exv10w1



 





Exhibit 10.1




 





STOCK PURCHASE AGREEMENT




by and between




H&R BLOCK, INC.,




BLOCK FINANCIAL CORPORATION




and




OOMC ACQUISITION CORP.




dated as of




April 19, 2007




 





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	I. Purchase and Sale
	 	 	1	 
	1.01. Purchase and Sale
	 	 	1	 
	1.02. Purchase Price
	 	 	1	 
	1.03. Closing; Closing Deliveries and Actions
	 	 	1	 
	1.04. Purchase Price Adjustment
	 	 	4	 
	1.05. Earnout Payment
	 	 	9	 
	II. Representations and Warranties of Seller
	 	 	13	 
	2.01. Organization
	 	 	13	 
	2.02. Authority; Enforceability
	 	 	13	 
	2.03. Non-Contravention
	 	 	14	 
	2.04. Consents and Approvals
	 	 	15	 
	2.05. Ownership of Shares
	 	 	15	 
	2.06. Capitalization
	 	 	15	 
	2.07. Financial Statements
	 	 	16	 
	2.08. Events Subsequent to Balance Sheet Date
	 	 	19	 
	2.09. Taxes
	 	 	19	 
	2.10. Litigation
	 	 	20	 
	2.11. Compliance with Law; Permits
	 	 	20	 
	2.12. Employee Benefits
	 	 	21	 
	2.13. Labor Relations
	 	 	23	 
	2.14. Real Property
	 	 	23	 
	2.15. Intellectual Property
	 	 	24	 
	2.16. Material Contracts
	 	 	25	 
	2.17. Environmental Matters
	 	 	28	 
	2.18. Affiliate Transactions
	 	 	29	 
	2.19. Brokers
	 	 	29	 
	2.20. Sufficiency of Assets
	 	 	30	 
	2.21. Risk Management Instruments
	 	 	30	 
	2.22. Origination and Servicing
	 	 	30	 
	2.23. Securitizations and Warehouse Facilities
	 	 	31	 
	2.24. EPDs; Recourse
	 	 	32	 
	2.25. Insurance
	 	 	33	 
	2.26. Board Minutes
	 	 	33	 
	2.27. No Other Representations or Warranties
	 	 	34	 
	III. Representations and Warranties of Purchaser
	 	 	34	 
	3.01. Organization
	 	 	34	 
	3.02. Authority; Enforceability
	 	 	34	 
	3.03. Non-Contravention
	 	 	35	 
	3.04. Governmental Consents
	 	 	35	 
	3.05. Availability of Funds
	 	 	35	 
	3.06. Litigation
	 	 	36	 
	3.07. Investment Intent
	 	 	36	 
	3.08. No Other Representations or Warranties
	 	 	36	 
	IV. Covenants of Seller
	 	 	36	 
	4.01. Conduct of the Business
	 	 	36	 






 









 






	 	 	 	 	 
	4.02. Access; Confidentiality
	 	 	40	 
	4.03. Assistance in Transfer of Licenses, Permits and Registrations
	 	 	43	 
	4.04. Third-Party Consents
	 	 	43	 
	4.05. Extinguishment of Intercompany Indebtedness and Certain Affiliate Transactions;
Restructuring Activities
	 	 	43	 
	4.06. Servicer Ratings
	 	 	44	 
	V. Covenants of Purchaser
	 	 	44	 
	5.01. Access
	 	 	44	 
	5.02. Releases under Certain Contracts; Termination of Intercompany Credit Agreement;
Intercompany Indebtedness
	 	 	44	 
	5.03. Contacts with Customers, Suppliers, Employees, etc
	 	 	45	 
	VI. Covenants of Purchaser and Seller
	 	 	45	 
	6.01. Commercially Reasonable Efforts; Further Assurances
	 	 	45	 
	6.02. HSR Clearance
	 	 	46	 
	6.03. Post-Closing Litigation Cooperation
	 	 	47	 
	6.04. Public Announcements
	 	 	47	 
	6.05. Trademarks and Tradenames of Seller
	 	 	48	 
	6.06. Notices of Certain Events
	 	 	48	 
	6.07. Non-Solicitation
	 	 	49	 
	VII. Tax Matters
	 	 	50	 
	7.01. General
	 	 	50	 
	7.02. Tax Cooperation
	 	 	50	 
	7.03. Tax Sharing Agreements; Apportionment; Return Filings; Refunds and Credits 
	 	 	51	 
	7.04. Tax Indemnification
	 	 	54	 
	7.05. Section 338(g) and Section 338(h)(10) Elections
	 	 	55	 
	VIII. Employees And Employee Benefits
	 	 	56	 
	8.01. Employee Benefits and Compensation
	 	 	56	 
	8.02. Employee Matters
	 	 	58	 
	8.03. No Third Party Beneficiaries
	 	 	58	 
	IX. Conditions to Closing
	 	 	59	 
	9.01. Conditions to Each Party’s Obligations
	 	 	59	 
	9.02. Conditions to Obligation of Purchaser
	 	 	59	 
	9.03. Conditions to Obligation of Seller
	 	 	61	 
	9.04. Frustration of Closing Conditions
	 	 	61	 
	X. Termination 
	 	 	61	 
	10.01. Grounds for Termination
	 	 	61	 
	10.02. Effect of Termination
	 	 	62	 
	XI. Survival; Indemnification
	 	 	62	 
	11.01. Survival
	 	 	62	 
	11.02. Indemnification of Purchaser by Seller
	 	 	63	 
	11.03. Indemnification of Seller by Purchaser
	 	 	65	 
	11.04. Procedures Relating to Indemnification
	 	 	66	 
	11.05. Limitations on Indemnification
	 	 	68	 
	11.06. Exclusive Remedy
	 	 	69	 
	11.07. Adjustments of Purchase Price
	 	 	69	 






 









 






	 	 	 	 	 
	XII. Miscellaneous
	 	 	69	 
	12.01. Definitions
	 	 	69	 
	12.02. Notices
	 	 	88	 
	12.03. Amendments and Waivers
	 	 	89	 
	12.04. Expenses
	 	 	89	 
	12.05. Successors and Assigns
	 	 	89	 
	12.06. Governing Law
	 	 	90	 
	12.07. Specific Performance; Jurisdiction
	 	 	90	 
	12.08. Waiver of Punitive and Other Damages and Jury Trial
	 	 	90	 
	12.09. Counterparts; Effectiveness; Third Party Beneficiaries
	 	 	91	 
	12.10. Other Definitional and Interpretative Provisions
	 	 	91	 
	12.11. Entire Agreement
	 	 	91	 
	12.12. Disclosure Schedules
	 	 	91	 
	12.13. Severability
	 	 	92	 
	12.14. Fulfillment of Obligations
	 	 	92	 
	12.15. Parent Guarantee
	 	 	92	 






 









 






TABLE OF EXHIBITS AND SCHEDULES




	 	 	 
	Exhibits
	 	 
	 
	 	 
	Exhibit A

	 	Closing Balance Sheet Methodologies
	Exhibit B

	 	Earnout Methodologies
	Exhibit C

	 	Transition Services Agreement
	Exhibit D

	 	Mutual Release
	Exhibit E

	 	Financing Commitments
	 
	 	 
	Purchaser Disclosure Schedule
	 
	 	 
	Section 9.02(h)
	 	Approvals, Consents and Filings
	 
	 	 
	Seller Disclosure Schedules
	 
	 	 
	Section 1.04(a)(i)

	 	Target Tangible Net Assets Statement
	Section 2.03

	 	Non-Contravention
	Section 2.04

	 	Consents and Approvals
	Section 2.06(b)

	 	Capitalization
	Section 2.07

	 	Financial Statements
	Section 2.08

	 	Events Subsequent to Balance Sheet Date
	Section 2.09

	 	Taxes
	Section 2.10

	 	Litigation
	Section 2.11

	 	Compliance with Laws; Permits
	Section 2.12

	 	Employee Benefits
	Section 2.13

	 	Labor Relations
	Section 2.14

	 	Real Property
	Section 2.15

	 	Intellectual Property
	Section 2.16

	 	Material Contracts
	Section 2.17

	 	Environmental
	Section 2.18

	 	Affiliate Transactions
	Section 2.20

	 	Sufficiency of Assets
	Section 2.22

	 	Origination and Servicing
	Section 2.23

	 	Securitizations and Warehouse Facilities
	Section 2.24

	 	EPDs; Recourse
	Section 4.01

	 	Conduct of Business
	Section 4.05

	 	Extinguishment of Intercompany Indebtedness and Certain Affiliate Transactions
	Section 8.01

	 	Employee Plans to be Maintained
	Section 9.02(d)

	 	Conditions to Closing Warehouse Facilities
	Section 12.01

	 	Knowledge of Seller






 









 






STOCK PURCHASE AGREEMENT




     This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of April 19, 2007, is by
and between OOMC Acquisition Corp., a Delaware corporation (“Purchaser”), Block Financial
Corporation, a Delaware corporation (“Seller”) and H&R Block, Inc., a Missouri corporation
(the “Parent”).



     WHEREAS, Seller is engaged, directly or indirectly, in the origination, purchase, sale and
servicing of residential mortgage loans through Option One Mortgage Corporation, a California
corporation (the “Company”), and the Company’s Subsidiaries; and



     WHEREAS, upon the terms and conditions contained in this Agreement, Seller desires to sell to
Purchaser and Purchaser desires to purchase from Seller all of the outstanding shares of capital
stock (the “Shares”) of the Company.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and
other good and valuable consideration, upon the terms and subject to the conditions set forth in
this Agreement the parties hereto hereby agree as follows:



I. PURCHASE AND SALE




          1.01. Purchase and Sale. At the Closing, Seller will sell and transfer the Shares to
Purchaser, free and clear of any Liens other than those arising from acts of Purchaser or its
Affiliates, and Purchaser will purchase the Shares from Seller (the “Purchase”).




          1.02. Purchase Price. At the Closing, in consideration for the transfer by Seller to
Purchaser of the Shares, Purchaser will pay to Seller an amount equal to (a) $969,027,000 (the
“Purchase Price”), plus (b) the Estimated Tangible Net Assets Surplus, if any, and
minus (c) the Estimated Tangible Net Assets Shortfall, if any (such sum, the “Closing
Date Cash Payment”). Such payment will be made by wire transfer of immediately available funds
to an account or accounts designated by Seller to Purchaser in writing no later than two Business
Days prior to the Closing.




          1.03. Closing; Closing Deliveries and Actions. (a) Closing. The closing of the Purchase (the
“Closing”) will take place at the offices of Schulte Roth & Zabel LLP located at 919 Third
Avenue, New York, New York (or at such other place as the parties may designate in writing) at
10:00 a.m. (New York City time) on (i) the last Business Day of the Company’s fiscal month in which
the last of the conditions set forth in Article IX to be fulfilled or waived are fulfilled or
waived (other than those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of such conditions), or (ii) at such other date or place as
Purchaser and Seller may agree in writing (the date on which the Closing occurs, the “Closing
Date”). Legal title, equitable title and risk of loss with respect to the Shares will transfer
to Purchaser at the

1









 








Closing, which transfer will be deemed effective for accounting and other computational
purposes as of 12:01 a.m. (Eastern Standard Time) on the Closing Date.




               (b) Deliveries by Purchaser at the Closing. At the Closing, Purchaser will deliver, or cause
to be delivered, to Seller the following:



                    (i) the Closing Date Cash Payment payable to Seller as set forth in Section 1.02;



                    (ii) the certificate to be delivered by Purchaser pursuant to Section 9.03(c);



                    (iii) the certificate of incorporation (or equivalent organizational document) of Purchaser,
certified as of a recent date by the Secretary of State of Delaware;



                    (iv) a certificate of the Secretary of State of Delaware as to the good standing as of a
recent date of Purchaser in such jurisdiction;



                    (v) a certificate of an officer of Purchaser, given by such officer on behalf of Purchaser and
not in such officer’s individual capacity, certifying as to the bylaws (or equivalent governing
document) of Purchaser and as to resolutions of the board of directors (or equivalent governing
body) of Purchaser authorizing this Agreement and the Transaction Agreements and the transactions
contemplated hereby and thereby;



                    (vi) a transition services agreement, in the form of Exhibit C (the “Transition
Services Agreement”), duly executed by Purchaser; and



                    (vii) such other documents and instruments as may be reasonably required to consummate the
transactions contemplated by this Agreement and the Transaction Agreements.



               (c) Deliveries by Seller at the Closing. At the Closing, Seller will deliver, or cause to be
delivered, to Purchaser the following:



                    (i) certificates representing the Shares, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank in proper form for transfer, with appropriate transfer tax stamps, if
any, affixed;



                    (ii) the certificate to be delivered by Seller pursuant to Section 9.02(f);



                    (iii) the certificate of incorporation (or equivalent organizational document) of Seller and
the Company, certified as of a recent date by the Secretary of State of the applicable jurisdiction
of incorporation;



2









 





                    (iv) a certificate of the Secretary of State of the applicable jurisdiction of incorporation
as to the good standing as of a recent date of Seller and the Company in such jurisdiction;



                    (v) a certificate of an officer of Seller and the Company, given by such officer on behalf of
Seller or the Company, as applicable, and not in such officer’s individual capacity, certifying as
to the bylaws (or equivalent governing document) of Seller or the Company, as applicable, and as to
resolutions of the board of directors (or equivalent governing body) of Seller authorizing this
Agreement and the Transaction Agreements and the transactions contemplated hereby and thereby;



                    (vi) a certificate of an officer of Parent, given by such officer on behalf of Parent, and not
in such officer’s individual capacity, certifying as to resolutions of the board of directors of
Parent authorizing the Guarantee;



                    (vii) the Transition Services Agreement, duly executed by Parent;



                    (viii) a mutual release in the form annexed hereto as Exhibit D, duly executed by the
Company, on behalf of itself and each of its Subsidiaries, and Parent, on behalf of itself and each
of its subsidiaries (other than the Company and its Subsidiaries);



                    (ix) original corporate record books and stock record books of the Company;



                    (x) written resignations of (A) Mark A. Ernst as a director of the Company, and (B) James E.
Karlin and Kennion K. Yano as officers of the Company and the Subsidiaries of which they are
officers, and to the extent requested by Purchaser at least three Business Days prior to the
Closing Date, written resignations of any other member of the board of directors, board of managers
or equivalent governing body, as applicable, of the Company and its majority-owned Subsidiaries;



                    (xi) a certificate signed by Seller dated as of the Closing Date, in the form required by the
Treasury Regulations issued under Section 1445 of the Code, to the effect that Seller is not a
foreign person for purposes of Section 1445 of the Code;



                    (xii) evidence, reasonably satisfactory to Purchaser, that Parent or Seller shall have
completed the Restructuring Activities; and



                    (xiii) such other documents and instruments as may be reasonably required to consummate the
transactions contemplated by this Agreement and the Transaction Agreements.



3









 





          1.04. Purchase Price Adjustment.




               (a) Estimate Statement.



                    (i) From and after the date hereof, each of Purchaser and Seller agree to take all of the
actions contemplated to be taken by the applicable party as set forth on Exhibit A (such
Exhibit including the Annexes thereto, the “Closing Balance Sheet Methodologies Schedule”).



                    (ii) Approximately 35 Business Days prior to the anticipated Closing Date, the Company shall
deliver to Purchaser mortgage loan tapes providing the relevant data with respect to the Specified
Line Items of the Business as such Specified Line Items existed as of a date as close in time to 35
Business Days prior to the anticipated Closing Date as reasonably practicable (but in no case
earlier than the 45th Business Day prior to the anticipated Closing Date) (such tapes, the
“Tapes”)) and provide Purchaser five Business Days to review the Tapes. At the end of such
five-Business Day period, the Company shall deliver the Tapes (taking into account any reasonable
comments thereon by Purchaser) to each of the Investment Banks (as defined by the Closing Balance
Sheet Methodologies Schedule), with a copy to Purchaser. The Company shall cooperate with, and
timely respond to, all reasonable requests from the Investment Banks for information to be used to
conduct any determinations contemplated by this Section 1.04. The Company shall notify
Purchaser of any such requests and provide Purchaser with copies of all information provided in
response to such requests. For purposes of complying with the terms set forth in this Section
1.04, each party will cooperate with and make available to the other party and its
representatives all information, records, data and working papers (subject to the execution of
customary access letters, if requested, with respect to the work product of a party’s independent
accountant), and will permit access to its facilities and personnel, as may reasonably be required
in connection with the preparation and analysis of the Initial Estimate Statement, the Estimate
Statement and the Final Statement, as applicable, including with respect to any valuations to be
performed and bids to be obtained in connection therewith.



                    (iii) Each Investment Bank shall be instructed to deliver (i) its written determination of the
Fair Market Value of the applicable Specified Line Item as of 10 Business Days prior to the
anticipated Closing Date (each such determination for any Specified Line Item, an “Initial
Pre-Closing Determination” and such date, the “Initial Estimate Date”)) and (ii) a
written schedule setting forth the prepayment speed and default curve vector graphs contemplated by
item (j) of Annex C to the Closing Balance Sheet Methodologies Schedule, signed by a duly
authorized officer of the applicable Investment Bank, to each of Seller and Purchaser by the close
of business on the 10th Business Day prior to the anticipated Closing Date in the case of clause
(i) and the 20th Business Day prior to the anticipated Closing Date in the case of clause (ii).
Each Initial Pre-Closing Determination shall take into account the information in the Tapes and be
determined in accordance with the applicable valuation methodology to be used for the Estimate
Statement set forth on the Closing Balance Sheet Methodologies Schedule. The fees and expenses of
the Investment Banks incurred



4









 




pursuant to this Section 1.04 shall be split equally between Seller and Purchaser and,
upon the request of any Investment Bank, the Company will enter into a customary indemnification
arrangement with such Investment Bank. For purposes of this sub-section (iii), “Fair Market
Value” shall mean the net aggregate value (as defined in the Closing Balance Sheet
Methodologies Schedule) that would be paid in cash by the applicable Investment Bank to a willing
seller as of the specified date, based on current market conditions, in a manner specified in the
Final Statement specifications set forth in the Closing Balance Sheet Methodologies Schedule of the
specified assets in a binding, unconditional sale transaction with no due diligence “kick out”
rights, where the buyer would be committed to such price for one Business Day after receipt by the
seller and would receive customary representations, warranties and indemnities (except in the case
of the Auctioned Mortgage Loans which would be sold on an “as is” basis with representations and
warranties consistent with a sale on such a basis (and no indemnity)). Seller shall calculate the
amount of Repurchase Liability on the Estimate Statement on a pro forma basis to take into account
any change in exposure that would occur due to such representations, warranties and indemnities had
such sale been effected on such a basis prior to Closing.




                    (iv) Approximately 30 Business Days prior to the anticipated Closing Date, the Company shall
deliver to Purchaser mortgage servicing rights tapes (but solely limited to those Eligible
Servicing Rights that require valuation by the MSR Valuation Firms pursuant to the Closing Balance
Sheet Methodologies Schedule) providing the relevant data with respect to the Mortgage Servicing
Rights (“MSR Tapes”) as of a date approximately 30 Business Days prior to the anticipated
Closing Date and provide Purchaser five Business Days to review the MSR Tapes. At the end of such
five Business Day period, the Company shall deliver the MSR Tapes (taking into account any
reasonable comments thereon by Purchaser) to Countrywide Servicing Exchange and MIAC (each, an
“MSR Valuation Firm”), with a copy to Purchaser. The Company shall cooperate with, and
timely respond to, all reasonable requests from the MSR Valuation Firms for information to be used
to conduct any determinations contemplated by this Section 1.04. The Company shall notify
Purchaser of any such requests and provide Purchaser with copies of all information provided in
response to such requests.



                    (v) Each MSR Valuation Firm shall be instructed to deliver in writing its valuations of
Mortgage Servicing Rights (the “MSR Valuations”), signed by a duly authorized officer of
the applicable MSR Valuation Firm, to each of Seller and Purchaser by the close of business on the
10th Business Day prior to the anticipated Closing Date. The MSR Valuations shall take into
account the information in the MSR Tapes and the prepayment speed and default curve vector graphs
prepared by the Investment Banks and provided to the MSR Valuation Firms in accordance with the
Closing Balance Sheet Methodologies Schedule and be determined in accordance with the applicable
valuation methodology to be used for the Estimate Statement set forth in the Closing Balance Sheet
Methodologies Schedule. The fees and expenses of the MSR Valuation Firms incurred pursuant to this
Section 1.04 shall be split equally between Seller and Purchaser and, upon the request of
any MSR Valuation Firm, the



5









 




Company will enter into a customary indemnification arrangement with such MSR Valuation Firm.




                    (vi) Approximately 30 Business Days prior to the anticipated Closing Date, the Company shall
deliver to Purchaser pipeline mortgage loan tapes providing the relevant data with respect to
Pipeline Mortgage Loans (“Pipeline Tapes”) as of a date approximately 30 Business Days
prior to the anticipated Closing Date and provide Purchaser five Business Days to review the
Pipeline Tapes. At the end of such five-Business Day period, the Company shall deliver the
Pipeline Tapes (taking into account any reasonable comments thereon by Purchaser) to the Investment
Banks, with a copy to Purchaser.



                    (vii) Each Investment Bank shall be instructed to deliver in writing its valuation of the
Pipeline Mortgage Loans (the “Pipeline Valuations”), signed by a duly authorized officer of
the applicable Investment Bank, to each of Seller and Purchaser by the close of business on the
10th Business Day prior to the anticipated Closing Date. The Pipeline Valuations shall take into
account the information in the Pipeline Tapes and be determined in accordance with the applicable
valuation methodology to be used for the Estimate Statement set forth on the Closing Balance Sheet
Methodologies Schedule.



                    (viii) No less than seven Business Days prior to the Closing Date, Seller will provide
Purchaser a statement (the “Initial Estimate Statement”) setting forth Seller’s
good faith estimate of the Closing Tangible Net Assets (the “Estimated Closing Tangible Net
Assets”), together with a calculation showing in reasonable detail how the Estimated Closing
Tangible Net Assets was calculated. The Initial Estimate Statement shall reflect (i) the Estimated
Value of each of the Specified Line Items, (ii) the value of the Mortgage Servicing Rights as
determined pursuant to the Closing Balance Sheet Methodologies Schedule based on the MSR Valuations
and (iii) the value of the Pipeline Mortgage Loans as determined pursuant to the Closing Balance
Sheet Methodologies based on the Pipeline Valuations. The Initial Estimate Statement will be
prepared by Seller on an unaudited basis, in the same form as that utilized in the Target Tangible
Net Assets Statement, and utilizing (A) the accounting principles, practices, methodologies and
policies specifically set forth on the Closing Balance Sheet Methodologies Schedule and (B) to the
extent not specifically set forth on the Closing Balance Sheet Methodologies Schedule and to the
extent that the same are consistent with GAAP, the accounting principles, practices, methodologies
and policies utilized in the preparation of the Target Tangible Net Assets Statement and (C) to the
extent that the accounting principles, practices, methodologies and policies utilized in the
preparation of the Target Tangible Net Assets Statement are not consistent with GAAP, then in
accordance with GAAP (collectively, the “Accounting Principles”).



                    (ix) Each Investment Bank shall be instructed to deliver its determination of the Fair Market
Value of the applicable Specified Line Item as of two Business Days prior to the anticipated
Closing Date (each such determination for any Specified Line Item, a “Pre-Closing
Determination” and such date, the “Estimate Date”))



6









 




in writing, signed by a duly authorized officer of the applicable Investment Bank, to each of
Seller and Purchaser by the close of business on the second Business Day prior to the anticipated
Closing Date. Each Pre-Closing Determination shall be determined in accordance with the applicable
valuation methodology set forth on the Closing Balance Sheet Methodologies Schedule.




                    (x) No less than one Business Day prior to the Closing Date, Seller will provide Purchaser an
updated statement (the “Estimate Statement”) setting forth the Estimated Closing
Tangible Net Assets, together with a calculation showing in reasonable detail how the Estimated
Closing Tangible Net Assets was calculated. The Estimate Statement shall reflect (i) the Estimated
Value of each of the Specified Line Items, (ii) the value of the Mortgage Servicing Rights as
determined pursuant to the Closing Balance Sheet Methodologies Schedule based on the MSR Valuations
and (iii) the value of the Pipeline Mortgage Loans as determined pursuant to the Closing Balance
Sheet Methodologies based on the Pipeline Valuations. The Estimate Statement will be prepared by
Seller on an unaudited basis, in the same form as that utilized in the Target Tangible Net Assets
Statement, and utilizing the Accounting Principles.



               (b) Final Statement.



                    (i) By no later than 10 Business Days after the Closing Date, the Company shall deliver to the
Investment Banks updated Pipeline Tapes providing the relevant data with respect to Pipeline
Mortgage Loans as of the Closing Date, with a copy to Seller.



                    (ii) Each Investment Bank shall be instructed to deliver in writing its valuation of the
Pipeline Mortgage Loans based on the updated Pipeline Tapes (the “Updated Pipeline
Valuations”), signed by a duly authorized officer of the applicable Investment Bank, to each of
Seller and Purchaser by the close of business on the 15th Business Day after the Closing Date. The
Updated Pipeline Valuations shall take into account the information in the updated Pipeline Tapes
and be determined in accordance with the applicable valuation methodology to be used for the Final
Statement set forth on the Closing Balance Sheet Methodologies Schedule.



                    (iii) By no later than 20 Business Days after receipt of those third-party valuations and firm
bids required to be obtained after the Closing pursuant to the Closing Balance Sheet Methodologies
Schedule and receipt of all other information necessary to calculate the value of the Specified
Line Items as contemplated by the Closing Balance Sheet Methodologies Schedule, Purchaser will
prepare a statement (as finally determined pursuant to Section 1.04, the “Final
Statement”) of the Closing Tangible Net Assets (as finally determined pursuant to this
Section 1.04, the “Final Closing Tangible Net Assets”) and deliver it to Seller.
The Final Statement will reflect each of the values determined pursuant to the Closing Balance
Sheet Methodologies Schedule. The Final Statement will be prepared by Purchaser on an unaudited
basis, in the same form as that utilized in the Target Tangible Net Assets Statement, and utilizing
the Accounting Principles.



7









 





               (c) Dispute. Seller will provide to Purchaser within 30 days after Purchaser’s
delivery of the Final Statement a notice to Purchaser disagreeing with any such calculation and
setting forth Seller’s calculation of the Final Closing Tangible Net Assets (the “Seller’s
Objection”), which shall describe in reasonable detail the specific nature and amount of each
disagreement and shall state in reasonable detail all bases upon which Seller believes the Final
Statement is not in conformity with Section 1.04. Seller shall be deemed to have agreed
with all other items and amounts contained in the Final Statement that are not specifically
identified as a disagreement in the Seller’s Objection. If Seller shall fail to deliver a Seller’s
Objection within such 30-day period, Seller shall be deemed to have agreed with Purchaser as to the
Final Statement. Purchaser and Seller will negotiate in good faith any disagreements contained in
the Seller’s Objection during the 30-day period immediately following the delivery of the Seller’s
Objection. If Purchaser and Seller agree to a Final Statement and calculation of the Final Closing
Tangible Net Assets within such 30-day period, the appropriate party will make the payment
contemplated by Section 1.04(d) or (e), as applicable. If Purchaser and Seller,
notwithstanding these good faith efforts, fail to agree on a Final Statement and calculation of the
Final Closing Tangible Net Assets, then as promptly as practicable (but in any event within 10
Business Days after expiration of such 30-day period), Purchaser and Seller jointly will engage the
firm of Crowe Chizek and Company LLP or such other nationally recognized accounting firm mutually
selected by Purchaser and Seller (the “Accounting Firm”) to resolve any dispute. As
promptly as practicable thereafter (but in any event within 15 Business Days of engagement of the
Accounting Firm), Purchaser and Seller will each prepare and submit a presentation to the
Accounting Firm setting forth such party’s proposed version of a Final Statement and calculation of
the Final Closing Tangible Net Assets. The scope of the disputes to be resolved by the Accounting
Firm will be limited to whether such Final Statements and calculations were prepared in accordance
with this Section 1.04, and the Accounting Firm is not to make any other determination,
including any determination as to whether GAAP was followed (except to the extent required by the
Accounting Principles). As soon as practicable thereafter (but in any event within 20 Business
Days), Purchaser and Seller will instruct the Accounting Firm to render a determination of Final
Closing Tangible Net Assets, such determination to be based solely upon the presentations by
Purchaser and Seller. In making such determination, the Accounting Firm will act as an expert and
not as an arbitrator in conducting its analysis, and may not assign a value to Final Closing
Tangible Net Assets greater than the greatest value claimed by either party or less than the
smallest value for Final Closing Tangible Net Assets claimed by either party. All fees and
expenses relating to the work, if any, to be performed by the Accounting Firm shall be borne pro
rata as between Purchaser, on the one hand, and Seller, on the other hand, in proportion to the
allocation of the dollar value of the amounts remaining in dispute between Purchaser and Seller
made by the Accounting Firm such that the prevailing party pays the lesser proportion of the fees
and expenses. All determinations made by the Accounting Firm will be final, conclusive and binding
on the parties.



               (d) Downward Adjustments. If the Final Cash Payment is less than the Closing Date
Payment, then the Seller will pay or cause to be paid to Purchaser by wire transfer of immediately
available funds to an account designated in



8









 




writing by Purchaser an amount in cash equal to such shortfall. Such payment will be made
within five Business Days of the date on which Final Statement is finally determined as aforesaid.
For purposes of this Agreement, the “Final Cash Payment” means (i) the Purchase Price,
plus (ii) if Final Closing Tangible Net Assets exceeds Estimated Closing Tangible Net
Assets, an amount equal to such excess, and minus (iii) if Final Closing Tangible Net
Assets is less than Estimated Closing Tangible Net Assets, an amount equal to such shortfall, in
each case of clause (ii) and (iii), disregarding any assets acquired or liabilities assumed by
Seller from the Company and its Subsidiaries pursuant to the Closing Balance Sheet Methodologies
Schedule.




               (e) Upward Adjustments. If the Final Cash Payment is greater than the Closing Date
Payment, then Purchaser will pay or cause to be paid to Seller by wire transfer of immediately
available funds to an account designated in writing by Seller an amount in cash equal to such
excess. Such payment will be made within five Business Days of the date on which Final Statement
is finally determined as aforesaid.



               (f) Interest. Any amount required to be paid pursuant to Section 1.04(d) or
(e) shall bear interest from and including the Closing Date to but excluding the actual
date of payment at the Reference Rate compounded quarterly. Such interest shall be payable at the
same time as the payment to which it relates and shall be calculated daily on the basis of a year
of 365 days and the actual number of days elapsed.



          1.05. Earnout Payment.




               (a) As soon as reasonably practicable after the completion of the Calculation Period, but in
no event later than 30 days after the Calculation Period End Date, Purchaser shall furnish (or
cause to be furnished) to the Seller:



                    (i) an unaudited consolidated balance sheet of the Business, as of the Calculation Period End
Date, together with a related unaudited consolidated statement of operations in respect of the
financial period from the Closing Date through the Calculation Period End Date, prepared in
accordance with U.S. GAAP, subject to the accounting principles, practices, methodologies and
policies set forth on Exhibit B (the “Earnout Methodologies”), and



                    (ii) a statement setting forth the Earnout Amount (as finally determined pursuant to this
Section 1.05, the “Final Earnout Amount”), together with a calculation showing in
reasonable detail how the Earnout Amount was calculated, prepared by Purchaser (the “Earnout
Statement”).



               (b) Seller will provide to Purchaser within 45 days after Purchaser’s delivery of the Earnout
Statement a notice to Purchaser disagreeing with any such calculation and setting forth Seller’s
calculation of the Earnout Amount (the “Seller’s Earnout Objection”), which shall describe
in reasonable detail the specific nature and amount of each disagreement and shall state in
reasonable detail all bases upon which Seller believes the Earnout Statement is not in conformity
with this Section 1.05. Seller



9









 




shall be deemed to have agreed with all other items and amounts contained in the Earnout
Statement that are not specifically identified as a disagreement in the Seller’s Earnout Objection.
If Seller shall fail to deliver a Seller’s Earnout Objection within such 45-day period, Seller
shall be deemed to have agreed with Purchaser as to the Earnout Statement. Purchaser and Seller
will negotiate in good faith any disagreements contained in the Seller’s Earnout Objection during
the 45 day period immediately following the delivery of the Seller’s Earnout Objection. If
Purchaser and Seller agree to a Earnout Statement and calculation of the Earnout Amount within such
45-day period, Purchaser will pay the Earnout Amount to Seller in accordance with Section
1.05(c). If Purchaser and Seller, notwithstanding these good faith efforts, fail to agree on
the Earnout Statement and calculation of the Earnout Amount, then as promptly as practicable (but
in any event within 10 Business Days after expiration of such 45-day period), Purchaser and Seller
jointly will engage the Accounting Firm to resolve any dispute. As promptly as practicable
thereafter (but in any event within 15 Business Days of engagement of the Accounting Firm),
Purchaser and Seller will each prepare and submit a presentation to the Accounting Firm setting
forth such party’s proposed version of the Earnout Statement and calculation of the Earnout Amount
in each case prepared in accordance with Section 1.05. The scope of the disputes to be
resolved by the Accounting Firm will be limited to whether such Earnout Statements and calculations
were prepared in accordance with this Section 1.05, and the Accounting Firm is not to make
any other determination, including any determination as to whether U.S. GAAP was followed (except
to the extent required by this Section 1.05). As soon as practicable thereafter (but in
any event within 20 Business Days), Purchaser and Seller will instruct the Accounting Firm to
render a determination of the Earnout Amount, such determination to be based solely upon the
presentations by Purchaser and Seller. In making such determination, the Accounting Firm will act
as an expert and not as an arbitrator in conducting its analysis, and may not assign a value to the
Earnout Amount greater than the greatest value claimed by either party or less than the smallest
value for the Earnout Amount claimed by either party. All fees and expenses relating to the work,
if any, to be performed by the Accounting Firm shall be borne pro rata as between Purchaser, on the
one hand, and Seller, on the other hand, in proportion to the allocation of the dollar value of the
amounts remaining in dispute between Purchaser and Seller made by the Accounting Firm such that the
prevailing party pays the lesser proportion of the fees and expenses. All determinations made by
the Accounting Firm will be final, conclusive and binding on the parties.




               (c) Purchaser shall pay or cause to be paid the Final Earnout Amount to the Seller by wire
transfer of immediately available funds to an account designated in writing by the Seller. Such
payment will be made within five Business Days of the date on which Final Earnout Amount is finally
determined as provided in this Section 1.05. It is understood that there will be no
payment if the Final Earnout Amount is $0 or a negative number.



               (d) During the Calculation Period the Purchaser shall be free to take, or cause to be taken,
any actions with respect to the Company or its Subsidiaries or the Business, including the
restructuring of the origination platform of the Company or its Subsidiaries or the Business;
provided, that the Purchaser shall not, and shall cause



10









 




the Company and its Subsidiaries not to, engage in any outsourcing arrangement with an
Affiliate of Purchaser other than the Company or any of its Subsidiaries, unless the terms of such
arrangement are on an arm’s length basis and are no less favorable to the Company than the terms
available at such time from third parties that are not Affiliates of Purchaser (it being understood
and agreed that this proviso shall not apply to any costs and expenses of any consultants
affiliated with Cerberus Capital Management, L.P. or any of its Affiliates). This covenant shall
not apply after a Business Combination Closing Date pursuant to which Purchaser has provided a
Termination Payout Election Notice.




               (e) Notwithstanding anything to the contrary in Section 12.05, to the extent there is
a Sale Transaction pursuant to which either (i) all or a majority of the origination platform
assets of the Company and its Subsidiaries or (ii) all of the outstanding capital stock of the
Company and its Subsidiaries are acquired by an Acquiring Party that is not an Affiliate of
Purchaser, Purchaser shall have the right either to (x) assign all of its obligations under this
Section 1.05 to the Acquiring Party effective as of the applicable Business Combination
Closing Date or (y) pay Seller the Earnout Termination Payment in accordance with subsection (h)
below.



               (f) To the extent Purchaser elects to pay Seller an Earnout Termination Payment pursuant to
subsection (e) above, Purchaser shall provide written notice to Seller of such election prior to
the Business Combination Closing Date (such notice, the “Termination Payout Election
Notice”). As soon as reasonably practicable after the Business Combination Closing Date, but in
no event later than 90 days thereafter, Purchaser shall furnish (or cause to be furnished) to the
Seller:



                    (i) an unaudited consolidated balance sheet of the Business, as of the Business Combination
End Date, together with a related unaudited consolidated statement of operations in respect of the
financial period from the Closing Date through the Business Combination End Date, prepared in
accordance with U.S. GAAP, subject to the Earnout Methodologies, and



                    (ii) a statement setting forth the Earnout Termination Payment (as finally determined pursuant
to this Section 1.05, the “Final Earnout Termination Payment”), together with a
calculation showing in reasonable detail how the Earnout Termination Payment was calculated
(including reasonable detail how the Sale Profit and components thereof were calculated), prepared
by Purchaser (the “Termination Payment Statement”).



               (g) Seller shall provide Purchaser within 45 days after Purchaser’s delivery of the
Termination Payment Statement a notice to Purchaser disagreeing with any such calculation and
setting forth Seller’s calculation of the Earnout Termination Payment (the “Seller’s
Termination Payment Objection”), which shall describe in reasonable detail the specific nature
and amount of each disagreement and shall state in reasonable detail all bases upon which Seller
believes the Termination Payment Statement is not in conformity with this Section 1.05.
Seller shall be deemed to have agreed with all other items and amounts contained in the Termination
Payment



11









 




Statement that are not specifically identified as a disagreement in the Seller’s Termination
Payment Objection. If Seller shall fail to deliver a Seller’s Termination Payment Objection within
such 45-day period, Seller shall be deemed to have agreed with Purchaser as to the Termination
Payment Statement. Purchaser and Seller will negotiate in good faith any disagreements contained in
the Seller’s Termination Payment Objection during the 45 day period immediately following the
delivery of the Seller’s Termination Payment Objection. If Purchaser and Seller agree to a
Termination Payment Statement and calculation of the Earnout Termination Payment within such 45-day
period, Purchaser will pay the Earnout Termination Payment to Seller in accordance with Section
1.05(h). If Purchaser and Seller, notwithstanding these good faith efforts, fail to agree on
the Termination Payment Statement and calculation of the Earnout Termination Payment, then as
promptly as practicable (but in any event within 10 Business Days after expiration of such 45-day
period), Purchaser and Seller jointly will engage the Accounting Firm to resolve any dispute. As
promptly as practicable thereafter (but in any event within 15 Business Days of engagement of the
Accounting Firm), Purchaser and Seller will each prepare and submit a presentation to the
Accounting Firm setting forth such party’s proposed version of the Termination Payment Statement
and calculation of the Earnout Termination Payment in each case prepared in accordance with
Section 1.05. The scope of the disputes to be resolved by the Accounting Firm will be
limited to whether such Termination Payment Statements and calculations were prepared in accordance
with this Section 1.05, and the Accounting Firm is not to make any other determination,
including any determination as to whether U.S. GAAP was followed (except to the extent required by
this Section 1.05). As soon as practicable thereafter (but in any event within 20 Business
Days), Purchaser and Seller will instruct the Accounting Firm to render a determination of the
Earnout Termination Payment, such determination to be based solely upon the presentations by
Purchaser and Seller. In making such determination, the Accounting Firm will act as an expert and
not as an arbitrator in conducting its analysis, and may not assign a value to the Earnout
Termination Payment greater than the greatest value claimed by either party or less than the
smallest value for the Earnout Termination Payment claimed by either party. All fees and expenses
relating to the work, if any, to be performed by the Accounting Firm shall be borne pro rata as
between Purchaser, on the one hand, and Seller, on the other hand, in proportion to the allocation
of the dollar value of the amounts remaining in dispute between Purchaser and Seller made by the
Accounting Firm such that the prevailing party pays the lesser proportion of the fees and expenses.
All determinations made by the Accounting Firm will be final, conclusive and binding on the
parties.




               (h) Purchaser shall pay or cause to be paid the Final Earnout Termination Payment to the
Seller by wire transfer of immediately available funds to an account designated in writing by the
Seller. Such payment will be made within five Business Days of the date on which Final Earnout
Termination Payment is finally determined as provided in this Section 1.05. Upon the
payment of the Earnout Termination Payment, Purchaser’s obligations under Section 1.05
shall be extinguished.



               (i) After the Closing, Purchaser shall, as soon as practicable, but in any event no later than
15 Business Days after each fiscal month end of the Company



12









 




after the Closing Date, deliver to Seller a copy of the normal, internal operating balance
sheet and internal profit and loss statement of the Company and its Subsidiaries (as such internal
reports are then generated by the Business) in respect of such fiscal month, for each fiscal month
that is included, in whole or in part, in the Calculation Period. All information that is provided
to Seller pursuant to the preceding sentence shall be considered Confidential Information subject
to the restrictions of

 Section 4.02(d).




II. REPRESENTATIONS AND WARRANTIES OF SELLER




     Seller hereby represents and warrants to Purchaser that, except as set forth in the applicable
sections of the Seller Disclosure Schedule:



          2.01. Organization. (a) Seller is duly organized, validly existing and in good standing
under the Laws of the State of Delaware. Seller is duly qualified to do business and is in good
standing (where such concept exists) as a foreign corporation in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so organized, qualified or in good standing or to have
such power or authority would not, individually or in the aggregate, reasonably be expected to
prevent, materially delay or materially impair the ability of Seller to consummate the transactions
contemplated by this Agreement or the Transaction Agreements.




               (b) The Company is duly organized, validly existing and in good standing under the Laws of the
State of California, and has the requisite corporate power and authority to own its properties and
to carry on its business as presently conducted and is duly qualified to do business and is in good
standing (where such concept exists) as a foreign corporation in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so organized, qualified or in good standing or to have
such power or authority would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect. Seller has made available to Purchaser a correct and complete copy of
the charter and bylaws, or other governing documents, of the Company, as amended to the date of
this Agreement, and each such document is in full force and effect.



          2.02. Authority; Enforceability. Seller has all necessary corporate power and authority to
execute and deliver this Agreement and Seller, the Company and each of the Company’s Subsidiaries
have all necessary corporate power and authority to execute and deliver each of the Transaction
Agreements with respect to which such Person is a party, to perform such Person’s obligations
hereunder and thereunder, as the case may be, and to consummate the transactions contemplated
hereby and thereby, as the case may be. The execution, delivery and performance of this Agreement
and the Transaction Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action on the part of
Seller, the Company and the Company’s Subsidiaries, as applicable, and no other corporate action on
the part of any such



13









 







Person or such Person’s board of directors (or the equivalent thereof) is necessary pursuant
to its governing documents or the Laws of its jurisdiction of organization to authorize this
Agreement or the Transaction Agreements, as applicable, or to consummate the transactions
contemplated hereby or thereby, as applicable. This Agreement has been duly executed and delivered
by Seller, and each Transaction Agreement will be duly executed and delivered by each of Seller,
the Company and the Company’s Subsidiaries to the extent a party thereto and, assuming due
authorization, execution and delivery by Purchaser, constitutes or will constitute a legal, valid
and binding agreement of Seller, the Company, and the Subsidiaries, as applicable, enforceable
against such Person in accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting
creditors’ rights generally and general equitable principles, whether considered in a proceeding in
equity or at law (collectively, the “General Enforceability Exceptions”).




          2.03. Non-Contravention.




               (a) The execution, delivery and performance of this Agreement by Seller and of the Transaction
Agreements, by Seller, the Company and the Company’s Subsidiaries to the extent a party, and the
consummation of the transactions contemplated hereby and thereby and the compliance by each such
Person with the applicable terms and conditions hereof or thereof, does not and will not (a)
conflict with or violate the organizational or governing documents of any such Person, (b) assuming
that all Required Regulatory Approvals have been obtained or made, as applicable, conflict with or
violate any Law applicable to any such Person, or (c) assuming that all Third Party Consents have
been obtained or made, as applicable, result in any breach or violation of or constitute a default
(or an event which with notice would become a default) or result in the loss of a benefit under, or
give rise to any right of termination, cancellation, modification, amendment or acceleration of
(whether after the filing of notice or otherwise), or require any notice under, any Material
Contract or Permit of any such Person, except for any such conflict, violation, breach, default,
loss, right or other occurrence that would not, in the case of clauses (b) and (c), reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or materially delay
or materially impair the consummation of the transactions contemplated by this Agreement or any of
the Transaction Agreements.



               (b) Without limiting the generality of Section 2.03(a), the execution and delivery by
Seller, the Company and the Company’s Subsidiaries of this Agreement and the Transaction
Agreements, as applicable, and the performance by each such Person of their respective obligations
hereunder and thereunder, as applicable, and the consummation of the transactions contemplated
hereby and thereby, do not and will not operate to invalidate or materially impair (i) any private
mortgage or loan insurance or commitment of any private insurer relating to any Loans of the
Company and Subsidiaries, (ii) any title insurance policy relating to any Loans of the Company and
Subsidiaries, (iii) any hazard insurance policy relating to any Loans of the Company and
Subsidiaries, (iv) any flood insurance policy relating to any Loans of the Company and
Subsidiaries, (v) any fidelity bond, direct surety bond, or errors and



14









 




omissions insurance policy required by any Governmental Authority or private insurer, or any
surety or guaranty agreement relating to any Loans of the Company and Subsidiaries, or (vi) any
insurance or guaranty obtained from any Governmental Authority relating to any Loans of the Company
and Subsidiaries.




          2.04. Consents and Approvals. (a) Section 2.04(a) of the Seller Disclosure Schedule,
sets forth each consent, waiver, authorization, notice or filing that is material to the Business
and is required to be obtained from, or to be given to, any Governmental Authority in connection
with the execution, delivery or performance of this Agreement or any of the Transaction Agreements
and the consummation of the transactions contemplated hereby and thereby, other than those that may
be required solely by reason of Purchaser’s (as opposed to any other third party’s) participation
in the transactions contemplated hereby. The consents, waivers, authorizations, notices and filings
listed on Section 2.04(a) of the Seller Disclosure Schedule are referred to herein as the
“Required Regulatory Approvals”.




               (b) Section 2.04(b) of the Seller Disclosure Schedule, sets forth each consent,
waiver, authorization, notice or filing that is material to the Business and is required to be
obtained from, or to be given to, any Person other than a Governmental Authority in connection with
the execution, delivery or performance of this Agreement or any of the Transaction Agreements and
the consummation of the transactions contemplated hereby and thereby. The consents, waivers,
authorizations, notices and filings listed on Section 2.04(b) of the Seller Disclosure
Schedule are referred to herein as the “Required Third Party Consents”.



          2.05. Ownership of Shares. Seller is the sole legal and beneficial owner of the Shares, in
each case, free and clear of all Liens. Each of the Shares is held of record by Seller. Seller is
not a party to any option, warrant, purchase right, or other contract or commitment (other than
this Agreement) that could require Seller to sell, transfer, or otherwise dispose of any capital
stock or other equity interests of the Company. Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital stock or other equity
interests of the Company. Upon delivery to Purchaser at the Closing of certificates representing
the Shares, duly endorsed by Seller for transfer to Purchaser, Seller’s entire ownership interest
in and to the Shares will pass to Purchaser, free and clear of any Liens, other than those arising
from acts of Purchaser or its Affiliates.




          2.06. Capitalization. (a) The authorized capital stock of the Company consists of 1,000,000
shares of common stock, par value $0.01 per share, of which 250,000 shares are issued and
outstanding. Except for the Shares, there are no shares of capital stock or other equity
securities of the Company issued, reserved for issuance or outstanding. The Shares are duly
authorized, validly issued, fully paid and nonassessable and are not subject to or issued in
violation of any purchase option, call option, voting trust agreement, proxy, right of first
refusal, preemptive right or subscription right or organizational documents of the Company or any
Contract to which the Company is a party or otherwise bound.




15









 








               (b) Section 2.06(b) of the Seller Disclosure Schedule lists for each Subsidiary (i)
its name and jurisdiction of incorporation, (ii) the shares of capital stock or equity interests of
such Subsidiary that are authorized and (iii) the number of shares or equity interests that are
issued and outstanding, the names of the holders thereof, and the number of shares or other equity
interests held by each such holder. All issued and outstanding shares of capital stock or other
equity securities of each of the Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and are not subject to or issued in violation of any purchase option, call option,
voting trust agreement, proxy, right of first refusal, preemptive right or subscription right or
organizational documents of such Subsidiary or any Contract to which such Subsidiary is a party or
otherwise bound. All of the outstanding shares of capital stock or other equity interests of each
Subsidiary are owned, directly or indirectly, by the Company.



               (c) There are no options, warrants or other securities authorized, issued or outstanding,
calls, purchase rights, subscription rights, exchange rights, convertible or exchangeable
securities, “phantom” stock rights, stock appreciation rights, stock-based performance units,
Contracts or undertakings of any kind to which the Company or any Subsidiary is a party or by which
it is bound (i) obligating the Company or any Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity interests in, or any
security convertible or exercisable for or exchangeable into any capital stock of or other equity
interest in, or any contractual rights containing any equity features (including stock
appreciation, phantom stock, profit participation, or similar rights with respect to the Company or
any of its Subsidiaries), the Company or any Subsidiary or (ii) obligating the Company or any
Subsidiary to issue, grant, extend or enter into any such option, warrant, call, right, unit,
Contract or undertaking. There are no outstanding contractual obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or
any Subsidiary.



               (d) With the exception of Subsidiaries, as of the date of this Agreement, neither the Company
nor any Subsidiary owns, directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest in any Person. There are no
Contracts that require the Company or any of its Subsidiaries to make any investments (in the form
of a loan, capital contribution or otherwise) in any Person.



          2.07. Financial Statements. (a) Section 2.07(a) of the Seller Disclosure Schedule
sets forth a true and correct copy of (i) the audited consolidated balance sheet of the Company and
the Subsidiaries as of April 30, 2005 and April 30, 2006 and the related audited consolidated
statements of operations, stockholders’ equity and cash flows of the Company and the Subsidiaries
for the years then ended, together with the notes thereto (the “2006 Audited Financial
Statements”), (ii) the unaudited consolidated balance sheet of the Company and the Subsidiaries
as of January 31, 2007 (such balance sheet, the “Most Recent Balance Sheet” and such date,
the “Balance Sheet Date”) and the related unaudited consolidated statements of operations,
stockholders’ equity and cash flows of the Company and the Subsidiaries for the nine months then
ended (the “Unaudited Financial Statements,” and together

16









 








with the 2006 Audited Financial Statements and the 2007 Financial Statements, the
“Financial Statements” provided that, notwithstanding anything to the contrary in this
Agreement, to the extent Closing occurs prior to the delivery of the 2007 Unaudited Financial
Statements, the term “Financial Statements” shall not include the 2007 Unaudited Financial
Statements) and (iii) the pro forma balance sheet of the Company and its Subsidiaries as of January
31, 2007, together with the related pro forma statement of operations for the nine-month period
ended January 31, 2007, as if the Divestment Activities had occurred as of the beginning of the
relevant period for the period (the “January 31 Pro Forma Financial Statements” and,
together with the April 30 Pro Forma Financial Statements, the “Pro Forma Financial
Statements”).




               (b) The Financial Statements (i) have been (or in the case of the 2007 Financial Statements
will be) based upon the information contained in the books and records of the Company and its
Subsidiaries, (ii) have been prepared (or in the case of the 2007 Financial Statements, will be
prepared), in all material respects, in accordance with GAAP applied on a consistent basis as at
the dates and for the periods presented (except, in the case of the Unaudited Financial Statements,
for the absence of footnote disclosures and normal year-end adjustments), and (iii) present fairly
(or in the case of the 2007 Financial Statements, will present fairly), in all material respects,
the financial position and the results of operations and cash flows of the Company on a
consolidated basis as at the dates and for the periods presented. The Target Tangible Net Assets
Statement was derived from the Most Recent Balance Sheet, reflects the Tangible Net Assets of the
Company and its Subsidiaries (adjusted to exclude HRBMC and all noneconomic residuals) as of the
Balance Sheet Date and has been prepared utilizing the accounting principles, practices,
methodologies and policies as used in the 2006 Audited Financial Statements, except as set forth on
Section 2.07(b) of the Seller Disclosure Schedule. The January 31 Pro Forma Financial
Statements have been (or in the case of the April 30 Pro Forma Financial Statements will be) based
upon the information contained in the books and records of the Company and its Subsidiaries, have
been (or in the case of the April 30 Pro Forma Financial Statements will be) be derived from the
Unaudited Financial Statements or the 2007 Audited Financial Statements, as applicable, and reflect
(or in the case of the April 30 Pro Forma Financial Statements will reflect) and reflect all
material adjustments required to present fairly in all material respects the pro forma financial
position and the results of operations and cash flows of the Company on a consolidated basis as at
the dates and for the periods presented as if the Divestment Activities had occurred as of the
beginning of the relevant period for the period or as of the date set forth therein.



               (c) The books and records of the Company and its Subsidiaries have been maintained in material
compliance with applicable legal and accounting requirements, and such books and records fairly
reflect in all material respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Company and its Subsidiaries. Parent maintains, or causes to be
maintained, internal controls over financial reporting to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements of Parent and
its Subsidiaries (including the Company and its Subsidiaries) on a consolidated, enterprise-wide
basis, for external purposes in accordance with GAAP, including



17









 




policies and procedures that (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the assets of Parent and
its Subsidiaries (including the Company and its Subsidiaries), (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements of Parent
and its Subsidiaries (including the Company and its Subsidiaries) in accordance with GAAP, and that
receipts and expenditures of the Company and its Subsidiaries are being made only in accordance
with authorizations of applicable management and directors of Parent and its Subsidiaries
(including the Company and its Subsidiaries) and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the assets of
Parent and its Subsidiaries (including the Company and its Subsidiaries). The Company and its
Subsidiaries have disclosed to KPMG LLP, the Company’s independent auditor, (i) all significant
deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to
adversely affect in any material respect the ability of the Company or any of its Subsidiaries to
record, process, summarize and report financial data and (ii) any fraud, whether or not material,
that involves management or other employees who have a significant role in the internal controls
over financing reporting of the Company and its Subsidiaries. Seller has made available to
Purchaser a summary of any such disclosure made by Parent or any of its Subsidiaries or any such
Person’s management since April 30, 2005.




               (d) Since April 30, 2004 none of the Company or any of its Subsidiaries nor, to the Seller’s
Knowledge, any director, officer, auditor, accountant, consultant or representative of the Company
or any of its Subsidiaries has received or otherwise has or obtained Knowledge of any material
substantive complaint, allegation, assertion or claim, whether written or oral, that the Company or
any of its Subsidiaries has engaged in questionable accounting or auditing practices. Seller has
made available to Purchaser (to the extent not publicly available as of the date of this Agreement
on the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) database) true and compete
copies of all correspondence directly related to the Business between the SEC, on the one hand, and
Parent or any of its Subsidiaries, on the other, since April 30, 2004, including all responses to
such comment letters by or on behalf of the Company.



               (e) There are no material off balance sheet transactions, arrangements, obligations or
relationships attributable to the Business or to which the Company or any of its Subsidiaries is a
party or bound (or has any commitment to be a party to or bound by), including any joint venture,
partnership agreement or any similar Contract relating to any transaction, arrangement or
relationship between or among Parent or any of its Subsidiaries, on the one hand, and any
unconsolidated affiliate (including any structured finance, special purpose or limited purpose
entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of
Regulation S-K)), other than those incurred after the date hereof in the ordinary course of
business consistent with past practice.



18









 





               (f) As of the date hereof, the Company and its Subsidiaries have no Liabilities of a type
required to be reflected on a balance sheet in accordance with GAAP other than (i) Liabilities
expressly reflected, reserved against or otherwise disclosed in the Most Recent Balance Sheet, (ii)
Liabilities incurred after the Balance Sheet Date in the ordinary course of business and (iii)
those Liabilities set forth in Section 2.07(f) of the Seller Disclosure Schedule. On the
Closing Date, the Company and its Subsidiaries have no Liabilities of a type required to be
reflected on a balance sheet in accordance with GAAP except to extent fully reflected on, or fully
reserved against in, the balance sheet of the Company and its Subsidiaries in accordance with the
Accounting Methodologies and taken into account in the final determination of Final Closing
Tangible Net Assets pursuant to Section 1.04.



          2.08. Events Subsequent to Balance Sheet Date. Since the Balance Sheet Date, (i) the Company
and its Subsidiaries have conducted the Business only in the ordinary course, (ii) there has been
no Material Adverse Effect, and (iii) there has not been any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or otherwise used by the
Company or any of its Subsidiaries, whether or not covered by insurance. Without limiting the
generality of the foregoing, since the Balance Sheet Date, none of the Seller, the Company or any
of the Company’s Subsidiaries has taken any action (or failed to take any action) that, if taken
(or failed to be taken) after the date hereof without the prior written consent of Purchaser would
constitute a breach of Section 4.01.




          2.09. Taxes. The Company and each of the Subsidiaries has timely filed all material U.S.
federal, state, local and foreign Tax Returns that it was required to file and has paid or withheld
all Taxes shown thereon as due and owing. All such Tax Returns were correct and complete in all
material respects. Neither the Company nor any of the Subsidiaries has agreed to any extension or
waiver of the statute of limitations applicable to any Tax Return, or agreed to any extension of
time with respect to a Tax assessment or deficiency, which period (after giving effect to such
extension or waiver) has not yet expired. Neither the Company nor any of the Subsidiaries is a
party to any Tax allocation or Tax sharing agreement (other than Tax allocation or Tax sharing
agreements which will be terminated prior to Closing and with respect to which no post-Closing
liabilities or obligations will exist); provided, however, leases and other
contracts which are listed on the Seller Disclosure Schedule that provide tangentially for an
allocation or apportionment of Tax liabilities generated or related to such contracts will not
constitute Tax allocation or Tax sharing agreements. As of the date of this Agreement, there is no
audit, claim or controversy currently pending or threatened in writing with respect to the Company
or any of the Subsidiaries in respect of any Tax. Neither the Company nor any of the Subsidiaries
(i) has been a member of an affiliated group of corporations within the meaning of Section 1504 of
the Code (other than a group the common parent of which is Seller) or (ii) has any liability for
Taxes of any Person (other than any other corporation that is a member of the affiliated group
filing a federal consolidated income tax return that the Company or such Subsidiary is currently a
member) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign Law), as a transferee or successor, by contract or otherwise. Neither the Company nor any
Subsidiary has filed with respect to any item a disclosure

19









 








statement pursuant to Section 6662 of the Code or any comparable disclosure with respect to
foreign, state or local Tax statutes. Set forth on Section 2.09 of the Seller Disclosure
Schedule is a list of all federal income Tax audits that have ended within five years of the date
of this Agreement and that have been completed by the IRS. Set forth on Section 2.09 of
the Seller Disclosure Schedule is a list of all federal income Tax audits by the IRS that are
currently open. Set forth on Section 2.09 of the Seller Disclosure Schedule is a list of
all state, local and foreign Tax audits that have ended within five years of the date of this
Agreement that have been completed by any state, local or foreign Taxing Authority. Set forth on
Section 2.09 of the Seller Disclosure Schedule is a list of all state, local and foreign
Tax audits by state, local or foreign Taxing Authorities that are currently open. The Company and
each Subsidiary has withheld and paid to the applicable Taxing Authority all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, customer, vendor, supplier or other third party. Neither the
Company nor any Subsidiary will be required to include any material item of income or gain in, nor
will the Company nor any Subsidiary exclude any material item of deduction or loss from, any
Post-Closing Tax Period or Post-Closing Straddle Period as a result of any: (i) change in method
of accounting for a Pre-Closing Tax Period or a Pre-Closing Straddle Period under Code Section
481(a) (or any corresponding provision of state Tax law), (ii) “closing agreement” described in
Code Section 7121 (or any corresponding or similar provision of state, local or foreign Tax law)
executed on or prior to the Closing Date, (iii) installment sale or open transaction made on or
prior to the Closing Date, or (iv) prepaid amount received on or prior to the Closing Date.




          2.10. Litigation. As of the date hereof, there are no Actions pending or, to Seller’s
Knowledge, threatened against the Company or any of its Subsidiaries or the Business that, if
determined adversely to the Company, its Subsidiaries or the Business, would reasonably be expected
to be material and (ii) no present or former officer, or director of the Company or any of its
Subsidiaries has made a claim, or has notified the Company or any of its Subsidiaries of his or her
intention to make a claim, for indemnification that, individually or in the aggregate is material.
As of the Closing Date, no Actions shall be pending or, to the Seller’s Knowledge, threatened
against the Company or any of its Subsidiaries or the Business that would be reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is a party or are subject to, and the Business is not otherwise bound by, any
order, writ, judgment, injunction, agreement, decree or award of, memorandum of understanding,
supervisory agreement, cease and desist order or similar arrangement with, or a commitment letter
or similar submission to, or supervisory letter from, any Governmental Authority nor, to Seller’s
Knowledge, is any such action contemplated or threatened, in any such case, that is material.




          2.11. Compliance with Law; Permits. The Company and its Subsidiaries, together with the
Business, have been and are in compliance with applicable Law, except for any noncompliance or
possible noncompliance that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. No investigation or review by any Governmental Authority with
respect

20









 








to the Company, its Subsidiaries or the Business is pending or, to the Seller’s Knowledge,
threatened, nor has any Governmental Authority indicated an intention to conduct the same, except
for those the outcome of which would not reasonably be expected to be, individually or in the
aggregate, material. The Company and its Subsidiaries, and any other Persons performing
origination or servicing activities under contract to the Company or its Subsidiaries, have
obtained and are in compliance, in all material respects, with all governmental permits, licenses,
franchises, variances, exemptions, exceptions, orders and other governmental authorizations,
consents, clearances and approvals necessary to conduct the Business as presently conducted
(collectively, the “Permits”), except those Permits the absence of which would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The
Company and each of its Subsidiaries has filed or caused to be filed all reports, notifications and
filings with, and have paid all regulatory fees to, the applicable Governmental Authority necessary
to maintain all of the Permits in full force and effect, except in each case for any Permits the
failure of which to be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. To Seller’s Knowledge, no material
change is required in the Company’s or any Subsidiaries’ processes, properties or procedures in
connection with any such Laws in effect as of the date hereof. Since January 31, 2007 to the date
hereof, no Governmental Authority with respect to which a Required Regulatory Approval is required
to be obtained or made has indicated an intent to (i) take any action or fail to take any action
that could be reasonably expected to restrain, prohibit, materially delay or impair the
consummation of the transactions contemplated by this Agreement or (ii) impose any obligation,
condition or damages in connection with such Required Regulatory Approval that could reasonably be
expected to result in, individually or in the aggregate, a material liability to Purchaser or any
of its Affiliates (including the Company or any of its Subsidiaries).




          2.12. Employee Benefits. (a) (i) Section 2.12(a)(i) of the Seller Disclosure
Schedule sets forth a correct and complete list identifying each bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, employment, consulting, change of control, disability, death
benefit, hospitalization, medical insurance, life insurance, welfare, severance or other employee
benefit plan, agreement, arrangement or understanding that is maintained, administered or
contributed to by Seller or its Affiliates, that covers any current or Former Employee or
consultant to the Company. Such plans are referred to collectively herein as the “Employee
Plans.”




                    (ii) Section 2.12(a)(i) of the Seller Disclosure Schedule identifies each Employee Plan
that is sponsored, maintained or entered into solely by either the Company or any Subsidiary (a
“Company Employee Plan”), and each Employee Plan that is not a Company Employee Plan (a
“Seller Employee Plan”).



                    (iii) True and correct copies (or descriptions of any informal arrangements) of each Employee
Plan have been made available to Purchaser in the Data Room and, to the extent applicable: (i) any
related trust agreement or other



21









 




funding instrument; (ii) the most recent determination letter, if applicable; (iii) the most
recent summary plan description; and (iv) for each Company Employee Plan, the two most recent (A)
the Form 5500 and attached schedules, (B) audited financial statements, and (C) actuarial valuation
reports.




                    (iv) No Employee Plans are subject to Title IV of ERISA and neither Seller nor its Affiliates
has at any time within the past 6 years sponsored or contributed to, or has or had within the past
6 years any liability or obligation in respect of, any plan subject to Title IV of ERISA. Neither
Seller nor any of its Affiliates has incurred any current or projected liability in respect of
post-employment or post-retirement health, medical or life insurance benefits for Employees for
Former Employees, except as required to avoid an excise tax under Section 4980B of the Code, and
except as would not reasonably be expected to have a material liability on the Company or its
Subsidiaries.



                    (v) No Employee Plan exists that, as a result of the transactions contemplated by this
Agreement (whether alone or in connection with any subsequent event(s)), could result in (i) the
payment to any Employee or Former Employee of severance pay or any increase in severance pay upon
any termination of employment of such Employee after the date of this Agreement, (ii) with respect
any Employee, accelerate the time of payment or vesting or result in any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under, increase the amount
payable or result in any other material obligation pursuant to, any of the Employee Plans, or (iii)
result in payments with respect to Employees or Former Employees under any of the Employee Plans
which would not be deductible under Sections 162(m) or 280G of the Code.



               (b) Except as, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect:



                    (i) Each Employee Plan that is intended to be qualified under Sections 401(a) and 401(k) of
the Code (A) has been maintained, operated and administered in compliance with its terms and
applicable Laws and (B) has received or has timely applied for a favorable determination letter
from the IRS, and there are no circumstances currently pending that could reasonably be expected to
result in revocation of any such favorable determination letter.



                    (ii) All Company Employee Plans are in compliance with ERISA (to the extent such Company
Employee Plans are subject to ERISA), the Code or other applicable Law.



                    (iii) As of the date hereof, there are no pending or, to Seller’s Knowledge, threatened,
Actions relating to the Company Employee Plans.



                    (iv) With respect to the Seller Employee Plans, no event has occurred and there exists no
condition or set of circumstances in connection with which the Company or any Subsidiary could be
subject to any liability under the terms of



22









 




or as a result of such Seller Employee Plans, ERISA, the Code or any other applicable Law.




          2.13. Labor Relations. (a) There are no labor or collective bargaining agreements which
pertain to Employees; no Employees are represented by any labor organization; no labor organization
or group of Employees has made a pending demand for recognition or certification to Seller and
there are no representation or certification proceedings or petitions seeking a representation
proceeding presently pending or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority relating to the Seller. Except as would
not reasonably be expected to have a Material Adverse Effect, no labor strike, work stoppage,
slowdown or dispute is pending or, to Seller’s Knowledge, threatened that involves any Employees.




               (b) The Company and the Subsidiaries have not committed any unfair labor practice, and there
is no charge or complaint against either of the Company or any Subsidiary by the National Labor
Relations Board pending or, to Seller’s Knowledge, threatened, except for any such matters that
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect. There is no charge of discrimination in employment or employment practices that has been
asserted or is now pending or, to Seller’s Knowledge, threatened before the United States Equal
Employment Opportunity Commission, or any other Governmental Authority against the Company or any
Subsidiary in any jurisdiction in which Employees are located, except for any such matters that
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.



          2.14. Real Property.




               (a) Section 2.14(a) of the Seller Disclosure Schedule lists all material real property
which is owned by the Company or any Subsidiary other than the REO (the “Owned Real
Property”). Except in each case as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (A) either the Company or one of the Subsidiaries, as
the case may be, has title to the Owned Real Property, free and clear of all Liens except Permitted
Liens and (B) except for the Leased Real Property or in connection with any Permitted Liens, no
Person owns any real property occupied by the Company or any Subsidiary except the Company and the
Subsidiaries. Other than the rights of Purchaser pursuant to this Agreement, there are no
outstanding options to purchase, lease or use, or right of first refusal or first offer to
purchase, lease, or other rights to purchase, lease or otherwise use or occupy any Owned Real
Property or any portion thereof or interest therein or contract relating to the right to receive
any portion of the income or profits from the sale, operation or development thereof.



               (b) Section 2.14(b) of the Seller Disclosure Schedule lists all material real property
leased or subleased by the Company or any Subsidiary as a tenant or subtenant (the “Leased Real
Property”) and sets forth the address of each Leased Real Property. Seller has made available
to Purchaser correct and complete



23









 




copies of all real property leases and subleases relating to the Leased Real Property (the
“Leases”) and any and all material ancillary documents pertaining thereto and to which the
Company or any Subsidiary is a party or is bound. To Seller’s Knowledge, (i) each Lease is in full
force and effect and is enforceable against the lessor that is party thereto in accordance with its
terms, subject to the General Enforceability Exceptions, (ii) there are no existing defaults under
any Lease by any party thereto, and (iii) no event has occurred that would reasonably be expected
to constitute a breach or default (or an event which with notice or lapse of time or both would
become a default) under any such Lease by any party thereto, except, in each case, where a failure
to be in full force and effect or enforceable or where a default or an event has not had and would
not reasonably be expected to have, individually or in the aggregate, a material adverse effect on
the ownership, or use or occupancy thereof.




               (c) The leasing, occupancy or use of the Owned Real Property and the Leased Real Property
(collectively, the “Real Property”), is not in violation of any Law, including any
building, zoning or other Law, except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Neither the Company nor any Subsidiary has received
written notice of, nor, to Seller’s Knowledge, is there threatened, with respect to any part of the
Real Property or portion of either thereof or interest therein, (i) any violation of any zoning,
subdivision or building Law applicable thereto, (ii) taking or intent to take by eminent domain any
part of such property, or (iii) commencement of enforcement proceedings with respect to delinquent
Taxes that in any such case would materially adversely affect the ownership, use or occupancy or
value thereof.



          2.15. Intellectual Property. Notwithstanding any other representation or warranty contained
in this Article II, the representations and warranties contained in this Section 2.15 constitute the sole representations and warranties of Seller relating to the Company
Intellectual Property.




               (a) Section 2.15(a) of the Seller Disclosure Schedule sets forth a correct and
complete list of each item of Company Intellectual Property that is registered with, or subject to
application for registration with, any Governmental Authority, indicating for each such item the
applicable registration or application number and the applicable filing jurisdiction. Section
2.15(a) of the Seller Disclosure Schedule also sets forth a correct and complete list of the
material Licensed Intellectual Property. The Company or a Subsidiary has good title to each item of
Company Intellectual Property, free and clear of any Lien (other than Permitted Liens) and has the
right to use pursuant to a license, sublicense, agreement or other permission all items of Licensed
Intellectual Property. The Company Intellectual Property and the Licensed Intellectual Property,
together with Intellectual Property in the public domain that is used in the Business, constitutes
all Intellectual Property that is used in or necessary for the conduct of the Business as currently
conducted. No item of Company Intellectual Property is licensed by the Company or any Subsidiary
to any unaffiliated third party, except for such licenses granted in the ordinary course of
business. None of the Company Intellectual Property is subject to any outstanding order, judgment,
decree or agreement adversely affecting the Company’s or any Subsidiary’s use thereof or rights



24









 




thereto. There is no litigation, opposition, cancellation, proceeding, objection or claim
pending, asserted or, to Seller’s Knowledge, threatened by or against the Company or any Subsidiary
concerning the ownership, validity, register ability, enforceability, infringement or use of, or
licensed right to use, any Company Intellectual Property or any Licensed Intellectual Property,
except for such of the foregoing as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.




               (b) No third party is infringing any Company Intellectual Property right and none of the
Company Intellectual Property infringes on or violates the intellectual property rights of any
Person, except for such of the foregoing as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.



               (c) The Company and each Subsidiary has taken reasonable measures to protect the secrecy,
confidentiality and value of all Company Intellectual Property and has a corporate policy
addressing confidentiality that is applicable to all officers, directors and employees with access
to the Company Intellectual Property. A copy of this policy is included in Section 2.15(c)
of the Seller Disclosure Schedule.



               (d) The IT Systems used in or necessary for the conduct of the Business as currently conducted
are adequate in all material respects for their intended use and for the operation of the Business
as currently conducted and contemplated to be conducted, and are in good working condition (normal
wear and tear excepted). There has not been any material malfunction with respect to any such IT
Systems that has not been remedied or replaced since April 30, 2006.



               (e) Section 2.15(e) of the Seller Disclosure Schedules sets forth a correct and
complete list of all Names used in the operation of the Business.



          2.16. Material Contracts. (a) Section 2.16(a) of the Seller Disclosure Schedule sets
forth a correct and complete list (to the extent applicable, arranged in subsections corresponding
to subsections (iii), (iv), (v), (vi), (viii), (x), (xv) and (xix) set forth below) of each of the
Material Contracts in effect as of the date of this Agreement. The term “Material
Contracts” means all of the following types of executory Contracts to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their assets are bound or
otherwise subject as of the date hereof (other than (I) agreements related to employee benefits and
employment agreements (which are provided for in Section 2.12) and (II) the Leases and
other Contracts relating to real estate (which are provided for in Section 2.14)):




                    (i) (1) any joint venture, partnership, strategic alliance, limited liability company,
teaming, cooperation and any other similar Contract involving a sharing of profits or losses, costs
or Liabilities to which the Company or any Subsidiary is a party or bound or (2) any other Contract
that relates to the formation, creation, operation, management or control of any Person (other than
a wholly-owned



25









 




Subsidiary) that is a legal entity to which the Company or any Subsidiary is a party or bound;




                    (ii) any Contract that is reasonably expected to require the payment by, or to, the Company or
any of the Subsidiaries of more than $500,000, in the aggregate, during any 12-month period;



                    (iii) any Contract executed on or after January 1, 2004 or that otherwise has any executory
indemnification obligations relating to the acquisition, lease or disposition, directly or
indirectly by merger or otherwise, of assets or capital stock or other equity interests of another
Person for aggregate consideration under such Contract in excess of $500,000 (other than
acquisitions or dispositions of Loans in the ordinary course of business);



                    (iv) any Contract that (1) limits, or purports to limit, the ability of the Company or any
Subsidiary after the Closing to compete in any line of business or with any Person or to operate in
any geographic area or during any period of time; or (2) contains an exclusivity, minimum
commitment or “take-or-pay” obligation of, grant of “most favored nation” status or grant of
“preferred pricing arrangements” by, the Company, or any Subsidiary (including any Contract
pursuant to which the Company or any Subsidiary is party or bound that imposes any such obligation
on any of their current or future Affiliates);



                    (v) any Contract that (1) grants any right of first refusal or first offer or similar right or
that could require the disposition of any material assets or line of the Business, the Company or
any Subsidiary or (2) limits the payment of dividends or other distributions by the Company or any
of its Subsidiaries;



                    (vi) any Contract containing any covenant limiting the freedom of the Company, any Subsidiary
or the Business to solicit for employment or hire Persons for employment or consultancy (including
any Contract pursuant to which the Company or any Subsidiary is party or bound that imposes such
any such obligation on any of their current or future Affiliates);



                    (vii) any Contract (1) evidencing an Affiliate Transaction; or (2) pursuant to which the
Company or any of its Subsidiaries currently benefits from any economies of scale or preferred
pricing arrangements through their affiliation with Parent and/or any of its Subsidiaries;



                    (viii) any Warehouse Facility, securitization facility or other material agreement related to
any Securitization;



                    (ix) any whole loan sale agreement or other arrangement pursuant to which the Company or any
of its Subsidiaries has sold or agreed to sell mortgage loans to any Person, but only to the extent
that the Company or any of its Subsidiaries has any remaining Liabilities thereunder;



26









 





                    (x) solely to the extent the Company or any of its Subsidiaries has any remaining Liability
thereunder, any Contract under which the Company or any of the Subsidiaries either (i) agreed to
purchase, guarantee or make any payment with respect to any security issued by, or interest in, any
Person (“Loan Purchaser”) which purchased Loan receivables from the Company or any
Subsidiary (each such transaction, a “Loan Sale”) or (ii) agreed to repurchase any Loans
included in a Loan Sale or agreed that the Loan Purchaser otherwise would have a right to payment
from, or recourse against, the Company or any of the Subsidiaries in connection with a Loan Sale;



                    (xi) any Seller Guarantees or Company Guarantees (including with respect to any Warehouse
Facility or Securitization);



                    (xii) any unexpired Derivative Contract;



                    (xiii) any Contract pursuant to which the Business currently performs mortgage loan servicing,
including in connection with a Loan Sale (each a “Servicing Agreement”);



                    (xiv) all Contracts relating to Indebtedness of the Company or any of its Subsidiaries in
excess of $5,000,000, other than loans to direct or indirect wholly-owned Subsidiaries made in the
ordinary course of business;



                    (xv) any Contract providing for “earn-out” or other similar contingent payment obligations, in
each case that after the date hereof could, if determined or otherwise resolved in a manner adverse
to the Company, result in payments that, individually or in the aggregate, are in excess of
$500,000;



                    (xvi) any Contract involving material Licensed Intellectual Property, except licenses to
non-custom software, and all Contracts granting a license or other permission under any Company
Intellectual Property;



                    (xvii) any settlement agreement entered into since April 30, 2006, other than (A) releases
immaterial in nature or amount entered into with Former Employees or independent contractors in the
ordinary course of business in connection with the routine cessation of such employee’s or
independent contractor’s employment or (B) settlement agreements for cash only that do not exceed
$500,000 as to such settlement;



                    (xviii) any settlement agreement, assurance of discontinuance, consent agreement, or
memorandum of understanding with any Governmental Authority, and any other Contract entered into
with any Governmental Authority other than in the ordinary course of business, and



                    (xix) each Contract not entered into on arm’s length terms.



               (b) Seller has made available to Purchaser correct and complete copies of each Material
Contract (including all material amendments,



27









 




modifications, extensions, renewals, guarantees, schedules, exhibits or ancillary agreements
with respect thereto, or in the case of oral Contracts, written descriptions of the material terms
thereof). Each Material Contract is in full force and effect and is valid, binding and enforceable
against the parties thereto in accordance with its terms, subject to the General Enforceability
Exceptions. Neither the Company nor any Subsidiary nor, to Seller’s Knowledge, any other party
thereto, is in material breach or violation of, or default under, any Material Contract, and none
of Seller, the Company and the Subsidiaries has received notice (and Seller does not have
Knowledge) of any event or condition that would constitute a violation, breach or event of default
(or an event which with notice or lapse of time or both would become a default) under any Material
Contract, except, where such breach, violation or default has not resulted in and would not
reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect.




               (c) As of the date hereof, none of Parent or any of its Subsidiaries is engaged in discussions
with any of the financing sources for the Financing Facilities regarding any cancellation,
termination or adverse modification of any financial source’s relationship with the Business in any
manner that would reasonably be expected to result in, individually or in the aggregate, a Material
Adverse Effect (regardless of any Seller Guarantees that may be effected prior to the Closing).
Since January 31, 2007 to the date hereof, none of such financing sources have sought to
renegotiate any of the significant terms of its relationship with the Business, except as would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect
(regardless of any Seller Guarantees that may be effected prior to the Closing).



               (d) Seller has made available to Purchaser correct and complete copies of all waivers and
consents obtained since January 31, 2007 through the date hereof by or on behalf of Parent or any
of its Subsidiaries related to the Financing Facilities.



               (e) Seller has made available to Purchaser a copy of each standard form Contract currently
used by the Company or any of its Subsidiaries.



          2.17. Environmental Matters. Notwithstanding any other representation or warranty contained
in this Article II, the representations and warranties contained in this Section 2.17 constitute the sole representations and warranties of Seller relating to any
Environmental Law. Except as set forth in Section 2.17 of the Seller Disclosure Schedule,
and with such exceptions as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect:




               (a) each of the Company and the Subsidiaries is and has been for the past 5 years in
compliance with applicable Environmental Laws and has received and is and has been for the past 5
years in compliance with all necessary permits or authorizations required under Environmental Laws
to operate its facilities, assets or business (“Environmental Permits”);



28









 





               (b) neither the Company nor any of the Subsidiaries has been for the past 3 years or is
presently the subject of any Environmental Claim and, to Seller’s Knowledge, no Environmental Claim
is pending or threatened against either the Company or any of the Subsidiaries or against any
Person whose liability for the Environmental Claim was retained or assumed contractually by either
the Company or any of the Subsidiaries;



               (c) to Seller’s Knowledge, there has been no Release of Hazardous Substances on, at or beneath
any of the Real Property or any of the properties previously owned or leased by the Company or any
of the Subsidiaries, or any REO in amounts or circumstances that would reasonably be expected to
form the basis for an Environmental Claim against either the Company or any of the Subsidiaries;



               (d) to Seller’s Knowledge, none of the Real Property or any REO contains any underground
storage tanks, aboveground storage tanks, asbestos or asbestos-containing material, polychlorinated
biphenyls, radioactive materials or any Releases of Hazardous Substances that presently require
investigation, remediation, removal or cleanup by the Company or any of its Subsidiaries pursuant
to any Environment Law;



               (e) no Lien imposed by any Governmental Authority pursuant to any Environmental Law is
currently outstanding and no material financial assurance obligation is in force as to any of the
Real Property;



               (f) the Company and the Subsidiaries have no material obligation or liability relating to or
arising under Environmental Law by Contract; and



               (g) each of the Company and the Subsidiaries further represents that is has made available to
Purchaser correct and complete copies of all environmental site assessment reports, studies,
investigations or material correspondence, in its possession or, to Seller’s Knowledge, in its
control, regarding any of its Environmental Liabilities at any of the Real Property.



          2.18. Affiliate Transactions. (a) Except for employment arrangements and Employee Plans set
forth on Section 2.12(a)(i) of the Seller Disclosure Schedule, there are no transactions,
agreements, arrangements or understandings between the Company or its Subsidiaries, on the one
hand, and any Affiliate (including any director or officer) thereof, but not including any wholly
owned Subsidiary of the Company, on the other hand (an “Affiliate Transaction”).




               (b) The Company and the Subsidiaries do not currently utilize the services or assets of Seller
or any of its Affiliates (other than the Company and the Subsidiaries) to conduct their business or
operations in the ordinary course.



     2.19. Brokers. Except for Goldman, Sachs & Co., whose fees and expenses will be paid by
Seller, no broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or



29









 




commission in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent, Seller, the Company or the Subsidiaries (other than as
will be paid by Parent or Seller, or as will be paid by the Company or the Subsidiaries prior to
the Closing).




          2.20. Sufficiency of Assets. Except for the services and assets contemplated to be performed
or provided to Purchaser pursuant to the Transaction Agreements, the assets of the Company and its
Subsidiaries constitute all assets, properties and rights necessary to conduct the Business in all
material respects as currently conducted (taking into account the actions contemplated by the
Restructuring Plan).




          2.21. Risk Management Instruments. All Derivative Contracts, whether entered into for the
account of the Company or the Subsidiaries or for the account of a customer or financing source of
any such Person, were entered into in the ordinary and usual course of business and in accordance
in all material respects with applicable rules, regulations and policies of all applicable
Governmental Authorities and with counterparties the Company believes to be financially
responsible.




          2.22. Origination and Servicing. (a) The Company and its Subsidiaries have been and are, in
compliance in all material respects with all Applicable Requirements. The Company and its
Subsidiaries have been and are in compliance in all material respects with the restrictions under
the applicable Servicing Agreements on solicitation of existing borrowers for the purposes of
refinancing their Loans. Each Loan, to Seller’s Knowledge, constituted the legal, valid and
binding obligation of the obligor named therein, except for those Loans that have been fully
reserved against in the financial statements of the Company and taken into account in the final
determination of Final Closing Tangible Net Assets pursuant to Section 1.04.




               (b) Since April 30, 2005, no Governmental Authority, Investor or private mortgage Insurer has
(i) provided written notice to the Company or any Subsidiary claiming that the Company or any of
its Subsidiaries has violated, breached or not complied with any Applicable Requirements in
connection with the Company’s or any of its Subsidiaries’ origination or servicing activities, or
(ii) imposed restrictions on the mortgage loan origination activities (including commitment
authority) of the Company or any Subsidiary, other than violations, breaches, instances of
non-compliance or restrictions (y) that have not had and could not reasonably be expected to have,
individually or in the aggregate, a material liability or (z) that have been in the financial
statements of the Company, taken into account in the final determination of Final Closing Tangible
Net Assets pursuant to Section 1.04.



               (c) As of the date specified in the applicable mortgage loan tape, the information set forth
in each mortgage loan, mortgage servicing rights and mortgage service advancing tape delivered to
Purchaser prior to the date hereof in connection with the transactions contemplated by this
Agreement is correct and complete in all material respects as of the applicable date specified in
such mortgage loan, mortgage servicing rights and mortgage service advance tape.



30









 





               (d) Set forth on Section 2.22(d) of the Seller Disclosure Schedule is a correct and
complete description, as of the date hereof, of the credit standards, policies with respect to
accruals of provisions for credit losses, Lending Policies and loan reserve policies of the Company
and its Subsidiaries (the “Company Loan Policies”), including the written policies and
practices relating to (i) documentation procedures, (ii) collateralization practices (including
loan to value ratios and valuation and appraisal of collateral), (iii) procedures for (including
frequency of) billing and on-going monitoring and auditing of Loans, collections and review of
past-due accounts, and (iv) making of charge-offs, write downs, specific accruals and specific
valuation reserves for Loans and the placing of Loans on a non-accrual status. The Business is
being operated in compliance with the Company Loan Policies and the Company Loan Policies have not
been modified, superseded or otherwise rendered inapplicable in any material respect.



               (e) Except as would not reasonably be expected, individually or in the aggregate, to be
material the Company and the Subsidiaries have not originated and currently do not originate “high
cost” mortgage loans as such term is defined in § 1602 of the Truth-In-Lending Act, 15 USC § 1602
and § 226.32 of its implementing regulation, Regulation Z ,12 CFR § 226.32, as well as under
applicable state Law.



          2.23. Securitizations and Warehouse Facilities. (a) Except to the extent fully reserved
against and taken into account in the final determination of Final Closing Tangible Assets pursuant
to Section 1.04: (i) each Loan sold by the Company or any of its Subsidiaries was made in
all respects in accordance with the Applicable Requirements and, as of the date each such Loan was
sold, was evidenced in all material respects by appropriate and sufficient documentation and
constituted the legal, valid and binding obligation of the obligor named therein, subject to the
General Enforceability Exceptions; (ii) upon origination of the underlying Loan, the Loan Documents
for all such Loans were in compliance in all material respects with Applicable Requirements and
were complete in all material respects; and (iii) no Governmental Authority or other Person has (x)
claimed that the Company or any of its Subsidiaries has violated or not complied with the
applicable underwriting standards with respect to the Loans sold by such Person to any Investor or
(y) imposed restrictions on the activities (including commitment authority) on such Person.




               (b) Set forth on Section 2.23(b)(i) of the Seller Disclosure Schedule is a correct and
complete list of Securitizations and Warehouse Facilities (along with a reasonable explanation of
the facts and circumstances of such Securitizations and Warehouse Facilities) in which the Company
or any of the Subsidiaries have provided a guarantee, funds for a reserve account, liquidity
facility, Derivative Contract or similar credit enhancement. Set forth on Section
2.23(b)(ii) of the Seller Disclosure Schedule sets forth a correct and complete list, by
securitization trust, of the unreimbursed servicing advances of each of the Company and its the
Subsidiaries as of February 28, 2007. There are no executory agreements (in writing or otherwise)
in which the Company or any of the Subsidiaries has a continuing obligation to purchase securities
issued by a Securitization Trust or Warehouse Facility.



31









 





               (c) Set forth on Section 2.23(c) of the Seller Disclosure Schedule is a correct and
complete list of Securitizations and Warehouse Facilities by the Company or any of the
Subsidiaries, specifying those that are properly treated as debt and those that are properly
treated as a sale for U.S. federal income Tax purposes. All such Securitizations are, and have
since their inception been, properly structured and operated in a manner so that the entity which
owns the underlying mortgage assets is not, for U.S. federal income Tax purposes, a corporation, an
association taxable as a corporation, a taxable mortgage pool or a publicly traded partnership.



               (d) Set forth on Section 2.23(d) of the Seller Disclosure Schedule is a correct and
complete list of securities issued by a Securitization Trust and owned on the date hereof by the
Company or any of the Subsidiaries.



               (e) Set forth on Section 2.23(e) of the Seller Disclosure Schedule is a correct and
complete list, as of the date hereof, of Securitizations and Warehouse Facilities (including under
pooling and servicing agreements and insurance agreements) (and the facts and circumstances) in
which there is a default, event of default, termination event or servicer default or termination
event or, in which with the giving of notice or the passage of time, will be a default, event of
default, termination event or servicer default or termination event.



               (f) No trigger event has occurred and is continuing with respect to the Securitizations and
Warehouse Facilities (including under pooling and servicing agreements and insurance agreements)
that has caused an increase in a reserve requirement, an early amortization of securities, or the
removal (or right to remove) the servicer.



               (g) No private placement memorandum or other offering document of the Company or any
Subsidiary, or any amendments or supplements thereto, contained, as of the date on which it was
issued in connection with any Securitization or Warehouse Facility, any untrue statement of a
material fact or omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading and there are no pending or, to the Seller’s Knowledge, threatened, lawsuits, actions,
proceedings or claims so alleging. No securities were issued or sold by the Company in violation
of Section 5 of the Securities Act in any Securitization. Neither the Company nor any Subsidiary
is required to register as an investment company under the Investment Company Act of 1940, as
amended.



               (h) The servicer in each of the Securitizations is entitled to pay or reimburse itself for all
advances, servicing advances, servicing fees and all other amounts due to the Servicer from all
collections on the Loans prior to any amounts being paid or distributed to any other Person.



          2.24. EPDs; Recourse. (a) Neither the Company nor any of its Subsidiaries is a party to (A)
any Contract with (or otherwise obligated to) any Person, including an Investor, Governmental
Authority or Insurer, to repurchase from any such


32









 






Person any Loans or Receivables; or (B) any Contract to reimburse, indemnify or hold harmless
any Person or otherwise assume any Liability with respect to any loss arising from Loans or
Receivables, including in the event of fraud on the part of a borrower.




               (b) Except (i) as expressly reflected, reserved against or otherwise disclosed in the Most
Recent Balance Sheet, (ii) except to extent fully reflected on, or fully reserved against in, the
balance sheet of the Company and its Subsidiaries and taken into account in the final determination
of Final Closing Tangible Net Assets pursuant to Section 1.04 or (iii) as would not
reasonably be expected to result in, individually or in the aggregate, a material liability, no
event has occurred that may give rise to an obligation to repurchase a Loan or Receivable or group
of Loans or Receivables or reimburse, indemnify or hold harmless any Person or otherwise assume any
Liability with respect to any loss arising from a Loan or Receivable.



               (c) Set forth on Section 2.24(c) of the Seller Disclosure Schedule is a correct and
complete list (including with loan amount information) of all requests in excess of $1,000,000 to
repurchase any Loans or Receivables or reimburse, indemnify or hold harmless any Person or
otherwise assume any Liability in excess of $1,000,000 with respect to any loss arising from any
Loan or Receivable received by the Company and/or the Subsidiaries during the ten-month period
ended February 28, 2007.



               (d) Set forth on Section 2.24(d) of the Seller Disclosure Schedule is a correct and
complete list as to the EPD repurchase obligations with respect to Loans or Receivables sold by the
Company or its Subsidiaries in sale transactions that closed during the period commencing on
January 1, 2006 and ending on February 28, 2007.



          2.25. Insurance. Seller has made available to Purchaser correct and complete copies of all
material and currently effective insurance policies issued in favor of the Company or any of the
Subsidiaries. With respect to each such policy, except as has not been, or would not reasonably be
expected to be, individually or in the aggregate, material, (i) the policy is in full force and
effect and premiums due thereon have been paid, (ii) neither the Company nor any of the
Subsidiaries is in breach or default, and no such Person has taken any action or failed to take any
action which would constitute a breach or default (or an action or inaction which with notice or
lapse of time or both would become a default) thereunder or permit termination or modification of,
any such policy, and (iii) no insurer on any such policy has been declared insolvent or placed in
receivership, conservatorship or liquidation, and no notice of cancellation or termination has been
received with respect to any policy. The Company and the Subsidiaries maintain insurance policies
that are customary for companies of similar size in the industries in which the Company
participates.




          2.26. Board Minutes. Seller has made available to Purchaser current and complete copies of
(i) the charter and bylaws or other governing documents of each of the Company’s Subsidiaries, as
amended to the date of this Agreement, and each such documents is in full force and effect and (ii)
the minutes of all meetings of the


33









 






stockholders, the Board of Directors (or the equivalent thereof) and each committee thereto of
the Company and each of the Company’s controlled Subsidiaries, held between January 1, 2005 and the
date hereof.




          2.27. No Other Representations or Warranties. Except for the representations and warranties
of Seller expressly set forth in this Agreement, neither Seller nor any other Person makes any
other express or implied representation or warranty on behalf of Seller with respect to Seller, the
Company or the Subsidiaries or the transactions contemplated by this Agreement and the Transaction
Agreements. The representations and warranties made in this Agreement with respect to the Company,
the Subsidiaries and the Shares and the transactions contemplated by this Agreement and the
Transaction Agreements are in lieu of all other representations and warranties Seller might have
given Purchaser, including implied warranties of merchantability and implied warranties of fitness
for a particular purpose. Purchaser acknowledges that all other warranties that Seller or anyone
purporting to represent Seller gave or might have given, or which might be provided or implied by
applicable Law or commercial practice, with respect to the Company, the Subsidiaries and the
Shares, are hereby expressly excluded. Purchaser acknowledges that neither Seller nor any other
Person acting on its behalf will have or be subject to any liability or indemnification obligation
to Purchaser or any other Person acting on its behalf resulting from the distribution in written or
oral communication to Purchaser, or use by Purchaser of, any information, documents, projections,
forecasts or other material made available to Purchaser in the Data Room, confidential information
memoranda or management interviews and presentations in expectation of the transactions
contemplated by this Agreement and the Transaction Agreements.




III. REPRESENTATIONS AND WARRANTIES OF PURCHASER




     Purchaser hereby represents and warrants to Seller that:



          3.01. Organization. Purchaser is duly organized, validly existing and in good standing under
the Laws of the state of its organization, and has the requisite corporate or similar power and
authority to own its properties and to carry on its business as presently conducted and is duly
qualified to do business and is in good standing (where such concept exists) as a foreign
corporation in each jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure to be so organized,
qualified or in good standing or have such power or authority would not prevent or materially delay
the consummation of the transactions contemplated by this Agreement or the Transaction Agreements.




          3.02. Authority; Enforceability. Purchaser has all necessary corporate or other power and
authority to execute and deliver this Agreement and the Transaction Agreements, to perform its
obligations hereunder and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser of this Agreement and the
Transaction Agreements and the consummation by Purchaser of the transactions contemplated hereby
and thereby have



34









 







been duly and validly authorized by all necessary action on the part of Purchaser, and no
other corporate proceedings on the part of Purchaser are necessary pursuant to its governing
documents or the Laws of its jurisdiction of organization to authorize this Agreement or the
Transaction Agreements or to consummate the transactions contemplated hereby or thereby. This
Agreement and each Transaction Agreement to which Purchaser is a party has been or will be duly
executed and delivered by Purchaser and, assuming due authorization, execution and delivery by the
other parties hereto and thereto, constitutes or will constitute a legal, valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the
General Enforceability Exceptions.




          3.03. Non-Contravention. The execution, delivery and performance by Purchaser of this
Agreement and the Transaction Agreements to which Purchaser is a party, and the consummation of the
transactions contemplated hereby and thereby and the compliance by each Purchaser with the
applicable terms and conditions hereof or thereof, does not and will not (a) conflict with or
violate its organizational documents, (b) assuming that all consents, approvals and authorizations
contemplated by Section 3.04 have been obtained and all filings described therein have
been made, conflict with or violate any Law applicable to Purchaser or (c) result in any breach or
violation of or constitute a default (or an event which with notice would become a default) or
result in the loss of a benefit under, or give rise to any right of termination, cancellation,
modification, amendment or acceleration of (whether after the filing of notice or otherwise), any
Contract or permit to which Purchaser is a party or by which Purchaser or any of Purchaser’s
respective properties or assets are bound, except for any such conflict, violation, breach,
default, loss, right or other occurrence which would not, individually or in the aggregate, prevent
or materially delay the consummation of the transactions contemplated hereby.




          3.04. Governmental Consents. No consent, waiver, authorization, permit, notice or filing is
required to be obtained from, or given to, any Governmental Authority in connection with the
execution, delivery and performance by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby and thereby, except for (a) the Required
Regulatory Approvals, and (b) those consents, approvals, authorizations or permits of, actions by,
filings with or notifications the failure of which to be made or obtained would not, individually
or in the aggregate, prevent or materially delay the consummation of the transactions contemplated
hereby.




          3.05. Availability of Funds. Attached as Exhibit E are correct and complete copies of
debt and equity commitment letters and related term sheets (collectively, excluding any engagement
and fee letters associated therewith, the “Financing Commitments”) to be used in connection
with the transaction contemplated hereby (“Acquisition Financing”). As of the date hereof,
the Financing Commitments are in full force and effect, have not been withdrawn or terminated or
otherwise amended or modified in any respect, and, as of the date hereof, Purchaser has no reason
to believe that the Financing Commitments will not lead to the Acquisition Financing contemplated
thereby. The proceeds from such Acquisition Financing constitute all of the financing required to
be provided by Purchaser for the consummation of the transactions





35









 




contemplated hereby. The Financing Commitments (other than the engagement and fee letters
entered into in connection therewith) constitute, as of the date hereof, the entire and complete
agreement between the parties thereto with respect to the financing contemplated thereby, and to
the Buyer’s knowledge, there are no conditions precedent or other contingencies related to the
funding of the Acquisition Financing other than as set forth in the Financing Commitments.




          3.06. Litigation. There is no Action pending against, or to Purchaser’s Knowledge, threatened
against or affecting, Purchaser that in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and the Transaction Agreements.




          3.07. Investment Intent. Purchaser is acquiring the Shares for its own account, for the
purpose of investment only and not with a view to, or for sale in connection with, any distribution
thereof in violation of applicable securities Laws.




          3.08. No Other Representations or Warranties. Except for the representations and warranties
of Purchaser expressly set forth in this Agreement, neither Purchaser nor any other Person makes
any other express or implied representation or warranty on behalf of Purchaser with respect to
Purchaser or the transactions contemplated by this Agreement and the Transaction Agreements.




IV. COVENANTS OF SELLER




          4.01. Conduct of the Business. Except as set forth on Section 4.01 of the Seller
Disclosure Schedule, from the date of this Agreement until the Closing, Seller will cause the
Company and the Subsidiaries to conduct their business in the ordinary course and use their
respective commercially reasonable efforts to preserve intact the Business and its relationships
with customers, suppliers, creditors and employees. Without limiting the generality of the
foregoing, except as set forth on Section 4.01 of the Seller Disclosure Schedule, as
required by applicable Law, in connection with the implementation of the Restructuring Activities
in accordance with Section 4.05 or as consented to by Purchaser (which consent may not be
unreasonably withheld, conditioned or delayed solely in the case of clause (i) of Section
4.01(k) and clause (ii) of Section 4.01(n)), from the date of this Agreement until the
Closing, Seller will cause the Company and each of the Subsidiaries not to:




               (a) transfer, sell, lease, license, surrender, divest, cancel, abandon or allow to lapse or
expire or otherwise dispose of any of its material assets, product lines or businesses, including
capital stock of any of its Subsidiaries, other than in the ordinary course of business;



               (b) (i) acquire, purchase, license or lease (in each case, whether by merger, consolidation or
by any other manner) any business or Person or any material assets or securities thereof, other
than purchases of mortgages in the ordinary course of business consistent with the Lending Policies
or (ii) subject to any Lien (other



36









 







than Permitted Liens) any of their material properties or assets, other than in the ordinary
course of business pursuant to the Financing Facilities;



               (c) (i) except in the ordinary course of business, modify or amend in any material respect, or
terminate, release, assign or waive any material rights or claims under, any Material Contract or
material Lease, (ii) except in the ordinary course of business in accordance with Section
4.01 of the Seller Disclosure Schedules, enter into any Contract that, if the Company or
Subsidiary had entered into such Contract immediately prior to the date of this Agreement, would be
a Material Contract, or (iii) enter into any material Lease;



               (d) except pursuant to those existing written, binding agreements in effect (and made
available to Purchaser) prior to the date hereof or as set forth in Section 4.01 of the
Seller Disclosure Schedule, with respect to Employees and Former Employees (i) enter into,
establish, grant, amend, terminate or renew any severance or termination pay in excess of $50,000
per Employee or $1,000,000 in the aggregate, (ii) increase or accelerate the compensation or
benefits payable under any existing severance or termination pay agreement or arrangement or other
Employee Plan, (iii) enter into, establish, amend, terminate or renew any employment, consultancy,
bonus, severance, termination pay, retirement or other similar agreement or arrangement (or amend
any such existing agreement or arrangement in a manner that would increase the Liabilities of the
Company and its Subsidiaries), (iv) enter into, establish, amend, terminate or renew any collective
bargaining, profit-sharing, thrift, pension, retirement, deferred compensation, incentive
compensation, equity compensation or other material benefit plan or arrangement in a manner that
would increase the Liabilities of the Company and its Subsidiaries (it being understood and agreed
that this clause (iv) does not restrict the hiring of employees (which is addressed in clause (vi)
below)), (v) make any increase in compensation or benefits (except for increases in salary or
hourly wage rates of employees (other than officers) in the ordinary course of business consistent
with past practice), (vi) hire any employees or retain any independent contractor with a base
salary or annual compensation, as applicable, over $150,000, (vii) take any action to accelerate
the vesting or payment of, or fund or in any other way secure the payment of, compensation or
benefits under any Employee Plan, to the extent not already provided in such Employee Plan as of
the date hereof, (viii) change any actuarial or other assumptions used to calculate funding
obligations with respect to any Company Employee Plan or change the manner in which contributions
to such plans are made by the Company or any Subsidiary or the basis on which such contributions
are determined, except as may be required by Law, or (ix) forgive any loans to directors or
officers;



               (e) with respect to any Employee or Former Employee grant any equity or equity-based
compensation (whether in the form of options, restricted stock, restricted units or otherwise) or
renew any previously terminated equity compensation plan, other than any action that is required
under any Employee Plan (as in effect as of the date hereof) or as required by Law;



37









 





               (f) (i) redeem or otherwise acquire any shares of its capital stock or issue, deliver, pledge,
encumber, dispose of or otherwise distribute or cause to be granted to any Person any capital stock
or ownership interests of or in the Company or any Subsidiary, or securities convertible or
exchangeable into or exercisable for any shares of such capital stock, or any options, warrants or
other rights of any kind to acquire any shares of such capital stock or such convertible or
exchangeable securities or amend, or authorize or propose to take any such action with respect
thereto or (ii) adopt, modify or propose an amendment or modification to any of its organizational
documents;



               (g) other than (A) in the ordinary course of business on terms not materially less favorable
than the applicable terms to which the Company and its Subsidiaries are subject as of the date
hereof pursuant to the Company’s and its Subsidiaries’ existing credit agreements, warehouse
facilities, wholesale loan agreements, indentures, securitization facilities and other financing
arrangements (including any amendments or supplements thereto and any renewals or replacements
thereof entered into after the date hereof in accordance with this Section 4.01) as set
forth in Section 2.16 of the Seller Disclosure Schedule (collectively, the “Financing
Facilities”) to the extent not otherwise inconsistent with Section 4.01 of the Seller
Disclosure Schedule or (B) by, to, between or among the Company and the wholly-owned Subsidiaries
of the Company, incur any Indebtedness for borrowed money, issue or sell any debt securities
(including securities issued in any form, debt or otherwise, in connection with securitization
transactions) or warrants or other rights to acquire any of its debt securities, assume, guarantee
or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person,
or make any Loans, advances or capital contributions to, or investments in, any other Person or
create any special purpose funding or variable interest entity; provided, that,
notwithstanding anything to the contrary in this Agreement, neither the Company nor any of its
Subsidiaries shall (i) enter into a new NIM securitization other than in a manner consistent with their
past practices (and which new NIM securitizations shall not include covenants that differ in any
material respect from the covenants included in NIM securitizations historically undertaken by the
Company and the Subsidiaries) or (ii) have any obligations to
purchase any instrument issued in a securitization (except to the
extent solely resulting from the Current Warehouse Facilities (or
replacement Warehouse Facilities)) as of
the Closing;



               (h) Except (i) as otherwise required in connection with a Final Tax Determination of any
Pending Federal Tax Matter or (ii) to the extent that it would not have the effect of materially
increasing the Tax liability or reducing any Tax Asset of the Company, any Subsidiary, Purchaser or
any Affiliate of Purchaser, make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, change any GAAP accounting method, file any
amended Return, enter into any closing agreement, settle any Tax Proceeding, surrender any right to
claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any
Tax Proceeding or take or omit to take any other action without the prior written consent of the
Purchaser;




38









 





               (i) merge or consolidate itself with any other Person, or restructure, reorganize or
completely or partially liquidate or otherwise enter into any agreements or arrangements imposing material changes or restrictions on its assets, operations
or businesses;



               (j) settle or compromise or commit to settle or compromise any Action pursuant to terms which,
individually or in the aggregate, would reasonably be expected to adversely affect in any material
respect the post-Closing operation of the Business or Purchaser or any of its Affiliates in any
manner;



               (k) (i) fail to make any capital expenditures in accordance with Section 4.01(k) of
the Seller Disclosure Schedule or (ii) enter into any agreement or binding obligation with third
party to make any capital expenditures after the Closing in excess of $250,000 individually or
$1,500,000 in the aggregate;



               (l) fail to file any material reports or take any steps necessary to comply with all Laws in
all material respects and to maintain, in good standing, all material Permits;



               (m) fail to operate the Business in all material respects in accordance with all Applicable
Requirements;



               (n) (i) enter into any new line of business, or (ii) change its Lending Policies in any
material respect except as required by applicable Law;



               (o) fail to comply in all material respects with the Company’s current policy of contacting
Investors on a routine basis to solicit EPD information;



               (p) fail to use commercially reasonable efforts to settle demands received by the Company or
any of its Subsidiaries to (i) repurchase any Loans or Receivables or (ii) reimburse, indemnify or
hold harmless any Person or otherwise assume any Liability with respect to any loss arising from
Loans or Receivables, including in the event of fraud on the part of a borrower; provided,
that nothing in this clause (p) shall permit the Company or any of its Subsidiaries to commit (or
purport to commit) Purchaser or any of its Affiliates (including the Company or any of its
Subsidiaries) to any settlement involving any obligations to be performed, or amounts required to
be paid, after the Closing;



               (q) fail to use commercially reasonable efforts to cause the current insurance policies
maintained by such Person not to be cancelled or terminated or any of the coverage thereunder to
lapse;



               (r) other than in the ordinary course of business in respect of immaterial amounts, delay or
postpone the payment of any accounts payable,



               (s) (i) enter into any Affiliate Transaction the terms of which are inconsistent with
Section 5.02 or (ii) except as expressly contemplated by Section 5.02, modify or
amend the terms of any Affiliate Transaction; or



39









 





               (t) enter into a binding written agreement or commitment to do any of the foregoing.



          4.02. Access; Confidentiality. (a) Subject to applicable Law, Seller will, and will cause
the Company and each of its Subsidiaries to, (i) permit Purchaser, its counsel, financial advisors,
financial sources, consultants and auditors and other authorized representatives full reasonable
access, during normal business hours and upon reasonable notice, and without undue interruption to
the Business, to the employees, premises and properties, books, records (with respect to income Tax
records, only to the extent directly related to the Company or any of its Subsidiaries), Contracts
and other documents of or pertaining to the Company or any of its Subsidiaries or the Business and
Seller’s outside accountants and other advisors, (ii) furnish to Purchaser, its counsel, financial
advisors, financial sources, consultants and auditors and other authorized representatives such
financing and operating data and other information relating to the Company and the Subsidiaries as
Purchaser may reasonably request, and (iii) instruct the employees of the Company and its
Subsidiaries and the legal counsel, accountants, and financial advisors of Parent and its
Subsidiaries to reasonably cooperate with Purchaser and its representatives in connection with the
foregoing. To the extent that Seller or its Affiliates incurs any incremental out-of-pocket costs
in processing, retrieving or transmitting any such information
pursuant to this Section 4.02, Purchaser will reimburse Seller for the reasonable out-of-pocket costs thereof
(including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee
benefits) promptly upon submission to Purchaser of an invoice therefor accompanied by reasonable
supporting documentation.




          (b) In addition to and not by way of limitation of the foregoing:




                    (i) Subject to applicable Law, Seller and its Affiliates will cooperate with Purchaser in
connection with the financing contemplated by the Financing Commitments, including providing
information to and permitting the financing sources and their representatives full access to the
employees, premises and properties, books, records (with respect to income Tax records, only to the
extent directly related to the Company or any of its Subsidiaries), Contracts and other documents
of or pertaining to the Company or any of its Subsidiaries or the Business (including the right to
conduct non-invasive environmental assessments and compliance audits), the accountants and other
advisors of Seller and/or its Affiliates, participating in meetings with prospective investors and
warehouse lenders and (permitting members of senior management of the Business to participate) in
“road shows” in connection with the financing contemplated by the Financing Commitments,
participating in meetings with rating agencies, participating in drafting sessions related to the
offering materials for the debt financing of Purchaser contemplated by the Financing Commitments,
causing the present independent accountants for the Company to participate in drafting sessions
related to the offering materials for any financing sought by Purchaser in connection with the
transactions contemplated hereby and making work papers available to Purchaser, the underwriters or
placement agents for the debt financing and their respective representatives. Commencing on the
date hereof, to the fullest extent permitted by applicable Law, Seller shall provide the Purchaser
with the right to



40









 







designate at least two persons to have access at the offices of the Company and its
Subsidiaries during normal business hours.



                    (ii) As soon as practicable, but in any event no later than 15 Business Days after each fiscal
month-end following the date hereof that occurs prior to the Closing Date, Seller will deliver to
Purchaser a copy of (i) the normal, internal operating balance sheet and internal profit and loss
statement of the Company and its Subsidiaries (as such internal reports are currently generated by
the Business) (the “Interim Monthly Financial Statements”) and (ii) the early payment
default (“EPD”) reports, the key assets financial package and the servicing assets
financial package (including mortgage servicing rights tapes) of the Company and its Subsidiaries
for the preceding month (in the same form as such data is currently presented to the management of
the Business). Promptly upon the Purchaser’s request, Seller will deliver to Purchaser a copy of
the mortgage loan tape for the preceding month (in the same form as such data is currently
presented to the management of the Business).



                    (iii) As soon as reasonably practicable, but in no event later than July 31, 2007, Seller
shall furnish to Purchaser the following financial statements for the Company and its Subsidiaries:
(x) the audited combined balance sheets of the Company and its Subsidiaries, as of April 30, 2007
and April 30, 2006, together with the related audited combined statements of operations and
combined statements of cash flows for the twelve-month periods ended April 30, 2007 and April 30,
2006 (collectively, “2007 Audited Financial Statements”) and (y) the pro forma balance
sheet of the Company and its Subsidiaries as of April 30, 2007, together with the related pro forma
statement of operations for the twelve-month period ended April 30, 2007, as if the Divestment
Activities had occurred as of the beginning of the relevant period for the period or as of the date
set forth therein (the “April 30 Pro Forma Financial Statements”) prepared in a manner
consistent with the January 31 Pro Forma Financial Statements.



                    (iv) As soon as reasonably practicable, but in no event later than September 15, 2007, Seller
shall furnish to Purchaser, the unaudited balance sheet of the Company and its Subsidiaries as of
July 31, 2007, together with the related unaudited statement of operations and statement of cash
flows for the three-month period then ended and the unaudited balance sheet and related unaudited
statement of operations and statement of cash flows for the comparable period of the prior fiscal
year thereto (the “2007 Unaudited Financial Statements”).



                    (v) Seller shall cause the Company to execute true and complete management representation
letters to permit KPMG LLP (“KPMG”) to issue its report with respect to the 2007 Audited
Financial Statements.



               (c) Seller and their Affiliates shall afford to the representatives of Purchaser, upon
reasonable notice and without undue interruption to Seller and its Affiliates, reasonable access
during normal business hours to the books and records of Parent and its Subsidiaries (other than
the Company and its Subsidiaries) pertaining to the operations of the Business prior to the Closing
Date for a period of eight years



41









 







following the Closing Date in connection with financial statements and SEC reporting
obligations, and the assets and liabilities of the Company and its Subsidiaries, and other
reasonable business purposes; provided, that nothing herein shall limit Purchaser’s rights
of discovery. Seller agrees to hold all of the books and records of the Business existing as of
the Closing Date in accordance with Parent’s standard record retention policies. Without limiting
the generality of the foregoing, Seller and its Affiliates shall cooperate with Purchaser and its
representatives in connection with the preparation of audited and unaudited U.S. GAAP financial
statements for the Business (including the Company and its Subsidiaries) that comply with
Regulation S-X promulgated under the Securities Act of 1933, as amended, with appropriate
presentation to reflect the Divestment Activities any other assets not acquired for all periods
required prior to consummation of the Purchase), including providing reasonable access during
normal business hours to the personnel of Parent and its Subsidiaries and books and records of such
Persons pertaining to the operations of the Business prior to the Closing Date to the extent
reasonably necessary for the preparation of such audited and unaudited financial statements.



               (d) After the Closing, Seller and its Affiliates will hold, and will use their commercially
reasonable efforts to cause their respective officers, directors, employees, advisors and agents
(collectively, “Representatives”) to hold, in confidence, all information (written or
otherwise), in any form or medium, that is confidential, proprietary or otherwise not generally
available to the public and exclusively relates to the Company or the Subsidiaries (the
“Confidential Information”), except to the extent that such information can be shown to
have been (i) in the public domain prior to the Closing, (ii) in the public domain at or after the
Closing through no fault of Seller or its Affiliates or Representatives or (iii) later lawfully
acquired by Seller or its Affiliates or Representatives from sources other than those related to
its prior ownership of the Company and the Subsidiaries. The obligation of Seller and its
Affiliates to hold the Confidential Information in confidence after the Closing will be satisfied
if Seller exercises the same care with respect to the Confidential Information as it would take to
preserve the confidentiality of its own similar information in the ordinary course of business.
Nothing in this Agreement will restrict the ability of Seller to keep copies of any Confidential
Information after the Closing, including copies of any and all books and records of the Company and
the Subsidiaries. If, after the Closing, Seller or any of its Representatives are legally required
to disclose any Confidential Information, Seller will (A) promptly notify Purchaser to permit
Purchaser, at its expense, to seek a protective order or take other appropriate action and (B)
cooperate as reasonably requested by Purchaser in Purchaser’s efforts to obtain a protective order
or other reasonable assurance that confidential treatment will be accorded such Confidential
Information, but only at Purchaser’s sole cost and expense. If, after the Closing and in the
absence of a protective order, Seller or any of its Representatives are compelled as a matter of
Law to disclose Confidential Information to a third party, Seller and its Representatives may
disclose to the third party compelling disclosure only the part of such Confidential Information as
is required by Law to be disclosed; provided, however, that, prior to any such disclosure, Seller
and its Representatives will use good faith efforts to advise and consult with Purchaser and its
counsel as to such disclosure and the nature and wording of such disclosure.



42









 





          4.03. Assistance in Transfer of Licenses, Permits and Registrations. Seller will use its
commercially reasonable efforts to assist Purchaser in obtaining the transfer of any transferable
Permits, including directing its employees to cooperate with such transfer and making any
notifications required to be sent by Seller prior to the Closing. Purchaser will be responsible
for any out-of-pocket expenses associated with any of the foregoing transfers or assignments, and
Seller will not have any Liability for the failure to obtain the transfer of any such Permit
(except to the extent arising from a breach of any of Seller’s representations and warranties in
Article II or any of Seller’s covenants in Article VI).




          4.04. Third-Party Consents. (a) Without limiting the effect of Section 6.01, Seller
will, and will cause each of the Company and its Subsidiaries to, (i) give any notices to Persons
required to be delivered pursuant to any Contract of the Company or any of its Subsidiaries in
connection with the consummation of the transaction contemplated under this Agreement or any of the
Transaction Agreements and (ii) use their respective commercially reasonable efforts to obtain all
approvals, consents, authorizations and waivers required to be obtained pursuant any Contract of
the Company and its Subsidiaries (other than Contracts relating to the Warehouse Facilities) in
connection with the consummation of the transaction contemplated under this Agreement or any of the
Transaction Agreements (collectively, “Third Party Consents”).




               (b) From the date hereof until the Closing, Seller will be solely responsible for any costs or
expenses associated with obtaining the Third Party Consents (excluding any costs or expenses of any
outside advisors or consultants of Purchaser or any of its Affiliates related thereto) and neither
Purchaser nor any of its Affiliates shall be required to make any payments or offer or grant any
accommodation (financial or otherwise) in exchange therefor. In connection with this Section
4.04, neither Seller nor any of its Affiliate shall consent to any modification of any Material
Contract or otherwise obligate the Company or any of its Subsidiaries to take or omit to take any
action after the Closing without the prior consent of Purchaser.



          4.05. Extinguishment of Intercompany Indebtedness and Certain Affiliate Transactions;
Restructuring Activities.




               (a) Prior to the Closing, Seller will cause all Intercompany Indebtedness to be paid in full,
cancelled, forgiven, terminated or otherwise cease to be obligations and rights of the Company and
the Subsidiaries (in each case, without Liability to Purchaser or any of its Affiliates including,
after the Closing, the Company any its Subsidiaries) such that as of the Closing there will be no
Intercompany Indebtedness.



               (b) Prior to the Closing, Seller will terminate, or cause to be terminated, all Affiliate
Transactions (other than the Transaction Agreements and those Affiliate Transactions set forth on
Section 4.05(b) of the Seller Disclosure Schedule), in each case, without Liability to
Purchaser or any of its Affiliates including, after the Closing, the Company any its Subsidiaries.



43









 





               (c) Prior to Closing, Seller shall have taken, or caused one or more of its Subsidiaries to
have taken, each of the actions set forth on Section 4.05(c) of the Seller Disclosure
Schedule (such actions, the “Divestment Activities”).



               (d) Prior to Closing, Seller shall have taken, or caused one or more of its Subsidiaries to
have taken, each of the actions set forth on Section 4.05(d) of the Seller Disclosure
Schedule (such actions, together with the Divestment Activities, the “Restructuring
Activities”). Sections 4.05(c) and (d) of the Seller Disclosure Schedule are
referred to in this Agreement, collectively, as the “Restructuring Plan.”



          4.06. Servicer Ratings. No earlier than 45 Business Days prior to the anticipated Closing Date
and no later than 30 Business Days prior to the anticipated Closing Date, Seller shall cause the
Company and its Subsidiaries to (i) request that each of the current rating agencies of the Company
and its Subsidiaries assess the Company’s primary servicer rating and (ii) use their respective
commercially reasonable efforts to obtain such updated primary servicer ratings prior to the
Closing.




V. COVENANTS OF PURCHASER




          5.01. Access. Other than with respect to Tax matters, which are governed solely by
Article VII, after the Closing, Purchaser will furnish to Seller, its counsel, financial
advisors, auditors and other authorized representatives such financial and operating data and other
information relating to the Company and the Subsidiaries as Seller may reasonably request. Seller
will bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding
reimbursement for general overhead, salaries and employee benefits) reasonably incurred in
connection with the foregoing.




          5.02. Releases under Certain Contracts; Termination of Intercompany Credit Agreement;
Intercompany Indebtedness. (a) Following the Closing, Purchaser will (i) use its commercially
reasonable efforts to procure the release by the applicable counterparty of any continuing
obligation of Seller or its Affiliates with respect to the Greenwich
Facility Guarantee, the JPM
Facility Guarantee or the UBS Facility Guarantee and (ii) indemnify and hold harmless
Seller and its Affiliates from and against any Liability directly resulting from any continuing
obligation of Seller or its Affiliates with respect to any Seller Guarantee (other than any
Liability with respect to which any Purchaser Indemnified Party is indemnified by Seller pursuant
to Section 7.04 or Article XI); provided, that, notwithstanding anything to
the contrary in this Agreement, Parent shall be solely liable with respect to any reimbursement
obligations (or guaranty thereof) arising from any NIM transactions that have been consummated
prior to the Closing (or that are pending as of the Closing Date), other than any liability
resulting from the failure after the Closing of the Company or any of its Subsidiaries to comply
with its obligations under the related pooling and servicing agreements, and Parent shall indemnify
and hold Purchaser, the Company and its Subsidiaries harmless from and against any Liability
resulting therefrom.



44









 








               (b) Purchaser acknowledges that the Intercompany Credit Agreement will be terminated at or
immediately prior to the Closing and consents to such termination for all purposes of this
Agreement.



          5.03. Contacts with Customers, Suppliers, Employees, etc. From the date of this Agreement
until the Closing, Purchaser (and all of its Affiliates and Representatives) will have the right to
contact and communicate with (i) each of the counterparties to the Financing Facilities provided
that Purchaser shall afford Seller a reasonable opportunity to be present at or participate in any
such contract or communication by notice to Rebecca Shulman, Treasurer, H&R Block, Inc., and (ii)
only with Seller’s prior written consent (which shall not be unreasonably withheld, conditioned or
delayed), each of the employees, consultants, customers, suppliers and distributors of the Company
and the Subsidiaries, in each case, in connection with the transactions contemplated by this
Agreement and the Transaction Agreements.




VI. COVENANTS OF PURCHASER AND SELLER




          6.01. Commercially Reasonable Efforts; Further Assurances. (a) Purchaser and Seller will use
their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, and assist and cooperate with the other parties to this Agreement in doing, all
things necessary or desirable under applicable Law to consummate, in the most expeditious manner
practicable, the transactions contemplated by this Agreement and the Transaction Agreements.




               (b) Purchaser and Seller will use their commercially reasonable efforts to: (i) prepare, as
soon as practicable, all filings and other presentations in connection with seeking the Required
Regulatory Approvals, exemption or other authorization from any Governmental Authority necessary to
consummate the transactions contemplated by this Agreement and the Transaction Agreements, (ii)
prosecute such filings and other presentations with diligence, and (iii) oppose any objections to,
appeals from or petitions to reconsider or reopen any such approval by Persons not party to this
Agreement. Purchaser and Seller will use their commercially reasonable efforts to facilitate
obtaining any final order or orders approving the transactions contemplated by this Agreement and
the Transaction Agreements, or to remove any impediment to the consummation of the transactions
contemplated hereby and thereby. Purchaser and Seller will use their commercially reasonable
efforts to furnish all information in connection with the approvals of or filings with regard to
the Required Regulatory Approvals with any Governmental Authority and will promptly cooperate with
and furnish information in connection with any such requirements imposed upon Purchaser, Seller or
any of their respective Affiliates in connection with this Agreement and the Transaction Agreements
and the transactions contemplated hereby and thereby; provided, however, that,
notwithstanding the foregoing, Purchaser shall not have any obligation to disclose confidential
information relating to itself or its Affiliates to Seller or any other Person, except to a
Governmental Authority where such Governmental Authority would afford confidential treatment to
such information. Each of the parties will use its commercially reasonable best efforts to obtain
the Required Regulatory Approvals required to be obtained by such party. Neither party will not
have



45









 







any Liability to the other party for the failure to obtain any such Required Regulatory
Approvals to the extent such party has satisfied its obligations under this Section 6.01.
Purchaser and Seller will each advise the other party promptly of any material communication
received by such party or any of its Affiliates from the Federal Trade Commission, Department of
Justice, any state attorney general or any other Governmental Authority regarding any of the
transactions contemplated by this Agreement and the Transaction Agreements, and of any
understandings, undertakings or agreements (oral or written) such party proposes to make or enter
into with the Federal Trade Commission, Department of Justice, any state attorney general or any
other Governmental Authority in connection with the transactions contemplated hereby and thereby.
To the fullest extent reasonably practicable, neither Seller nor Purchaser will independently
participate in any meeting with any Governmental Authority in respect of any findings or inquiry in
connection with the transactions contemplated hereby without giving the other prior notice of the
meeting and the opportunity to attend and/or participate, in each case, unless prohibited by the
Governmental Authority. Seller and Purchaser will consult and cooperate with one another in
connection with any information or proposals submitted in connection with proceedings under or
relating to the HSR Act in connection with the transactions contemplated hereby. Subject to
applicable Laws relating to the exchange of information and consistent with their obligations
hereunder, the parties shall jointly direct all matters with any Governmental Authorities, except
where the matter or disclosure solely concerns Purchaser, in which case Purchaser shall have the
right to direct the matter.



               (c) Without limiting the generality of Section 6.01(b) above, Parent and Seller shall
use their respective best efforts to cause the conditions set forth in Sections 9.02(d)(i)
and 9.02(d)(ii) to be satisfied; provided, however, that Purchaser’s
remedies for any failure by Parent or Seller to comply with their obligations pursuant to this
Section 6.01(c) shall be limited to those provided in Articles IX and X of
this Agreement.



          6.02. HSR Clearance (a) In furtherance and not in limitation of the provisions set forth in
Section 6.01, each of Purchaser and Seller will make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act (an “HSR Filing”) with respect to the
transactions contemplated hereby as promptly as practicable after the date hereof (and in no case
less than 10 Business Days after the date hereof), and thereafter make any other required
submissions with respect to the transactions contemplated hereby under the HSR Act and take all
other appropriate actions reasonably necessary, proper or advisable to cause the expiration or
termination of the applicable waiting period under the HSR Act as soon as practicable (the “HSR
Clearance”).




               (b) Notwithstanding anything to the contrary contained in this Agreement, nothing in this
Agreement, including, without limitation, Section 6.01 or Section 6.02, shall
require, or be construed to require, (i) Purchaser or any of its Affiliates to proffer to, or agree
to, sell divest, lease, license, transfer, dispose of or otherwise encumber or hold separate and
agree to sell, divest, transfer, dispose of or otherwise encumber before or after the Closing, any
assets, licenses, operations, rights,



46









 







product lines, businesses or interests therein of Purchaser, the Company or any of their
respective Affiliates (or to consent to any sale, divestiture, lease, license, transfer,
disposition or other encumberment by the Company or any of its Subsidiaries of any of their
respective assets, licenses, operations, rights, product lines, businesses, or interest therein or
to any agreement by any such Person to take any of the foregoing actions) or to agree to make any
material changes (including, without limitation, through a licensing arrangement) or restriction
on, or other impairment of Purchaser’s ability to own or operate, of any such assets, licenses,
product lines, businesses or interests therein or Purchaser’s or any of its Affiliate’s ability to
vote, transfer, receive dividends, or otherwise exercise full ownership rights with respect to the
capital stock of the Company or any of its Subsidiaries or (ii) Purchaser or any of its Affiliates
to take any other action under Section 6.01 or Section 6.02 if the DOJ or FTC
authorizes its staff to seek a preliminary injunction or restraining order to enjoin the
consummation of the transactions contemplated by this Agreement.



          6.03. Post-Closing Litigation Cooperation. From and after the Closing, except as would be
reasonably expected to materially impair, or interfere with, the operation of such party’s
business, if and for so long as any party hereto is actively contesting or defending against any
claim or legal proceeding arising in connection with (i) the transactions contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior to the Closing Date
involving the Company or any of the Subsidiaries (other than an action brought by one party to this
Agreement against another party or parties under the terms of this Agreement or in connection with
the transactions contemplated hereby), each of the parties will reasonably cooperate with the
contesting or defending party and its counsel in the contest or defense, make available its
personnel, and provide such testimony and, subject to any applicable confidentiality restrictions,
access to its books and records as is reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under Article VIII).




          6.04. Public Announcements. From the date hereof through the Closing Date, no public release
or announcement concerning the transactions contemplated by this Agreement and the Transaction
Agreements will be issued by Purchaser or any of its Affiliates or their respective Representatives
without the prior consent of Seller (which consent will not be unreasonably withheld, conditioned
or delayed), and no public release or announcement concerning the transactions contemplated hereby
and thereby will be issued by Seller or any of its Affiliates or their respective Representatives
without the prior consent of Purchaser (which consent will not be unreasonably withheld,
conditioned or delayed), except, in each case, as such release or announcement as a party may
determine in good faith may be required to be made by it or any of its Affiliates by Law or the
rules, regulations or policies of any United States or foreign securities exchange, in which case
such party will use its commercially reasonable efforts to allow the other party reasonable time to
comment on such release or announcement in advance of such issuance; provided, however, that Seller
and its Affiliates may make internal announcements regarding the transaction

47









 








contemplated by this Agreement and the Transaction Agreements to their employees after
reasonable prior notice to, and consultation with, Purchaser.




          6.05. Trademarks and Tradenames of Seller. (a) Except as provided in Section
6.05(b), immediately following the Closing, Purchaser and its Affiliates will not use the
Names or other names confusingly similar thereto. In addition, upon termination of Purchaser’s and
its Affiliates’ rights to use the Names, Purchaser and Affiliates will amend or terminate any
certificate of assumed name or d/b/a/ filings containing any Names so as to eliminate its or its
Affiliates’ right to use the Names. Nothing in this Agreement will constitute or be interpreted to
grant or transfer to the Purchaser, its Affiliates, the Company and the Subsidiaries any rights in
any Names, except as provided in this Section 6.05. Notwithstanding anything to the
contrary in this Agreement, the Purchaser and its Affiliates shall have the right to: (i) keep
records and other historical or archived documents containing or referencing the Names and (ii)
refer to the historical fact that the Business was previously conducted under the Names.




               (b) After the Closing, Purchaser and its Affiliates will have the right to use existing
labeling, stationery, business forms, supplies, advertising and promotional materials and any
similar materials bearing the Names for 30 days following the Closing; provided,
however, that (i) neither Purchaser nor any of its Affiliates will take any action that
could reasonably be expected to impair the value of the Names, (ii) when using the items listed
above in the context of entering into or conducting contractual relationships, Purchaser will make
clear to all other applicable parties that Purchaser, rather than Seller or its Affiliates, is the
party entering into or conducting the contractual relationship, and (iii) that personnel of
Purchaser or its Affiliates using the above items will not, and will have no authority to, hold
themselves out as officers, employees or agents of Seller or any Affiliate of Seller.



               (c) Purchaser will use its commercially reasonable efforts to minimize its use of the Names,
and, in any event, will cease using, and cause its Affiliates (including the Company and the
Subsidiaries) to cease using, the Names as soon as practicable and in any event within 30 days
after the Closing.



               (d) Following the Closing, Seller will not, and will cause its controlled subsidiaries not to,
conduct business under or use the name “Option One” or any confusingly similar name.



          6.06. Notices of Certain Events. From the date hereof until the Closing Date, each party will
promptly notify the other party of:




               (a) any material notice or other communication from any Person alleging that the consent of
such Person is or may be required in connection with the transactions contemplated by this
Agreement and the Transaction Agreements;



               (b) any written notice or other written communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement and the Transaction Agreements; and



48









 





               (c) any change or fact of which it is aware that will or is reasonably expected to result in
any of the conditions set forth in Article IX becoming incapable of being satisfied;


provided, however, that the delivery of any notice pursuant to this Section 6.06
shall not limit or otherwise affect the representations and warranties of the delivering party or
remedies available hereunder to the party receiving that notice.




          6.07. Non-Solicitation. (a) Seller agrees that for a period of 24 months from the Closing
Date, Seller will not, and will cause Parent and Parent’s other subsidiaries not to, without
obtaining the prior written consent of the Purchaser:




                    (i) employ (or refer to another Person for the purpose of such Person soliciting or employing)
any of the management-level employees of the Company or any of the Subsidiaries so long as they are
employed by the Company or any of the Subsidiaries; provided, however, that neither
the Seller nor Parent nor Parent’s subsidiaries shall be deemed to have solicited any such person
and may hire any such person who (i) responds to any public advertisement placed by or on behalf of
the Seller, Parent or any of Parent’s subsidiaries or (ii) has been terminated by the Purchaser or
its subsidiaries prior to the employment relations with the Seller, Parent or any of Parent’s
subsidiaries; or



                    (ii) solicit any current wholesale broker or servicing customer of the Business or otherwise
take any action reasonably likely to have the effect of discouraging any such broker or servicing
customer from maintaining the same business relationships in respect of the Business with Purchaser
and its Subsidiaries (including the Company and its Subsidiaries) after the Closing as maintained
by the Company and its Subsidiaries as of the date hereof; provided, however, that
neither the Seller nor Parent nor Parent’s subsidiaries shall be deemed to have solicited any such
person who responds to any public advertisement placed by or on behalf of the Seller, Parent or any
of Parent’s subsidiaries.



               (b) Except as may be required by applicable Law, promptly following the Closing, Seller will,
and will cause Parent and Parent’s other subsidiaries to, destroy all copies of broker lists or
servicing customer lists pertaining to wholesale brokers or servicing customers, as the case may
be, of the Business in existence as of the Closing in the possession or control of any such Person.
Within five Business Days of Closing, Seller will provide Purchaser with a written confirmation,
signed by a duly authorized officer of Parent, to the effect that all such copies have been
destroyed.



               (c) Purchaser agrees that for a period of 24 months from the Closing Date, neither Purchaser
nor any of its controlled Affiliates will, without obtaining the prior written consent of the
Seller, employ (or refer to another Person for the purpose of such Person soliciting or employing)
any of the management-level employees of Parent or any of its subsidiaries so long as they are
employed by Parent or any of its subsidiaries; provided, however, that neither the Purchaser nor
its controlled Affiliates shall be deemed to have solicited any such person and may hire



49









 







any such person who (i) responds to any public advertisement placed by or on behalf of the
Purchaser or any of its controlled Affiliates or (ii) has been terminated by the Seller or its
subsidiaries prior to the employment relations with the Purchaser or its controlled Affiliates.



VII. TAX MATTERS




          7.01. General. Notwithstanding any other provision in this Agreement (with the exception of
Sections 2.09 and 4.01(h) hereof), this Article VII will exclusively govern
Tax matters.




          7.02. Tax Cooperation. (a) Purchaser and Seller will furnish to each other, upon request, as
promptly as practicable, such information and assistance relating to the Company and the
Subsidiaries (including access to books and records) as is reasonably necessary for the filing of
all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any
Taxing Authority and the prosecution or defense of any Action relating to any Tax. The party
requesting any such information will bear all of the reasonable out-of-pocket costs and expenses
(including attorneys’ fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such information. Except with respect to
information that is generally available to the public, the party requesting such information will
(a) hold all such information in the strictest confidence, except as required by applicable Law or
which must be disclosed in connection with any audit or Taxing Authority inquiry, (b) disseminate
such information only to its Representatives who have been advised of the confidential nature of
such information, and only on an as-needed basis, (c) return any original documents promptly, after
(i) the filing of such Tax Returns, the making of such election, or the conclusion of such audit or
Action and (ii) upon request of the other party, all copies of the information received by it, and
(d) take all steps necessary to cause its officers, directors, employees and Representatives to
comply with the terms and conditions of this Section 7.02. Purchaser and Seller
will retain all books and records with respect to Taxes pertaining to the Company and the
Subsidiaries for a period of seven years following the Closing or, if longer, until the statute of
limitations has run on any Pre-Closing Tax Period or Straddle Period.
Subject to Section 7.04(c), Purchaser and Seller will cooperate with each other in the conduct of any
audit or other proceeding relating to Taxes involving the Company and the Subsidiaries.
Notwithstanding the foregoing, Purchaser will not have access to any books, records, Tax Returns or
other information of Seller that do not relate exclusively to the Company and the Subsidiaries.




               (b) Elections. At Seller’s reasonable request, Purchaser will cause the Company and/or any of
the Subsidiaries to make and/or join with Seller (or any of its Affiliates) in making any election
if the making of such election could not have any adverse impact on Purchaser, the Company or the
Subsidiaries for a Post-Closing Tax Period or Post-Closing Straddle Period.



               (c) Transfer Taxes. Purchaser will timely file all Tax Returns with respect to all excise,
sales, use, value added, registration, stamp, recording,



50









 







documentary, conveyancing, franchise, transfer, transaction privilege and similar Taxes,
levies, charges and fees incurred in connection with the transactions contemplated by this
Agreement (collectively, the “Transfer Taxes”) and all such Transfer Taxes (and all
out-of-pocket costs for preparation of such Tax Returns) shall be borne equally by Purchaser and
Seller, whether or not reflected on a Tax Return. Within 10 days prior to payment of such Transfer
Taxes being due, Purchaser will provide Seller with copies of all such Tax Returns, and Seller will
pay to Purchaser within 7 days thereof 50% of the amount of such Transfer Taxes. Purchaser and
Seller will reasonably cooperate to reduce or eliminate Transfer Taxes to the extent permitted by
applicable Law. If Seller or Purchaser pays a Transfer Tax at the Closing or pursuant to a
post-Closing assessment by a Taxing Authority, the other party will reimburse the paying party for
50% of the amount of such Tax within 14 days of the paying party’s written demand therefor.



          7.03. Tax Sharing Agreements; Apportionment; Return Filings; Refunds and Credits. (a) Seller
will cause the provisions of any Tax sharing or Tax allocation agreement or arrangement solely
between the Seller or any of its Affiliates (other than the Company and the Subsidiaries), and the
Company or any of the Subsidiaries, to be terminated on or before the Closing Date. After the
Closing Date, no party will have any rights or obligations under any such Tax sharing or Tax
allocation agreement or arrangement.




               (b) For purposes of this Agreement, the portion of Tax with respect to the income, property or
operations of the Company and the Subsidiaries that relate to any taxable period that includes but
does not end on the Closing Date (a “Straddle Period”) will be apportioned between the
period of the Straddle Period that extends before the Closing Date through the Closing Date (the
“Pre-Closing Straddle Period”) and the period of the Straddle Period that extends from the
day after the Closing Date to the end of the Straddle Period (the “Post-Closing Straddle
Period”) in accordance with this Section 7.03(b). The portion of such Tax
attributable to the Pre-Closing Straddle Period will (i) in the case of any Taxes other than sales
or use taxes, value-added taxes, employment taxes, withholding taxes and any Tax based on, or
measured by income, receipts or profits earned during a Straddle Period, be deemed equal to the
amount that would be payable for the entire Straddle Period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Straddle
Period, and denominator of which is the number of days in the Straddle Period and (ii) in the case
of any sales or use taxes, value added taxes, employment taxes, withholding taxes, and any Tax
based on or measured by income, receipts or profits earned during a Straddle Period, be deemed
equal to the amount that would be payable if the Straddle Period ended on and included the Closing
Date. To the extent that any Tax for a Straddle Period is based on the greater of a Tax on net
income, on the one hand, and a Tax measured by net worth or some other basis not otherwise measured
by income, on the other hand, the portion of such Tax related to the Pre-Closing Straddle Period
will be determined based on the foregoing and based on the manner in which the actual Tax liability
for the entire Straddle Period is determined. For purposes of this Section
7.03(b), any exemption,



51









 







deduction, credit or other item that is calculated on an annual basis will be allocated to the
Pre-Closing Straddle Period on a pro rata basis by multiplying the total amount of such items for
the Straddle Period by a fraction, the numerator of which is the number of calendar days in the
Pre-Closing Straddle Period, and the denominator of which is the number of calendar days in the
Straddle Period. The portion of Tax attributable to a Post-Closing Straddle Period will be
calculated in a corresponding manner. All transactions not in the ordinary course of business
occurring on the Closing Date after the Closing will be allocated to a Post-Closing Straddle Period
or a Post-Closing Tax Period, as the case may be, to the extent permitted by Treasury Regulation
Section 1.1502-76(b)(1)(ii)(B).



               (c) Preparation of Tax Returns.



                    (i) Seller or its designee will prepare and timely file (including extensions), or cause to be
prepared and timely filed (including extensions), in proper form with the appropriate Taxing
Authority all necessary Tax Returns of or which include or relate to the Company and the
Subsidiaries for (A) Pre-Closing Tax Periods that are required to be filed (including extensions)
on or prior to the Closing Date and (B) for all other Pre-Closing Tax Periods to the extent that
such Tax Returns are filed reflecting the effect of a 338(h)(10) Election. Seller will pay or will
cause to be paid any and all Taxes due with respect to such Tax Returns.



                    (ii) Seller or its designee will prepare and timely file (including extensions), or cause to
be prepared and timely filed (including extensions), in proper form with the appropriate Taxing
Authority all consolidated, combined or unitary Tax Returns of Seller that include or relate to the
Company and the Subsidiaries and any income Tax Return of the Company and the Subsidiaries that
reflect any Pre-Closing Straddle Period or any Pre-Closing Tax Period (including any short period)
that are not required to be filed on or prior to the Closing Date (“Seller Tax Returns”).
Seller will pay or will cause to be paid any and all Taxes due with respect to such Seller Tax
Returns. Purchaser will provide or cause to be provided to Seller in a timely manner all
reasonably necessary data and other information to prepare all Seller Tax Returns.



                    (iii) Seller will have the exclusive authority and obligation to prepare or cause to be
prepared all Tax Returns subject to Section 7.03(c)(i) and Section 7.03(c)(ii).
Such authority will include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the income, properties and
operations of the Company and the Subsidiaries will be reported or disclosed in such Tax Returns;
provided, however, that all such Tax Returns which affect or may affect the Tax
liability of the Company or any Subsidiaries with respect to a Post-Closing Tax Period or
Post-Closing Straddle Period shall be as filed correct and complete and all such determinations
shall be made in a manner consistent with the Company’s past practices or as may be required by a
Final Tax Determination of any Pending Federal Tax Matter.



                    (iv) Purchaser or its designee will prepare and timely file (including extensions), or cause
to be prepared and timely filed (including extensions),



52









 







in proper form with the appropriate Taxing Authority all Tax Returns of the Company and the
Subsidiaries for which Seller is not responsible pursuant to Section 7.03(c)(i)
and Section 7.03(c)(ii). Purchaser will deliver to Seller any Tax Returns that relate to
any Pre-Closing Straddle Period or Pre-Closing Tax Period, as the case may be, (and any relevant
workpapers or other documents reasonably requested by Seller) for Seller’s review and comment at
least 45 days prior to the due date of such Tax Returns (or such shorter period as is necessary to
allow for the timely filing of such Tax Returns), and Seller will provide Purchaser with Seller’s
comments no later than 10 days before the respective due dates of such Tax Returns (or such shorter
period as is necessary to allow for the timely filing of such Tax Returns). Purchaser will (A)
reasonably consider any revisions that relate to any Pre-Closing Straddle Period or Pre-Closing Tax
Period to such Tax Returns as are requested by Seller, and (B) make any revisions requested by
Seller which are required by a Final Tax Determination of any Pending Federal Tax Matter.
Purchaser will pay or cause to be paid any and all Taxes allocable to any Post-Closing Straddle
Period or Post-Closing Tax Period, as the case may be, pursuant to Section 7.03(b) and
Seller will pay to Purchaser, at least 3 days prior to the date on which payment is due to the
applicable Taxing Authority, Taxes allocable to any Pre-Closing Straddle Period or Pre-Closing Tax
Period, provided, however, that Seller shall not have to pay to Purchaser any such Taxes to the
extent accrued reserves for such Taxes were included in the Most Recent Balance Sheet.



                    (v) Neither Purchaser nor any of its Affiliates will amend, refile, revoke or otherwise modify
any Tax Return or Tax election of the Company or the Subsidiaries with respect to a Pre-Closing Tax
Period or Pre-Closing Straddle Period without the prior written consent of Seller. Seller may not
amend, refile, revoke or otherwise modify or cause or permit to be amended, refiled, revoked or
otherwise modified any Tax Return or Tax election of the Company or any Subsidiaries that affects
or may affect the Tax liability of the Company or any Subsidiaries with respect to a Post-Closing
Tax Period or Post-Closing Straddle Period without the prior written consent of Purchaser, except
to the extent that such amendment, refiling, revocation or other modification is required by a
Final Tax Determination of any Pending Federal Tax Matter.



                    (vi) With respect to any Tax Returns for any Straddle Period, to the extent permissible, but
not required, pursuant to applicable Tax Law, Seller may and Purchaser or its Affiliates will, at
Seller’s direction, cause the Company to (A) take all steps as are or may be reasonably necessary,
including the filing of elections or returns with applicable Taxing Authorities, to cause such
period to end on the Closing Date or (B) if clause (A) is inapplicable, report the operations of
the Company only for that portion of such period ending on the Closing Date in a combined,
consolidated, or unitary Tax Return filed by Seller or an Affiliate of Seller, notwithstanding that
such taxable period does not end on the Closing Date.



               (d) Purchaser will pay or cause to be paid to Seller any refunds or credits of Income Taxes
(including interest thereon) with respect to any Pre-Closing Tax Period or Pre-Closing Straddle
Period received by or credited to Purchaser, the Company, any Subsidiary or any of their Affiliates
within 10 Business Days after the



53









 







receipt of such refund or the realization of such credit. At Seller’s reasonable request,
Purchaser and its Affiliates will cooperate with Seller in obtaining such refunds or credits,
including through the filing of amended Tax Returns or refund claims as prepared by Seller, at
Seller’s own expense; provided, however, that such assistance shall not include the
carryback of losses or other action which has or could reasonably have an adverse economic impact
on Purchaser, the Company or any of the Affiliates thereof, except to the extent such other actions
are required by the Final Tax Determination of any Pending Federal Tax Matter. Purchaser will
permit Seller to control the prosecution of any such refund claim and, where deemed appropriate by
Seller, will authorize by appropriate powers of attorney such Persons as Seller will designate to
represent the Company and/or the Subsidiaries with respect to such refund claim.



          7.04. Tax Indemnification. (a) From and after the Closing, Seller will indemnify the
Purchaser Indemnified Parties against and hold them harmless from (i) all liability for Taxes of
the Company and the Subsidiaries or any affiliated group of which the Company or any Subsidiary has
ever been a member for the Pre-Closing Tax Period or the Pre-Closing Straddle Period, (ii) subject
to Section 7.02(c), all liability for Taxes as a result of the Purchase, including all
liability for Taxes arising from any 338(h)(10) Election, (iii) any breach by the Company, the
Subsidiaries or any affiliated group of which the Company or any Subsidiary has ever been a member
of any representation set forth in Section 2.09 (determined without regard to any Material
Adverse Effect or materiality qualifiers) or any certificate delivered pursuant to Section
1.03(c)(xii), any covenant in Section 4.01(h) or any covenant in Article VII;
and (iv) all liability for reasonable accounting and legal fees and expenses attributable to any
item in clauses (i) through (iii). Notwithstanding anything to the contrary in the foregoing, any
indemnity payment payable pursuant to this Section 7.04(a) in respect of Non-Income Taxes
for any Pre-Closing Tax Period or Pre-Closing Straddle Period shall only be payable as a Covered
Loss pursuant to Section 11.05(a).




               (b) From and after the Closing, Purchaser will indemnify the Seller Indemnified Parties and
hold them harmless from (i) all liability for Taxes of the Company and the Subsidiaries for any
Post-Closing Tax Period or Post-Closing Straddle Period, (ii) pursuant to Section 7.02(c),
50% of the amount of any Transfer Taxes, (iii) any breach by the Company, the Subsidiaries or
Purchaser of any covenant in Article VII, and (iv) all liability for reasonable legal fees
and expenses attributable to any item in clauses (i) or (iii).



               (c) Procedures Relating to Defense of Tax Claims.



                    (i) If notice of a claim will be made by any Taxing Authority, which, if successful, might
result in an indemnity payment to any Purchaser Indemnified Party pursuant to this Section
7.04(c) (a “Tax Claim”), Purchaser will promptly notify Seller in writing of such
claim after receipt of notice by the Purchaser Indemnified Party; provided,
however, that the failure to forward such notices and communications to the indemnifying
party shall not release the indemnifying party from



54









 







any of its obligations under this Section 7.04(c) except to the extent (and only to
the extent) the indemnifying party is actually and materially prejudiced by such failure.



                    (ii) With respect to any Tax Claim relating solely to Taxes of the Company or any of the
Subsidiaries, Seller will control all proceedings taken in connection with such Tax Claim
(including selection of counsel) and, without limiting the foregoing, may in its sole discretion
pursue or forego any and all administrative appeals, proceedings, suits, contests, hearings and
conferences with any Taxing Authority with respect thereto (each, a “Tax Proceeding”), and
may, in its sole discretion, either pay the Tax claimed and sue for a refund where applicable Law
permits such refund suits or contest the Tax Claim in any permissible manner; provided, however,
that Seller first acknowledges in writing that it has sole liability (except however, in the case
of Non-Income Taxes, to the extent Seller would not be liable by virtue of the application of
Section 11.05(a)) for any Taxes that might arise from or in connection with such Tax
Proceeding. Seller shall keep Purchaser reasonably and regularly informed about such Tax
Proceedings. With respect to any Tax Claim relating to Taxes of the Company or any of the
Subsidiaries (A) for a Straddle Period, Purchaser may participate in, at its expense, and may
control the Post-Closing portion of any Tax Proceeding involving a Tax Claim and (B) for a Tax
Proceeding involving Non-Income Taxes which Seller might not be liable in whole or in part by
virtue of the application of Section 11.05(a) hereof, Purchaser may participate in, at its
expense, and may control the portion of any such Tax Proceeding for which Seller may not be liable.
In any case under this Section 7.04(c)(ii) where a Taxing Authority fails to permit both the Seller
and the Purchaser to control a Tax Proceeding, the party with the greater financial exposure shall
control such Tax Proceeding provided however that it will not settle or otherwise compromise any
such Tax Proceeding without the other party’s prior written consent, which consent will not be
unreasonably withheld, conditioned or delayed.



               (d) Any indemnification of a party pursuant to this Section 7.04 will be effected by
wire transfer or transfers of immediately available funds from the indemnifying party to an account
or accounts designated by the indemnified party within 15 days of the final determination thereof.



          7.05. Section 338(g) and Section 338(h)(10) Elections. (a) Neither Seller nor any of
its Affiliates shall make any election pursuant to Section 338(g) of the Code and the U.S. Treasury
Regulations promulgated thereunder (or any comparable election under state or local Tax law) with
respect to the Company or any Subsidiaries.




               (b) Seller shall join Purchaser in making an election (each, a “338(h)(10) Election”)
under Section 338(h)(10) of the Code (or any comparable provision of state or local law) with
respect to the acquisition by Purchaser of the Company and any Subsidiaries (each, a
“338(h)(10) Acquired Company”). Seller and Purchaser shall each execute (or cause to be
executed) on a timely basis all documentation required to be submitted to any Taxing Authority in
accordance with any applicable Tax law for each 338(h)(10) Election.



55









 





               (c) On or prior to the Closing Date, Seller and Purchaser shall agree to an allocation of the
Purchase Price among the Company and any Subsidiaries. Seller and Purchaser agree to further
allocate any amounts allocated to a 338(h)(10) Acquired Company pursuant to the immediately
preceding sentence (plus any Liabilities of 338(h)(10) Acquired Companies assumed by Purchaser)
(for each 338(h)(10) Company, the “338(h)(10) Amount”) among the assets of such 338(h)(10)
Acquired Company in accordance with Section 7.05(d).



               (d) Within 45 days after the determination of the Final Closing Tangible Net Assets pursuant
to Sections 1.04(b) or 1.04(c), as the case may be, Purchaser shall deliver to Seller a statement
(the “Asset Allocation Statement”) allocating each 338(h)(10) Amount among the assets of
the relevant 338(h)(10) Acquired Company (and among the assets of any Acquired Company that is a
disregarded entity for U.S. federal income tax purposes); provided that such allocations be
consistent with U.S. federal income tax law and, to the extent consistent therewith, also be
consistent with the Final Statement. If no changes are proposed in writing to Purchaser within
thirty (30) days after delivery of the Asset Allocation Statement, Seller shall be deemed to have
agreed to the Asset Allocation Statement. If within thirty (30) days after delivery of the Asset
Allocation Statement, Seller notifies Purchaser in writing that Seller objects to an allocation set
forth in the Asset Allocation Statement, Purchaser and Seller shall use commercially reasonable
efforts to resolve such dispute within thirty (30) days; provided, however, that if
Purchaser and Seller are unable to resolve their dispute within such thirty day period, Purchaser
and Seller shall jointly retain the Accounting Firm to resolve the disputed items. Upon resolution
of the disputed items, the allocations reflected on the Asset Allocation Statement shall be
adjusted to reflect such resolution. The costs, fees and expenses of the Accounting Firm in
resolving any dispute pursuant to this Section 7.05(d) shall be borne equally by Purchaser and
Seller.



               (e) If an adjustment is made to the Purchase Price pursuant to Section 1.04 or
Section 1.05, Seller and Purchaser agree, for all Tax purposes, to allocate the adjustment
among the Company and any Subsidiaries and/or the assets of the 338(h)(10) Acquired Companies based
on the item or items to which such adjustment is principally attributable. Neither Seller nor
Purchaser (nor any of their respective Affiliates) shall file any Tax Return, or take a position
with a Taxing Authority, that is inconsistent with this Section 7.05 or that treats the
transactions under this Agreement in a manner inconsistent with the terms of this Agreement.



VIII. EMPLOYEES AND EMPLOYEE BENEFITS




          8.01. Employee Benefits and Compensation. (a) Except as otherwise provided in this
Section 8.01, the Company and the Subsidiaries will be responsible following the Closing
for all employee benefit (other than with respect to Seller Employee Plans) and employment-related
liabilities (whether incurred before, on or after the Closing Date) with respect to the Employees,
Persons who are former employees of the Company or any Subsidiary (“Former Employees”) and
their spouses or dependents, including liability for continuation coverage under group health plans
pursuant to Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.




56









 








               (b) Until the first anniversary of the Closing Date, Purchaser will, or will cause the Company
and the Subsidiaries to, provide Employees with a level of aggregate employee benefits and
compensation that is substantially comparable in the aggregate to the aggregate employee benefits
and compensation (other than equity-based compensation) provided to the Employees as of immediately
prior to the Closing taking into account all Employee Plans and other programs (other than
equity-based compensation) sponsored or maintained by Seller and its Affiliates (the term
“Affiliates” as used herein to include the Company and the Subsidiaries prior to the
Closing). Purchaser will, or will cause the Company and the Subsidiaries to, assume and honor in
accordance with their terms the Company Employee Plans and the Seller Employee Plans set forth on
Section 8.01(b) of the Seller Disclosure Schedule.



               (c) Purchaser will, or will cause the Company and the Subsidiaries to, cause all plans and
programs of Purchaser, the Company and the Subsidiaries that provide benefits to Employees to
recognize all service of the Employees with Seller or any of its predecessors and Affiliates to the
same extent and for the same purposes thereunder as such service was counted under similar benefit
plans of the Seller or any of its predecessors and Affiliates for all purposes (except that, with
respect to benefit accrual, such service will not be counted to the extent that it would result in
a duplication of benefits and will not be required to be counted for purposes of benefit accrual
under any defined benefit pension plan). Any medical, dental or health plan of Purchaser, the
Company or any Subsidiary that is adopted or continued after the Closing to provide group health
benefits to Employees (a “Purchaser Group Health Plan”) will not include with respect to
any Employee any restrictions or limitations with respect to pre-existing condition exclusions or
any actively-at-work requirements (except to the extent such restrictions or limitations were
applicable as of the Closing Date under the Company’s or any Subsidiary’s current group health
plans in effect as of the Closing Date or any similar plans of the Seller or any of its
predecessors or Affiliates (an “Existing Group Health Plan”)), and any eligible expenses
incurred by any Employee and his or her covered dependents during the portion of the plan year of
such Existing Group Health Plan ending on the date such Employee’s participation in such Purchaser
Group Health Plan begins will be taken into account under the Purchaser Group Health Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements
applicable to such Employee and his or her covered dependents for the applicable plan year as if
such amounts had been paid in accordance with such Purchaser Group Health Plan.



               (d) Active participation of all Employees, Former Employees and their respective spouses and
dependents under the Seller Employee Plans will terminate effective immediately prior to the
Closing Date and, except as set forth in Section 8.01(b), Seller shall retain all
liabilities and obligations related to the Seller Employee Plans (whether incurred prior to, on or
after the Closing Date). Following the Closing Date, the Seller Employee Plans will be liable for
benefits accrued (in the case of pension plans within the meaning of Section 3(1) of ERISA) and
claims incurred (in the case of welfare plans within the meaning of Section 3(2) of ERISA) under
the Seller Employee Plans prior to the Closing Date with respect to Employees, Former Employees and
their respective spouses and dependents, and the Companies and the



57









 







Subsidiaries will retain sponsorship of and any and all Liabilities under the Company Employee
Plans following the Closing Date. A claim will be deemed “incurred” on the date that the event
that gives rise to the claim occurs (for purposes of life insurance, sickness, accident and
disability programs) or on the date that treatment or services are provided (for purposes of health
care programs).



               (e) Following the Closing, Seller will cause its 401(k) Retirement Plan (the “Seller
Retirement Plan”) to make distributions to Employees in accordance with the terms of the Seller
Retirement Plan. Purchaser will cause a defined contribution plan or plans sponsored by Purchaser
to accept direct rollovers (described in Section 401(c) of the Code) of lump sum distributions
which Employees receive from the Seller Retirement Plan.



               (f) Effective as of the Closing Date, Purchaser will establish, or will cause the Company to
establish, a medical flexible spending account plan (“Purchaser’s Flexible Spending Account
Plan”) for the benefit of Employees which will recognize the elections that Employees had in
effect for purposes of the plan year in which the Closing Date occurs under the medical flexible
spending account plan of Seller (“Seller’s Flexible Spending Account Plan”). As soon as
practicable after the Closing Date, Purchaser will cause Purchaser’s Flexible Spending Account Plan
to assume the account balances associated with the Employees’ flexible spending accounts under
Seller’s Flexible Spending Account Plan. After the Closing Date, Purchaser ‘s Flexible Spending
Account Plan will be responsible for reimbursement of all previously unreimbursed reimbursable
medical claims incurred by Employees in the Seller’s plan year in which the Closing Date occurs.



          8.02. Employee Matters. (a) It is expressly agreed and understood that neither Purchaser nor
Seller has any right, power or authority to control, direct or regulate the labor relations and
human resources policies and procedures of the other, that neither is deemed to constitute the
agent or representative of the other, and that neither is liable in any manner whatsoever for the
acts or omissions of the other, its agents, representatives or employees.




               (b) At all times prior to the Closing, Seller will have sole and exclusive responsibility for
the operation and management of the Company and the Subsidiaries, for the employment and control of
the Employees, for compliance with all Laws governing the employment relationship, and for
compliance with the terms of any employment Contract or Employee Plan covering the Employees or any
of Seller’s Former Employees. At all times subsequent to the Closing, Purchaser will have sole and
exclusive responsibility for the operation and management of the Company and the Subsidiaries, for
the employment and control of Employees, for compliance with all Laws governing the employment
relationship, and for compliance with the terms of any employment Contract or Company Employee Plan
covering Employees.



          8.03. No Third Party Beneficiaries. No provision of this Article VIII creates any
third-party beneficiary or other rights in any Employee or Former Employee (including any
beneficiary or dependent thereof) of Seller, the Company, any

58









 








Subsidiary, the Purchaser or any other Person other than the parties hereto and their
respective successors and assigns, or constitute or create an employment agreement or an amendment
to or adoption of any employee benefit plan of or by Seller, the Company, any Subsidiary or
Purchaser.




IX. CONDITIONS TO CLOSING




          9.01. Conditions to Each Party’s Obligations. The obligations of each party hereto to
consummate the transactions contemplated hereby are subject to the satisfaction of the following
conditions:




               (a) the waiting period under the HSR Act relating to the Purchase shall have been terminated
or expired; and



               (b) no court or other Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law (and if an injunction, whether temporary,
preliminary or permanent) that is in effect and prevents, restrains, enjoins or otherwise prohibits
the consummation of any of the transactions contemplated by this Agreement or makes such
consummation illegal (collectively, an “Order”).



          9.02. Conditions to Obligation of Purchaser. The obligation of Purchaser to consummate the
transactions contemplated hereby are subject to the satisfaction of the following further
conditions:




               (a) Seller shall have performed in all material respects all of its obligations hereunder
required to be performed by it on or prior to the Closing Date, provided, however, for the
avoidance of doubt, neither the Purchaser’s receipt of the financing contemplated by the Financing
Commitments, nor the receipt by Purchaser of the proceeds of any other financing, is a condition to
the Purchaser’s obligation to consummate the transactions contemplated hereby,



               (b) the representations and warranties of Seller contained in this Agreement and in any
certificate or other writing delivered by Purchaser pursuant hereto shall be true and correct
(without regard to any qualifications therein to materiality or Material Adverse Effect, other than
the reference to Material Adverse Effect in the first sentence of Section 2.08) as of the
date hereof and at and as of the Closing, as if made at and as of such time (or, if made as of a
specific date, at and as of such specified date), except for such inaccuracies that would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
provided, however, that the representations and warranties set forth in
Sections 2.01, 2.02, 2.05 and 2.06 shall be true and correct in all
respects.



               (c) since the date of this Agreement, there shall not have occurred any change, effect or
development that has had, or could reasonably be expected to have, a Material Adverse Effect;



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               (d) (i) except as otherwise provided in Section 9.02(d)(ii) of the Seller Disclosure
Schedule, from the date hereof through the Closing, (A) no less than $8,000,000,000 (of which at
least $2,000,000,000 shall be in the form of unused capacity as of the Closing Date) of the Current
Warehouse Facilities (or replacement Warehouse Facilities incurred in accordance with Section
4.01(g)) shall be in full force and effect and (B) there shall not be any default (or any event
that would have constituted a default with notice) under or with respect to any such Warehouse
Facilities; (ii) there shall not have occurred a Servicer Downgrade; and (iii) as of the Closing,
there shall be at least $2,000,000,000 of BIT Mortgage Loans that will have been funded within 60
days of the Closing Date excluding any BIT Mortgage Loans sourced out of the Business’ relationship
with HRBMC or funded through the Business’ correspondent channel (the most recently originated
$2,000,000,000 of such BIT Mortgage Loans, as measured by unpaid principal balance as of the
Closing Date, being referred to as the “BIT Requirement Loans”);



               (e) all Intercompany Indebtedness shall have been extinguished in accordance with Section
4.05;



               (f) Purchaser shall have received a certificate signed by an officer of Parent certifying that
the conditions set forth in Sections 9.02(a) through (e) shall have been satisfied;



               (g) Purchaser will have received at least five Business Days prior to Closing the 2007 Audited
Financial Statements, including an auditor’s opinion prepared by KPMG that contains no exceptions,
qualifications or disclaimers, except for (i) those exceptions, qualifiers or disclaimers that were
contained in the auditor’s opinion of KPMG to the 2006 Audited Financial Statements, and (ii) the
explanatory paragraph described in Section 9.02(g)(ii) of the Purchaser Disclosure
Schedule; and



               (h) (i) all of the approvals, consents, authorizations, orders, permits and filings listed in
Section 9.02(h)(i) of the Purchaser Disclosure Schedule shall have been obtained (without
the imposition of any material limitations, restrictions or conditions) or made and be in full
force and effect, (ii) all other approvals, consents, authorizations, orders, permits and filings
required to be obtained from or made with a Governmental Authority to consummate the transactions
contemplated hereby or otherwise operate the Company or any of its Subsidiaries immediately after
the Effective Time as presently conducted shall have been obtained (without the imposition of any
material limitations, restrictions or conditions) or made and be in full force and effect;
provided, that, this clause (ii) shall be deemed to be satisfied to the extent (x)
all approvals, consents, authorizations, orders, permits and filings required to be obtained from
or made with 50% of the U.S. states and territories not listed on Section 9.02(h)(i) of the
Purchaser Disclosure Schedule (the “Other Regulatory Approvals”) have been obtained
(without the imposition of any material limitations, restrictions or conditions) or made and are in
full force and effect and (y) the failure to obtain or make all other approvals, consents,
authorizations, orders, permits and filings required to be obtained from Governmental Authorities
would not reasonably be expected to provide a reasonable basis to conclude that Purchaser or any of
its Affiliates (including the



60









 







Company and its Subsidiaries) would be subject to risk of criminal sanctions; and (iii) all
other approvals or consents (excluding those consents set forth on Section 9.02(h)(iii) of
the Purchaser Disclosure Schedule) required to be obtained from a Person other than a Governmental
Authority to consummate the transactions contemplated hereby or otherwise operate the Company or
any of its Subsidiaries immediately after the Effective Time as presently conducted shall have been
obtained (without the imposition of any material limitations, restrictions or conditions) or made
and be in full force and effect, other than those, with respect to this clause (iii), the absence
of which, individually or in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect.



          9.03. Conditions to Obligation of Seller. The obligation of Seller to consummate the
transactions contemplated hereby is subject to the satisfaction of the following further
conditions:




               (a) Purchaser shall have performed in all material respects all of its obligations hereunder
required to be performed by it at or prior to the Closing Date;



               (b) the representations and warranties of Purchaser contained in this Agreement and in any
certificate or other writing delivered by Purchaser pursuant hereto will be true in all material
respects as of the date hereof and at and as of the Closing, as if made at and as of such time (or
if made as of a specific date, at and as of such date); provided, however, that the
representations and warranties set forth in Sections 3.01 and 3.02 shall be true
and correct in all respects; and



               (c) Seller shall have received a certificate signed by an officer of Purchaser certifying that
the conditions set forth in Sections 9.03(a) and (b) shall have been satisfied;



          9.04. Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure
of any condition set forth in Sections 9.01, 9.02 or 9.03, as the case
may be, to be satisfied if such failure was caused by such party’s failure to comply with its
obligations to consummate the transactions contemplated by this Agreement as required by the
provisions of this Agreement, including Section 6.01.




X. TERMINATION




          10.01. Grounds for Termination. This Agreement may be terminated at any time prior to the
Closing:




               (a) by mutual written agreement of Seller and Purchaser;



               (b) by either Seller or Purchaser if the Closing has not been consummated on or before
December 31, 2007 (the “Termination Date”); provided, however, that the
right to terminate this Agreement pursuant to this Section 10.01(b) will not be available
to the party seeking to terminate if any action of such party or the failure of such party to
perform any of its obligations under this Agreement required to be performed at or prior to the
Closing has been the proximate cause of the failure of



61









 







the Closing to occur on or before the Termination Date and such action or failure to perform
constitutes a breach of this Agreement;



               (c) by Seller in the event that Purchaser has materially breached any applicable
representation, warranty, or covenant contained in this Agreement such that the condition set forth
in Section 9.03(a) or (b) would not be satisfied, and which has not been cured, if
capable of being cured, prior to the earlier of (i) thirty (30) days after the notice of breach and
(ii) the Termination Date;



               (d) by Purchaser in the event that (1) Seller has materially breached any applicable
representation, warranty, or covenant contained in this Agreement such that the condition set forth
in Section 9.02(a) or (b) would not be satisfied, and which has not been cured, if
capable of being cured, prior to the earlier of (i) thirty (30) days after the notice of breach and
(ii) the Termination Date; or (2) a change, event or development (or series of changes, events, or
developments) has occurred that, individually or in the aggregate, has had or would be reasonably
likely to have a Material Adverse Effect.


The party desiring to terminate this Agreement pursuant to Section  10.01(b), will give
written notice of such termination to the other party.




          10.02. Effect of Termination. If this Agreement is terminated as permitted by Section
 10.01, such termination will be without liability of any party hereto (or any equityholder,
director, officer, employee, agent, consultant or representative of any such party) to any other
party to this Agreement; provided, however, that nothing herein will relieve any
party from liability for any willful and material breach hereof. The provisions of Sections
 6.04 (Public Announcements),  10.02 (Effect of Termination) and Article
 XII (Miscellaneous) will survive any termination hereof pursuant to  10.01.




XI. SURVIVAL; INDEMNIFICATION




          11.01. Survival. (a) The representations and warranties of the Purchaser and Seller
contained in this Agreement and all claims with respect thereto shall expire upon the second
anniversary of the Closing Date; provided, however, that (i) the representations
and warranties contained in Section 2.06 (Capitalization), Section 2.11 (Compliance
with Laws; Permits) and Section 2.23(g) (Securitizations and Warehouse Facilities) shall
expire upon the fifth anniversary of the Closing Date, (ii) the representations and warranties
contained in Section 2.17 (Environmental Matters) and Section 2.22 (Origination and
Servicing) shall expire upon the third anniversary, (iii) the representations and warranties
contained in Section 2.09 (Taxes) and Section 2.12 (Employee Benefits) shall expire
90 days after the applicable statute of limitations, including any extensions or waivers thereof
and (iv) the representations and warranties contained in Sections  2.01 (Organization),
 2.02 (Authority; Enforceability),  2.05 (Ownership of Shares),  3.01
(Organization)  and 3.02 (Authority; Enforceability) will survive the Closing indefinitely.




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               (b) The covenants and agreements of the parties hereto contained in this Agreement will
survive in accordance with their respective terms.



               (c) No investigation made (including any environmental investigation or assessment or any due
diligence review or investigation) or knowledge acquired or capable of being acquired by or on
behalf of a party hereto at any time before or after the date of this Agreement shall affect any
representation, warranty, covenant or undertaking of the other party contained in this Agreement or
the indemnification obligations of any party under this Agreement.



          11.02. Indemnification of Purchaser by Seller. (a) Except with respect to the matters
specifically provided for in Section 7.04, from and after the Closing Date, Seller will
indemnify and save and hold harmless Purchaser and its Affiliates, and the Company and its
Subsidiaries, and each of their respective officers, directors, shareholders, partners, members and
employees and their heirs, successors and permitted assigns (collectively, the “Purchaser
Indemnified Parties”) from and against any Covered Losses imposed on, incurred, asserted
against or suffered by any such Purchaser Indemnified Party, whether in respect of a Third-Party
Claim or otherwise, directly or indirectly, resulting from or arising out of: (i) any
misrepresentation of or inaccuracy in any representation or warranty of Seller in this Agreement
(other than in respect of (1) Actions under Section 2.10 (which is addressed in clause (iv)
below), (2) Section 2.22(a) or (d) or Section 2.23(a) (which are addressed
in clause (iv) below) and Section 2.23(f) (insofar as it solely relates to events causing
an increase in the reserve requirements relating to loan repurchases) and Section 2.24
(which are addressed in clause (v) below)) or by Seller or in any document or certificate delivered
pursuant hereto (it being understood that for purposes of this Section 11.02, any
qualifications relating to materiality or “Material Adverse Effect” contained in any such
representation or warranty (other than in the first sentence of Section 2.08) shall be
disregarded), (ii) any nonfulfillment or breach of any covenant or agreement made by Seller in this
Agreement or in any document or certificate delivered pursuant hereto, and (iii) the Restructuring
Activities or any Liabilities relating to HRBMC or the operation of HRBMC prior to the Closing Date
(except to the extent any such Losses are of a nature addressed pursuant to clause (v) below, in
which case the Purchaser Indemnified Parties shall be indemnified pursuant to such clause, unless
such Losses are also of a nature addressed pursuant to clause (iv)(A) below, in which case the
Purchaser Indemnified Parties shall be indemnified pursuant to clause (iv) below and not clause
(v)); (iv) (A) any misrepresentation of or inaccuracy in Section 2.22(a) or (d) or
Section 2.23(a) in this Agreement (it being understood that for purposes of this clause
(iv), any qualifications relating to materiality or “Material Adverse Effect” contained in any
such representation or warranty shall be disregarded) in so far as it relates to origination or
servicing of Loans or Receivables or any Action alleging a violation of Law or act of fraud or
predatory lending or failure to disclose or meet borrower suitability standards by the Company or
any of its Subsidiaries or any of its employees, representatives, agents or any other Person or
entity acting on behalf of any such Person or the Business prior to the Closing (including, without
limitation, any failure to obtain or comply with any Permit) in connection with the origination or
servicing of Loans or Receivables and (B) any of the Actions listed (or required to be listed) in
Section 2.10 of the Seller Disclosure
 

63









 







Schedule or other Actions against the Company or any of its Subsidiaries or the Business
arising after the date hereof and prior to the Closing, in each case clause (A) and (B), to the
extent that the sum of such Covered Losses exceeds (such excess, “Compliance/Actions Covered
Losses”) the amount of reserves for such non-compliance or Actions incorporated in the final
determination of Final Closing Tangible Net Assets pursuant to Section 1.04;
provided, that, Seller shall only be obligated to indemnify and hold harmless the Purchaser
Indemnified Parties from and against 75% of the first $10,000,000 of Compliance/Actions Covered
Losses (it being understood and agreed that Seller shall be obligated to indemnify and hold
harmless the Purchaser Indemnified Parties from and against 100% of all Compliance/Actions Covered
Losses in excess of $10,000,000), (v) any Company Guarantee in respect of any sales of Loans or
Receivables by the Company or any of its Subsidiaries prior to the Closing or any misrepresentation
of or inaccuracy in Section 2.23(f) (insofar as it solely relates to events causing an
increase in the reserve requirements relating to loan repurchases) and Section 2.24, but
only to the extent that the Covered Losses of the Company and its Subsidiaries in respect of such
Company Guarantees and/or arising from any such misrepresentation or inaccuracy exceed in the
aggregate (such excess, the “Repurchase Obligation Covered Losses”) the sum of (A) the
amount reflected as “Repurchase Liabilities” in the calculation of Final Closing Tangible Net
Assets and (B) $5,000,000; provided, that, Seller shall only be obligated to indemnify and
hold harmless the Purchaser Indemnified Parties from and against 75% of the first $50,000,000 of
Repurchase Obligation Covered Losses (it being understood and agreed that Seller shall be obligated
to indemnify and hold harmless the Purchaser Indemnified Parties from and against 100% of all
Repurchased Obligation Covered Losses in excess of such dollar amount), and (vi) any failure to
fund any Loans prior to Closing in violation of contractual obligations resulting from any change
in the Company’s underwriting guidelines since January 31, 2007.




               (b) The Purchaser Indemnified Parties will not be entitled to assert any indemnification
pursuant to Section  11.02(a)(i) after the expiration of the applicable survival period
with respect to misrepresentations of or inaccuracies in the representations and warranties of
Seller referenced in Section  11.01; provided, however, that if, on or
prior to such expiration of the applicable survival period, a notice of claim will have been given
to Seller in accordance with Section  11.04 (Procedures Relating to Indemnification) for
such indemnification, the Purchaser Indemnified Parties will continue to have the right to be
indemnified with respect to such indemnification claim until such claim for indemnification has
been satisfied or otherwise resolved as provided in this Article  XI.



               (c) Any indemnification of a Purchaser Indemnified Party pursuant to this Section
 11.02 will be effected by wire transfer or transfers of immediately available funds from
Seller to an account or accounts designated in writing by the applicable Purchaser Indemnified
Party to Seller within 15 days following receipt from a Purchaser Indemnified Party of a written
demand for indemnification in respect of Covered Losses, together with reasonable back-up
documentation, unless Seller in good faith disputes in whole or in part the demand for
reimbursement in which event the recipient of the indemnification claim shall so notify the
Purchaser Indemnified Party



64









 







and, following any Final Determination of such disputed claim, shall make payment within five
Business Days thereof. A “Final Determination” is deemed to have occurred for purposes of
this Article XI when (i) the parties to the dispute have reached an agreement in writing,
(ii) a court of competent jurisdiction shall have entered into a final non-appealable order or
judgment or (iii) an arbitration or similar panel shall have rendered a final, non-appealable
determination with respect to disputes the Parties have agreed to submit thereto; provided,
that to the extent an indemnified party is required to pay any Taxes, fees, fines, penalties or
payments to any Governmental Authority in respect of a purported indemnified matter and a court of
competent jurisdiction shall have entered into an order or judgment that, among other things,
provides that the indemnified party is liable hereunder in respect of the claim, the indemnifying
party shall be required to fund any such Taxes, fees, fines, penalties or payments due to the
Governmental Authority at the time such decision or order is rendered; provided,
however, that to the extent failure to pay any such Taxes, fees, fines, penalties or
payments at the time demanded by such Governmental Authority could reasonably be expected to
adversely effect such indemnified party in any material respect, then the indemnifying party shall
be required to fund such Taxes, fees, fines, penalties or payments due at the time demanded by such
Governmental Authority; provided, further, that to the extent there is a final
non-appealable order or judgment holding that all or a portion of the Taxes, fees, fines, penalties
or payments paid to such Governmental Authority were not required to be paid, the indemnified party
shall reasonably cooperate with the indemnifying party in effort to obtain the remittance of such
amount of Taxes, fees, fines, penalties or payments that were not required to be paid, and the
indemnified party shall remit to the indemnifying party such Taxes, fees, fines, penalties or
payments promptly upon reimbursement by the applicable Governmental Authority.



          11.03. Indemnification of Seller by Purchaser. (a) Except with respect to the matters
specifically provided for in Section 7.04, from and after the Closing Date, Purchaser and
its Affiliates will indemnify and save and hold harmless Seller and its Affiliates and their
respective officers, directors, shareholders, partners, members, and employees and their heirs,
successors and permitted assigns (collectively, the “Seller Indemnified Parties”) from and
against any Covered Losses suffered by any such Seller Indemnified Parties resulting from or
arising out of: (i) any misrepresentation of or inaccuracy in any representation or warranty of
Purchaser in this Agreement or in any document or certificate delivered pursuant hereto or (ii) any
nonfulfillment or breach of any covenant or agreement made by Purchaser in this Agreement or in any
document or certificate delivered pursuant hereto.




               (b) The Seller Indemnified Parties will not be entitled to assert any indemnification in
accordance with Section 11.03(a) after the expiration of the applicable survival period
with respect to misrepresentations of or inaccuracies in the representations and warranties of
Purchaser referenced in Section 11.01; provided, however, that if on or
prior to the expiration of the applicable survival period, a notice of claim will have been given
to Purchaser pursuant to Section 11.04 (Procedures Relating to Indemnification) for such
indemnification, the Seller Indemnified Parties will continue to have the right to be indemnified
with respect to such indemnification claim until such



65









 







claim for indemnification has been satisfied or otherwise resolved as provided in this
Article  XI.



               (c) Any indemnification of a Seller Indemnified Party pursuant to this Section  11.03
will be effected by wire transfer or transfers of immediately available funds from Purchaser to an
account or accounts designated by the applicable Seller Indemnified Party to Purchaser within 15
days following receipt by Purchaser from a Seller Indemnified Party of a written demand for
indemnification in respect of Covered Losses, together with reasonable back-up documentation,
unless Purchaser in good faith disputes in whole or in part the demand for reimbursement in which
event the recipient of the indemnification claim shall so notify the Seller Indemnified Party and,
following any Final Determination of such disputed claim, shall make payment within five Business
Days thereof.



          11.04. Procedures Relating to Indemnification. (a) In order for an indemnified party to be
entitled to any indemnification provided for under this Article  XI in respect of, arising
out of or involving a claim or demand made by any Person (other than a party hereto or Affiliate
thereof) against the indemnified party (a “Third-Party Claim”), such indemnified party must
notify the indemnifying party in writing, and in reasonable detail, of the Third-Party Claim as
promptly as reasonably practicable after receipt by such indemnified party of written notice of the
Third-Party Claim (the “Claim Notice”); provided, however, that failure to
give such notification will not affect the indemnification provided hereunder except to the extent,
and solely to the extent, the indemnifying party’s defense or other rights available to it will
have been actually prejudiced as a result of such failure. The indemnified party will deliver to
the indemnifying party, within ten Business Days after the indemnified party’s receipt thereof,
copies of all notices and documents (including court papers) received by the indemnified party
relating to the Third-Party Claim. For the avoidance of doubt, all indemnifiable Taxes shall not
be governed by this Section 11.04 and shall, instead, be governed by Section
7.04(c).




               (b) The indemnifying party will have twenty (20) days (or such lesser number of days as set
forth in the Claim Notice as may be required by court proceeding in the event of a litigation
matter) after receipt of the Claim Notice to notify the indemnified party that it desires to assume
and thereafter conduct the defense of the Third-Party Claim with counsel of its choice reasonably
satisfactory to the indemnified party, unless the indemnified party has notified the indemnifying
party that it has determined in good faith that (i) there is a reasonable probability that such
claim may adversely effect it or its Affiliates in any material respect (other than the payment of
money damages in an amount that does not exceed the Cap), (ii) a conflict of interest exists in
respect of such claim, (iii) there are specific defenses available to the indemnified party that
are different from or additional to those available to the indemnifying party and that could be
adverse to the indemnifying party; and (iv) the claim involves money damages in an amount in excess
of the Cap. If the indemnifying party assumes the defense of the Third-Party Claim, it shall have
conclusively established its obligation to indemnify the indemnified party with respect to such
Third-Party Claim.



66









 





               (c) If the indemnifying party assumes such defense, the indemnified party will have the right
to participate in the defense thereof and to employ counsel, at its own expense except that such
counsel shall be at the expense of the indemnifying party in the instances specified in clauses
(i), (ii), (iii) or (iv) of Section 11.04(b)) separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party will control such defense. The
indemnifying party will be liable for the fees and expenses of counsel employed by the indemnified
party for any period during which the indemnifying party has not assumed the defense thereof.



               (d) If the indemnifying party chooses to defend any Third-Party Claim, all the parties hereto
will cooperate in the defense or prosecution thereof. Such cooperation will include the retention
and (upon the indemnifying party’s request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third-Party Claim, and the use of commercially
reasonable efforts to make employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. All reasonable out-of-pocket costs
incurred by an indemnified party in connection with any such cooperation shall constitute
“Covered Losses” for purposes of this Article XI. Whether or not the indemnifying
party shall have assumed the defense of a Third-Party Claim, the indemnified party will not admit
any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without
the indemnifying party’s prior written consent (which consent will not be unreasonably withheld,
conditioned or delayed). The indemnifying party shall not admit any liability or wrongdoing with
respect to, consent to the entry of any judgment or enter into any settlement or compromise with
respect to the Third-Party Claim without the prior written consent of the indemnified party (not to
be unreasonably withheld, conditioned or delayed) unless the judgment or settlement involves only
the payment of money damages all of which will be borne by the indemnifying party in accordance
with its indemnification obligations hereunder and does not (i) impose an injunction or other
equitable relief upon the indemnified party, or (ii) involve any admission of liability or
wrongdoing by the indemnified party or its Affiliates or (iii) otherwise involve any other remedy
materially adverse to the indemnified party.



               (e) If any indemnified party desires to assert any claim for indemnification provided for
under this Article XI other than a claim in respect of, arising out of or involving a Third-Party
Claim, such indemnified party will notify the indemnifying party in writing, and in reasonable
detail (taking into account the information actually known by such indemnified party as of the
notification date), of such claim promptly after becoming aware of the existence of such claim;
provided, however, that the failure of an indemnified party to notify the
indemnifying party will relieve the indemnifying party from its obligation to indemnify only to the
extent that the indemnifying party is actually and materially prejudiced as a result of such
failure.



               (f) If the indemnifying party (i) elects not to defend the indemnified party against a
Third-Party Claim, whether by not giving the indemnified party timely notice of its desire to so
defend or otherwise, (ii) is not entitled to defend the



67









 







Third-Party Claim as a result of the indemnified party’s election to defend the Third-Party
Claim as provided in Section 11.04(b), or (iii) after assuming the defense of a Third-Party
Claim, fails to take reasonable steps necessary to defend diligently such Third-Party Claim within
ten days after receiving written notice from the indemnified party to the effect that the
indemnifying party has so failed, the indemnified party shall have the right but not the obligation
to assume its own defense; it being understood that the indemnified party’s right to
indemnification for a Third-Party Claim shall not be adversely affected by assuming the defense of
such Third-Party Claim. Unless and until an indemnifying party assumes the defense of a
Third-Party Claim, the indemnified party may defend against the Third-Party Claim in any manner it
may reasonably deem appropriate at the expense of the Indemnifying Party, subject to Section
11.04(d).



          11.05. Limitations on Indemnification. (a) Seller will have no liability for indemnification
pursuant to clause (i) of Section  11.02(a) or, but solely in respect of Non-Income Taxes,
Section 7.04(a) with respect to:




                    (i) Covered Losses for which indemnification is provided thereunder unless such Covered Losses
exceed in the aggregate an amount equal to 1.0% of the Final Closing Tangible Net Assets (the
“Deductible”), in which case Seller will be liable for all such Covered Losses in excess of
such amount (subject to the other limitations set forth in this Agreement, including those set
forth in clause (ii) of this Section 11.05(a)); provided, however, that the
Deductible shall not apply to the representations and warranties contained in Sections
 2.01 (Organization),  2.02 (Authority; Enforceability), or  2.05 (Ownership of
Shares), or 2.06 (Capitalization), or



                    (ii) Covered Losses for which indemnification is provided thereunder to the extent that such
Covered Losses exceed in the aggregate an amount equal to $250,000,000 (the “Cap”), in
which case Seller will not be liable for the portion of such Covered Losses in excess of such
amount; provided, however, that the Cap shall be the Purchase Price with respect to
the representations and warranties contained in Sections  2.01 (Organization),
 2.02 (Authority; Enforceability),  2.05 (Ownership of Shares) or 2.06
(Capitalization).



               (b) Purchaser will have no liability for indemnification pursuant to clause (i) of Section
 11.03(a) with respect to:



                    (i) Covered Losses for which indemnification is provided thereunder unless such Covered Losses
exceed in the aggregate the Deductible, in which case Purchaser will be liable for all such Covered
Losses in excess of such amount (subject to the other limitations set forth in this Agreement,
including those set forth in clause (ii) of this Section 11.05(b)); provided,
however, that the Deductible shall not apply to the representations and warranties
contained in Sections 3.01 (Organization) or  3.02 (Authority; Enforceability); or



                    (ii) Covered Losses for which indemnification is provided thereunder to the extent that such
Covered Losses exceed in the aggregate an amount equal to the Cap, in which case Purchaser will not
be liable for the portion of such



68









 







Covered Losses in excess of such amount; provided, however, that the Cap shall
be the Purchase Price with respect to the representations and warranties contained in Sections
3.01 (Organization) or  3.02 (Authority; Enforceability).



               (c) No indemnified party will be entitled to recover from an indemnifying party more than once
in respect of the same Covered Loss.



               (d) For the avoidance of doubt, losses relating to Income Taxes and Transfer Taxes indemnified
under Section 7.04 shall not be subject to the limitations of Section 11.05.



          11.06. Exclusive Remedy. Except as otherwise provided in Article VII, this
Article  XI will be the exclusive remedy of the parties hereto following the Closing for
any losses arising out of any misrepresentation or breach of the representations, warranties,
covenants or agreements of the parties contained in this Agreement or any document or certificate
delivered pursuant hereto, except for (a) any fraudulent breach, (b) a party’s right to specific
performance under this Agreement or (c) as otherwise provided in this Agreement. In furtherance of
the foregoing, each of the parties hereto hereby waives, to the fullest extent permitted under
applicable Law, any and all rights, claims and causes of action it may have against the other
parties hereto, arising under or based upon any Law (including CERCLA and other Environmental
Laws), other than the right to seek indemnity pursuant to this Article  XI.




          11.07. Adjustments of Purchase Price. Any indemnification payments made pursuant to
Articles VII and XI shall be deemed to be adjustments of Purchase Price, to the
extent permitted by the Code.




XII. MISCELLANEOUS




          12.01. Definitions. The following terms, as used herein, have the following meanings:




     “2006 Audited Financial Statements” has the meaning set forth in Section
2.07(a).



     “2007 Audited Financial Statements” has the meaning set forth in Section
4.02(b)(iii).



     “2007 Financial Statements” means the 2007 Audited Financial Statements and the 2007
Unaudited Financial Statements.



     “2007 Unaudited Financial Statements” has the meaning set forth in Section
4.02(b)(iv).



     “338(h)(10) Acquired Company” has the meaning set forth in Section 7.05(b).



     “338(h)(10) Amount” has the meaning set forth in Section 7.05(c).



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     “338(h)(10) Election” has the meaning set forth in Section 7.05(b).



     “Accounting Firm” has the meaning set forth in Section 1.04(c).



     “Accounting Principles” has the meaning set forth in Section 1.04(a)(viii).



     “Acquiring Party” means the Party that acquires the portion of the Business that is
the subject of the Sale Transaction.



     “Acquisition Financing” has the meaning set forth in Section 3.05.



     “Acquisition Transaction” means any acquisition or purchase by the Company or any of
its Subsidiaries of any business or Person or any material assets or securities thereof (whether by
merger, stock purchase, asset purchase, consolidation or similar transaction), other than purchases
of mortgage loans in the ordinary course of business



     “Action” means any civil, criminal or administrative claim, demand, action, suit,
proceeding (public or private), investigation, hearing litigation, prosecution, arbitration,
mediation, SEC “Wells” process or audit by or before any Governmental Authority.



     “Adjustment Fraction” means, with respect to any Specified Line Item, a fraction equal
to (x) the Applicable Determination of such Specified Line Item, over (y) the estimated
book value of such Specified Line Item as of the Applicable Estimation Date.



     “Affiliate” means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such other Person as of the date on which,
or at any time during the period for which, the determination of affiliation is being made. For
purposes of this definition, the term “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities, by Contract or
otherwise.



     “Affiliate Transaction” has the meaning set forth in Section 2.18(a).



     “Agreement” has the meaning set forth in the Preamble.



     “Applicable Determination” means the average of the Initial Pre-Closing Determinations
in the case of the Initial Estimate Statement and the average of the Pre-Closing Determinations in
the case of the Estimate Statement; provided, that in the case of Beneficial Interests in
Trust, the term has the meaning set forth in the Closing Balance Sheet Methodologies Schedule under
the heading “Beneficial Interest in Trust.”



     “Applicable Estimation Date” means the Initial Estimate Date in the case of the
Initial Estimate Statement and the Estimate Date in the case of the Estimate Statement.



     “Applicable Requirements” means, with respect to the Company and its Subsidiaries:
(A) all obligations under any Material Contracts pertaining to the



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origination, sale and/or servicing of Loans, (B) all Laws and Orders pertaining to the
origination, sale and/or servicing of Loans applicable to the Company or any of its Subsidiaries
and (C) the Company Loan Policies and all other applicable requirements, handbooks, manuals and
guidelines of the Company and its Subsidiaries.



     “April 30 Pro Forma Financial Statements” has the meaning set forth in Section
4.02(b)(iii).



     “Asset Allocation Statement” has the meaning set forth in Section 7.05(d).



     “Balance Sheet Date” has the meaning set forth in Section 2.07(a).



     “BIT Requirement Loans” has the meaning set forth in Section 9.02(d)(iii).



     “Business” means the origination, purchase, sale and servicing of residential mortgage
loans as presently conducted by the Company and its Subsidiaries (excluding any business conducted
by HRBMC).



     “Business Combination” means any Acquisition Transaction or Sale Transaction.



     “Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by Law to close.



     “Calculation Period” means the 18-month period immediately following the Closing.



     “Calculation Period End Date” means the last day of the 18th month immediately
following the Closing.



     “Cap” has the meaning set forth in Section 11.05(a)(ii).



     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. §§ 9601 et seq.



     “Claim Notice” has the meaning set forth in Section 11.04(a).



     “Closing” has the meaning set forth in Section 1.03(a).



     “Closing Balance Sheet Methodologies Schedule” has the meaning set forth in
Section 1.04 (a)(i).



     “Closing Date” has the meaning set forth in Section 1.03(a).



     “Closing Date Cash Payment” has the meaning set forth in Section 1.02.



     “Closing Tangible Net Assets” means the Tangible Net Assets of the Company and its
Subsidiaries (adjusted to exclude HRBMC and all noneconomic residuals) as of 11:59 PM (Eastern
Standard Time) on the day immediately preceding the Closing Date.



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



     “Company” has the meaning set forth in the Recitals.



     “Company Employee Plan” has the meaning set forth in Section 2.12(a)(ii).



     “Company Guarantees” means all guarantees, surety bonds, covenants, indemnities,
representations and warranties, obligations to repurchase (including obligations to repurchase
arising out of borrower fraud), letters of credit, letters of comfort, commitments and similar
credit assurances provided by the Company or any of its Subsidiaries.



     “Company Intellectual Property” means all Intellectual Property owned by the Company
or any Subsidiary.



     “Company Loan Policies” has the meaning set forth in Section 2.22(d).



     “Compliance/Actions Covered Losses” has the meaning set forth in Section
11.02(a).



     “Confidential Information” has the meaning set forth in Section 4.02(d).



     “Contract” means any agreement, contract, commitment, instrument, undertaking, lease,
note, mortgage, indenture, sales or purchase order, license or arrangement, whether written or
oral.



     “Covered Loss” means any and all losses, Liabilities, claims, fines, deficiencies,
damages, obligations, payments (including those arising out of any settlement, judgment or
compromise relating to any Action and any D&O Required Payments), reasonable costs and expenses
(including interest and penalties due and payable with respect thereto and reasonable attorneys’
and accountants’ fees and any other reasonable out-of-pocket expenses incurred in investigating,
preparing, defending, avoiding or settling any Action) (collectively, “Losses”), arising
under, out of or in connection with any matter that is the subject of indemnification pursuant to:
(a) Article XI (disregarding any of the cost-sharing principles or thresholds set forth in
Section 11.02(a)(iv) or (v) or (b) solely in respect of Non-Income Taxes,
Section 7.04(a)); provided, however, that Covered Loss excludes (i) any
loss or Liability having an aggregate value of less than $100,000, (ii) any loss or Liability that
has been reflected in the calculation of the Final Closing Tangible Net Assets, but solely to the
extent of such reserve; provided, that such loss or Liability has resulted in an adjustment
of the Purchase Price in favor of the indemnified party or its affiliates as finally determined
pursuant to Section 1.4, (iii) any punitive, exemplary, consequential or similar damages
and any diminution in value or lost profit, in each case, except to the extent awarded by a court
of competent jurisdiction in connection with a Third-Party Claim or in the case of consequential or
similar damages (other than punitive damages) or any loss of anticipated or future business or
profits, to the extent reasonably foreseeable. The amount of any Covered Loss subject to
indemnification hereunder shall be calculated net of any insurance proceeds received by the
indemnitee on



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account of such Covered Loss net of any actual costs, expenses or premiums incurred in
connection with securing or obtaining such proceeds. The indemnitee shall use commercially
reasonable efforts to (i) seek full recovery from any third parties and under all insurance
policies covering any Covered Loss and (ii) use commercially reasonable efforts to mitigate any
actual Covered Loss, in each case to the same extent as it would if such Covered Loss were not
subject to indemnification pursuant to the terms of this Agreement. In the event that insurance
proceeds are received by the indemnitee with respect to any Covered Loss for which it has received
indemnification proceeds hereunder, then a refund equal to the net amount of the recovery shall be
made promptly to the indemnitor that provided such indemnification to the indemnitee; provided,
that the indemnified party shall not be required to refund any amount in excess of the
indemnification proceeds received from the indemnifying party.



     “Current Warehouse Facilities” means the Warehouse Facilities of the Company and its
Subsidiaries listed (or required to be listed) on Section 2.16(a)(viii) of the Seller
Disclosure Schedule.



     “D&O Required Payments” means any payments required to be made to any present or
former employee, officer or director of the Company or its Subsidiaries in respect of any Losses
incurred in connection with any Action arising out of or pertaining to matters existing or
occurring at or prior to the Closing (and whether asserted or claimed prior to, at or after the
Closing) that are, in whole or in part, based on or arising out of the fact that such person is or
was a director, officer, employee of the Company or any of Subsidiary, including the transactions
contemplated by this Agreement or served as a fiduciary under, or with respect to, any Employee
Plan at any time maintained by or contributed to by the Company or any of its Subsidiaries.



     “Data Room” means that certain virtual data room relating to the Company established
by Seller and its Affiliates through WebEx WebOffice as such data room existed on the Business Day
immediately preceding the date of this Agreement.



     “Deductible” has the meaning set forth in Section 11.05(a)(i).



     “Derivative Contract” means any swap transaction, option, warrant, forward purchase or
sale transaction, futures transaction, cap transaction, floor transaction or collar transaction
relating to one or more currencies, commodities, emissions allowances, renewable energy credits,
bonds, equity securities, loans, interest rates, catastrophe events, weather-related events,
credit-related events or conditions on any indexes, or any other similar transaction (including any
option with respect to any of these transactions) or combination of any of these transactions,
including collateralized mortgage obligations or other similar instruments or any debt or equity
instruments evidencing or embedding any such types of transactions, and any related credit support,
collateral or other similar arrangements related to such transactions.



     “Disclosure Schedules” has the meaning set forth in Section 12.12.



     “Divestment Activities” has the meaning set forth in Section 4.05(c).



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     “Domain Names” means Internet electronic addresses, uniform resource locators and
alpha-numeric designations associated therewith registered with or assigned by any domain name
registrar, domain name registry or other domain name registration authority as part of an
electronic address on the Internet and all applications for any of the foregoing.



     “Earnout Amount” means the lower of (i) 50% of the Net Income during the Calculation
Period and (ii) $300,000,000.



     “Earnout Methodologies” has the meaning set forth in Section 1.05(a)(i).



     “Earnout Statement” has the meaning set forth in Section 1.05(a)(ii).



     “Earnout Termination Payment” means, with respect to a Sale Transaction, the amount
equal to (i) the Earnout Amount calculated for the period from the Closing Date to the applicable
Business Combination Closing Date plus (ii) solely to the extent such Earnout Amount is less than
$300,000,000, the Pro Rata Sale Profit; provided, that in no event shall the Earnout
Termination Payment exceed $300,000,000.



     “Employee” means any individual who, as of the Closing, is actively employed (whether
full- or part-time) by the Company or any Subsidiary or any such individual who is on short-term
disability leave, authorized leave of absence, military service or lay-off with recall rights as of
the Closing.



     “Employee Plans” has the meaning set forth in Section 2.12(a)(i).



     “Environment” means any ambient, air, surface water, drinking water, groundwater, land
surface (whether below or above water), and subsurface strata.



     “Environmental Claim” means any claim, cause of action, investigation or notice by any
Person or any Governmental Authority threatening or alleging potential liability (including
potential liability for investigatory costs, cleanup or remediation costs, governmental or third
party response costs, natural resource damages, property damage, personal injuries, or fines or
penalties) based on or resulting from (a) the presence or Release of any Hazardous Substances at
any location, whether or not owned or operated by the Company or any of the Subsidiaries, or (b)
any violation of any Environmental Law.



     “Environmental Laws” means any Law relating to: (i) protection and reclamation of the
Environment, (ii) exposure of employees or third parties to any Hazardous Substances, (iii) any
Release or threatened Release of any Hazardous Substances, including investigation, assessment,
testing, monitoring, containment, removal, remediation and cleanup of any such Release or
threatened Release, or (iv) the management of any Hazardous Substances, including the disposal,
storage, treatment, transport, or recycling of any Hazardous Materials.



     “Environmental Liabilities” means any monetary obligations, losses, liabilities
(including strict liability), damages, punitive damages, consequential damages, treble




74









 




damages, costs and expenses (including all reasonable out-of-pocket fees, disbursements
and expenses of counsel, out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any Environmental Claim filed by any Governmental
Authority or any third party which relate to any violations of Environmental Laws, Remedial
Actions, Releases or threatened Releases of Hazardous Substances from or onto any property
presently or formerly owned by the Company and the Subsidiaries.




     “Environmental Permits” has the meaning set forth in Section 2.17(a).



     “EPD” has the meaning set forth in Section 4.02(b)(ii).



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



     “Estimate Date” has the meaning set forth in Section 1.04(a)(ix).



     “Estimate Statement” has the meaning set forth in Section 1.04(a).



     “Estimated Closing Tangible Net Assets” has the meaning set forth in Section
1.04(a).



     “Estimated Tangible Net Assets Shortfall” means the amount, if any, by which the
Target Tangible Net Assets exceeds the Estimated Closing Tangible Net Assets.



     “Estimated Tangible Net Assets Surplus” means the amount, if any, by which the
Estimated Closing Tangible Net Assets exceeds the Target Tangible Net Assets.



     “Estimated Value” means, with respect to any Specified Line Item required to be set
forth on the Initial Estimate Statement or the Estimate Statement, as the case may be, the product
of (x) the estimated book value of such Specified Line Item as at the Closing Date, and (y) the
applicable Adjustment Fraction.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     “Existing Group Health Plan” has the meaning set forth in Section 8.01(c).



     “Fair Market Value” has the meaning set forth in Section 1.04 (a)(iii).



     “Final Cash Payment” has the meaning set forth in Section 1.04(d).



     “Final Closing Tangible Net Assets” has the meaning set forth in Section
1.04(b)(iii).



     “Final Determination” has the meaning set forth in Section 11.02(c).



     “Final Earnout Amount” has the meaning set forth in Section 1.05(a)(ii).



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     “Final Earnout Termination Payment” has the meaning set forth in Section
1.05(f)(ii).



     “Final Residuals” means any “Residuals” reflected on the Final Statement.



     “Final Statement” has the meaning set forth in Section 1.04(b)(iii).



     “Final Tax Determination” means (i) a closing agreement, settlement agreement or
similar agreement settling a Tax Proceeding entered into among the Seller, the Company and the IRS
between or (ii) a final non-appealable order or judgment rendered by a court of competent
jurisdiction concluding a Tax Proceeding.



     “Financial Statements” has the meaning set forth in Section 2.07(a).



     “Financing Commitments” has the meaning set forth in Section 3.05.



     “Financing Facilities” has the meaning set forth in Section 4.01(g).



     “Former Employees” has the meaning set forth in Section 8.01(a).



     “GAAP” means United States generally accepted accounting principles, consistently
applied.



     “General Enforceability Exceptions” has the meaning set forth in Section 2.02.



     “Governmental Authority” means any federal, state, local or foreign government
(including any political or other subdivision or judicial, legislative, executive or administrative
branch, agency, commission, authority or other body of any of the foregoing).



     “Greenwich Facility Guarantee” means the Guaranty, dated as of April 1, 2001, of H&R
Block, Inc. in favor of Wells Fargo Bank Minnesota, National Association under that certain
Indenture, dated as of April 1, 2001, between Option One Owner Trust 2001-1A and Wells Fargo Bank
Minnesota, National Association, and the Noteholders parties thereto.



     “Hazardous Substance” means any “hazardous substance” and any “pollutant or
contaminant“ as those terms are defined in CERCLA; any “hazardous waste” as that term is defined in
the Resource Conservation and Recovery Act, as amended (“RCRA”); and any “hazardous
material” as that term is defined in the Hazardous Materials Transportation Act (49 U.S.C. § 1801
et seq.), as amended and including, any petroleum product or byproduct, radioactive material,
asbestos, and polychlorinated biphenyls (or PCBs).



     “HRBMC” means H&R Block Mortgage Corporation, a Massachusetts corporation.



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



     “HSR Clearance” has the meaning set forth in Section 6.02(a).



     “HSR Filing” has the meaning set forth in Section 6.02(a).



     “Income Taxes” means any taxes imposed by a Taxing Authority on or measured by net
income (or in the case of Texas, gross receipts), or any franchise taxes imposed in lieu thereof,
including any interest, penalties or additions to tax attributable to such Taxes.



     “Indebtedness” means, without duplication, (i) any indebtedness for borrowed money,
whether secured or unsecured, or issued in substitution for or exchange of indebtedness for
borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture or other debt
security, or are liabilities in respect of mandatorily redeemed or purchasable capital stock or
securities convertible into capital stock; (iii) any obligations as lessee under capital leases,
(iv) obligations under conditional sale or other title retention agreement relating to property
purchased by such Person, (v) obligations under Derivative Contracts (valued at the termination
value thereof), (vi) any guaranty of any of the foregoing (including with respect to any third
party) and (vii) any fees, penalties, premiums (in the case of prepayments or otherwise) or accrued
and unpaid interest with respect to the foregoing.



     “Initial Estimate Date” has the meaning set forth in Section (1.04(a)(iii).



     “Initial Estimate Statement” has the meaning set forth in Section
1.04(a)(viii).



     “Initial Pre-Closing Determination” has the meaning set forth in Section
1.04(a)(iii).



     “Insurer” means (i) a Person who insures or guarantees all or any portion of the risk
of loss on any Loan, including any provider of PMI, standard hazard insurance, flood insurance,
earthquake insurance or title insurance with respect to any Loan or related mortgaged real
property.



     “Intellectual Property” means any and all patents and patent applications; trademarks,
service marks, trade names, brand names, trade dress, slogans, and logos, Domain Names and other
indicia of origin, and the goodwill associated with any of the foregoing; inventions (whether
patentable or not), industrial designs, discoveries, improvements, ideas, designs, models,
formulae, patterns, compilations, data collections, drawings, blueprints, mask works, devices,
methods, techniques, processes, know-how, proprietary information, customer lists, software,
technical information, IT Systems and trade secrets; copyrights, copyrightable works, and rights in
databases and data collections; moral and economic rights or authors and inventors; other
intellectual or industrial property rights and foreign equivalent or counterpart rights
and forms of protection of a similar or analogous nature to any of the foregoing or having
similar effect in any jurisdiction throughout the world; and registrations and



77









 




applications for registration of any of the foregoing, including any renewals, extensions,
continuations (in whole or in part), divisionals, re-examinations or reissues or equivalent or
counterpart thereof; and all documentation and embodiments of the foregoing.




     “Intercompany Credit Agreement” means that certain Credit Agreement dated April 30,
2006 by and between Seller and the Company, and any successor agreement or any other agreement that
provides for H&R Block, Inc. or any Affiliate of H&R Block, Inc. to make loans or extend credit to
the Company or any of its Affiliates.



     “Intercompany Indebtedness” means all Indebtedness owed by, or to, the Company and the
Subsidiaries, on the one hand, and Seller and its Affiliates (other than the Company and the
Subsidiaries), on the other hand.



     “Interim Monthly Financial Statements” has the meaning set forth in Section
4.02(b)(ii).



     “Investment Bank” has the meaning given in the Closing Balance Sheet Methodologies
Schedule.



     “Investor” means any Person who owns or holds Loans, or servicing rights related
thereto, sold by the Company or any Subsidiary.



     “IRS” means the United States Internal Revenue Service.



     “IT Systems” means electronic data processing, information, recordkeeping,
communications, telecommunications, networking, account management, inventory management and other
such applications, software, hardware, equipment and services (including all applications and
software installed on all hardware and equipment), and all documentation related to the foregoing.



     “January 31 Pro Forma Financial Statements” has the meaning set forth in Section
2.07(a).



     “JPM Facility Guarantee” means the Guaranty, dated as of August 8, 2003, made by Parent in favor of Wells Fargo Bank Minnesota, N.A., as indenture trustee under the Indenture, dated as of August 8, 2003, between Option One Owner Trust 2003-4 and the indenture trustee, and the noteholders defined therein.



     “Knowledge” means the actual knowledge, after due inquiry, of (i) with respect to
Seller, any person listed in Section 12.01(d) of the Seller Disclosure Schedule, and (ii)
with respect to Purchaser, of any officer of Purchaser.



     “KPMG” has the meaning set forth in Section 4.02(b)(v).



     “Law” means any statute, law, ordinance, regulation, rule, code or other requirement
of a Governmental Authority or any Order.



     “Leased Real Property” has the meaning set forth in Section 2.14(b).



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     “Leases” has the meaning set forth in Section 2.14(b).



     “Lending Policies” means the written policies and procedures used by the Company and
the Subsidiaries in the origination, administration and servicing of the Loans.



     “Liability” means any direct or indirect liability, debt, obligation, commitment,
guaranty, claim, loss, damage, deficiency, fine, cost or expense of any kind, whether relating to
payment, performance or otherwise, known or unknown, fixed, absolute or contingent, accrued or
unaccrued, matured or unmatured, disputed or undisputed, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, asserted or unasserted, vested or unvested,
executory, determined, determinable or otherwise, whenever and however arising (including whether
or not required to be reflected or reserved against on the financial statements of the obligor
under GAAP).



     “Licensed Intellectual Property” means all Intellectual Property that the Company or
any Subsidiary is licensed or otherwise permitted by other Persons to use.



     “Lien” means any security interest, pledge, mortgage, lien (including liens imposed by
Law, such as but not limited to, mechanics’ liens), charge, hypothecation, option to purchase or
lease or otherwise acquire any interest, conditional sales agreement, adverse claim of ownership or
use, title defect, easement, right of first refusal, encumbrance, right of way or other encumbrance
of any kind, other than those arising by reason of restrictions on transfers under federal, state
and foreign securities Laws.



     “Loan Documents” means the documents relating to Loans required by Applicable
Requirements to document and service the Loans, whether on hard copy, microfiche or its equivalent
or in electronic format and, to the extent required by Applicable Requirements, credit and closing
packages and disclosures.



     “Loan Purchaser” has the meaning set forth in Section 2.16(a)(x).



     “Loan Sale” has the meaning set forth in Section 2.16(a)(x).



     “Loans” means any loan, loan agreement, note, borrowing arrangement or extension of
credit, including letters of credit, leases, credit enhancements, guarantees and similar
interest-bearing assets, as well as commitments to extend any of the same.



     “Material Adverse Effect” means an event, change, occurrence, fact, variation,
development or circumstance having or resulting in, or that could be reasonably be expected to have
or result in, a material adverse effect on the business, operations, assets, liabilities, financial
condition or results of operations of the Company and its Subsidiaries, taken as a whole;
provided, however, that any such effect resulting or
arising from any of the following matters will not be considered when determining whether a
Material Adverse Effect has occurred or could be reasonably be
expected to occur: (i) any conditions in the United States general economy or the general economy in which the
Company and its Subsidiaries operate;



79









 




(ii) political conditions including acts of war (whether or
not declared), armed hostilities and terrorism, or developments or changes therein; (iii) any
conditions resulting from natural disasters; (iv) compliance by Seller with its covenants and
agreements contained in this Agreement (but nothing in this clause shall affect Seller’s
representations and warranties in this Agreement or Purchaser’s rights under Article XI with
respect thereto); (v) the failure of the financial or operating performance of the Company and
Subsidiaries, taken as a whole, to meet internal projections or budgets for any period prior to, on
or after the date of this Agreement (but the underlying reason for failure to meet such projections
or budgets may be considered); (vi) any action taken or omitted to be taken by or at the written
request or with the written consent of Purchaser (including the completion of the Restructuring
Activities); (vii) effects or conditions resulting from the announcement of this Agreement or the
transactions contemplated hereby or the identity of the Purchaser (including any employee
departures); (viii) changes in any Laws or GAAP; or (ix) any action that is expressly permitted to
be taken by Parent or its Affiliates pursuant to Section 9.02(d)(ii) of the Seller
Disclosure Schedule (but nothing in this clause (ix) shall exclude any adverse effect resulting
from any such action from being taken into account for purposes of determining whether a Material
Adverse Effect has occurred or could be reasonably be expected to occur)); provided,
further, that with respect to clauses (i), (ii), (iii), or (viii), such event, change or
occurrence shall be considered to the extent that it disproportionately affects the Company and its
Subsidiaries as compared to businesses of similar size operating in the same industries and
geographic areas as the Company and its Subsidiaries operate.




     “Material Contracts” has the meaning set forth in Section 2.16(a).



     “Most Recent Balance Sheet” has the meaning set forth in Section 2.07(a).



     “MSR Tapes” has the meaning set forth in Section 1.04(a)(iv).



     “MSR Valuation Firm” has the meaning set forth in Section 1.04(a)(iv).



     “MSR Valuations” has the meaning set forth in Section 1.04(a)(v).



     “Names” means the trade names, service marks, and trademarks owned or licensed by
Seller, and any variations and derivatives thereof, but excluding the Company Intellectual
Property.



     “Net Income” means the amount equal to (i) the net income of the Company and its
Subsidiaries, less (ii) Servicing Net Income, in each case, as reported in accordance with
U.S. GAAP, subject to the Earnout Methodologies, plus (iii) the difference between (A) the
fair market value as of the Calculation Period End Date of any Loans held in the Company’s
Warehouse Facilities that were originated prior to the 75th day immediately preceding the Calculation
Period End Date and (B) the book value of such Loans as of the Calculation Period End Date;
provided, that “Net Income” shall not include any income arising from any Final Residuals or any impairment charges taken in respect of any such
Final Residuals; provided, further, that for purposes of calculating the net income derived by the Company and its
Subsidiaries from the BIT Requirement Loans



80









 




held by the Company and its Subsidiaries immediately following the Closing,
the book value of such BIT Requirement Loans shall be deemed to be the value for such BIT Requirement Loans as set forth
on the Final Statement and not the book value ascribed to such BIT Requirement Loans according to U.S. GAAP on the opening
balance sheet of the Company.




     “Non-Income Taxes” means any Taxes other than Income Taxes and Transfer Taxes.



     “OOMC Branches” means the branch offices of the Company or any of its Subsidiaries,
disregarding any branch offices acquired pursuant to any Acquisition Transaction or any branch
offices of another Person combined with the Company or any of its Subsidiaries in connection with
any Sale Transaction.



     “Order” has the meaning set forth in Section 9.01(b).



     “Other Regulatory Approvals” has the meaning set forth in Section 9.02(h).



     “Owned Real Property” has the meaning set forth in Section 2.14(a).



     “Parent” has the meaning set forth in the Preamble.



     “Pending Federal Tax Matters” means the IRS audits and the Company’s requests to the
IRS for changes in accounting method listed on Section 2.09 of the Seller Disclosure
Schedule.



     “Permits” has the meaning set forth in Section 2.11.



     “Permitted Liens” means: (i) Liens that relate to Taxes imposed upon the Company or
the Subsidiaries that are not yet due and payable or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been made, in each case, in an amount
that would not be material; (ii) Liens imposed by Law that relate to obligations that are not yet
due and have arisen in the ordinary course of business; (iii) pledges or deposits to secure
obligations under workers’ compensation Laws or similar legislation or to secure public or
statutory obligations; (iv) mechanics’, carriers’, workers’, repairers’ and similar Liens imposed
upon the Company or the Subsidiaries arising or incurred in the ordinary course of business; (v)
the effect of zoning, entitlement and other land use and Environmental Laws; (vi) imperfections or
irregularities in title, charges, easements, survey exceptions, leases, subleases, license
agreements and other occupancy agreements, reciprocal easement agreements, restrictions and other
customary encumbrances on title to or use of real property; (vii) any utility company or
Governmental Authority rights, easements or franchises for electricity, water, sanitary sewer,
steam, surface water drainage, gas, telephone or other service or the right to use and maintain
poles, lines, wires, cables, pipes, boxes and other fixtures and facilities in, over, under and
upon any of the Real Property or other general easements granted to Governmental Authorities in the
ordinary course of developing or operating any Real Property; (viii) any encroachments of stoops,
areas, cellar steps, trim and cornices, if any, upon any street or
highway or



81









 




other matters which
would be shown by a current, accurate survey or physical inspection of any Real Property;
provided, however, that in the case of clauses (v) through (viii), none of the
foregoing materially interfere with the use or occupancy of such Real Property in the operation of the Business taken as a whole, individually or in the
aggregate, would reasonably be expected to have a Materially Adverse Effect on the continued use of
the property in a manner; (ix) Liens existing in connection with any Warehouse Facilities of the
Company or any of the Subsidiaries, and (x) any matters disclosed any title commitment procured by
Purchaser or of record.




     “Person” means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a Governmental Authority.



     “Pipeline Tapes” has the meaning set forth in Section 1.04(a)(vi).



     “Pipeline Valuations” has the meaning set forth in Section 1.04(a)(vii).



     “PMI” means the default insurance provided by private mortgage insurance companies.



     “Post-Closing Straddle Period” has the meaning set forth in Section 7.03(b).



     “Post-Closing Tax Period” means all taxable periods beginning after the Closing Date.



     “Pre-Closing Determination” has the meaning set forth in Section 1.04(a)(ix).



     “Pre-Closing Straddle Period” has the meaning set forth in Section 7.03(b).



     “Pre-Closing Tax Period” means all taxable periods or portions thereof ending on or
before the Closing Date.



     “Pro Forma Financial Statements” has the meaning set forth in Section
2.07(a).



     “Pro Rata Sale Profit” means, with respect to a Sale Transaction, the product of (i)
50% of the Sale Profit and (ii) the fraction obtained by dividing (A) the number of days remaining
in the Calculation Period calculated from the applicable Business Combination Closing Date into (B)
548.



     “Purchase” has the meaning set forth in Section 1.01.



     “Purchase Allocation Fraction” means the fraction equal to the amount of proceeds
allocated to the origination platform business of the Company and its Subsidiaries in connection
with the Sale in accordance with Section 7.05 divided by the total amount of proceeds
allocated to the assets of the Business sold in the Purchase in accordance with Section
7.05.



     “Purchase Price” has the meaning set forth in Section 1.02.




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     “Purchaser” has the meaning set forth in the Preamble.



     “Purchaser Disclosure Schedule” means the disclosure schedule delivered by Purchase to
Seller prior to the execution and delivery of this Agreement.



     “Purchaser’s Flexible Spending Account Plan” has the meaning set forth in Section
8.01(f).



     “Purchaser Group Health Plan” has the meaning set forth in the Section
8.01(c).



     “Purchaser Indemnified Parties” has the meaning set forth in Section 11.02(a).



     “Real Property” has the meaning set forth in the Section 2.14(c).



     “Receivable” means (i) a Loan or right to payment which is secured by a Lien on or
other interest in real or personal property, (ii) any debt or equity security (including a
participation certificate) that represents an interest in (or represents an ownership interest in,
or a debt obligation of, a Person which owns, directly or indirectly) a pool of instruments
described in clause (i) above, or (iii) an interest in servicing or other rights, relating to
clause (i) or (ii) above.



     “Reference Rate” means the rate per annum equal to the “Prime Rate” as published in
The Wall Street Journal, Eastern Edition.



     “Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, placing, discarding, abandonment, or disposing
into the environment.



     “Remedial Action” means all actions taken to (i) clean up, remove, remediate, contain,
treat, monitor, assess, or evaluate Hazardous Substances in the Environment, (ii) prevent or
minimize a Release or threatened Release of Hazardous Substances so they do not migrate or endanger
or threaten to endanger public health or welfare or the Environment, or (iii) perform pre-remedial
studies and investigations and post-remedial operation and maintenance activities.



     “REO” means a real property, together with any improvements thereon, securing a
mortgagor’s indebtedness under a mortgage loan and that was acquired by the Company or the
Subsidiaries as a result of the foreclosure, liquidation or other termination or settlement of such
mortgage loan.



     “Representatives” has the meaning set forth in Section 4.02(d).



     “Repurchase Obligation Covered Losses” has the meaning set forth in Section
11.02(a).



     “Required Regulatory Approvals” has the meaning set forth in Section 2.04(a).



     “Required Third Party Consents” has the meaning set forth in Section 2.04(b).



83









 




     “Restructuring Activities” has the meaning set forth in Section 4.05(d).



     “Restructuring Plan” has the meaning set forth in Section 4.05(d).




     “Sale Allocation Fraction” means, in connection with a Sale Transaction, the fraction
equal to the amount of proceeds allocated to the origination platform business of the Company and
its Subsidiaries divided by the total amount of proceeds allocated to the assets of the Business
sold in the Sale Transaction, in each case, pursuant to the definitive transaction documents;
provided, that if the definitive transaction documents do not allocate such values, then
the term “Sale Allocation Fraction” shall mean the fraction equal to the fair market value of such
origination platform business as at the applicable Business Combination Closing Date (as determined
by an independent investment bank retained by Purchaser) divided by the fair market value of all
assets of the Business sold in the Sale Transaction as at the applicable Business Combination
Closing Date.



     “Sale Profit” means:




     (i) with respect to a Sale Transaction pursuant to which all or substantially all of
the assets of, or all of the outstanding capital stock of, the Company and its Subsidiaries
is sold, the amount equal to (A) the proceeds received by the Company and its Subsidiaries
(or Purchaser, in the case of a stock sale) in such Sale Transaction, minus (B) the
transaction expenses incurred by the Company and its Subsidiaries (or Purchaser, in the case
of a stock sale) in such Sale Transaction, minus (C) the amount of the Final Cash
Payment, minus (D) the transaction expenses incurred by Purchaser in connection with
the Purchase, minus (E) the amount of capital (debt or equity) funded into the
Business on or after the Closing (including Direct Capital and Other Third Party Debt) in
existence as of the Business Combination Closing Date, less any such debt assumed by the
Acquiring Party, and less any repayments or returns of capital paid to Purchaser or any of
its Affiliates in respect of such capital on the Business Combination Closing Date; and




     (ii) with respect to any other Sale Transaction described in Section 1.05(e),
the amount equal to (A) the product of (x) the proceeds received by the Company and its
Subsidiaries (or Purchaser, in the case of a stock sale) in such Sale Transaction and (y)
the Sale Allocation Fraction, minus (B) the product of (x) the transaction expenses
incurred by the Company and its Subsidiaries (or Purchaser, in the case of a stock sale) in
such Sale Transaction and (y) the Sale Allocation Fraction, minus (C) the amount of
the Final Cash Payment allocated to the origination platform business of the Company and its
Subsidiaries consistent with Section 7.05, minus (D) the product of (x) the
transaction expenses incurred by Purchaser in connection with the Purchase and (y) the
Purchase Allocation Fraction, minus (E) the amount of Excess Capital as at the
applicable Business Combination Closing Date without deduction for the Excess Capital
Threshold.




84









 





     “Sale Transaction” means any sale on a going concern basis of more than 20% (based on
book value as of the Closing Date) of the origination platform assets of the Company and its
Subsidiaries, taken as a whole, in one transaction or a series of
related transactions, whether by merger, consolidation, recapitalization, sale of assets or
otherwise, excluding any sale of mortgage loans in the ordinary course of business.



     “Securitization” means a public or private sale or other transfer of Receivables or
interests therein, including any transactions involving the sale of Receivables to a Securitization
Trust.



     “Securitization Trust” means any Person which has been established for the purpose of
issuing debt or equity securities in connection with any Securitization.



     “Seller” has the meaning set forth in the Preamble.



     “Seller Disclosure Schedule” means the disclosure schedule delivered by Seller to
Purchaser prior to the execution and delivery of this Agreement.



     “Seller Employee Plan” has the meaning set forth in Section 2.12(a)(ii).



     “Seller Guarantees” means all guarantees, surety bonds, covenants, indemnities,
letters of credit, letters of comfort and similar credit assurances provided by Parent or any of
its Affiliates (other than the Company or any Subsidiaries) that relate exclusively or primarily to
the Business.



     “Seller Indemnified Parties” has the meaning set forth in Section 11.03(a).



     “Seller Retirement Plan” has the meaning set forth in Section 8.01(e).



     “Seller Tax Returns” has the meaning set forth in Section 7.03(c)(ii).



     “Seller’s Earnout Objection” has the meaning set forth in Section 1.05(b).



     “Seller’s Flexible Spending Account Plan” has the meaning set forth in Section
8.01(f).



     “Seller’s Objection” has the meaning set forth in Section 1.04(c).



     “Seller’s Termination Payment Objection” has the meaning set forth in Section
1.05(g).



     “Servicer Downgrade” has the meaning set forth in Section 9.02(d)(i) of the
Seller Disclosure Schedule.



     “Servicing Agreement” has the meaning set forth in Section 2.16(a)(xiii).



     “Servicing Net Income” means the (i) revenues derived by the servicing platform and
servicing assets of the Company and its Subsidiaries less (ii) the expenses attributable to
the servicing platform and servicing assets of the Company and its



85









 






Subsidiaries (which shall
include an allocation of the corporate overhead of the Company and its Subsidiaries, based on the
same methodology used for allocating corporate overhead in the valuation of Eligible Servicing
Rights set forth on Annex C of Exhibit A), as reported in accordance with U.S. GAAP, subject to the Earnout
Methodologies.




     “Shares” has the meaning set forth in the Recitals.





     “Specified Line Items” means each of the following line items in respect of the
Company and its Subsidiaries: Mortgage Loans Held for Sale – Net of Loss Reserves, Beneficial
Interests in Trust and Residuals – Available for Sale and Held for Trade.



     “Straddle Period” has the meaning set forth in Section 7.03(b).



     “Subject Branch” means any branch office of the Company or any of its Subsidiaries
that is acquired pursuant to a Sale Transaction.



     “Subsidiaries” means the direct and indirectly owned subsidiaries of the Company
(each, a “Subsidiary”).



     “subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its board of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person or by another subsidiary of such first Person; provided, that to the extent
under applicable Law any other Person constitutes a “subsidiary” of the Company or any of the
Company’s subsidiaries, such Person shall be deemed to be a “subsidiary” of the Company for
purposes of this Agreement.



     “Tangible Net Assets” means (i) the sum of “Cash,” “Cash – Restricted,”  “Mortgage Loans Held for Sale, Net of Loss Reserves,” “Beneficial Interest in
Trust,” “Residuals – Available for Sale,” “Residuals – Held for Trade,” “Mortgage Servicing
Rights,” “Property, Plant and Equipment,” “Servicing and Related Assets”, “Mortgage Loans Held for
Investment,” “Other Real Estate Owned,” “Pipeline Mortgage Loans,” and “Other Assets,” less
(ii) the sum of “Repurchase Liability,” “Borrowings and Due to Warehouse,” and “Other Liabilities.”
Each of the capitalized terms in clauses (i) and (ii) of the preceding sentence have meanings
consistent with the meanings given to such terms in the Target Tangible Net Assets Statement.
Notwithstanding anything to the contrary herein, the calculation of Tangible Net Assets will not
include any Intercompany Indebtedness, Deferred Tax Asset, Deferred Tax Liability or any
liabilities or assets related to Taxes or other matters which Seller has agreed to pay or provide
indemnity hereunder.



     “Tapes” has the meaning set forth in Section 1.04(a)(ii).



     “Target Tangible Net Assets” means $1,269,027,000.




86









 






     “Target Tangible Net Assets Statement” means the unaudited statement of Tangible Net
Assets of the Company and its Subsidiaries (adjusted to exclude HRBMC and all noneconomic
residuals) as of the Balance Sheet Date set forth on Section 1.04(a)(i) of the Seller
Disclosure Schedule.



     “Tax” means all taxes, fees, levies or other assessments imposed by a Taxing
Authority, including income, gross receipts, excise, real and
personal property, municipal, capital, sales, use, transfer, license, payroll and franchise taxes, and such term will
include any interest, penalties, or additions to tax attributable to such taxes, fees, levies or
other assessments.




     “Tax Asset” means any net operating loss, net capital loss, Tax basis in any asset,
investment Tax credit, or any other credit or Tax attribute which could reduce Taxes (including
deductions and credits related to alternative minimum Taxes).



     “Tax Claim” has the meaning set forth in Section 7.04(c)(i).



     “Tax Proceeding” has the meaning set forth in Section 7.04(c)(ii).



     “Tax Returns” means any return, report or information return required to be filed with
any Taxing Authority in connection with Taxes, and any supplement, schedule or amendment thereto.



     “Taxing Authority” means any Governmental Authority responsible for the administration
or imposition of any Tax.



     “Termination Date” has the meaning set forth in Section 10.01(b).



     “Termination Payment Statement” has the meaning set forth in Section
1.05(f)(ii).



     “Termination Payout Election Notice” has the meaning set forth in Section
1.05(f).



     “Third Party Claim” has the meaning set forth in Section 11.04(a).



     “Third Party Consents” has the meaning set forth in Section 4.04(a).



     “Transaction Agreements” means, collectively, the Transition Services Agreement and
the License Agreement.



     “Transfer Taxes” has the meaning set forth in Section 7.02(c).



     “Transition Services Agreement” has the meaning set forth in Section
1.03(b)(vi).



     “UBS Facility Guarantee” means the Guaranty, dated as of July 2, 2002, made by Parent in favor of Wells Fargo Bank Minnesota, N.A., as facility administrator under the  Facility
Administration Agreement, dated as of July 2, 2002, between Option One Owner Trust 2002-3 and the facility administrator,
and the noteholders defined therein.



     “Unaudited Financial Statements” have the meaning set forth in Section
2.07(a).




87









 






     “Updated Pipeline Valuations” has the meaning set forth in Section
1.04(b)(ii).



     “U.S. GAAP” means U.S. generally accepted accounting principles as consistently
applied by Purchaser.



     “Warehouse Facility” means any funding arrangement pursuant to which one or more
lenders, purchasers, conduit or special purpose vehicles and other financial institutions provide
financing to purchase, originate, sell, securitize, carry, service or maintain Receivables or other
financial assets or servicing rights.



          12.02. Notices. All notices, requests and other communications to any party hereunder will be
in writing (including electronic facsimile transmission) and will be given:



if to Purchaser, to:



OOMC Acquisition Corp.

c/o Cerberus Capital Management, L.P.

299 Park Avenue

New York, New York 10171

Attention: Mark A. Neporent

Facsimile No.: (212) 891-2153



with a copy to:



Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York

Attention: Stuart D. Freedman

Facsimile No: (212) 593-5955



if to Seller, to:



Block Financial Corporation

c/o H&R Block, Inc.

One H&R Block Way

Kansas City, MO 64105

Attention: Carol Graebner

Facsimile No.: (816) 854 8500





88









 





with a copy to:



Jones Day

222 East 41st Street

New York, NY 10017

Attention: Robert A. Profusek, Esq.

Facsimile No.: (212) 755-7306



and



Jones Day

901 Lakeside Avenue

Cleveland, Ohio 44114

Attention: Christopher J. Hewitt, Esq.

Facsimile No.: (216) 579-0212



or such other address or electronic facsimile number as such party may hereafter specify for the
purpose by notice to the other parties hereto. All such notices, requests and other communications
will be deemed received on the date of receipt by the recipient thereof if received prior to 5:00
p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise,
any such notice, request or communication will be deemed not to have been received until the next
succeeding Business Day in the place of receipt.




          12.03. Amendments and Waivers. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective. No failure or delay by any party in exercising any right, power or privilege
hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power or privilege.




          12.04. Expenses. Except as otherwise provided herein, all costs and expenses incurred in
connection with this Agreement will be paid by the party incurring such cost or expense.




          12.05. Successors and Assigns. The provisions of this Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns;
provided, however, that no party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the consent of each other party hereto,
except that Purchaser may (unless such assignment would impair or delay the consummation of the
Closing or result in additional Liability to Seller) (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates, to any purchaser of all or any portion of the
Business, or to any of the lenders providing the Financing (or any replacement financing or
refinancing thereof) and (ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Purchaser (A) nonetheless shall remain responsible for the
performance




89









 







of all of its obligations hereunder and (B) shall indemnify Seller for any
out-of-pocket costs and expenses directly arising as a result of such assignment).




          12.06. Governing Law This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to the conflict of laws rules
thereof.




          12.07. Specific Performance; Jurisdiction. 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
will 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 the courts of the State
of New York, this being in addition to any other remedy to which such party is entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of the courts of the State of New York (and, with respect to claims in which the
exclusive subject matter jurisdiction of such claims is federal, any federal district court located
in the State of New York) in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from such court, (c) agrees that it
will not bring any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any other court, and (d) to the fullest extent permitted by Law, consents to
service being made through the notice procedures set forth in 

Section  12.02.




          12.08. Waiver of Punitive and Other Damages and Jury Trial (a) Except as expressly provided
in this Agreement, each party to this Agreement expressly waives and foregoes any right to recover
punitive, exemplary, consequential or similar damages and any diminution in value or lost profits
in any arbitration, lawsuit, litigation or proceeding arising out of or resulting from any
controversy or claim arising out of or relating to this Agreement or the transactions contemplated
hereby.




               (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.



               (c) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE EITHER OF THE FOREGOING WAIVERS, (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT
HAS BEEN INDUCED TO ENTER INTO THIS




90









 








AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS SET FORTH IN THIS SECTION  12.08.



          12.09. Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed
in any number of counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. The electronic facsimile transmission
of any signed original counterpart of this Agreement will be deemed to be the delivery of an
original counterpart of this Agreement. Except with respect to the use of electronic facsimile
transmissions permitted hereunder, the Seller and Purchaser disclaim the applicability of the
Federal Electronic Signatures in Global and National Commerce Act and the New York Electronic
Signatures and Records Act to this Agreement and the Transaction Agreements. No provision of this
Agreement is intended to confer any rights, benefits, remedies or Liabilities hereunder upon any Person other than the parties hereto, their respective
successors and assigns and the Purchaser Indemnified Parties and the Seller Indemnified Parties.




          12.10. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and
“hereunder” and words of like import used in this Agreement will refer to this Agreement as a whole
and not to any particular provision of this Agreement. Terms defined in the singular in this
Agreement will also include the plural and vice versa. The captions and headings herein are
included for convenience of reference only and will be ignored in the construction or
interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles,
Sections, Exhibits and Schedules of this Agreement unless otherwise specified. Whenever the words
“include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed
by the words “without limitation,” whether or not they are in fact followed by those words or words
of like import. The phrases “the date of this Agreement,” “the date hereof” and phrases of similar
import, unless the context otherwise requires, will be deemed to refer to the date set forth in the
Preamble to this Agreement. The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. If any ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.




          12.11. Entire Agreement. This Agreement, together with the Seller Disclosure Schedule, the
Transaction Agreements and that certain Confidentiality Agreement, by and between Seller and
Cerberus Capital Management, L.P., dated October 10, 2006, as amended on October 27, 2006,
constitutes the entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both oral and written, between the
parties hereto with respect to the subject matter hereof.




          12.12. Disclosure Schedules There may be included in the Seller Disclosure Schedule or
Purchaser Disclosure Schedule (collectively, the “Disclosure Schedules”) items and
information that are not “material,” and inclusion in the




91









 






Disclosure Schedules will not be deemed
to be an acknowledgment or agreement that any such item or information (or any non-disclosed item
or information of comparable or greater significance) is “material,” or to affect the
interpretation of such term for purposes of this Agreement. Matters reflected in the Disclosure
Schedules are not necessarily limited to matters required by this Agreement to be disclosed in the
Seller Disclosure Schedule or Purchaser Disclosure Schedule, as the case may be. The Disclosure
Schedules set forth items of disclosure with specific reference to the particular Section or
subsection of this Agreement to which the information in such Disclosure Schedule relates;
provided, however, that any information set forth in one Section pertaining to
representations and warranties of the Seller Disclosure Schedule or Purchaser Disclosure Schedule,
as the case may be, will be deemed to apply to each other Section or subsection thereof pertaining
to representations and warranties to the extent it is reasonably apparent on the face of such
disclosure it is relevant to such other sections of the Seller Disclosure Schedule or Purchaser Disclosure Schedule, as the case may
be.




          12.13. Severability. Whenever possible, each provision of this Agreement will be interpreted
so as to be effective and valid under applicable Law, but if any provision or portion of any
provision of this Agreement is held invalid, illegal or unenforceable in any respect under any
applicable Law, then such invalidity, illegality or unenforceability will not affect the validity,
legality or enforceability of any other provision or portion of any provision of this Agreement,
and this Agreement will be re-formed, construed and enforced in such manner as will effect as
nearly as lawfully possible the purposes and intent of such invalid, illegal or unenforceable
provision or portion of any provision of this Agreement.




          12.14. Fulfillment of Obligations. Any obligation of any party to any other party under this
Agreement, or any of the Transaction Agreements, which obligation is performed, satisfied or
fulfilled completely by an Affiliate of such party, shall be deemed to have been performed,
satisfied or fulfilled by such party.




          12.15. Parent Guarantee.




               (a) Parent hereby fully, irrevocably and unconditionally guarantees to each of the Purchaser
Indemnified Parties the full and timely performance of all of the obligations of Seller, including
any required payment, under the provisions of Section 7.04 and Article XI of this
Agreement. At the time any payment is due under Section 7.04 or Article XI from
Seller, Parent agrees to pay, or cause to be paid, the amount due promptly. This is a guarantee of
payment and performance, and not of collection, and Parent acknowledges and agrees that this
guarantee is full and unconditional, and no release or extinguishment of Seller’s obligations or
liabilities (other than in accordance with the terms of the Agreement) shall affect the continuing
validity and enforceability of this Section 12.15(a).



               (b) Parent hereby waives, for the benefit of each of the Purchaser Indemnified Parties, (i)
any right to require any such Purchaser Indemnified Party as a condition of payment or performance
by Parent, to proceed against Seller or




92









 




pursue any other remedy whatsoever and (ii) to the fullest
extent permitted by law, any defenses or benefits that may be derived from or afforded by law or at
equity which limit the liability of or exonerate guarantors or sureties, except to the extent that
any such defense is available to Seller.



[SIGNATURE PAGE FOLLOWS THIS PAGE]




93








 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.



	 	 	 	 	 
	 	OOMC ACQUISITION CORP.

 	 
	 	By:  	/s/ Lenard B. Tessler	 
	 	 	Name:  	Lenard B. Tessler	 
	 	 	Title:  	President	 
	 
	 	BLOCK FINANCIAL CORPORATION

 	 
	 	By:  	/s/ Mark A. Ernst
 	 
	 	 	Name:  	Mark A. Ernst 	 
	 	 	Title:  	President 	 
	 
	 	H&R BLOCK, INC.

 	 
	 	By:  	/s/ Mark A. Ernst
 	 
	 	 	Name:  	Mark A. Ernst 	 
	 	 	Title:  	President and

Chief Executive Officer 	 
	 




[Stock Purchase Agreement
— Signature Page]










 





EXHIBIT A




CLOSING BALANCE SHEET METHODOLOGIES SCHEDULE




Investment Banks To Be Utilized for Purposes of Section 1.04(a) (Estimate Statement)



No later than 40 Business Days after the date of this Agreement, each of Purchaser and Seller will
select one investment bank from the list set forth on Annex A attached hereto.



If any such investment bank becomes unavailable to perform the services contemplated by Section
1.04, the party that selected that investment bank may select another investment bank from the
above list.



The investment banks selected by the parties pursuant to the foregoing provisions are referred to
herein as “Investment Banks”.




Bidders To Be Utilized for Purposes of Section 1.04(b) (Final Statement)



For purposes of obtaining firm bids on the Mortgage Loans Held for Sale, BIT Mortgage Loans and
Residuals, Seller and the Company shall solicit firm bids from the institutions set forth on the
applicable lists set forth on Annex B attached hereto. These institutions are referred to
herein as “Bidders.”




* * * * *



For purposes of calculating Estimated Closing Tangible Net Assets and Closing Tangible Net Assets,
the value of Tangible Net Assets using the Valuation Methodologies set forth below shall be
determined as if any impairment charges required solely because the purchase price to be paid by
Purchaser is less than the Tangible Net Assets of the Company and its Subsidiaries as of January
31, 2007 were taken solely at the Parent level, notwithstanding any requirement of GAAP to the
contrary.




Valuation Methodologies




1. Cash: valued at book value determined in accordance with GAAP.



2. Cash-restricted: valued at book value determined in accordance with GAAP.



3. Mortgage Loans Held for Sale, Net of Loss Reserves: Prior to the Closing, the Company may sell
to a third party or distribute to Parent or its Affiliates all or a portion of the remaining
balance of existing Mortgage Loans Held for Sale (i) on a servicing-released basis, or (ii) on a
servicing-retained basis (provided that mortgage loans sold on a servicing-retained basis are
either (A) sold to a warehouse lender in connection with a Warehouse Facility, or (B) are sold to a
Securitization Trust in connection with a securitization or in a whole loan sale that is not a sale
of “scratch-and-dent” mortgage loans). To the extent any Mortgage Loans Held for Sale exist as at
the Closing, the value of Mortgage Loans Held for Sale, Net of Loss Reserves shall be determined as
set forth below.




For purposes of preparing the Estimate Statement:



This value shall be calculated in accordance with the provisions of Section 1.04 of the
Agreement.




 









 








For purposes of preparing the Final Statement:



As soon as practicable after the Closing Date, but in no event later than 75 days after the Closing
Date, Seller and the Company shall jointly cause the Mortgage Loans Held for Sale (including
accrued interest through the Closing Date)1 other than Mortgage Loans Under Contract
(the “Auctioned Mortgage Loans”) to be auctioned for cash (whether for one or more pools of
such mortgage loans) through a process of obtaining firm bids (with the same value date as
determined by Purchaser and Seller) from the Bidders.



Seller will be permitted to set reserve prices on the Auctioned Mortgage Loans, and if the highest
price included in the firm bids for some or all of the Auctioned Mortgage Loans does not exceed the
reserve price (or if no firm bids are received in accordance with this Exhibit A), such
Auctioned Mortgage Loans shall be acquired by Seller prior to the expiration of the 75-day period
for cash in an amount equal to the amount of such Auctioned Mortgage Loans reflected on the
Estimate Statement (it being understood that such acquisition will be effected without any
representations, warranties or indemnities from Purchaser, the Company or the Subsidiaries) and the
amount attributed to such Auctioned Mortgage Loans for purposes of determining the value of the
Final Closing Tangible Net Assets shall be the amount of cash paid to the Company.



Each loan pool will be auctioned on a servicing-released basis.



In conducting the auction, the Company shall provide (and shall so indicate to the Bidders) that at
least the HFS Minimum Amount will be sold to the highest Bidder of such Auctioned Mortgage Loans as
long as the price bid exceeds any reserve price for such Auctioned Mortgage Loans. For purposes of
this Exhibit A, the “HFS Minimum Amount” shall be the greater of (i) 25% of the
total Auctioned Mortgage Loans and (ii) $50MM of par value of Auctioned Mortgage Loans. In the
event that the aggregate par value of the Auctioned Mortgage Loans is less than $50MM, the HFS
Minimum Amount shall be the entire portfolio of Auctioned Mortgage Loans.



Upon receipt of the firm bids, the Company may (as so directed by Purchaser), elect to sell some or
all of the Auctioned Mortgage Loans to the relevant winning Bidder(s) or may elect to retain some
or all of the Auctioned Mortgage Loans (subject to compliance with its obligation to sell at least
the HFS Minimum Amount).



Mortgage Loans Held for Sale, Net of Loss Reserves shall be valued based on:





     (a) with respect to the Auctioned Mortgage Loans, the net aggregate value of the
highest firm bid(s) received for each loan pool of Auctioned Mortgage Loans; plus




     (b) with respect to Mortgage Loans Under Contract, the aggregate cash purchase price
received for such mortgage loans sold prior to the expiration of the 75-day period;
plus




     (c) the amount of the accrued interest on the Auctioned Mortgage Loans and Mortgage
Loans Under Contract as of the Closing Date (without duplication of any accrued interest
taken into account in the firm bid referenced in clause (a) above); provided, that
any accrued interest related to mortgage loans past due more than 30





 




			
	1	 	The Estimate Statement and Final Statement
shall each reflect the treatment of accrued interest income and accrued
interest expense consistent with this Exhibit A.




 









 











days (such accrued interest, “Excluded Interest”) shall be valued at zero; and
further provided that any amounts collected by or on behalf of the Company
or its affiliates subsequent to Closing in respect of the Excluded Interest shall be
promptly remitted when received to the Seller (and the Company shall use commercially
reasonable efforts to collect such Excluded Interest).


The term “net aggregate value” with respect to any firm bid means the aggregate cash value
of the firm bid, net of all applicable fees and expenses and taking into account any price
fluctuation provision permitted under this definition of “firm bid”; provided, that, with
respect to any firm bid that has been accepted by the Company prior to or at the time of valuation,
such firm bid shall be valued at the aggregate cash purchase price received by the Company in
respect of such firm bid.



The term “Mortgage Loans Under Contract” means any mortgage loans in respect of which, as
of the Closing Date, the Company is subject to a binding contractual obligation to sell all, but
not less than all, of the mortgage loans prior to the expiration of the 75-day period on an “as is”
basis for a specified cash price that is not subject to adjustment or interest rate fluctuation to
an unaffiliated third party that is subject to a binding, unconditional contractual obligation to
purchase such mortgage loans with representations and warranties consistent with a sale on an “as
is” basis and no indemnity.



The parties agree that to the extent a breach of contract occurs with respect to any Mortgage Loans
Under Contract prior to the expiration of the 75-day period, that mortgage loan (together with any
right to recover for breach of contract against the proposed purchaser under the applicable
contract) shall be acquired by Seller for cash in an amount equal to the amount of such Mortgage
Loans reflected on the Estimate Statement prior to the expiration of the 75-day period (it being
understood that such sale will be effected without any representations, warranties or indemnities
from Purchaser, the Company or the Subsidiaries) and the value shall be attributed to such acquired
Mortgage Loans Under Contract for purposes of determining Final Closing Tangible Net Assets shall
be the amount of cash paid to the Company.



For purposes of Section 1.4 and this Exhibit A, the term “firm bid” means:





     (a) with respect to the Mortgage Loans Held for Sale or the Residuals, a binding
commitment to acquire all, and not less than all (i.e., no “kickout” rights), of the assets
offered for sale, and




     (b) with respect to the BIT Mortgage Loans, a binding commitment to acquire all of the
assets offered for sale subject to the right to reject specific mortgage loans that do not
conform to the bid specifications (i.e. subject to “kickout rights”),




in each case, it being understood that (i) assets may be marketed in specified pools, in
which case the bid shall be for all of the assets in such pool (subject to “kickout rights”,
in the case of pools of BIT Mortgage Loans); (ii) each binding commitment must be (w) at a
specified cash price, (x) fully, irrevocably and unconditionally executable by the Company
subject only to the applicable assumptions, terms and conditions expressly set forth in this
Exhibit A, (y) received by 10:30 am (New York City time) on the specified bid date
and (z) valid at least until 5:00 pm (New York City time) on the specified bid date; and
(iii) in making their bids, if applicable, the Bidders will assume receipt of customary
representations, warranties and indemnities in such bids (except in the case of the
Auctioned Mortgage Loans which the parties agree shall be sold on an “as is” basis with
representations and warranties consistent with a sale on such a basis (and no



 









 







indemnity)), with the exposure under such representations, warranties and indemnities taken
into account for purposes of determining Repurchase Liability below; provided, that
the terms of such contract shall not include any adjustment or recourse for price
fluctuation other than adjustment for price fluctuation to the date the firm bid is valued
for purposes of this Exhibit A.


4. Beneficial Interest in Trust: Prior to Closing, Seller will not be deemed to have violated any
of its representations, warranties or covenants under the Agreement if existing mortgage loans in
the warehouse trusts underlying the Beneficial Interest in Trust (the “BIT Mortgage Loans”)
other than the BIT Requirement Loans are sold to a third party or distributed to Parent or its
Affiliates, in each case on a servicing-retained basis. To the extent any BIT Mortgage Loans exist
as at the Closing, the value of the Beneficial Interest in Trust shall be determined as set forth
below. For the avoidance of doubt, no debt issued in a securitization by the Company or any of the
Subsidiaries that is held by the Company or any of the Subsidiaries after the closing of such
securitization or NIM securitizations (“NIM Securitizations”) shall be included in
“Beneficial Interest in Trust” and shall instead be treated as set forth under “5. Residuals” below
(any such debt held by the Company or any of its Subsidiaries after the applicable closing,
“Retained Securitization Debt”).




For purposes of preparing the Estimate Statement:



The Tapes delivered by the Company to the Investment Banks pursuant to Section 1.04 shall
identify the BIT Mortgage Loans on a loan pool-by-pool basis (with the BIT Requirement Loans
identified in a pool or pools separate from the other BIT Mortgage Loans) for valuation by the
Investment Banks pursuant to Section 1.04. The Investment Banks shall determine the Fair
Market Value of such BIT Mortgage Loans according to such loan pool identification, together with
valuation on a loan-level basis for each of the BIT Requirement Loans (and if loan-level data is
not provided with respect to any pool, loan-level valuation shall be calculated on an average basis
for such pool).



For purposes of Section 1.04, the term “Applicable Determination” means, with respect to
Beneficial Interest in Trust, the aggregate value of the pools of BIT Mortgage Loans, which shall
be calculated as follows:




     (a) for each pool of BIT Requirement Loans, its value shall be equal to the difference
(positive or negative) between:



          (i) the aggregate amount for the pool of mortgage loans of the lower of, determined on a loan
level basis, (1) the sum of (i) par, plus (ii) FAS 91 expenses determined in accordance
with GAAP, plus (iii) the BIT Repurchase Reserve or (2) the average of the Fair Market
Values provided by the Investment Banks in respect of such BIT Requirement Loan, plus, if
valued on a servicing-retained basis, the BIT MSR Value for such mortgage loan, and




          (ii) the par value of the debt being held against such pool of BIT Mortgage Loans (i.e., the
warehouse advance); and




     (b) for each pool of BIT Mortgage Loans other than the BIT Requirement Loans, its value shall
be an amount (positive or negative) equal to:



          (i) the average of the Fair Market Values provided by the Investment Banks in respect of such
pool of BIT Mortgage Loans pursuant to Section 1.04, plus for those loans valued on
a servicing-retained basis, the aggregate amount of BIT MSR Value for such loans,

 









 








minus (ii) the par value of the debt being held against such BIT Mortgage Loans (i.e., the warehouse
advance), plus (iii) the aggregate amount of accrued interest as of the Closing Date on the
BIT Mortgage Loans in such pool, net of accrued interest on any debt being held against any such
BIT Mortgage Loans; provided that any accrued interest on any BIT Mortgage Loans more than
30 days past due shall be valued at zero.



The term “BIT Repurchase Reserve” shall mean, with respect to any mortgage loan, an amount
equal to 0.35% of the par amount of such loan.



The term “BIT MSR Value” shall mean, with respect to any mortgage loan, an amount equal to
the lower of (i) 0.75% of the par amount of such reference loan and (ii) the rate determined by the
Company in the ordinary course of business using current market values.




For purposes of preparing the Final Statement:



As soon as practicable after the Closing Date, but in no event later than 75 days after the Closing
Date, Seller and the Company shall jointly approach the trustee(s) of the warehouse trusts of the
Company and shall propose that all of the mortgage loans in the warehouse trusts (including accrued
interest through the Closing Date) other than any BIT Mortgage Loans Under Contract (the
“Auctioned BIT Mortgage Loans”) be auctioned (whether for one or more pools of such
mortgage loans) through a process of obtaining firm bids for each pool (with the same value date as
determined by Purchaser and Seller) from the Bidders in respect of each loan pool, together with,
to the extent reasonably possible, valuation on a loan-level basis for each of the BIT Requirement
Loans (and if loan-level data is not provided with respect to any pool, loan-level valuation shall
be calculated on an average basis for such pool).



To the extent the Company notifies Seller within 30 calendar days after the Closing that the
Company intends to effect a securitization of any of its mortgage loans held in any warehouse
trust, Seller and the Company shall instruct the Bidders to provide a firm bid on the Residual to
be created from such securitized mortgage loans and such value shall be reflected in the aggregate
value of Beneficial Interests in Trust set forth on the Final Statement.



Seller will be permitted to propose to the trustee(s) reserve prices on each pool of Auctioned BIT
Mortgage Loans being auctioned, and if the highest price included in the bids for such pool of
mortgage loans does not exceed the reserve price (or if no firm bids are received in accordance
with this Exhibit A), the Company may propose that such pool of Auctioned BIT Mortgage
Loans be sold to Seller prior to the expiration of the 75-day period for cash in an amount equal to
the amount of such pool of Auctioned BIT Mortgage Loans reflected on the Estimate Statement (it
being understood that such sale will be effected without any representations, warranties or
indemnities from Purchaser, the Company or the Subsidiaries) and in the event of such transfer the
value attributed to such pool of Auctioned BIT Mortgage Loans for purposes of determining the value
of the Final Closing Tangible Net Assets shall be the amount of cash paid to the Company.



Prior to the auction, the Company may propose to the trustee whether each loan pool will be
auctioned on a servicing-released or servicing-retained basis.



In conducting the auction, the Company shall propose that the trustee(s) provide (and to so
indicate to the Bidders) that at least the BIT Minimum Amount will be sold to the highest Bidder of
each pool of Auctioned BIT Mortgage Loans as long as the price bid exceeds any reserve price for
such pool of Auctioned BIT Mortgage Loans. For purposes of this Exhibit A, the “BIT
Minimum Amount” shall be the greater of (i) 25% of the total pool of Auctioned BIT Mortgage


 









 






Loans, or (ii) $250MM of par value of Auctioned BIT Mortgage Loans. In the event that the
aggregate par value of the pool of Auctioned BIT Mortgage Loans is less than $250MM, the BIT
Minimum Amount shall be the entire pool of Auctioned BIT Mortgage Loans.



Upon receipt of the firm bids, the Company may (as so directed by Purchaser), elect to propose to
the trustee to sell some or all of the pools of Auctioned BIT Mortgage Loans to the relevant
winning Bidder or may elect to propose to the trustee that some or all of the pools of Auctioned
BIT Mortgage Loans be retained (subject to compliance with its obligation to propose that at least
the BIT Minimum Amount to be sold).



For purposes of the Final Statement, the value of the Beneficial Interest in Trust will be equal to
the aggregate value of the pool of BIT Mortgage Loans, which shall be calculated as follows:





     (a) for each pool of BIT Requirement Loans: its value shall be equal to the sum of (i)
the BIT Requirement Loan Amount, minus (ii) the aggregate amount (determined on a
loan level basis) of the Offsetting Par Value, plus (iii) the aggregate amount
(determined on a loan level basis) of Accrued Interest Amount; and




     (b) for any pool of BIT Mortgage Loans other than BIT Requirement Loans: its value
shall be equal to the sum of (i) the Other BIT Mortgage Loan Amount, minus (ii) the
aggregate amount of the Offsetting Par Value, plus (iii) the aggregate amount of the
Accrued Interest Amount.


The “BIT Requirement Loan Amount” means, with respect to any pool of BIT Requirement Loans,
the amount that is equal to the sum of, for each mortgage loan in such pool, the lesser of:





     (a) the sum of (i) the par value, (ii) any deferred FAS 91 expenses determined in
accordance with GAAP, and (iii) the BIT Repurchase Reserve, or




     (b) (i) if the BIT Requirement Loan is an Auctioned BIT Mortgage Loan, the value of
the BIT Requirement Loan as per the highest firm bid received for such pool of Auctioned BIT
Mortgage Loans plus, if sold on a servicing-retained basis, the BIT MSR Value in
respect of such mortgage loan, or (ii) if such BIT Requirement Loan is a BIT Mortgage Loan
Under Contract, the cash purchase price received for such mortgage loan sold (determined on
a loan level basis) prior to the expiration of the 75-day period plus, if such BIT
Mortgage Loan is sold on a servicing-retained basis, the BIT MSR Value in respect of such
mortgage loan.


The “Other BIT Mortgage Loan Amount” means, with respect to any pool of BIT Mortgage Loans
other than pool of BIT Requirement Loans, the amount that is equal to the sum of:





     (a) (i) if such pools of BIT Mortgage Loans are Auctioned BIT Mortgage Loans, the value
of the highest firm bid received for such pools of Auctioned BIT Mortgage Loan, or (ii) if
such pools of BIT Mortgage Loans are BIT Mortgage Loans Under Contract, the aggregate cash
purchase price received for such pools of mortgage loan sold prior to the expiration of the
75-day period, plus




     (b) if such pools of BIT Mortgage Loans are sold on a servicing-retained basis, the BIT
MSR Value in respect of such pools of mortgage loans.



 









 




The “Offsetting Par Value” means, with respect to any BIT Mortgage Loan, the par value the
debt being held against such BIT Mortgage Loan (i.e., the warehouse advance), plus any accrued
interest on any debt being held against such BIT Mortgage Loan.



The “Accrued Interest Amount” means, with respect to any BIT Mortgage Loan, the amount of
the accrued interest on such BIT Mortgage Loan as of the Closing Date; provided that any
accrued interest related to such BIT Mortgage that is past due more than 30 days (“Excluded BIT
Interest”) shall be valued at zero; provided further, however, that any amounts
collected by or on behalf of the Company or its affiliates subsequent to Closing in respect of the
Excluded BIT Interest shall be promptly remitted when received to the Seller (and the Company shall
use commercially reasonable efforts to collect such Excluded BIT Interest).



The term “BIT Mortgage Loans Under Contract” means any pool of mortgage loans held on
behalf of the Company or its Subsidiaries in one of their warehouses in respect of which, as of the
Closing Date, (i) the warehouse trust is subject to a binding contractual obligation to sell all,
but not less than all, of the pool of mortgage loans prior to the expiration of the 75-day period
for a specified cash price on terms and with conditions consistent with industry practice
(including customary representations, warranties and indemnities), or (ii) such pool of mortgage
loans have been contracted to be sold as a part of a securitization transaction that has been
priced prior to Closing and settles within 20 calendar days of Closing, in each case, to an
unaffiliated third party that is subject to a binding, unconditional contractual obligation to
purchase such mortgage loans, with the exposure under such representations, warranties and
indemnities taken into account for purposes of determining Repurchase Liability, below.



The parties agree that to the extent a breach of contract occurs with respect to a mortgage loan
under any BIT Mortgage Loans Under Contract prior to the expiration of the 75-day period, that loan
(together with any right to recover for breach of contract against the proposed purchaser under the
applicable contract) shall be acquired by Seller prior to the expiration of the 75-day period for
cash in an amount equal to the amount of such BIT Mortgage Loans Under Contract reflected on the
Estimate Statement (it being understood that such sale will be effected without any
representations, warranties or indemnities from Purchaser, the Company or the Subsidiaries) and the
value attributed to such transferred BIT Mortgage Loans Under Contract for purposes of determining
Final Closing Tangible Net Assets shall be the amount of cash paid to the Company.



The value of firm bids on BIT Mortgage Loans where those firm bids include “kick out” rights shall
be deemed to be:





     (a) for Auctioned BIT Mortgage Loans which the Company elects to be sold and the BIT
Mortgage Loans Under Contract and any BIT Requirement Loans sold:




          (i) The value shall be the cash actually received by the Company upon settlement of the
sale, less with respect to any BIT Mortgage Loans Under Contract sold in a
securitization, all costs and expenses incurred by the Company or any of its Subsidiaries in
respect of such securitization.




          (ii) Any mortgage loans kicked-out of the loan pool prior to settlement will be, to the
extent commercially reasonable and consistent with the Company’s customary practices, cured
and disposed of by the Company within 90 days of the Closing based on its customary
practices, with the proceeds received from those loan dispositions promptly remitted to
Seller upon receipt by the Company and no value shall be attributed to such kicked-out loans
for purposes of determining Final Closing Tangible Net Assets.



 









 






     (b) For Auctioned BIT Mortgage Loans that are not sold and for those BIT Requirement
Loans not sold:




          (i) The value shall be the specified cash price of the firm bid, less an
estimate of the cost of kick-outs based on the Company’s actual experience over the prior 12
months on kick-out percentages, cure rates and severity of loss on disposition;
provided, that, with respect to any kicked-out loans, the Company shall have the
right to sell such kicked-out loans to Seller for cash in an amount equal to the amount of
such loans reflected on the Estimate Statement (it being understood that such sale will be
effected without any representations, warranties or indemnities from Purchaser, the Company
or the Subsidiaries) and the value attributed to such loans for purposes of determining the
value of the Final Closing Tangible Net Assets shall be the amount of cash paid to the
Company.


5. Residuals — Available for Sale and Held for Trade: Prior to Closing, the Company may
distribute to Parent or its Affiliates or sell to third parties all or a portion of the remaining
balance of existing Residuals—Available for Sale and Held for Trade (collectively, the
“Residuals”) and Retained Securitization Debt. To the extent any Residuals or Retained
Securitization Debt exist as at the Closing, “Residuals—Available for Sale and Held for Trade”
shall be determined as set forth below. Notwithstanding the foregoing, to the extent the book
value of the Residuals as at Closing is less than $25MM (the “Retained Residuals”), the
parties agree that the Retained Residuals shall be retained by Seller (it being understood that no
representations, warranties or indemnities shall be given from the Company or the Subsidiaries) and
no value shall be attributed to such Retained Residuals for purposes of Section 1.04.




For purposes of preparing the Estimate Statement:



The Residuals shall be valued in accordance with the provisions of Section 1.04 of the
Agreement.




For purposes of preparing the Final Statement:



As soon as practicable after the Closing Date, but in no event later than 75 days after the Closing
Date, Seller and the Company shall jointly cause (i) the Residuals other than the Residuals Under
Contract (the “Auctioned Residuals”) and (ii) the Retained Securitization Debt (the
“Auctioned Retained Securitization Debt”) to be auctioned through a process of obtaining
firm bids (with the same value date as determined by Purchaser and Seller) from the Bidders. The
auction of Auctioned Residuals and Auctioned Retained Securitization Debt shall be conducted on a
separate basis.



Seller will be permitted to set reserve prices on the Auctioned Residuals and Auctioned Retained
Securitization Debt, and if the highest price included in the firm bids for such Auctioned
Residuals or Auctioned Retained Securitization Debt, as applicable, does not exceed the applicable
reserve price (or if no firm bids are received in accordance with this Exhibit A), such
Auctioned Residuals or Auctioned Retained Securitization Debt, as the case may be, shall be
acquired by Seller prior to the expiration of the 75-day period for cash in an amount equal to the
amount of such Auctioned Residuals or Auctioned Retained Securitization Debt, as applicable,
reflected on the Estimate Statement (it being understood that such acquisition will be effected
without any representations, warranties or indemnities from Purchaser, the Company or the
Subsidiaries) and the value attributed to such Auctioned Residuals or Auctioned Retained
Securitization Debt, as the case may be, for purposes of determining the value of the Final Closing
Tangible Net Assets shall be the amount of cash received by the Company.




 









 







In conducting the auction of Auctioned Residuals, the Company shall provide (and shall so indicate
to the Bidders) that at least the Residual Minimum Amount will be sold to the highest Bidder of
such Auctioned Residuals as long as the price bid exceeds any reserve price for such Auctioned
Residuals. For purposes of this Exhibit A, the “Residual Minimum Amount” shall be
the greater of (i) 25% of the total Residuals present at Closing and (ii) $25MM book value of
Residuals.



In the event that the Auctioned Residuals existing at Closing have a book value of less than $25MM,
such Auctioned Residuals shall be acquired by Seller prior to the expiration of the 75-day period
for cash in an amount equal to the amount of such Auctioned Residuals reflected on the Estimate
Statement (it being understood that such acquisition will be effected without any representations,
warranties or indemnities from Purchaser, the Company or the Subsidiaries) and the value attributed
to such Auctioned Residuals for purposes of determining the value of the Final Closing Tangible Net
Assets shall be the amount of cash received by the Company.



Upon receipt of the firm bids, the Company may (as so directed by Purchaser), elect to sell some or
all of the Residuals and/or Auctioned Retained Securitization Debt, as applicable, to the relevant
winning Bidder or may elect to retain some or all of the Auctioned Residuals (subject to compliance
with its obligation to sell at least the Residual Minimum Amount) and/or Auctioned Retained
Securitization Debt, as applicable.



In either case, the Residuals—Available for Sale and Held for Trade shall be valued based on:




     (a) with respect to the Auctioned Residuals, the net aggregate value of the highest firm
bid(s) received for such Auctioned Residuals,



     (b) with respect to Residuals Under Contract, the cash purchase price for such Residuals under
the binding obligations in place as of the Closing pursuant to which such Residuals will be sold,
and



     (c) with respect to the Auctioned Retained Securitization Debt, the net aggregate value of the
highest firm bid(s) received for such Auctioned Retained Securitization Debt.


The term “Residuals Under Contract” means any Residuals (excluding, for the avoidance of
doubt, any noneconomic residuals to be retained by Seller) held on behalf of the Company or its
Subsidiaries in respect of which, as of the Closing Date, the Company or any of its Subsidiaries is
subject to a binding contractual obligation to sell all, but not less than all, of the Residuals
prior to the expiration of the 75-day period for a specified price on terms and conditions
consistent with industry practice (including customary representations, warranties and indemnities)
to an unaffiliated third party that is subject to a binding, unconditional contractual obligation
to purchase such Residuals, with the exposure under such representations, warranties and
indemnities taken into account for purposes of determining Repurchase Liability, below.



The parties agree that to the extent a breach or default occurs with respect to a Residual under
any Residuals Under Contract prior to the expiration of the 75-day period, that Residual (together
with any right to recover for breach of contract against the proposed purchaser under the
applicable contract) shall be transferred to Seller prior to the expiration of the 75-day period
(it being understood that such transfer will be effected without any representations, warranties or
indemnities from Purchaser, the Company or the Subsidiaries) and no value shall be attributed to
such transferred Residuals Under Contract for purposes of determining Final Closing Tangible Net
Assets.




 









 







The non-economic residuals owned by the Company and the Subsidiaries shall be distributed to Seller
prior to the Closing in accordance with Section 4.05.



6. Mortgage Servicing Rights.




For purposes of preparing the Estimate Statement:



The Company and Seller shall jointly obtain a valuation of the Company’s Eligible Servicing Rights
as provided in Section 1.04 and this Exhibit A. Each MSR Valuation Firm (as
defined in Section 1.04) shall provide two valuation ranges for the Eligible Servicing
Rights based on the MSR Tapes, one valuation range based on the Vector Graphs provided by one of
the Investment Banks and the other value based on the Vector Graphs provided by the other
Investment Bank.



The value of the Eligible Servicing Rights to be used by the Seller for purposes of the Estimate
Statement shall be equal to the average of: (a) the average of the midpoints of the valuation
ranges obtained from Countrywide Servicing Exchange (or, if a valuation range from Countrywide
Servicing Exchange cannot be obtained, from another reputable independent third-party appraiser
mutually acceptable to Seller and Purchaser) based on the MSR Tapes and Vector Graphs and (b) the
average of the midpoints of the valuation range obtained by MIAC (or if a valuation range from MIAC
cannot be obtained, from another reputable independent third party appraiser mutually acceptable to
Seller and Purchaser) based on the MSR Tapes and Vector Graphs.



Each of Countrywide and MIAC shall follow the parameters and assumptions set forth on Annex
C hereto.



The term “Eligible Servicing Rights” means all servicing rights arising under pooling and
servicing agreements, sale and servicing agreements, securitization servicing agreements, or
servicing agreements (or similar agreements) of the Company or any of its wholly-owned Subsidiaries
under which such Person has agreed to service pools of mortgage loans held by bankruptcy remote
entities, which mortgage loans have been assigned or pledged to a trustee to secure or otherwise
back mortgage-backed securities, excluding, in each case, servicing under loans that constitute
Beneficial Interests in Trust or Mortgage Loans Held for Sale.



The term “Vector Graphs” means the prepayment speed and default curve vector graphs that
are described in item (j) of Annex C to this Exhibit A and contemplated to be
provided to the MSR Valuation Firms by the Investment Banks pursuant to Section 1.04.




For purposes of preparing the Final Statement:



As soon as practicable after the Closing Date, but in any event no later than 75 days after the
Closing Date, the Company and Seller shall jointly obtain valuations of the Company’s Eligible
Servicing Rights as of the Closing Date from the MSR Valuation Firms in accordance with this
paragraph.



No later than 15 Business Days after the Closing, (a) the Investment Banks shall provide Vector
Graphs with information as of the Closing Date to the MSR Valuation Firms, with a copy to the
Company and Seller; and (b) the Company shall provide updated MSR Tapes with information as of the
Closing Date to the MSR Valuation Firms, with a copy to Seller.




 









 







No later than 20 Business Days after receipt of such updated Vector Graphs and updated MSR Tapes,
each MSR Valuation Firm shall provide two valuation ranges for the Eligible Servicing Rights based
on such updated MSR Tapes, one valuation range based on the updated Vector Graphs provided by one
of the Investment Banks and the other valuation range based on the updated Vector Graphs provided
by the other Investment Bank.



The value of the Eligible Servicing Rights to be used by Purchaser for purposes of the Final
Statement shall be equal to the average of: (a) the average of the midpoints of the valuation
ranges obtained from Countrywide Servicing Exchange (or, if a valuation range from Countrywide
Servicing Exchange cannot be obtained, from another reputable independent third-party appraiser
mutually acceptable to Seller and Purchaser) based on such updated MSR Tapes and updated Vector
Graphs and (b) the average of the midpoints of the valuation range obtained by MIAC (or if a
valuation range from MIAC cannot be obtained, from another reputable independent third party
appraiser mutually acceptable to Seller and Purchaser) based on the updated MSR Tapes and updated
Vector Graphs.



Each of Countrywide and MIAC follow the parameters and assumptions set forth on Annex C
hereto.



7. Property, Plant and Equipment: Valued at book value determined in accordance with GAAP with
impairment charges taken for the Restructuring Activities.



8. Servicing and Related Assets: Servicing and Related Assets shall be valued at book value,
determined in accordance with GAAP, with additional provisions recorded for the following asset
categories: (a) no assets will be recorded for Late Fee Income Receivables (Account 1809); (b) no
assets will be recorded, for any type of advance (excluding amounts disregarded as per item (a)
above), for individual securitizations or whole loan sales with less than 10% of the original
unpaid principal balance outstanding and where the total advances receivable is greater than 75% of
the total unpaid principal balance; and (c) no assets will be recorded for advances related to
Mortgage Loans Held for Sale or BIT Mortgage Loans; provided, that, in each case, (i) if
any servicing advances are uncollectible under GAAP for any reason, they shall be reflected at zero
and (ii) all advances related to delinquent loans (through REO process) shall be reflected at their
present value assuming collection twelve months later using a discount rate of LIBOR plus
50 basis points; provided, further, that for assets recorded as zero per items (a),
(b) and (c) above, any amounts collected by the Company or its affiliates subsequent to Closing in
respect of those assets shall be promptly remitted when received to Seller (and the Company shall
use commercially reasonable efforts to collect such amounts).



9. Mortgage Loans Held for Investment: To the extent the Company or any of its Subsidiaries owns
any loans that are classified as Held for Investment, such loans shall be valued on a loan-by-loan
basis at the lower of (a) amortized cost less any allowance for losses or (b) market value (based
on a firm bid).



10. Other Real Estate Owned: Other Real Estate Owned shall be valued at the lower of cost or
market value, on a property-by-property basis, with market value being determined based on the net
cash proceeds received from the applicable sale within 75 days after the Closing Date, or estimated
net cash proceeds for properties under contract to be sold within 75 days after the Closing Date,
and if not sold or under contract to be sold within such timeframe, from an independent appraisal
obtained within 75 days of the Closing Date by an independent appraisal firm mutually acceptable to
the Company and Seller.




 









 







11. Pipeline Mortgage Loans: As contemplated by Section 1.04, the Investment Banks shall
conduct, prior to Closing and after Closing, valuations of the mortgage loans which the Company has
committed to fund (taking into account applications in a manner consistent with the Company’s past
practices) but has not actually funded at Closing (the “Pipeline Mortgage Loans”). The
Pipeline Mortgage Loans shall be valued at the difference between (a) the estimated market value as
if the Pipeline Mortgage Loans had been funded and sold on a servicing-released basis, plus an
amount equal to 35 basis points of the par amount of the Pipeline Mortgage Loans and (b)
the sum of par plus an estimate of FAS 91 deferred expenses determined in accordance with GAAP
based on the Company’s actual experience for the 60-day period prior to Closing.




For purposes of determining the Pipeline Mortgage Loans entry for both the Estimate Statement
and the Final Statement:



The value of the Pipeline Mortgage Loans determined by the Investment Banks in accordance with
Section 1.04 and this Exhibit A shall be added to the value of any derivatives
identified by the Company as hedging the Pipeline Mortgage Loans, and this sum:




     (a) if positive, will be reflected on the Estimate Statement or the Final Statement, as
applicable, as zero; and



     (b) if negative, will be reflected on the Estimate Statement or the Final Statement, as
applicable, as a contra-asset as “Pipeline Mortgage Loans”.


The derivatives associated with the Pipeline Mortgage Loans will be removed from Other Assets
and/or Other Liabilities in calculating the book value of those assets.



12. Other Assets (excluding Other Real Estate Owned, Mortgage Loans Held for Investment and
Pipeline Mortgage Loans)4: valued at book value determined in accordance with GAAP with
impairment charges taken for the Restructuring Activities; provided, that, to the extent
any other asset is a marketable security or marketable financial instrument (each, an
“Additional Marketable Asset”), the Additional Marketable Asset shall be valued as provided
in the applicable bullet points below:




With respect to the Estimated Statement:



Approximately 30 Business Days prior to the anticipated Closing Date, the Company shall deliver to
Purchaser all material information within the Company’s possession or control necessary to
determine the Fair Market Value of the Additional Marketable Asset (or series of related Additional
Marketable Assets) as of a date that is approximately 30 Business Days prior to the anticipated
Closing Date and provide Purchaser five Business Days to review.



At the end of such five business day period, the Company shall deliver to each of the Investment
Banks such information (taking into account any reasonable comments thereon by Purchaser), with a
copy to Purchaser.



Each Investment Bank shall be instructed to deliver within 10 Business Days prior to the Closing
such Investment Bank’s written determination of the Fair Market Value of the Additional






 




			
	4	 	Any other mortgage loans on the balance sheet
shall be included in Auctioned Mortgage Loans Held for Sale and included in the
auction process discussed above under the heading “Mortgage Loans Held for
Sale, Net of Loss Reserves”.




 









 









Marketable Asset (or series of related Additional Marketable Assets) as of 10 Business Days prior
to the anticipated Closing, signed by a duly authorized officer of such Investment Bank.



The value of the Additional Marketable Asset (or series of related Additional Marketable Assets)
shall be equal to the average of the Fair Market Values provided by the Investment Banks pursuant
to this sentence.




With respect to the Final Statement:



As soon as practicable after the Closing Date, but in no event later than 75 days after the Closing
Date, Seller and the Company shall jointly cause the Additional Marketable Asset (or series of
related Additional Marketable Assets) to be auctioned for cash through a process of obtaining firm
bids (with the same value date as determined by Purchaser and Seller) from the Investment Banks.



Seller will be permitted to set reserve prices on the Additional Marketable Assets, and if the
highest price included in the firm bids for the Additional Marketable Assets does not exceed the
reserve price (or if no firm bids are received in accordance with this Exhibit A), such
Additional Marketable Assets shall be acquired by Seller prior to the expiration of the 75-day
period for cash in an amount equal to the amount of such Additional Marketable Assets reflected on
the Estimate Statement (it being understood that such acquisition will be effected without any
representations, warranties or indemnities from Purchaser, the Company or the Subsidiaries) and the
amount attributed to such Additional Marketable Assets for purposes of determining the value of the
Final Closing Tangible Net Assets shall be the amount of cash paid to the Company.



Upon receipt of the firm bids, the Company may (as so directed by Purchaser), elect to sell some or
all of the Additional Marketable Assets to the relevant winning Bidder(s) or may elect to retain
some or all of the Additional Marketable Assets.



The value of each Additional Marketable Asset (or series of related Additional Marketable Assets)
shall be based on the net aggregate value of the highest firm bid(s) received for such Additional
Marketable Asset (or series of related Additional Marketable Assets).



If a firm bid is not received for any Additional Marketable Asset then such Additional Marketable
Asset shall be acquired by Seller prior to the expiration of the 75-day period for cash in an
amount equal to the amount of such Additional Marketable Asset reflected on the Estimate Statement
(it being understood that such acquisition will be effected without any representations, warranties
or indemnities from Purchaser, the Company or the Subsidiaries) and the amount attributed to such
Additional Marketable Asset for purposes of determining the value of the Final Closing Tangible Net
Assets shall be the amount of cash paid to the Company.



13. Repurchase Liability: Repurchase reserves shall be calculated in accordance with GAAP and
shall take into account (without limitation) the exposure under the representations, warranties and
indemnities provided to any of the investment banks or other buyers as discussed in “Mortgage Loans
Held for Sale, Net of Loss Reserves” and “Beneficial Interest in Trust” above (including in respect
of Mortgage Loans under Contract and BIT Mortgage Loans under Contract, but excluding loans sold to
Seller after the Closing without any representations, warranties or indemnities) and Pipeline Loans
assuming customary representations, warranties and indemnities. Initial reserve level shall be set
based on historical repurchase rates, early payment default rates, severity and cure rates during
the 60-day period prior to the Closing Date. Adjustments to the initial reserve level are based
upon several factors including, but not limited to, estimated repurchases from whole loan sales or
warehouse based on contractual obligations


 









 






(with cure rates applied), early payment default rates, whole loan repurchases during the 60-day
period prior to the Closing Date, current loans on problem loan list (including warehouse and whole
loan repurchases) using estimated severity and losses based on loan sales during the 60-day period
prior to the Closing Date. Notwithstanding anything to the contrary herein, (i) to the extent any
mortgage loan has an early payment default (“EPD”) and to the extent that a loss reserve
had not already been established for such mortgage loan, an additional loss reserve shall be set
based on current severity rates during the 60-day period prior to the Closing Date and (ii) a
representation and warranty reserve shall be taken for any known or threatened exposure outstanding
as of the Closing and any known or threatened repurchase obligation shall be fully provisioned for.



14. Borrowings and Due to Warehouse: Principal amount and accrued interest and fees, calculated in
accordance with GAAP.



15. Other Liabilities (including Retention Payments): Valued at book value determined in
accordance with GAAP with impairment charges or accruals taken for the Restructuring Activities.
All retention payments required to be paid to any officer or employee of the Company and its
Subsidiaries on or after the Closing shall be included in “Other Liabilities” in accordance with
GAAP.



Notwithstanding anything to the contrary in this Exhibit A, (i) to the extent the
Investment Banks or Bidders attribute value to any assets as part of their Fair Market Valuations
or firm bids on any other asset set forth in this Exhibit A, such asset shall be classified
(without duplication) on the Estimate Statement or Final Statement, as applicable, together with
the asset that is the subject of the Fair Market Valuation or firm bid, as applicable, and valued
(without duplication) according to the asset that is the subject of the Fair Market Valuation or
firm bid and (ii) to the extent the Investment Banks or Bidders include any asset as part of their
Fair Market Valuations or firm bids on any other asset set forth in this Exhibit A and
attribute zero value to such Other Asset, or disregard such asset even though it relates to the
asset being valued, such asset shall be classified (without duplication) on the Estimate Statement
or Final Statement, as applicable, together with the asset that is the subject of the Fair Market
Valuation or firm bid, as applicable, and valued at zero for purposes of the Estimate Statement
and/or Final Statement, as applicable.





 










 





ANNEX A




List of Potential Investment Banks




Bear Stearns




Greenwich Capital Markets




Lehman Brothers




Morgan Stanley




Wachovia




Citigroup














 





Annex B




Potential Bidders on Loans and Residuals




Potential Bidders for Mortgage Loans Held for Sale




Bayview




Bear Stearns




C-BASS




Citibank




Deustche




GMAC




Goldman




Greenthal




Lehman Brothers




RFC




Truman Capital




UBS




Wachovia




 









 





Potential Bidders for BIT Mortgage Loans




Bank of America




Barclays




Bear Stearns




Carrington




Citibank




Credit Suisse




Deutsche Bank




Fortress




GMAC




Goldman Sachs




Greenwich




HSBC




JP Morgan/Chase




Lehman Brothers




Merrill Lynch




Morgan Stanley




RFC




Soc Gen




UBS




Wachovia




Winter Group




 









 





Potential Bidders for Residuals




Bear Stearns




Blue Wave (Carlisle)




Carrington




C-BASS




Citadel




Ellington




Fortress




HBK




Goldman




Greenwich




JP Morgan Arb




Lehman




Morgan Stanley




Stark




Wachovia




 









 





Annex C




Agreed Parameters/Assumptions 

to be Used in the Valuation of Eligible Servicing Rights



Each firm engaged to provide a valuation of the Eligible Servicing Rights shall be instructed to
determine the Value of the Eligible Servicing Rights as of the Closing Date. The term “Value”
shall mean, with respect to each Eligible Servicing Right (other than any Eligible Servicing Right
for which a Delinquency Master Servicer Termination Trigger has occurred (which shall be valued at
zero)), the fair market value that a willing buyer would pay to a willing seller for the actual
discounted economic cash-flows expected to be generated by the Eligible Servicing Right by the
Company based, to the extent possible, on the following parameters and assumptions:





	(a)	 	Cost Parameters: The fully loaded cost to service (including corporate overhead) broken out
by 30, 60, 90, foreclosure and REO and bankruptcy buckets based on actual historical
experience during the 4 month period prior to the Closing. Non-recurring extraordinary gain
or losses should be excluded from figures.






	(b)	 	Ancillary Income: Fixed dollar amount per loan per year, calculated using a historical
average for the 4 month period prior to the Closing of the Company’s total monthly income
earned and collected exclusive of late fees, converted to an annual number, divided by the
aggregate number of loans serviced during each monthly period. Late Fees will be expressed as
the current average late fee charge that is assessed as a percentage of the contractually
eligible monthly P&I payment, multiplied by the actual historical collection rate for the 4
month period prior to the Closing for 15/30/60/90 day delinquencies, and projected based on
expected delinquency behavior as determined by the chosen delinquency curves (i.e., 30/60/90
delinquent and foreclosure) and prepayment and default curves.






	(c)	 	Discount Rate: The higher of (a) 19% and (b) the midpoint of the discount rates that each of
the engaged firms would otherwise use in the ordinary course in connection with an independent
valuation of mortgage servicing rights similar to the Eligible Servicing Rights.






	(d)	 	Expense Inflation Rate: The higher of 2% or the Company’s actual annualized expense inflation
rate experienced in the prior 4 months for each cost parameter described above.






	(e)	 	Escrow Growth Rate: The difference between (a) the Company’s actual average T&I constant per
loan for the 4 month period prior to the Closing and (b) the Company’s actual average T&I
constant per loan for the same 4 month period during the prior calendar year.






	(f)	 	Escrow Earning Rate: The Company’s actual escrow earnings rate (expressed relative to 1 month
LIBOR) over the 12 month period prior to the Closing.






	(g)	 	Float Earnings Rate: The Company’s actual float earnings rate (expressed relative to 1 month
LIBOR) over the 12 month period prior to the Closing.





(h) Cost of Advance: 1-month LIBOR + 200bps





	(i)	 	Investor Remittance and Float Assumptions: Each of the Interest Shortfall on Prepayments,
Prepayment Interest Expense, Remittance Type and Advance Requirements shall be determined
based on the specific remittance provisions in the Company’s Pooling and Servicing Agreements.
The cutoff dates, remittance dates, and advance obligations shall be




 









 






	 	 	determined by the individual Pooling and Servicing Agreements, whereas each of the number of
days of P&I Float, Prepayment Float, Interest Shortfall on Prepayments, Prepayment Interest
Excess, assumed P&I collection dates and prepayment dates shall be based on an average of the
Company’s actual experience during the 4 month period prior to Closing subject to the applicable
collars set forth below:






	 	•	 	Days of P&I Float will be calculated based on the Company’s 4 month historical
average, subject to a minimum of 6 days and a maximum of 12 days.
	 
	 	•	 	Days Payoff Float will be calculated based on the Company’s 4 month historical
average, subject to a minimum of 17 days and a maximum of 25 days.
	 
	 	•	 	Days of Interest Shortfall will be calculated based on the Company’s 4 month
historical average, subject to a minimum of 5 days and a maximum of 15 days.






	(j)	 	Prepayment Speed and Default Curves: Based on vector graphs provided by the            Investment
Banks for the servicing portfolio. Prepayment curves to be broken out by product (at a
minimum fixed and ARM also including prepayment penalties and no prepayment penalties). To the
extent that the loans being considered are the same as the residuals valuation, to the fullest
extent reasonably practicable, the same vector graphs should be utilized as the ones utilized
by the Bidders providing firm bids for those assets.






	(k)	 	Any assumptions not included above: Should be determined by referring to recent actual
experience, except for forward-looking assumptions related to credit or prepayment
characteristics, which should be utilized using assumptions provided by the Investment Banks.






 










 




EXHIBIT B




The Earnout Methodologies





	•	 	On the Closing Date, the opening consolidated balance sheet of the
Company and its Subsidiaries shall be adjusted to reflect purchase
accounting adjustments required by U.S. GAAP.






	•	 	During the Calculation Period, the accounts of the Company and its
Subsidiaries will be recorded in accordance with U.S. GAAP,
subject to the following:






	 	•	 	For purposes of calculating “Net Income,” each of the following items will be
excluded from such calculation:






	 	(a)	 	any extraordinary or unusual charges incurred in connection with any
restructuring plans, including branch closures and related employee terminations,
incurred subsequent to the six-month anniversary of the Closing; provided,
however, that charges incurred after the six-month anniversary arising from
restructurings implemented prior to the six-month anniversary, including
obligations in respect of retention payments, shall be included,
	 
	 	(b)	 	Covered Losses for which the Seller has actually reimbursed the
Purchaser Indemnified Parties under the indemnifications provisions in the
Agreement,
	 
	 	(c)	 	board monitoring fees, reimbursements to board members for costs and
expenses of attending board meetings and any monitoring, management or other costs
or expenses of or payable to Purchaser or any of its Affiliates, but including
costs and expenses of any consultants affiliated with Cerberus Capital Management,
L.P. or any of its Affiliates to the extent retained by the Company or any of its
Subsidiaries on arm’s length terms,
	 
	 	(d)	 	any internal or external advisory, legal, and other similar transaction
expenses of Purchaser or its Affiliates (including the Company and the
Subsidiaries) directly arising from the Purchase or any Business Combination,
whether or not consummated,
	 
	 	(e)	 	losses and gains (including any write-offs or write-ups) resulting from
the sale of any assets of the Business to the extent the Person effecting such sale
is granted the right to repurchase such asset, and
	 
	 	(f)	 	any impairment charges taken or any income related to negative goodwill
created as of the Closing Date with respect to any of the assets of the Business.






	 	•	 	Neither the Company nor its Subsidiaries will elect to account for mortgage
loans held for sale at fair value or any other financial assets or liabilities at fair
value (that are not currently accounted for at fair value) as permitted under FAS 159
(“The Fair




 









 












Value Option for Financial Assets and Financial Liabilities Including an Amendment of
FASB Statement No. 115”).




	 	•	 	Residuals resulting from gain-on-sale transactions shall be accounted for as
“Available for Sale.”
	 
	 	•	 	An assumed tax rate of 38% shall be applied with respect to determining Net
Income.
	 
	 	•	 	A capital charge shall be applied to all Direct Capital in an amount equal to
the applicable interest rate or dividend rate associated therewith. The term
“Direct Capital” means capital specifically identifiable to the assets of the
Business’ origination platform or servicing platform of the Business (whether
on-balance sheet or off-balance sheet, such as warehouse facilities (including, during
the Stub Period, warehouse facilities of the Acquiring Party to the extent used for the
Business)).
	 
	 	•	 	Any third party debt incurred in respect of the Business (including, during the
Stub Period, third party debt incurred by any Acquiring Party in respect of the
Business that is the subject of the Sale Transaction) other than Direct Capital shall
be applied a capital charge in an amount equal to the applicable interest rate
(“Other Third Party Debt”).
	 
	 	•	 	A capital charge shall be applied to any Excess Capital during the Calculation
Period equal to 20% (on an annualized basis).






	 	•	 	The term “Excess Capital” means, with respect to any financial
period, the amount of capital (debt or equity) funded into the Business on or
after the Closing in existence for such period (other than Direct Capital or
Other Third Party Debt) less any repayments or returns of capital paid
to the applicable investors of such capital during such period, less
$400,000,000 (the “Excess Capital Threshold”), less the
Servicing Capital Amount, and less the Residuals Capital Amount.
	 
	 	•	 	To the extent Excess Capital is a negative number, no cost of capital shall
be applied.
	 
	 	•	 	The term “Servicing Capital Amount” means, with respect to any
financial period, the amount equal to:






	 	a.	 	the value of “Mortgage Servicing Rights”
reflected on the Final Statement and any Property, Plant & Equipment
related to the servicing platform, less
	 
	 	b.	 	the amount of debt available to be funded on
“Mortgage Servicing Rights” at Closing or within 60 days thereafter,
plus
	 
	 	c.	 	the value of “Servicing and Related Assets”
reflected on the Final Statement, less




 









 












	 	d.	 	the amount of debt available to be funded in
respect of servicer advances at Closing or within 60 days thereafter.






	 	•	 	The term “Residuals Capital Amount” means, with respect to any
financial period, the amount equal to:






	 	a.	 	the value of Final Residuals, less
	 
	 	b.	 	the amount of debt available to be funded on
Final Residuals at Closing or within 60 days thereafter.






	•	 	Notwithstanding anything to the contrary above or in Section 1.05, to the extent a
Business Combination occurs during the Calculation Period, then for purposes of the
calculation of “Net Income,” the following treatment shall be applied for the period from the
date of consummation of such Business Combination (the “Business Combination Closing
Date”) until the end of the Calculation Period (the “Stub Period”):






	 	•	 	In the case of a Sale Transaction involving all of the OOMC Branches, the term
“net income of the Company and its Subsidiaries” shall be deemed to be solely the net
income generated by subprime Loans originated by the OOMC Branches (taking into account
all expenses incurred at the OOMC Branch-level (including expenses arising out of
liabilities associated with such origination, such as litigation and regulatory
compliance expenses) and all Indirect Expenses).
	 
	 	•	 	In the case of a Sale Transaction involving less than all of the OOMC Branches,
the term “net income of the Company and its Subsidiaries” shall be deemed to
include the net income generated by subprime Loans originated by the Subject
Branches (taking into account all expenses incurred at the Subject Branch-level
(including all expenses arising out of liabilities associated with such origination,
such as litigation and regulatory compliance expenses) and the applicable amount of
Indirect Expenses in respect of such Subject Branches).
	 
	 	•	 	In the case of an Acquisition Transaction, the term “net income of the Company
and its Subsidiaries” shall be deemed to be solely the net income generated by subprime
Loans originated by the OOMC Branches (taking into account all expenses incurred at the
OOMC Branch-level (including all expenses arising out of liabilities associated with
such origination, such as litigation and regulatory compliance expenses) and all
Indirect Expenses).
	 
	 	•	 	All restructuring costs incurred in connection with such Business Combination
shall be disregarded.
	 
	 	•	 	All refinancing costs incurred in connection with such Business Combination
shall be disregarded.
	 
	 	•	 	When calculating Excess Capital in connection with any Sale Transaction, the
following definition shall be used:




 









 












	 	•	 	The term “Excess Capital” shall means, with respect to any financial
period, the amount equal to (i) the sum of (A) amount of capital (debt or
equity) funded into the Business on or after the Closing in existence for such
period (other than Direct Capital or Other Third Party Debt), plus (B)
any capital of the Acquiring Entity funded in respect of the Business of the
Subject Branches (other than Direct Capital or Other Third Party Debt), in each
case, less any repayments or returns of capital paid to the applicable
investors of such capital during such period, less (ii) $400,000,000
(the “Excess Capital Threshold”), less (iii) the Servicing
Capital Amount.






	 	•	 	The term “Indirect Expenses” shall mean all expenses attributable to
the operation of origination platform of the Business (other than those incurred at an
OOMC Branch-level basis), including, corporate general and administrative expenses.
Indirect Expenses shall be allocated for the Stub Period to each Subject Branch on a
pro rata basis based on the amount of subprime Loans generated by such Subject Branch
(on a UPB basis) during the 90-day period immediately prior to the Sale Transaction
Closing Date as compared to the amount of subprime Loans generated by all OOMC Branches
(on a UPB basis) during the 90-day period immediately prior to the Sale Transaction
Closing Date (such pro rata amount, the “Pro Rata Amount”); provided,
that if the Company’s fully-loaded cost to originate for the 60-day period prior to
Closing is less than 1.25% of its origination settlement, then the amount of Indirect
Expenses that shall be allocated during the Stub Period with respect to any Subject
Branch shall be the lower of (A) the applicable Pro Rata Amount and (b) the
actual amount of expenses attributable to the operation of such Subject Branch during
the Stub Period (other than those expenses incurred at the Subject Branch-level basis),
including corporate general and administrative expenses, allocated by the Acquiring
Party to the Subject Branches during the Stub Period.