionee in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors’ rights generally and (ii) the availability of
the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought.


 


Section 6.3                                      Consents
and Approvals; No Violations.  Except
for the filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of the HSR Act and state
securities or blue sky laws, none of the execution, delivery or performance of
this Agreement and the Contingent Payment Agreement by Optionee, the
consummation by Optionee of the Transactions or compliance by Optionee with any
of the provisions hereof and thereof will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or by-laws of
Optionee, (ii) require the Optionee to make any filing with, or obtain any
permit, authorization, consent or approval of, any Governmental Entity, (iii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Optionee or any of its Subsidiaries is
a party or by which any of them or any of their respective properties or assets
may be bound, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable


 


36





















 


to Optionee, any of its Subsidiaries or any
of their properties or assets, excluding from the foregoing clauses (ii), (iii) and
(iv) such violations, breaches or defaults which would not, individually
or in the aggregate, impair in any material respect Optionee’s ability to
consummate the Transactions or which arise from the regulatory status of the
Company or the Company Subsidiaries.


 


Section 6.4                                      Investment
Representation.  Optionee is
acquiring the Option Shares for investment for its own account, not as a
nominee or agent, and not with a view to, or for resale in connection with, any
distribution thereof in violation of the Securities Act.


 


Section 6.5                                      Sufficient
Funds.  Optionee has available, or
has made valid and effective arrangements to obtain (through existing credit
arrangements or otherwise), sufficient funds to acquire all of the Option
Shares to be purchased pursuant hereto and to pay all fees and expenses
incurred by it related to the Transactions.


 


Section 6.6                                      Brokers
or Finders.  Neither Optionee nor any
of its Subsidiaries or its Affiliates has entered into any agreement or
arrangement entitling any agent, broker, investment banker, financial advisor
or other firm or Person to any broker’s or finder’s fee or any other commission
or similar fee in connection with any of the Transactions.


 


ARTICLE VII


 


COVENANTS


 


Section 7.1                                      Interim
Operations of the Company.  The
Company covenants and agrees that, after the date hereof and prior to the
Closing Date, except (i) as expressly provided in this Agreement, (ii) as
set forth in the Disclosure Schedule, or (iii) as may be agreed in writing
by Optionee:


 


(a)                                  the
business of the Company and the Company Subsidiaries shall be conducted
substantially in the same manner as heretofore conducted and in the ordinary
course, and the Company and the Company Subsidiaries shall use commercially
reasonable efforts to preserve the business organization of the Company and the
Company Subsidiaries intact, keep available the services of the current
officers and employees of the Company and the Company Subsidiaries and maintain
the existing relations with franchisees, customers, suppliers, creditors,
business partners and others having business dealings with the Company or the
Company Subsidiaries;


 


(b)                                 the
Company and the Company Subsidiaries shall timely respond to all customer complaints
as required by any applicable law or Governmental Entity;


 


(c)                                  neither
the Company nor any Company Subsidiary shall: 
(i) amend its certificate of incorporation or by-laws or similar
organizational documents, (ii) issue, sell, transfer, pledge, dispose of
or encumber any shares of any class or series of its capital stock or Voting
Debt, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of any class or
series of its capital stock or any Voting Debt, other than the shares of Common
Stock reserved for issuance on the date hereof pursuant to the exercise of
Company Options outstanding on the date hereof,


 


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(iii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to any shares of any class or series of its capital stock; (iv) split,
combine or reclassify any shares of any class or series of its stock; or (v) redeem,
purchase or otherwise acquire directly or indirectly any shares of any class or
series of its capital stock, or any instrument or security which consists of or
includes a right to acquire such shares (other than the redemption, purchase or
other acquisition by the Company or any Company Subsidiary of shares of Common
Stock or Company Options not currently owned by an Optionor);


 


(d)                                 neither
the Company nor any Company Subsidiary shall organize any new Subsidiary or
acquire any capital stock or other equity securities, or equity or ownership
interest in the business, of any other Person;


 


(e)                                  neither
the Company nor any Company Subsidiary shall modify, amend or terminate any of
its Material Contracts or waive, release or assign any material rights or
claims, except in the ordinary course of business and consistent with past
practice;


 


(f)                                    neither
the Company nor any Company Subsidiary shall terminate or permit to lapse any
material Company Permit;


 


(g)                                 neither
the Company nor any of the Company Subsidiaries shall:  (i) incur or assume any long term
Indebtedness, or except in the ordinary course of business, incur or assume
short term Indebtedness exceeding $250,000 in the aggregate from the date
hereof until the Closing; (ii) pay, repay, discharge, purchase, repurchase
or satisfy any Indebtedness (other than the Promissory Notes) issued or
guaranteed by the Company or any Company Subsidiary, except as required by the
terms thereof; (iii) modify the terms of any Indebtedness or other
liability, other than modifications of short term debt in the ordinary and
usual course of business and consistent with past practice; (iv) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person, except in
the ordinary course of business and consistent with past practice; (v) make
any loans, advances or capital contributions to, or investments in, any other
Person (other than to or in wholly owned Subsidiaries of the Company existing on
the date hereof); (vi) write down the value of any MSRs or write off as
uncollectible any notes or accounts receivable other than as required or
permitted by GAAP; (vii) dispose of or permit to lapse any rights to any
material Intellectual Property or (viii) change any of the banking or safe
deposit arrangements described or referred to in the Disclosure Schedule in
any adverse manner;


 


(h)                                 neither
the Company nor any Company Subsidiary shall lease, license, mortgage, pledge
or encumber any assets other than in the ordinary course of business and
consistent with the past practice or purchase, transfer, sell or dispose of any
assets other than in the ordinary course of business and consistent with past
practice or dispose of or permit to lapse any rights to any material
Intellectual Property other than in the ordinary course of business and
consistent with past practice;


 


(i)                                     neither
the Company nor any Company Subsidiary shall (i) fire any Key Employee
other than for cause or (ii) hire any Person performing functions similar
to or compensated at the same level as a Key Employee; provided, however,
that the Company and any Company Subsidiary may hire a Person that replaces a
Key Employee who resigns after the


 


38





















 


date hereof if the Company has consulted with
the Optionee in good faith prior to hiring such Person (it being agreed that
neither the Company nor any Company Subsidiary shall have any obligation to
follow or adopt any recommendation made by the Optionee in respect of hiring
such Person);


 


(j)                             neither the Company nor
any Company Subsidiary shall make any change in the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring increases in the ordinary course of
business) or to Persons providing management services, or enter into or amend
any employment, severance, consulting, termination or other agreement with, or
employee benefit plan for, any of its officers, directors, employees,
Affiliates, agents or consultants or make any change in its existing borrowing
or lending arrangements for or on behalf of any of such Persons pursuant to an
employee benefit plan or otherwise;


 


(k)                                  neither
the Company nor any Company Subsidiary shall (i) pay or make any accrual
or arrangement for payment of any pension, retirement allowance or other
employee benefit pursuant to any existing plan, agreement or arrangement to any
officer, director, employee or Affiliate or pay or agree to pay or make any
accrual or arrangement for payment to any officer, director, employee or
Affiliate of any amount relating to unused vacation days, except to the extent
the Company or a Company Subsidiary is legally or contractually obligated to do
so or such action is required under a current policy of the Company or a
Company Subsidiary, (ii) adopt or pay, grant, issue, accelerate or accrue
salary or other payments or benefits pursuant to any pension, profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director, officer,
employee, agent or consultant, whether past or present, except to the extent
the Company or a Company Subsidiary is legally or contractually obligated to do
so or such action is required under a current policy of the Company or a
Company Subsidiary, or (iii) amend in any material respect any such
existing plan, agreement or arrangement in a manner inconsistent with the
foregoing;


 


(l)                                     neither
the Company nor any Company Subsidiary shall permit any insurance policy naming
it as a beneficiary or a loss payable payee to be cancelled or terminated
without notice to Optionee, except (i) policies providing coverage for
losses not in excess of $250,000 which are replaced without diminution of or
gaps in coverage and (ii) policies that terminate at the Closing as a
result of the sale of the Option Shares to the Optionee;


 


(m)                               neither
the Company nor any of the Company Subsidiaries shall enter into any contract
or transaction relating to the purchase of assets other than in the ordinary
course of business and consistent with past practice;


 


(n)                                 other than the
Promissory Notes, which shall be paid in full by the Servicer at or prior to
the Closing, neither the Company nor any Company Subsidiary shall pay,
repurchase, discharge or satisfy any of its claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations


 


39





















 


reflected or reserved against in, or
contemplated by, the Financial Statements or incurred since the Balance Sheet
date in the ordinary course of business;


 


(o)                                 neither
the Company nor any of the Company Subsidiaries shall adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any Company
Subsidiary;


 


(p)                                 neither
the Company nor any Company Subsidiary shall (i) change any of the
accounting methods used by it unless required by GAAP or (ii) make any
election relating to Taxes, change any election relating to Taxes already made,
adopt any accounting method relating to Taxes, change any accounting method
relating to Taxes unless required by GAAP, enter into any closing agreement
relating to Taxes, settle any claim or assessment relating to Taxes or consent
to any claim or assessment relating to Taxes or any waiver of the statute of
limitations for any such claim or assessment;


 


(q)                                 neither
the Company nor any of the Company Subsidiaries shall take, or agree to or
commit to take, any action that would or is reasonably likely to result in any
of the conditions to the Closing set forth in Article IX not being
satisfied, or would make any representation or warranty of the Company
contained herein inaccurate in any material respect at, or as of any time prior
to, the Closing Date, or that would materially impair the ability of the
Company, Optionee or the Optionors to consummate the Closing in accordance with
the terms hereof or materially delay such consummation; and


 


(r)                                    neither
the Company nor any of the Company Subsidiaries shall enter into any agreement,
contract, commitment or arrangement to do any of the foregoing, or authorize,
recommend, propose or announce an intention to do, any of the foregoing.


 


Section 7.2                                      Access;
Confidentiality.  (a) Between
the date of this Agreement and the Closing, the Company shall (i) afford
Optionee and its authorized representatives full and complete access during
normal working hours to all books, records, offices and other facilities of the
Company and each Company Subsidiary, including employees, (ii) permit
Optionee to make such inspections and to make copies of such books and records
as it may reasonably require and (iii) furnish Optionee with such
financial and operating data and other information as Optionee may from time to
time reasonably request.  Optionee and
its authorized representatives shall conduct all such inspections in a manner
that will minimize disruptions to the business and operations of the Company
and the Company Subsidiaries.


 


(b)                                 Optionee
and its authorized representatives (including its designated engineers or
consultants) may at any time during normal business hours, upon reasonable
advance notice, enter into and upon all or any portion of the Company’s or any
Company Subsidiary’s properties (including all Real Property and all real
estate which is the subject of a Lease) in order to investigate and assess, as
Optionee deems necessary or appropriate in its sole and absolute discretion,
the environmental condition of such properties or the business conducted
thereat.  The Company shall, and shall
cause the Company Subsidiaries to, cooperate with Optionee and its authorized
representatives in conducting such investigation, shall allow Optionee and its
authorized representatives full access during normal business hours, upon
reasonable advance notice, to their properties and businesses, together with
full permission to conduct such


 


40





















 


investigation, and shall provide to Optionee
and its authorized representatives all plans, soil or surface or ground water
tests or reports, any environmental investigation results, reports or
assessments previously or contemporaneously conducted or prepared by or on
behalf of, or in the possession of or reasonably available to the Company or
any Company Subsidiary or any of their engineers, consultants or agents and all
other information relating to environmental matters in respect of their
properties and businesses.


 


(c)                                  Each
party agrees that it will treat in confidence all documents, materials and
other information which it shall have obtained regarding the other party during
the course of the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of this
Agreement), the investigation provided for herein and the preparation of this
Agreement and other related documents, and, if the transactions contemplated
hereby are not consummated, each party will return to the other party all
copies of nonpublic documents and materials which have been furnished in
connection therewith; provided, however, that the Optionors shall
not be required to return any documents or materials to the Company if the
transactions contemplated hereby are not consummated.  Such documents, materials and information
shall not be communicated to any third Person (other than, in the case of the
Optionee, the Company and the Optionors, their respective counsel, accountants,
financial advisors or lenders).  No party
shall use any confidential information in any manner whatsoever except solely
for the purpose of evaluating the proposed purchase and sale of the Option
Shares and consummating the Transactions; provided, however, that after the
Closing, Optionee may use or disclose any confidential information reasonably
related to the business of the Company or the Company Subsidiaries.  The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information which (i) is or becomes available to such party from a source
other than the other party not in breach of an obligation of confidentiality, (ii) is
or becomes available to the public other than as a result of disclosure by such
party or its agents, or (iii) is required to be disclosed under applicable
law or judicial process, but only to the extent it must be disclosed.


 


Section 7.3                                      Efforts
and Actions to Cause Closing to Occur. 
(a) Following the Exercise Date and until the Closing, upon the
terms and subject to the conditions of this Agreement, Optionee and the Company
shall use their respective commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done and cooperate with each
other party hereto in order to do, all things necessary, proper or advisable
(subject to any applicable laws) to consummate the Closing and the other
Transactions as promptly as practicable including, but not limited to, the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the Closing and the other Transactions and the taking of
such actions as are necessary to obtain any requisite approvals,
authorizations, consents, orders, licenses, permits, qualifications, exemptions
or waivers by any third party or Governmental Entity.  In addition, no party hereto shall take any
action after the Exercise Date that could reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity or other Person required to be obtained
prior to Closing.  Following the Exercise
Date and until the Closing, each Optionor shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done and cooperate with each other party hereto in order to do, all things
necessary, proper or advisable (subject to any applicable laws) within such
Optionor’s control to


 


41





















 


cause the satisfaction of the conditions to
Closing (solely with respect to such Optionor) set forth in Sections 9.1(b),
9.2(c), 9.2(e), 9.2(g) and 9.2(h).


 


(b)                                 Following
the Exercise Date and until the Closing, each party shall promptly consult with
the other parties hereto with respect to, provide any necessary information
with respect to, and provide the other parties (or their respective counsel)
with copies of, all filings made by such party with any Governmental Entity or
any other information supplied by such party to a Governmental Entity in
connection with this Agreement and the Transactions.  Each party hereto shall promptly provide the
other parties with copies of any communication received by such party from any
Governmental Entity regarding any of the Transactions.  If any party hereto or Affiliate thereof
receives a request for additional information or documentary material from any
such Governmental Entity with respect to any of the Transactions, then such
party shall endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other parties, an
appropriate response in compliance with such request.  To the extent that transfers, amendments or
modifications of permits (including environmental permits) are required as a
result of the execution of this Agreement or consummation of any of the
Transactions, the Company shall use its commercially reasonable efforts to
effect such transfers, amendments or modifications.


 


(c)                                  The
Company shall use its commercially reasonable efforts to obtain, prior to the
Closing, (i) the unconditional consent to the Closing and the other
Transactions of each lender to whom the Company or any Company Subsidiary owes
in excess of $250,000 as of the Closing Date; (ii) the unconditional
consent to the Closing and the other Transactions of each Person holding a
mortgage or lien on real property or material personal property owned or leased
by the Company or any Company Subsidiary; (iii) the unconditional consent
to the Closing and the other Transactions of each lessor of real or material
personal property leased by the Company; (iv) the unconditional consent to
the Closing and the other Transactions of the issuer of each material insurance
policy referred to in the Disclosure Schedule (other than the policies set
forth on Schedule 5.27 of the Disclosure Schedules which terminate at the
Closing as a result of the sale of the Option Shares to the Optionee) and (v) the
unconditional consent to the Closing and the other Transactions of each other
party to each material contract with the Company or any Company Subsidiary, in
each case if required by the terms of such loan, mortgage, lease, insurance
policy or contract, but only if and to the extent that the failure to obtain
such consent would adversely affect the Company or any Company Subsidiary or
the ability of the Company to consummate the Transactions.  All such consents shall be in writing and
executed counterparts thereof shall be delivered to Optionee at or prior to the
Closing.


 


(d)                                 In
addition to and without limiting the agreements of the parties contained above,
the Company, Optionee and the Optionors shall, following the Exercise Date:


 


(i)                                     take promptly all
actions necessary to make the filings required of them or any of their
Affiliates under the HSR Act;


 


(ii)                                  comply at the
earliest practicable date with any request for additional information or
documentary material received by the Company, Optionee, the Optionors or any of
their Affiliates from the FTC or the DOJ pursuant to the HSR Act or from any
state Attorney General or other Governmental Entity in connection with
antitrust matters;


 


42





















 


(iii)                               cooperate with each
other in connection with any filing under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the Transactions
commenced by the FTC, DOJ, any state Attorney General or any other Governmental
Entity;


 


(iv)                              use all reasonable
commercial efforts to resolve such objections, if any, as may be asserted with
respect to the Transactions under any antitrust law; and


 


(v)                                 advise the other
parties promptly of any material communication received by such party from the
FTC, DOJ, any state Attorney General or any other Governmental Entity regarding
any of the Transactions, and of any understandings, undertakings or agreements
(oral or written) such party proposes to make or enter into with the FTC, DOJ,
any state Attorney General or any other Governmental Entity in connection with
the Transactions.


 


Concurrently with the filing of notifications under the HSR Act or as
soon thereafter as practicable, the Optionors and Optionee shall each request
early termination of the HSR Act waiting period.


 


(e)                                  Notwithstanding
the foregoing or any other covenant herein contained, nothing in this Agreement
shall be deemed to require any party hereto (i) to divest or hold separate
any assets or agree to limit its future activities, method or place of doing
business, (ii) to commence any litigation against any entity in order to
facilitate the consummation of any of the Transactions or (iii) to defend
against any litigation brought by any Governmental Entity seeking to prevent
the consummation of, or impose limitations on, any of the Transactions.


 


(f)                                    The
Company and each Company Subsidiary shall take all action reasonably requested
by Optionee, including the preparation for delivery at the Closing of all
notes, financing documents, mortgages, loan agreements, pledges, filing
statements contemplated by the Uniform Commercial Code and officer’s
certificates as Optionee may request for the purpose of consummating Optionee’s
financing of the Transactions.


 


Section 7.4                                      Notification
of Certain Matters.  (a) From
time to time prior to the earlier of Closing or the termination of this
Agreement, the Company shall supplement or amend the Disclosure Schedule with
respect to any matter, whether existing as of the date hereof or arising
thereafter, that was, or would have been, required to be set forth or described
in the Disclosure Schedule.  Each
supplement to or amendment of the Disclosure Schedule (a “Disclosure Schedule Supplement”)
made after the execution hereof shall be effective and shall be deemed to
modify the representations and warranties made pursuant to this Agreement, from
and after the delivery to Optionees of such Disclosure Schedule Supplement.  The Company and Optionee shall give notice to
the other promptly (with a copy to each Optionor) after becoming aware of (i) the
occurrence or non occurrence of any event whose occurrence or non occurrence
would be likely to cause either (A) any representation or warranty set
forth in this Agreement that is qualified as to materiality to be untrue or
incorrect in any respect at any time from the date hereof to the Closing Date
or any representation or warranty that is not so qualified to be untrue or
incorrect in any material respect at any time from the date hereof to the Closing
Date or (B) any condition set forth in Article IX to be unsatisfied
at any time from the date hereof to the


 


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Closing Date and (ii) any
failure to perform in any material respect any obligation or to comply in any
material respect with any agreement or covenant to be performed or complied
with hereunder; provided, however, that (x) the delivery of any
notice pursuant to this section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice and (y) the
failure to give such notice shall not be required from and after the time the
party to whom such notice is to be given has actual knowledge of the
information required to be included in such notice.


 


(b)                                 The
Company shall deliver to Optionee (with a copy to each Optionor) copies of (i) all
audit reports, letter rulings, technical advice memoranda and similar documents
issued by a Governmental Entity relating to the United States federal, state,
local or foreign Taxes due from or with respect to the Company or any Company
Subsidiary, (ii) any closing agreements entered into by the Company or any
Company Subsidiary with any taxing authority, which come into the possession of
the Company after the date hereof, (iii) any letter of revocation of a
Company Permit, (iv) any complaints of material litigation filed by or
against the Company or any Company Subsidiary, and (v) any agreements to
terminate any Material Contracts.


 


Section 7.5                                      No
Solicitation of Competing Transaction.


 


(a)                                  Neither
the Optionors, the Company nor any Company Subsidiary shall (and each of the
Optionors, the Company and the Company Subsidiaries shall instruct its
respective officers, directors, employees, representatives and agents,
including investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, initiate or participate in discussions or
negotiations with, or provide any information to, any Person or group (other
than Optionee, any of its Affiliates or representatives) concerning any
Acquisition Proposal.  None of the
Optionors, the Company or any Company Subsidiary shall enter into any agreement
with respect to any Acquisition Proposal. 
Upon execution of this Agreement, the Optionors and the Company shall immediately
cease any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing, and the Optionors
and the Company shall request (or if any of them has the contractual right to
do so, demand) the return of all confidential documents, analyses, financial
statements, projections, descriptions and other data previously furnished to
others in connection with the Optionors’ efforts to sell the Company.  The Company or the Optionors shall immediately
notify Optionee of the existence of any proposal or inquiry received by the
Company, and the Company shall immediately communicate to Optionee the terms of
any proposal or inquiry which it may receive (and shall immediately provide to
Optionee copies of any written materials received by the Company in connection
with such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry.


 


(b)                                 Neither
the Company Board of Directors nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Optionee,
the approval by such Company Board of Directors or any such committee of this
Agreement, (ii) approve or recommend or propose to approve or recommend,
any Acquisition Proposal or (iii) authorize the Company to enter into any
agreement with respect to any Acquisition Proposal.


 


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Section 7.6                                      Transfer
of Optionors’ Shares.  The Company
hereby waives any and all rights the Company may have under all agreements
between the Company and one or more of the Optionors or otherwise to object to
the transfer to Optionee of the Option Shares and hereby covenants not to
consent, where it has the discretion to do so, to the transfer of any Option
Shares to any Person other than Optionee.


 


Section 7.7                                      Waiver
Pursuant to and Termination of Shareholders Agreement.  Each of the Optionors and the Company hereby
waives any restrictions on transfer, rights of first refusal, tag along rights and
bring along rights that it may have pursuant to Sections 3, 4 and 5 of the
Shareholders Agreement and Sections 2, 3 and 4 of the Ozanne Agreement in
respect of the sale of the Option Shares to Optionee in accordance with the
terms of this Agreement; provided, however, that such waiver
shall not affect any Optionor’s rights under this Agreement.  Each of the Optionors and the Company hereby
agree that, in the event the Closing occurs, the Shareholders Agreement, the
Ozanne Agreement and the Registration Rights Agreement shall terminate
immediately upon Closing and be of no further force and effect without any
liability to any Optionor or the Company.


 


Section 7.8                                      Subsequent
Actions.  If at any time after the
Closing Optionee will consider or be advised that any deeds, bills of sale,
instruments of conveyance, assignments, assurances or any other actions or
things are necessary or desirable (i) to vest, perfect or confirm
ownership (of record or otherwise) in Optionee, its right, title or interest
in, to or under any or all of the Option Shares, (ii) to vest, perfect or
confirm ownership (of record or otherwise) in the Company and each Company
Subsidiary, any of its rights, properties or assets or (iii) otherwise to
carryout this Agreement, the Optionors and the Company shall execute and
deliver all deeds, bills of sale, instruments of conveyance, powers of
attorney, assignments and assurances and take and do all such other actions and
things as may be reasonably requested by Optionee and at the expense of Optionee
in order to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in Optionee or the Company or
any Company Subsidiary.


 


Section 7.9                                      FIRPTA
Certificates.  Each Optionor shall
deliver to the Optionee at or prior to the Closing a certificate, in form and
substance reasonably satisfactory to the Optionee and consistent with Treasury
Regulation Section 1.1445-2, certifying that it is not a foreign person.


 


Section 7.10                                Limitation
on Certain Actions.  Prior to the
Closing, the Optionee shall not take any action, or request that the Company or
any Company Subsidiary take any action, that, alone or in combination with
another event, could (i) entitle any current or former employee, director
or officer of the Company or any Company Subsidiary to severance pay,
unemployment compensation or any other payment or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee, director or officer.


 


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ARTICLE VIII


 


TAX MATTERS


 


Section 8.1                                      Transfer
Taxes.  All Transfer Taxes and
related amounts incurred in connection with the transactions contemplated
herein will be split equally among Optionors on the one hand and Optionee on
the other.  The Optionors and the
Optionee will cooperate to timely prepare any Tax Returns or other filings
relating to such Transfer Taxes, including any claim for exemption or exclusion
from the application or imposition of any Transfer Taxes.  Unless otherwise required by applicable
law,  the Optionors will file all Tax
Returns or other filings with respect to Transfer Taxes, the Optionee will pay
to Optionors, not later than five (5) Business Days before the due date
for payment of such Transfer Taxes, an amount equal to 50% of the Transfer
Taxes shown on such return or other filing, and promptly following the filing
thereof, the Optionors will furnish to the Optionee a copy of such return or
other filing and a copy of a receipt showing payment of any such Transfer
Tax.  With respect to any such returns or
filings required to be filed by the Optionee, the Optionors will pay to the
Optionee, not later than five (5) Business Days before the due date for
payment of such Transfer Taxes, an amount equal to 50% of the Transfer Taxes
shown on such return or other filing, and the Optionee will furnish to the
Optionors a copy of such return or other filing and a copy of a receipt showing
payment of any Transfer Tax.


 


Section 8.2                                      Tax
Return Filings.  At the Optionors’
expense, the Optionee shall, or shall cause the Company and each Company
Subsidiary to, timely prepare and file with the relevant Taxing Authorities all
Tax Returns of the Company and each Company Subsidiary covering a Pre-Closing
Tax Period or a Straddle Period the due date for filing of which, determined
taking into account extensions, is after the Closing Date; provided that
the Optionee shall furnish the Optionors with a copy of such Tax Returns not
later than thirty (30) days before such Tax Returns are due, and no such Tax
Returns shall be filed with any Taxing Authority without the Optionors’ written
consent, which consent shall not be unreasonably withheld..  The Optionors shall, or shall cause the
Company and each Company Subsidiary to, timely prepare and file with the
relevant Taxing Authorities all Tax Returns for any taxable periods of the
Company, any of each Company Subsidiary, or for each Company Group with respect
to which the Company or any Company Subsidiary is the parent, the due date for
filing of which, determined taking into account extensions, is on or before the
Closing Date.  Any Tax Returns described
in this Section 8.2 shall be prepared on a basis consistent with
applicable law and the past practices of the Company and each Company
Subsidiary and in a manner that does not distort taxable income (e.g.,
by deferring income or accelerating deductions).  All Tax Returns for a taxable period
including the Closing Date shall be filed on the basis that the relevant
taxable period ended as of the close of business on the Closing Date, unless
the relevant Taxing Authority will not accept such a Tax Return.  Further, the Optionee, the Company and/or
each Company Subsidiary shall not enter into any transaction on the Closing Date
(i) not contemplated by this Agreement, and (ii) outside the ordinary
course of business which may result in the Company or any Company Subsidiary
paying additional Taxes.  Promptly
following the filing of any Pre-Closing Tax Period Tax Return or a Straddle
Period Tax Return that the Optionee is responsible for preparing pursuant to
this Section 8.2, the Optionee shall provide to the Optionors a schedule detailing
the reasonable out-of-pocket costs paid to third parties in the preparation of
such Tax Returns (the “Tax Return Cost Schedule”).  The Optionors shall reimburse Optionee, not
later than thirty (30)


 


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days after receipt of any Tax Return Cost Schedule (i) the
full amount reflected thereon in respect of any Pre-Closing Tax Period Tax
Return, and (ii) in the case of any Straddle Period Tax Return, the amount
reflected on such Tax Return Cost Schedule multiplied by a fraction, the
numerator of which is the amount of Tax reflected on the related Straddle
Period Tax Return for which the Optionors are liable, and the denominator of
which is the total amount of Tax shown as due on such Straddle Period Tax
Return.


 


Section 8.3                                      Tax
Indemnification.


 


(a)                                  Optionors
Indemnification.  From and after the
Closing, notwithstanding any disclosures set forth in the Disclosure Schedule,
the Optionors, severally in proportion with such Optionor’s Percentage
Interest, and not jointly, shall be liable for, and shall indemnify all Optionee
Indemnified Persons against and hold them harmless from (i) all liability
for Taxes of the Company, each Company Subsidiary and each Company Group with
respect to any Pre-Closing Tax Period, (ii) all liability (as a result of
Treasury Regulation § 1.1502-6(a) or otherwise) for Taxes of the
Optionors or any other corporation which is or has ever been affiliated with
the Optionors (other than the Company or any Company Subsidiary) or with whom
the Company or any Company Subsidiary otherwise joins, has ever joined, or is
or has ever been required to join, in filing any consolidated, combined or
unitary Tax Return prior to the Closing Date, (iii) all liability for
Taxes of the Company, any Company Subsidiary or any Company Group arising
(directly or indirectly) as a result of the sale of the Option Shares,  (iv) any Loss resulting from any breach
of representation or warranty contained in Section 5.19, and (v) all
liability for reasonable legal fees and expenses attributable to any item in
the foregoing clauses, provided, however, that all Losses,
including legal fees and expenses, relating to Specified Tax Matters shall not
be considered Losses for which indemnification is provided pursuant to this Section 8.3(a) and
indemnification for Specified Tax Matters shall instead be provided under Section 8.3(b).  Notwithstanding the above, Optionors’
liability and indemnification obligation with respect to Taxes pursuant to this
Section 8.3(a) shall be reduced by the amount reflected as a
liability or in the reserve for Taxes on the Closing Balance Sheet (other than
the Specified Tax Reserves) and, in addition, by the amount of any estimated
Taxes paid by or on behalf of any Company, Company Subsidiary or Company Group;
provided, however, that all Losses for Specified Tax Matters for
which indemnification is provided pursuant to Section 8.3(b), below, shall
not be reduced by the amount reflected as a liability or in the reserve for
Taxes on the Closing Balance Sheet.


 


(b)                                 From
and after the Closing Date, notwithstanding any disclosures set forth in the Disclosure
Schedule, the Optionors, severally in proportion with such Optionor’s
Percentage Interest, and not jointly, shall be liable for and shall indemnify
all Optionee Indemnified Persons in the manner set forth in Sections 8.3(b)(iii) and
(iv) against all liability for Taxes of the Company, any Company
Subsidiary, or any Company Group arising as a result of:


 


(i)                                     a successful
Internal Revenue Service challenge of the Company’s characterization of its
$5,000,000 tax loss for the 2003 Tax year as a result of sale of shares of
capital stock of Truman as an ordinary loss, requiring such loss to be treated
as a capital loss, and


 


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(ii)                                  a successful Internal
Revenue Service challenge of the Company’s amortization treatment of purchased
mortgage servicing rights, requiring the purchased mortgage servicing rights to
be amortized over a longer period.


 


(iii)                               The Optionee shall be
indemnified for the full amount of any disallowed ordinary loss in the event of
the occurrence of the Specified Tax Matter described in Section 8.3(b)(i);
provided, however, that the Optionee shall subsequently reimburse
the Optionors for such indemnification payment if, and then only to the extent,
after taking all other available capital losses into account, the Company, any
Company Subsidiary, any Company Group or the Optionee has filed a Tax Return on
which it has offset capital gain by part or all of the capital loss from the
sale of the shares of capital stock of Truman.


 


(iv)                              The amount for which the
Optionee shall be indemnified with respect to the Specified Tax Matter
described in Section 8.3(b)(ii) shall be equal to (A) the amount
of Taxes payable to the Internal Revenue Service with respect to the Specified
Tax Matter, reduced by (B) an amount equal to the present value of the
expected tax benefits (determined using a 5% discount rate) arising solely from
an increase in the amount of amortization of purchase mortgage servicing rights
taken into account after the Closing Date with respect to the Specified Tax
Matter, which expected tax benefit shall not, however, include any amount of
amortization that could not be used to offset income as a result of a
limitation imposed under Section 382 of the Code and shall be determined
by assuming a 35% effective Tax rate.


 


(c)                                  Notwithstanding
any disclosures set forth in the Disclosure Schedule, Optionee shall be liable
for and shall indemnify the Optionors from and against, and agrees to promptly
pay the Optionors, all Tax Losses incurred as a result of a claim, notice of
deficiency, or assessment by, or any obligation owing to, any taxing authority
for any Taxes of the Company, any Company Subsidiary or any Company Group with
respect to any Post-Closing Tax Period.


 


(d)                                 Straddle
Periods.  In the case of any Straddle
Period:


 


(i)                                     Property Taxes of the Company and each
Company Subsidiary for the Pre-Closing Tax Period shall equal the Property
Taxes for such Period multiplied by a fraction, the numerator of which is the
number of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the Straddle
Period; and


 


(ii)                                  the Taxes of the
Company and each Company Subsidiary (other than Property Taxes) for the
Pre-Closing Tax Period shall be computed by assuming that the portion of the
Straddle Period ending on the Closing Date constitutes a separate taxable
period and by taking into account the actual taxable events occurring during
such period (except that exemptions, allowances and deductions for a Straddle
Period that are calculated on an annual or periodic basis, such as the
deduction for depreciation, shall be apportioned ratably on a per diem basis).


 


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(e)                                  The
indemnity obligation under this Section 8.3 in respect of Taxes for a
Straddle Period shall initially be satisfied by its payment to the Optionee, or
at the Optionee’s direction, to the Company, of the excess of (i) such
Taxes for the Pre-Closing Tax Period, over (ii) the amount of such Taxes
paid by the Company or any Company Subsidiary on or prior to the Closing Date
(including any estimated Taxes) and any amount reflected as a liability or in
the reserve for Taxes on the Closing Balance Sheet (other than the Specified
Tax Reserve).  At least thirty (30) days
prior to the due date (including extensions) of such Tax Return, Optionee shall
deliver to Optionors a copy of such Tax Return which will permit Optionors to
review and substantiate the accuracy of such Tax Return.  If the aggregate amount of Tax so determined
to be attributable to the Pre-Closing Tax Period is in excess of the amount of
such Taxes paid by the Company or any Company Subsidiary on or prior to the
Closing Date (including any estimated Taxes) and any amount reflected as a
liability or in the reserve for Taxes on the Closing Balance Sheet (other than
the Specified Tax Reserve), Optionors shall pay such excess to Optionee no
later than 5 days prior to the date of such Tax Return.  If the amount of such Taxes attributable to
the Pre-Closing Tax Period is less than the amount of such Taxes paid by the
Company or any Company Subsidiary on or prior to the Closing Date (including
any estimated Taxes) and any amount reflected as a liability or in the reserve
for Taxes on the Closing Balance Sheet (other than the Specified Tax Reserve),
Optionees shall pay to the Optionors the amount of such excess not less than 5
days prior to the due date of such Tax Return. 
The payments to be made pursuant to this Section 8.3(e) with
respect to a Straddle Period shall be appropriately adjusted to reflect any
Final Determination with respect to Straddle Period Taxes.


 


(f)                                    Any
indemnity payment to be made under this Section 8.3, other than an
indemnity payment described in the immediately preceding paragraph, 8.3(e),
shall be paid within 10 days after the indemnified party makes written demand
upon the indemnifying party, but in no case earlier than 5 Business Days prior
to the date on which the relevant Taxes are required to be paid to the relevant
Taxing Authority (including as estimated Tax payments).


 


(g)                                 Any
indemnification obligation under this Article VIII shall remain in full
force for the applicable statute of limitations, taking into account any
extensions, plus thirty (30) days.


 


Section 8.4                                      Cooperation.  The Optionors, the Company and the Optionee
shall reasonably cooperate, and shall cause their respective Affiliates,
officers, employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns, including maintaining and
making available to each other all records necessary in connection with Taxes,
and in resolving all disputes and audits with respect to all taxable periods
relating to Taxes, including all Tax Claims.


 


Section 8.5                                      Refunds
and Credits.  Any refund or credit of
Taxes of the Company or any Company Subsidiary for any taxable period ending on
or before the Closing Date shall be for the account of the Optionors.  Notwithstanding the foregoing, however, any
such refund or credit shall be for the account of the Optionee to the extent
that such refunds or credits are attributable (determined on a marginal basis)
to the carryback from a Post-Closing Tax Period (or the portion of a Straddle
Period that begins on the date after the Closing Date) of items of loss,
deductions or other Tax items of the Company or any Company Subsidiary (or any
of their respective


 


49





















 


Affiliates, including the
Optionee).  Any refund or credit of Taxes
of the Company or any Company Subsidiary for any Post-Closing Tax Period shall
be for the account of the Optionee; provided, however, any such refund or
credit shall be for the account of the Optionors to the extent that such
refunds or credits are attributable (determined on a marginal basis) to the
carryforward from a Pre-Closing Tax Period (or the portion of a Straddle Period
that ends on the Closing Date) of items of loss, deductions or other Tax items
of the Company or any Company Subsidiary (or any of their respective
Affiliates, including the Optionee).  Any
refund or credit of Taxes of the Company or any Company Subsidiary for any
Straddle Period shall be equitably apportioned between the Optionors and the
Optionee.  Each party shall, or shall
cause its Affiliates to, forward to any other party entitled under this Section
8.5 to any refund or credit of Taxes any such refund within 10 days after such
refund is received or reimburse such other party for any such credit within 10
days after the credit is allowed or applied against other Tax liability; provided,
however, that any such amounts shall be net of any Tax Cost or Tax
Benefit to the payor party attributable to the receipt of such refund and/or
the payment of such amounts to the payee party. 
The parties shall treat any payments under this section as an adjustment
to the Exercise Price, unless, and then only to the extent, otherwise required
by a Final Determination.  The control of
the prosecution of a claim for refund of Taxes paid pursuant to a deficiency
assessed subsequent to the Closing Date as a result of an audit shall be
governed by the provisions of Section 8.7.


 


Section 8.6                                      Calculation
of Losses.  The amount of any Loss
for which indemnification is provided under this Article VIII shall be net
of any amounts recoverable by the indemnified party under insurance policies
with respect to such Loss and shall be (i) increased to take account of
any net Tax Cost to the indemnified party arising from the receipt of indemnity
payments hereunder (grossed up for such increase) and (ii) reduced to take
account of any net Tax Benefit realized by the indemnified party arising from
the incurrence or payment of any such Loss. 
Any indemnity payment under this Agreement shall be treated as an
adjustment to the Exercise Price for Tax purposes, unless, and then only to the
extent, otherwise required by a Final Determination.


 


Section 8.7                                      Procedures
Relating to Indemnification of Tax Claims.


 


(a)                                  Notice.  If a claim shall be made by any Taxing
Authority, which, if successful, might result in an indemnity payment to any Optionee
Indemnified Person pursuant to Section 8.3, the Optionee shall promptly
notify the Optionors in writing of such claim (a “Tax
Claim”).  Failure to give
notice of a Tax Claim to the Optionors within a sufficient period of time and
in reasonably sufficient detail to allow the Optionors to effectively contest
such Tax Claim shall affect the liability of the Optionors to any Optionee
Indemnified Person only to the extent that the Optionors’ position is actually
and materially prejudiced as a result thereof.


 


(b)           Control of Proceedings.  The Optionors shall, at the Optionors’
expense, control all proceedings taken in connection with any Tax Claim
relating solely to Taxes of the Company or any Company Subsidiary for a
Pre-Closing Tax Period, and may make all decisions in connection with such Tax
Claim, provided, however, that the Optionors shall not settle any
such Tax Claim without prior written consent of the Optionee, which consent
shall not be unreasonably withheld, if such settlement would increase the Tax
liability of the Company and/or Optionee for any Post-Closing Period.  The Optionors and the Optionee shall


 


50





















 


jointly control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of the Company or any
Company Subsidiary for a Straddle Period, and neither party shall settle any
such Tax Claim without the written consent of the other party.  The Optionee shall control all proceedings
with respect to all other Tax Claims.


 


Section 8.8                                      Tax
Sharing Agreements.  The Optionors
shall cause any and all Tax sharing agreements between (i) the Optionors
or any of their Affiliates (other than the Company and any Company Subsidiary)
and (ii) the Company or any Company Subsidiary, to be terminated on or
before the Closing Date.  After the
Closing Date, no party shall have any rights or obligations under any such Tax
sharing agreements.


 


Section 8.9                                      Miscellaneous.  All indemnity obligations payable under this Article VIII
by or to Optionors shall be in accordance with each Optionor’s Percentage
Interest.


 


ARTICLE IX


 


CONDITIONS


 


Section 9.1                                      Conditions
to Each Party’s Obligation to Effect the Closing.  The respective obligation of each party to
effect the Closing shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions:


 


(a)                                  Statutes;
Court Orders.  No statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
which prohibits the consummation of the Closing; and there shall be no order or
injunction of a court of competent jurisdiction in effect precluding
consummation of the Closing.


 


(b)                                 HSR
Approval.  The applicable waiting
period under the HSR Act shall have expired or been terminated.


 


(c)                                  Contingent
Payment Agreement.  The Contingent
Payment Agreement shall have been executed by each other party thereto and
shall be in full force and effect.


 


Section 9.2                                      Conditions
to Obligations of Optionee to Effect the Closing.  The obligations of Optionee to consummate the
Closing shall be subject to the satisfaction on or prior to the Closing Date of
each of the following conditions:


 


(a)                                  Government
Action.  There shall not be
threatened or pending any suit, action or proceeding by any Governmental
Entity:


 


(i)                                     seeking to
prohibit or impose any limitations on Optionee’s ownership or operation (or
that of any of its Subsidiaries or Affiliates) of all or a portion of their or
the Company’s businesses or assets, or to compel Optionee or the Company or any
of their respective Subsidiaries or Affiliates to dispose of or hold separate
any portion of the business or assets of the Company or Optionee or any of
their respective Subsidiaries or Affiliates;


 


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(ii)                                  seeking to restrain
or prohibit the consummation of the Closing or the performance of any of the
other Transactions, or seeking to obtain from the Company or Optionee any
damages in connection with the performance of this Agreement or the other
Transactions;


 


(iii)                               seeking to impose
limitations on the ability of Optionee, or rendering Optionee unable, to accept
for payment or pay for or purchase some or all of the Option Shares or
consummate the Closing;


 


(iv)                              seeking to impose
limitations on the ability of Optionee effectively to exercise full rights of
ownership of the Option Shares, including the right to vote the Option Shares;
or


 


(v)                                 which otherwise is
reasonably likely to have a material adverse effect on the prospects,
consolidated financial condition, businesses or results of operations of the
Company and the Company Subsidiaries, considered as a whole;


 


or there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Transactions, or any other action shall be taken by any Governmental Entity,
other than the application to the Transactions of applicable waiting periods
under the HSR Act, that is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (v) above.


 


(b)                                 Certificate
of Company’s Officers.  The Company
shall have delivered to Optionee at the Closing a certificate signed by the
chief executive officer of the Company and by the chief financial officer of
the Company, dated the Closing Date, in form and substance reasonably
satisfactory to Optionee, to the effect that, as of the Closing Date,
(w) all of the representations and warranties of the Company set forth in this
Agreement that are qualified as to materiality are true and correct,
(x) all such representations and warranties that are not so qualified are
true and correct in all material respects, (y) there has not occurred any
Material Adverse Change since the date hereof and (z) the Company has
performed all material obligations required under this Agreement to be
performed by it, at or prior to the Closing.


 


(c)                                  Certificates
of Optionors’ Officers.  Each
Optionor shall have delivered to Optionee at the Closing a certificate signed
by an officer of such Optionor involved with such Optionor’s investment in the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to Optionee, to the effect that, as of the Closing Date, (x) all of the
representations and warranties of such Optionor set forth in this Agreement
that are qualified as to materiality are true and correct, (y) all such
representations and warranties that are not so qualified are true and correct
in all material respects and (z) such Optionor has performed all material
obligations required under this Agreement to be performed by it.


 


(d)                                 Consents
Obtained.  All material consents of
any Person necessary to the consummation of the Closing and the other
Transactions, including consents from parties to loans, contracts, leases or
other agreements and consents from Governmental Entities, including, without
limitation, all consents related to the transfer of all state, federal or
foreign licenses and/or confirmation that such licenses have been transferred
or reapplications


 


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approved, whether federal, state or local
shall have been obtained, and a copy of each such consent shall have been
provided to Optionee at or prior to the Closing.


 


(e)                                  Resignation
of Directors and Officers.  Such
members of the boards of directors and such officers of the Company and the
Company Subsidiaries as are designated in a written notice delivered at least
two (2) Business Days prior to the Closing by Optionee to the Company
shall have tendered, effective at the Closing, their resignations as such
directors and officers or shall have been removed.


 


(f)                                    Material
Adverse Change.  There shall not have
occurred any Material Adverse Change.


 


(g)                                 Representations
and Warranties.  All of the
representations and warranties of the Optionors and the Company set forth in
this Agreement that are qualified as to materiality shall be true and correct
in all respects and each such representation or warranty that is not so
qualified shall be true and correct in all material respects, in each case as
of the Closing Date.


 


(h)                                 No
Optionor Breach.  No Optionor shall
have failed to perform in any material respect any obligation or to comply in
any material respect with any agreement or covenant to be performed or complied
with by such Optionor under this Agreement.


 


(i)                                     No
Company Breach.  The Company shall
not have failed to perform in any material respect any obligation or to comply
in any material respect with any agreement or covenant to be performed or
complied with by it under this Agreement.


 


(j)                                     Acquisition
of Common Stock and Termination of Company Options.  The Company shall have consummated the
acquisition of all outstanding shares of Common Stock not owned by an
Optionor.  There shall not be outstanding
any Company Option that does not terminate upon the Closing.


 


(k)                                  Certain
Payments.  The Company shall have
made the payment to the Chief Executive Officer of the Company that is required
under his employment agreement and is due and payable at Closing.


 


(l)                                     Fee
Matrix.  The Company shall have
delivered to Optionee at the Closing a copy of the Fee Matrix of the Servicer
as it exists as of the Closing (the “Fee Matrix”).  The Fee Matrix shall not reflect any increase
in any fee set forth in the Signing Date Fee Matrix, unless the Optionee has
consented to such increase.


 


The foregoing conditions are for the sole benefit of Optionee, may be
waived by Optionee, in whole or in part, at any time and from time to time in
the sole discretion of Optionee.  The
failure by Optionee at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.


 


Section 9.3                                      Conditions
to Obligations of Optionors to Effect the Closing.  The obligations of the Optionors to
consummate the Closing shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions:


 


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(a)                                  Government
Action.  There shall not be
threatened or pending any suit, action or proceeding by any Governmental Entity
seeking to restrain or prohibit the consummation of the Closing or the
performance of any of the Transactions, or seeking to obtain from the Company
or Optionee any damages that are material in relation to the Company or the
Company Subsidiaries.


 


(b)                                 Representations
and Warranties.  All of the
representations and warranties of Optionee set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects and each
such representation or warranty that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date.


 


(c)                                  No
Optionee Breach.  Optionee shall not
have failed to perform in any material respect any material obligation or to
comply in any material respect with any agreement or covenant of Optionee to be
performed or complied with by it under this Agreement.


 


(d)                                 Certificate
of Optionee’s Officer.  Optionors and
the Company shall have received from Optionee a certificate, dated the Closing
Date, duly executed by an officer of Optionee to the effect of paragraphs (a) and
(b) above.


 


(e)                                  Satisfaction
of Promissory Notes.  All amounts
outstanding under the Promissory Notes shall have been paid in full on or prior
to the Closing Date.


 


(f)                                    Purchase
Agreement.  MSR Seller shall have
performed all of its obligations under the Purchase Agreement required to be
performed by it on or prior to the Closing Date.


 


The foregoing conditions are for the sole benefit of the Optionors, may
be waived on behalf of all Optionors by PMI and FSA, acting jointly, in whole
or in part, at any time and from time to time in the sole discretion of PMI and
FSA.  The failure by the Optionors at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.


 


ARTICLE X


 


TERMINATION


 


Section 10.1                                Termination.  The Option and this Agreement shall terminate
at the Expiration Time, without the need for any party hereto to take any
action, if the Option has not been properly exercised prior to the Expiration
Time in accordance with Section 3.1(a). 
In addition, the Option and this Agreement may be terminated or
abandoned at any time prior to the Closing Date:


 


(a)                                  By
the mutual written consent of Optionee, PMI and FSA;


 


(b)                                 By
either PMI or FSA if Optionee shall have breached in any material respect any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach cannot be or has not been cured within 30 days
after the giving of


 


54





















 


written notice by either PMI or FSA to
Optionee and each other party hereto specifying such breach; or


 


(c)                                  By
Optionee if any Optionor or the Company shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of a condition set forth in Article IX which
breach cannot be or has not been cured within 30 days after giving written
notice by Optionee to all Optionors specifying such breach.


 


(d)                                 By
PMI and FSA, acting jointly, at any time after the first Business Day
immediately following November 30, 2005 if the Closing has not occurred on
or before such first Business Day and by either PMI or FSA at any time after
the first Business Day immediately following December 31, 2005 if the
Closing has not occurred on or before such first Business Day.


 


(e)                                  By
Optionee at any time after the first Business Day immediately following November 30,
2005 if the Closing has not occurred on or before such first Business Day.


 


Section 10.2                                Effect
of Termination.  In the event of the
termination or abandonment of the Option or this Agreement by any party hereto
pursuant to the terms of this Agreement, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination or abandonment is made, and there shall be no
liability or obligation thereafter on the part of Optionee, the Optionors or
the Company except (a) for breach of this Agreement prior to such
termination or abandonment, (b) as set forth in Sections 12.1, 12.19
and 12.20, and (c) for breach of the confidentiality provisions of Section 7.2(c).  Notwithstanding anything to the contrary
contained herein, the termination or abandonment of the Option or this
Agreement shall not terminate the Purchase Agreement.


 


ARTICLE XI


 


INDEMNIFICATION


 


Section 11.1                                Survival
of Representations and Warranties; Time Limitations.


 


(a)                                  The
representations, warranties, covenants and agreements made herein shall survive
the Closing, subject to the other provisions of this Article XI.


 


(b)                                 The
right of any Optionee Indemnified Person to initiate any action against any
Optionor for a breach of any of the covenants or agreements of the Company or
any Optionor set forth herein shall terminate on December 31, 2007; except
with respect to such covenants or agreements set forth in this Agreement that
by their terms are required to be performed from and after such date
(including, without limitation, the covenants and agreements set forth in Section 11.2(d)).


 


(c)                                  The
right of any Optionee Indemnified Person to initiate any action against any
Optionor for a breach of any of the representations or warranties of the
Optionors set forth in Article IV or any of the representations or
warranties of the Company set forth in Sections 5.3 and 5.5 shall survive
indefinitely.


 


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(d)                                 The
right of any Optionee Indemnified Person to initiate any action against any
Optionor for any breach of the representations or warranties of the Company set
forth in Section 5.19 shall terminate thirty (30) days after the
expiration of the applicable statute of limitations, taking into account any
extensions.


 


(e)                                  The
right of any Optionee Indemnified Person to initiate any action against any
Optionor for any breach of the representations or warranties of the Company set
forth herein (other than the representations or warranties set forth in
Sections 5.3, 5.5 and 5.19), shall terminate on December 31, 2007.


 


Section 11.2                                Indemnification;
Remedies.


 


(a)                                  From
and after the Closing Date, each Optionor shall, severally and not jointly,
indemnify, defend and hold harmless each Optionee Indemnified Person from and
against any and all Losses incurred by such Optionee Indemnified Person arising
from any breach of any representation or warranty of such Optionor set forth in
Article IV of this Agreement or any covenant or agreement of such Optionor
set forth in this Agreement.


 


(b)                                 From
and after the Closing Date, each Optionor, severally in proportion with such
Optionor’s Percentage Interest, and not jointly, shall indemnify, defend and
hold harmless each Optionee Indemnified Person from and against any and all
Losses incurred by such Optionee Indemnified Person arising from (i) any
breach by the Company on the Closing Date of any representation or warranty of
the Company set forth in Article V of this Agreement, (ii) any breach
by the Company prior to the Closing (which has not been cured or set forth in
the Disclosure Schedules prior to the Closing Date) of any covenant of the
Company contained in this Agreement, (iii) notwithstanding whether any
indemnity obligation exists pursuant to Sections 11.2(b)(i) or
11.2(b)(ii) and notwithstanding any disclosures set forth in the
Disclosure Schedule, the facts underlying the Specified Disputes to the extent
that such Losses arise from events that have occurred prior to the Closing Date
or (iv) notwithstanding whether any indemnity obligation exists pursuant
to Sections 11.2(b)(i) or 11.2(b)(ii) and notwithstanding any
disclosures set forth in the Disclosure Schedule, indemnification by the
Company or a Company Subsidiary of directors or officers thereof (other than
persons that are employed by the Company or a Company Subsidiary on the Closing
Date) but only to the extent that such indemnification is mandatory under the
terms of (A) an enforceable written indemnification agreement entered into
by the Company or a Company Subsidiary with such director or officer prior to
the Closing Date, (B) the certificate of incorporation or bylaws of the
Company or a Company Subsidiary as they existed on or prior to the Closing Date
or (C) applicable law (the “Specified Indemnification Obligations”)
and such Losses arise from a Mortgage Loan Servicing Error occurring before the
Closing Date or a Regulatory Action; provided, however, that the
Optionors’ liability and indemnification obligation with respect to Specified
Disputes shall be reduced by any amount received by an Optionee Indemnified
Person in respect of any counter claim asserted by any Optionee Indemnified
Person in connection with such Specified Dispute; provided, further,
that the Optionors’ liability and indemnification obligation with respect to
the Specified Indemnification Obligations shall be reduced by any amount
recovered pursuant to insurance policies or other contractual indemnities,
which recovery each Optionee Indemnified Person agrees to pursue to the extent
commercially reasonable.  The right of an


 


56





















 


Optionee Indemnified Person to initiate any
action against any Optionor for indemnification relating to the Specified
Indemnification Obligations shall terminate on December 31, 2007.


 


(c)                                  Notwithstanding
whether any indemnity obligation exists pursuant to Sections 11.2(b)(i) or
11.2(b)(ii) and notwithstanding any disclosures set forth in the
Disclosure Schedule, from and after the Closing Date, each Optionor shall,
severally in proportion with such Optionor’s Percentage Interest, and not
jointly, indemnify, defend and hold harmless each Optionee Indemnified Person
from and against any and all Losses incurred by such Optionee Indemnified
Person in respect of any Specified Real Property that arise from any Environmental
Claim, to the extent arising from actions or conditions existing prior to the
Closing Date; provided, however, that such liability and
indemnification of the Optionors shall not apply with respect to (and the
following shall not constitute Losses for purposes of this Section 11.2(c)):  (i) the costs of any environmental
testing, sampling or monitoring performed by or on behalf of an Optionee
Indemnified Person, including the costs of any Phase I and Phase II
environmental site assessments; (ii) any Losses arising from remedial or
other actions to the extent such actions entail costs greater than necessary to
meet the minimum standards mandated by applicable Environmental Laws; (iii) any
Losses to the extent caused by or resulting from any action or omission of any
Optionee Indemnified Person (provided, however, that the
discovery of any environmental condition while conducting any Phase I or Phase
II environmental site assessments shall not constitute an action causing or
resulting in a Loss for purposes of this clause (iii)); and (iv) any
Losses arising or resulting from any REO Property; provided, further,
that such liability and indemnification of the Optionors shall be reduced by
any amount recovered by any Optionee Indemnified Person pursuant to insurance
policies, contractual indemnities, leaking tank or other governmental
remediation trust funds, or cost recovery or contribution claims or from
landlords, which recoveries each Optionee Indemnified Person agrees to pursue
to the extent commercially reasonable. 
For any Optionee Indemnified Person to be eligible for indemnification
under this Section 11.2(c), such person must have complied in all material
respects with applicable Environmental Laws, as well as any orders or
directives of any Governmental Entity, in connection with or relating to the
issues for which indemnification is sought. 
No claim may be made against any Optionor for indemnification pursuant
to this Section 11.2(c) unless the aggregate amount of Optionee’s
Losses (exclusive of legal fees incurred in connection with pursuing such
claim) arising from claims under this Section 11.2(c) exceed
$250,000, and in such event, shall be recoverable under this Section 11.2(c) only
to the extent Optionee’s Losses (exclusive of legal fees incurred in connection
with pursuing such claim prior to satisfying such threshold and exclusive of
any Losses in the first sentence of this Section 11.2(c) for which
the Optionors are not liable) under this Section 11.2(c) exceed
$250,000 in the aggregate.  The portion
of any Losses not subject to indemnification by the Optionors pursuant to this Section 11.2(c) shall
be borne by the Optionee Indemnified Persons and shall not be subject to
indemnification under any other provision of this Agreement or the Contingent
Payment Agreement.  The right of an
Optionee Indemnified Person to initiate any action against any Optionor for
indemnification under this Section 11.2(c) shall terminate on December 31,
2007.


 


(d)                                 Notwithstanding
whether any indemnity obligation exists pursuant to Sections 11.2(b)(i) or
11.2(b)(ii) and notwithstanding any disclosures set forth in the
Disclosure Schedule, from and after December 31, 2007, each Optionor
shall, severally in proportion with such Optionor’s Percentage Interest, and
not jointly, indemnify, defend and hold harmless the


 


57





















 


Servicer from and against any and all (i) Designated
Litigation Expenses paid by the Servicer on or after January 1, 2006
(subject to the immediately following sentence) arising from a Specified
Private Litigation Matter to the extent that such Designated Litigation Expense
was not deducted from a Monthly Contingent Payment or the Final Payment Amount
and (ii) Customer Accommodations paid by the Servicer on or after January 1,
2006 (subject to the immediately following sentence) to the extent that such
Customer Accommodations were not deducted from a Monthly Contingent Payment or
the Final Payment Amount; provided, however, that the Optionors
shall not be required to make any payments under this Section 11.2(d) until
either (i) the Final Payment Amount is paid in full in accordance with the
Contingent Payment Agreement or (ii) the Optionee provides written notice
to the Optionors that the Final Payment Amount is zero.  The Servicer shall have the right to defend
any Specified Private Litigation Matter through counsel of its own choosing and
may enter into any settlement, compromise or discharge of a Specified Private
Litigation Matter without the consent of any Optionor and may pay any Customer
Accommodation without the consent of any Optionor; provided, however,
that if the Servicer enters into any settlement, compromise or discharge of a
Specified Private Litigation Matter without the prior written consent of PMI
and FSA that results in Designated Litigation Expenses in excess of $15,000,
then the aggregate amount of Designated Litigation Expenses recoverable by the
Servicer from the Optionors under this Section 11.2(d) and the
Contingent Payment Agreement shall equal the sum of (i) $15,000 plus (ii) two-thirds
of the total Designated Litigation Expenses for such Specified Private
Litigation Matter in excess of $15,000; provided, further, that
if the Servicer makes or pays any Customer Accommodation without the prior
written consent of PMI and FSA that results in a Customer Accommodation in
excess of $10,000, then the aggregate amount of such Customer Accommodation
recoverable by the Servicer from the Optionors under this Section 11.2(d) and
the Contingent Payment Agreement shall equal the sum of (i) $10,000 plus (ii) two-thirds
of the total Customer Accommodation for such Customer Accommodation in excess
of $10,000.  The portion of any
Designated Litigation Expenses not subject to indemnification by the Optionors
pursuant to this Section 11.2(d) as a result of the immediately
preceding sentence shall be borne by the Servicer and shall not be subject to
indemnification under any other provision of this Agreement or the Contingent
Payment Agreement.


 


(e)                                  Notwithstanding
whether any indemnity obligation exists pursuant to Sections 11.2(b)(i) or
11.2(b)(ii) and notwithstanding any disclosures set forth in the
Disclosure Schedule, from and after the Closing Date, each Optionor shall,
severally in proportion with such Optionor’s Percentage Interest, and not
jointly, indemnify the each Optionee Indemnified Person for (i) 100% of
the first $500,000 of Regulatory Payments paid by the Servicer after the
Closing; (ii) 60% of the next $4.5 million of Regulatory Payments paid by
the Servicer after the Closing; (iii) 75% of the next $5.0 million of
Regulatory Payments paid by the Servicer after the Closing; and (iv) 100%
of all additional Regulatory Payments paid by the Servicer after the
Closing.  The portion of any Regulatory
Payments not subject to indemnification by the Optionors pursuant to this Section 11.2(e) shall
be borne by the Servicer and shall not be subject to indemnification under any
other provision of this Agreement or the Contingent Payment Agreement and shall
not count towards the satisfaction of the Indemnification Threshold.  The Servicer shall have the right to defend
any Regulatory Action occurring prior to the Closing Date through counsel of
its own choosing and may enter into any settlement, compromise or discharge of
such Regulatory Action without the consent of any Optionor, except that the
Servicer shall (i) act in good faith and exercise ordinary business care
and


 


58





















 


prudence in entering into any settlement,
compromise or discharge of such Regulatory Action and (ii) consult in good
faith with the Optionors prior to entering into any settlement, compromise or
discharge of a Regulatory Action that would result in a Regulatory Payment of
$250,000 or more (it being agreed that the Servicer shall have no obligation
under this Section 11.2(e) to follow or adopt any recommended action
made by the Optionors hereunder).  The
right of an Optionee Indemnified Person to initiate any action against any
Optionor for indemnification under this Section 11.2(e) shall
terminate on December 31, 2007.


 


(f)                                    No
claim may be made against any Optionor for indemnification pursuant to
Sections 11.2(b)(i) or 11.2(b)(ii) unless the aggregate amount
of Optionee’s Losses (exclusive of legal fees incurred in connection with
pursuing such claim) arising from claims under Sections 11.2(b)(i) and
11.2(b)(ii) (together with the amount of the Optionee’s Environmental
Expenditures, if any) exceed $2,500,000 (the “Indemnification Threshold”),
and in such event, shall be recoverable under such sections only to the extent
Optionee’s Losses (exclusive of legal fees incurred in connection with pursuing
such claim prior to satisfying the Indemnification Threshold) under such
sections (together with the amount of the Optionee’s Environmental
Expenditures, if any) exceed $2,500,000 in the aggregate; provided, however,
that solely for purposes of determining whether the Indemnification Threshold
has been satisfied, the qualification of any representation, warranty or
covenant by reference to the terms “material” or “Material Adverse Effect”
shall be disregarded and the determination of whether any such representation,
warranty or covenant contained herein (other than Section 5.9(a)) has been
breached prior to satisfying the Indemnification Threshold shall be made
without regard to such qualification; provided, further, that once the
Indemnification Threshold has been satisfied, references to the terms “material”
or “Material Adverse Effect” shall no longer be disregarded.


 


(g)                                 Under
no circumstances shall the Optionors’ liability under Sections 11.2(a),
11.2(b), 11.2(c), 11.2(d) and 11.2(e) exceed $25,000,000 in the
aggregate, nor shall the liability of any Optionor under Sections 11.2(a),
11.2(b), 11.2(c), 11.2(d) and 11.2(e) exceed such Optionor’s
proportionate share of the Losses incurred by Optionee, based on such Optionor’s
Percentage Interest.


 


(h)                                 Notwithstanding
anything to the contrary contained herein, the Optionee agrees that the sole
and exclusive remedy available to any Optionee Indemnified Person relating to (i) Losses
arising from Regulatory Actions, including Regulatory Payments, shall be under Section 11.2(e) hereof,
(ii) Losses arising from Private Litigation, including Designated
Litigation Expenses, shall be under the Contingent Payment Agreement and Section 11.2(d) hereof,
(iii) Customer Accommodations shall be under the Contingent Payment
Agreement and Section 11.2(d) hereof and (iv) Advances,
including Nonrecoverable Advances, and Customer Reversals (in each case as such
terms are defined in the Contingent Payment Agreement) shall be under the
Contingent Payment Agreement. 
Accordingly, no Optionee Indemnified Person shall have any rights to
indemnification with respect to such matters under Sections 11.2(b)(i) or
11.2(b)(ii).


 


(i)                                     No
Optionor shall be liable to any Optionee Indemnified Person pursuant to
Sections 8.3(a), 8.3(b) or 11.2, to the extent the conduct giving rise to
the right to indemnification is attributable to or arises out of the conduct of
any Optionee Indemnified Person after the Closing Date, except for purposes of
Sections 11.2(b)(iv), 11.2(d) and 11.2(e)


 


59





















 


to the extent that Mortgage Loan Servicing
Errors giving rise to indemnification thereunder occur both before the Closing
Date and during the 180 day period immediately after the Closing Date.  Notwithstanding anything to the contrary
contained herein, the Optionee agrees that the Optionors shall have no
liability for, and shall not provide any indemnification with respect to, any
Mortgage Loan Servicing Errors that occur solely after the Closing Date.


 


(j)                                     Notwithstanding
anything to the contrary contained in this Agreement or the Contingent Payment
Agreement, neither the inclusion of the Signing Date Fee Matrix as an exhibit
hereto nor the delivery of the Fee Matrix at Closing shall alter or limit in
any way any Optionee Indemnified Person’s rights under this Article XI; provided,
however, that this Section 11.2(j) shall not in any way limit or
otherwise effect the ability of the Optionors to utilize the Signing Date Fee
Matrix or the Fee Matrix in any action, suit or proceeding relating to this
Agreement or the Contingent Payment Agreement (including, without limitation, in
any dispute resolution pursuant to Section 3.3(c)(iv) of this
Agreement or Section 3(e) of the Contingent Payment Agreement).


 


Section 11.3           Notice
of Claim; Defense.  (a) The Optionee
Indemnified Person shall give each Optionor prompt notice of any claim (including
third-party claims) that may give rise to any indemnification obligation under
this Article XI (without regard to whether the Indemnification Threshold has
been satisfied), together with the estimated amount of such claim, and the
Optionors shall have the right to assume the defense (at their expense) of any
such third-party claim (other than a Regulatory Action or a Private Litigation)
through counsel of their own choosing by so notifying the Optionee Indemnified
Person within 30 days of the first receipt by any Optionor of such notice from
the Optionee Indemnified Person; provided, however, that any such
counsel shall be reasonably satisfactory to Optionee.  Failure to give such notice shall not affect
the indemnification obligations hereunder in the absence of actual and material
prejudice.  If, under applicable
standards of professional conduct, a conflict with respect to any significant
issue between any Optionee Indemnified Person and any Optionor exists in
respect of such third-party claim, the Optionee Indemnified Person shall be
entitled to assume the defense of such third-party claim through counsel of its
own choosing and, if the Indemnification Threshold has been satisfied, the
Optionors shall pay the reasonable fees and expenses of such counsel.  If the Indemnification Threshold has been
satisfied, the Optionors shall be liable for the fees and expenses of counsel
employed by any Optionee Indemnified Person for any period during which the
Optionors have not assumed the defense of any such third-party claim (other
than during any period in which the Optionee Indemnified Person will have
failed to give notice of the third-party claim as provided above).  If the Optionors assume such defense, the
Optionee Indemnified Person shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Optionors, it being understood that the Optionors shall control
such defense.  If the Optionors choose to
defend or prosecute a third-party claim, the Optionee Indemnified Person shall
cooperate in the defense or prosecution thereof, which cooperation shall
include, to the extent reasonably requested by the Optionors, the retention,
and the provision to Optionors, of records and information reasonably relevant
to such third-party claim, and making employees of the Company available on a
mutually convenient basis to provide additional information and explanation of
any materials provided hereunder.  If the
Optionors choose to defend or prosecute any third-party claim, the Optionee
Indemnified Person shall agree to any settlement, compromise or discharge of
such third-party claim that the Optionors may recommend and that, by its terms,
discharges all the Optionee Indemnified


 


60





















 


Persons from the full amount of
liability in connection with such third-party claim; provided, however,
that, without the consent of the Optionee Indemnified Person, the Optionors
shall not consent to, and the Optionee Indemnified Person shall not be required
to agree to, the entry of any judgment or enter into any settlement that (i)
provides for injunctive or other non-monetary relief affecting any Optionee
Indemnified Person, (ii) does not include as an unconditional term thereof the
giving of a release from all liability with respect to such claim by each
claimant or plaintiff to each Optionee Indemnified Person that is the subject
of such third-party claim, or (iii) does not include as an unconditional term
thereof the obligation to keep all terms and conditions of such settlement
confidential.


 


(b)                                 Notwithstanding
the forgoing, if the Optionee Indemnified Person determines in good faith that
there is a reasonable probability that a third-party claim that may give rise
to any indemnification obligation under this Article XI may materially
adversely affect the business of the Company or any Company Subsidiary from and
after the Closing Date, then the Optionee Indemnified Person may, by notice to
each Optionor, conduct and control, through counsel of its choosing, which
counsel shall be reasonably acceptable to the Optionors, the defense,
compromise or settlement of any such claim. 
In any such case, the Optionors shall cooperate in connection therewith
and shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Optionee Indemnified Person in connection
therewith; provided, that the Optionors may participate, through counsel chosen
by it and at its own expense, in the defense of any such claim as to which the
Optionee Indemnified Person has so elected to conduct and control the defense
thereof.


 


Section 11.4                                Tax
Treatment of Indemnification Payments. 
The parties agree to treat any indemnification payment pursuant to this
Agreement as an adjustment to the Exercise Price for Tax purposes.


 


ARTICLE XII


 


MISCELLANEOUS


 


Section 12.1                                Fees
and Expenses.  All costs and expenses
incurred in connection with this Agreement, the Contingent Payment Agreement
and the consummation of the Transactions shall be paid by the party incurring
such expenses, except as specifically provided to the contrary in this
Agreement.  The Optionee shall pay any
fee payable to the Federal Trade Commission in connection with the pre-merger
notice filing required by the HSR Act, but the Optionee shall be entitled to
reimbursement of $62,500 of such fee at the Closing in accordance with Section 3.3(b).


 


Section 12.2                                Amendment
and Modification.  This Agreement may
be amended, modified and supplemented in any and all respects, but, except as
otherwise contemplated by Section 7.4 with respect to Disclosure Schedule Supplements,
such amendments shall be made only by a written instrument signed by all of the
parties hereto expressly stating that such instrument is intended to amend,
modify or supplement this Agreement.


 


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Section 12.3                                Publicity.  Until the Closing, or the date the
Transactions are terminated or abandoned pursuant to Article X, neither
the Optionors, the Company, Optionee nor any of their respective Affiliates
shall issue or cause the publication of any press release or other public
announcement or provide comments to the press when requested with respect to
this Agreement or the other Transactions without prior consultation with the
other party, except as may be required by law or by any listing agreement with
a national securities exchange or trading market.


 


Section 12.4                                Notices.  All notices and other communications
hereunder shall be in writing and shall be delivered personally by hand, by
facsimile (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by such party by like notice):


 


if to
Optionee, to:


 


Credit Suisse First Boston (USA), Inc.

c/o Credit Suisse First Boston LLC

Eleven Madison Avenue, 4th Floor

New York, New York 10010

Attention:  Bruce Kaiserman                                         

Telephone:  (212) 538-1962

Telecopy:  (917) 326-7936


 


with copies to
(which copies shall not constitute notice):


 


Credit Suisse First Boston (USA), Inc.

c/o Credit Suisse First Boston LLC

One Madison Avenue, 9th Floor

New York, New York 10010

Attention:  Colleen A. Graham, Esq.

Telephone:  (212) 325-7951

Telecopy:  (212) 325-8282


 


Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY  10281

Attention:  William P. Mills, III, Esq.

Telephone:  212-504-6436

Telecopy:  212-504-6666


 


if to PMI, to:


 


The PMI Group, Inc.

PMI Plaza

3003 Oak Road

Walnut Creek, CA  94597

Attention:  General Counsel


Telephone: 
925-658-6384

Telecopy: 925-658-6175


 


62





















 


with a copy to
(which copy shall not constitute notice):


 


Bracewell & Giuliani LLP

711 Louisiana Street, Suite 2300

Houston, Texas  77002

Attention:  William S. Anderson

Telephone:  713-221-1122

Telecopy:  713-437-5370

Email: 
will.anderson@bracewellgiuliani.com


 


if to FSA, to:


 


FSA Portfolio Management Inc.,

c/o Financial Security Assurance Holdings Ltd.

31 West 52nd Street

New York, New York  10019

Attention:  General Counsel

Telephone:  212-339-3482

Telecopy:  212-339-0849

Email:  generalcounsel@fsa.com


 


if to
Greenrange, to:


 


if via mail:


 


P.O. Box 975

Darien, CT 06820


 


if via personal delivery or overnight courier
service:


 


114 Goodwives River Rd.

Darien, CT 06820


 


Attention: 
James H. Ozanne

Telephone:  (203) 655-5410

Telecopy:  (203) 655-6044


 


if to the
Company, to:


 


SPS Holding Corp.

P. O. Box 65250

Salt Lake City, UT 84165-0250

Attention:  General Counsel

Telephone:  (801) 293-2512

Telecopy:  (801) 293-3907


 


63





















 


with a copy to
(which copy shall not constitute notice):


 


Thomas F. Cooney, III

Kirkpatrick & Lockhart Nicholson Graham LLP

1800 Massachusetts Avenue, N.W.

Second Floor

Washington, D.C.  20036

Telephone:  (202) 778-9076

Telecopy:  (202) 778-9100


 


All notices given pursuant to this Section 12.4 shall be deemed to
have been given (i) if delivered personally on the date of delivery or on
the date delivery was refused by the addressee, (ii) if delivered by
facsimile transmission, when transmitted to the applicable number so specified
in (or pursuant to) this Section 12.4 and an appropriate confirmation is
received or (iii) if delivered by overnight courier, on the date of
delivery as established by the return receipt or courier service confirmation
(or the date on which the courier service confirms that acceptance of delivery
was refused by the addressee).


 


Section 12.5           Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.  Copies of executed counterparts transmitted
by telecopy or other electronic transmission service shall be considered
original executed counterparts, provided receipt of such counterparts is
confirmed.


 


Section 12.6                                Entire
Agreement; No Third Party Beneficiaries. 
This Agreement, the Contingent Payment Agreement and the Purchase
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof and (b) is not intended
to confer any rights or remedies upon any Person other than the parties hereto
and thereto.


 


Section 12.7                                Severability.  Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. 
If the final judgment of a court of competent jurisdiction or other
authority declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination shall
have the power to reduce the scope, duration, area or applicability of the term
or provision, to delete specific words or phrases, or to replace any invalid,
void or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.


 


Section 12.8                                Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law thereof.


 


64





















 


Section 12.9                                Enforcement;
Venue.  The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
State of New York or in New York state court, this being in addition to any
other remedy to which they are entitled at law or in equity.  In addition, each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any Federal court located in
the State of New York or any New York state court in the event any dispute
arises out of this Agreement or any of the Transactions, (b) agrees that
it shall not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it shall
not bring any action relating to this Agreement or any of the Transactions in
any court other than a Federal or state court sitting in the State of New York.


 


Section 12.10                          Waiver
of Jury Trial.  EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS.


 


Section 12.11                          Time
of Essence.  Each of the parties
hereto hereby agrees that, with regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.


 


Section 12.12                          Extension;
Waiver.  At any time prior to the
Closing Date, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) waive compliance by the other parties with any of the
agreements or conditions contained in this Agreement.  Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. 
The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.


 


Section 12.13                          No
Other Representations.  Optionee
acknowledges and agrees that the representations and warranties of the
Optionors and the Company contained in this Agreement are the sole and
exclusive representations and warranties of the Optionors and the Company to
the Optionee in connection with the transactions contemplated by this Agreement
and that, except as provided in Article IV and V, none of the Company or
any Optionor makes or has made any express or implied representation or
warranty to the Optionee regarding the Option Shares, the Company or any
Company Subsidiaries or their respective businesses.


 


Section 12.14                          Sole
and Exclusive Remedy.  Except with
respect to instances of fraudulent misrepresentation, the indemnification
provisions of Article XI shall be the sole and exclusive remedy of the
Optionee Indemnified Persons for any breach by the Company or any Optionor of
any representations, warranties, covenants or agreements contained in this
Agreement or otherwise with respect to this Agreement.


 


65





















 


Section 12.15                          No
Consequential Damages.  In no event
will any party to this Agreement be liable to any other party or any Optionee
Indemnified Person for any punitive, exemplary, indirect, special, incidental
or consequential damages, including lost profits or savings, damage to business
reputation or loss of opportunity.


 


Section 12.16                          No
Set-Off.  All payments to be made by
the Optionee to an Optionor pursuant to this Agreement or the Contingent
Payment Agreement (including, without limitation, the Cash Payment, the Monthly
Contingent Payments and the Final Payment Amount) shall be made without any
setoff, abatement, withholding, deduction, counter claim or reduction in
respect of, or otherwise affected by, any claim or dispute related to this
Agreement (including, without limitation, any claim pursuant to Article XI),
any Servicing Agreement or any Subsequent Designated Agreement that the
Optionee or the Company or any of their respective parents, Subsidiaries or
Affiliates may have with any of the Optionors or their respective parents,
Subsidiaries or Affiliates.


 


Section 12.17                          Assignment.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.  Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.


 


Section 12.18                          Documentation.  This Agreement was initially prepared by
Optionee’s legal counsel as a matter of convenience only, and such document has
been thoroughly reviewed by the Optionors, the Company and their legal counsel
and the input of the Optionors, the Company and their legal counsel was
properly considered, and therefore, no interpretation will be made in favor of
any of the parties or any of their respective Affiliates with respect to this
Agreement for the reason that such document was prepared by Optionee’s legal
counsel.


 


Section 12.19                          No
Disparagement.


 


(a)                                  Subject
to Section 12.19(d), the Optionee agrees that, prior to the Closing, in
the event that this Agreement is terminated, for a period of three years
commencing on the date of such termination, and, in the event that the Closing
occurs, for a period of three years commencing on the Closing Date, neither the
Optionee nor any of its officers, directors, employees, counsel or other
representatives shall publish in the media or make an oral statement related to
this Agreement, the Contingent Payment Agreement or the Purchase Agreement with
the intent or understanding that it be published in the media, or willfully
make any statement to any other Person, that would libel, slander, disparage or
denigrate the Company or any Company Subsidiary or any of their respective past
or present officers, directors or shareholders.


 


(b)                                 Subject
to Section 12.19(d), the Company agrees that, prior to the Closing, in the
event that this Agreement is terminated, for a period of three years commencing
on the date of such termination and, in the event that the Closing occurs, for
a period of three years commencing on the Closing Date, neither the Company nor
any of its officers, directors, employees, counsel or other representatives
shall publish in the media or make an oral statement related to this Agreement,
the Contingent Payment Agreement or the Purchase


 


66





















 


Agreement with the intent or understanding
that it be published in the media, or willfully make any statement to any other
Person, that would libel, slander, disparage or denigrate the Optionee or any
of its Subsidiaries or any of their respective past or present officers,
directors or shareholders.


 


(c)                                  Subject
to Section 12.19(d), each Optionor agrees, severally and not jointly,
that, prior to the Closing, in the event that this Agreement is terminated, for
a period of three years commencing on the date of such termination and, in the
event that the Closing occurs, for a period of three years commencing on the
Closing Date, neither such Optionor nor any of its officers, directors,
employees, counsel or other representatives shall publish in the media or make an
oral statement related to this Agreement, the Contingent Payment Agreement or
the Purchase Agreement with the intent or understanding that it be published in
the media, or willfully make any statement to any other Person directly related
to this Agreement, the Contingent Payment Agreement or the Purchase Agreement,
that would libel, slander, disparage or denigrate the Optionee or any of its
Subsidiaries or any of their respective past or present officers, directors or
shareholders.


 


(d)                                 The
provisions of Sections 12.19(a), (b) and (c) shall not restrict or
otherwise limit the ability of the Optionee, any Optionor, the Company or any
Company Subsidiary nor any of their respective officers, directors, employees,
counsel or other representatives to make any statement in connection with any
action, suit, investigation, examination, or proceeding or any filing with or
submission to any Governmental Entity or any statement required by applicable
law or judicial process.


 


Section 12.20                          No
Solicitation of Company Employees. 
The Optionee agrees that, prior to the Closing and, in the event that
this Agreement is terminated, for a period of one year commencing on the date
of such termination, neither the Optionee nor any of its Affiliates nor any of
their respective officers, directors or employees shall, directly or
indirectly, actively call on or solicit any employee or officer of the Company
or any Company Subsidiary regarding employment of such person; provided,
however, that the foregoing provision shall not prohibit the Optionee or
any of its Affiliates from engaging in a general solicitation of employment not
specifically directed towards an employee of SPS, including, but not limited
to, solicitations by means of a general advertisement or through a professional
recruiter or as a result of a general inquiry received by the Optionee or its
affiliate regarding potential employment by an employee of SPS.


 


[SIGNATURES ON FOLLOWING PAGE]


 


67





















 


IN WITNESS WHEREOF, Optionee, the Company and
each of the Optionors have executed this Agreement or caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first written above.


 


	
   

  	
  CREDIT
  SUISSE FIRST BOSTON (USA),

  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James P. Healy

  
	
   

  	
   

  	
  Name: James P. Healy

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPS HOLDING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Matt Hollingsworth

  
	
   

  	
   

  	
  Name: Matt Hollingsworth

  
	
   

  	
   

  	
  Title: CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE PMI GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Victor J. Bacigalupi

  
	
   

  	
   

  	
  Name: Victor J. Bacigalupi

  
	
   

  	
   

  	
  Title: Executive Vice President, Chief
  Administrative Officer and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Donald P. Lofe, Jr.

  
	
   

  	
   

  	
  Name: Donald P. Lofe, Jr.

  
	
   

  	
   

  	
  Title: Executive Vice President and General
  Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FSA PORTFOLIO MANAGEMENT INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Bruce E. Stern

  
	
   

  	
   

  	
  Name: Bruce E. Stern

  
	
   

  	
   

  	
  Title: General Counsel and Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GREENRANGE PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James H. Ozanne

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Signature Page to
Option Agreement


 





















 


Exhibit A


 


OPTIONOR
DATA


 


	
  Name of Optionor

  	
   

  	
  Type of 

  Legal Entity

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Number of

  Shares

  of Series C

  Preferred Stock

  	
   

  	
  Number of

  Shares of

  Common Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The PMI Group, Inc.

  	
   

  	
  Corporation

  	
   

  	
  Delaware

  	
   

  	
  1,522,666

  	
   

  	
  5,152,485

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FSA Portfolio Management Inc.

  	
   

  	
  Corporation

  	
   

  	
  New York

  	
   

  	
  361,333

  	
   

  	
  3,140,620

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Greenrange Partners LLC

  	
   

  	
  Limited
  Liability Company

  	
   

  	
  Connecticut

  	
   

  	
  None

  	
   

  	
  103,350