Document:

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

         FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment"), dated
as of April 29, 2005, by and between AMITY ENTERTAINMENT, INC., a Delaware
corporation ("Purchaser"), and MAC FILMWORKS, INC., a Delaware corporation (the
"Seller").

                              W I T N E S S E T H:

         WHEREAS, the Purchaser and the Seller entered into that certain Asset
Purchase Agreement, dated as of March 18, 2005 (the "Purchase Agreement"),
pursuant to which the Purchaser agreed to purchase, and the Seller agreed to
sell, certain assets of the Seller, as more particularly described therein; and

         WHEREAS, the parties hereto have agreed to amend the Purchase Agreement
accordance with the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties hereby agree as follows:

         1. Definitions. Terms used but not defined herein shall have the
meanings assigned thereto in the Purchase Agreement.

         2. Amendments to Purchase Agreement.

                  (a) Section 1.05 shall be, and hereby is, amended and restated
         in its entirety to read as follows:

                  "Section 1.05. Purchase Price. The purchase price for the
                  Assets shall be an amount equal to one million six hundred
                  twenty thousand dollars ($1,600,000) (the "Purchase Price)."

                  (b) Section 1.06(a) shall be, and hereby is, amended and
         restated in its entirety to read as follows

                  "(a) to Seller, the Purchase Price less (i) the principal
                  amount of the Seller Notes, and (ii) the amounts paid to the
                  obligors under the Seller Obligations pursuant to Section
                  1.06(b) below (the "Closing Cash Consideration");"

                  (c) Section 1.06(c) shall be, and hereby is, amended and
         restated in its entirety to read as follows:

                  "(c) to Seller, a promissory note in a form to be mutually
                  agreed upon by Seller and Purchaser (the "First Seller Note")
                  in the amount of two hundred fifty thousand dollars ($250,000)
                  that will be secured by the Assets and due and payable on the
                  date that is twelve (12) months from the Closing Date"

<PAGE>

                  (d) A new Section 1.06(d) shall be added immediately following
         Section 1.06(c) and shall read as follows:

                  "(d) to Seller, a promissory note in a form to be mutually
                  agreed upon by Seller and Purchaser (the "Second Seller Note"
                  and, together with the First Seller Note, the "Seller Notes")
                  in the amount of two hundred fifty thousand dollars ($250,000)
                  that will be secured by the Assets and due and payable on the
                  date that is twenty four (24) months from the Closing Date"

                  (e) Section 2.02(a)(i) shall be amended by deleting the phrase
         "Seller Note" where it appears in such section and inserting the phrase
         "Seller Notes" in lieu thereof.

                  (f) Section 7.09 shall be amended and restated in its entirety
         as follows:

                  "Section 7.09.  Intentionally Omitted."

                  (g) The first sentence of Section 9.05 shall be amended by
         deleting the phrase "against the Seller Note" where it appears in such
         sentence and inserting the phrase "first against the First Seller Note
         if any amounts are then outstanding under such note, and then against
         the Second Seller Note if any amounts are then outstanding under such
         note" in lieu thereof.

                  (h) The penultimate sentence of Section 9.05 shall be amended
         by deleting the parenthetical "(on the dates and in the amounts set
         forth in the Seller Note)" where it appears in such section and
         inserting the parenthetical "(on the dates and in the amounts set forth
         in the applicable Seller Note)" in lieu thereof.

                  (i) The definition of "Seller Note" shall be deleted in its
         entirety and the following definition inserted in lieu thereof:

                  "Seller Notes" shall have the meaning set forth in Section
         1.06(d)"

                  (j) Schedule 3.06(a) shall be amended by deleting such
         schedule in its entirety and replacing it with the revised Schedule
         3.06(a) attached hereto as Exhibit A.

         3. Counterparts. This Amendment may be executed by the parties hereto
individually or in any combination, in one or more counterparts, each of which
shall be an original and all of which shall constitute one and the same
instrument.

         4. Purchase Agreement in Full Force and Effect. All of the provisions
of the Purchase Agreement shall remain in full force and effect from and after
the date hereof as amended hereby.

         5. References to Purchase Agreement. From and after the date hereof,
(i) all references in the Purchase Agreement to "this Agreement," "hereof,"
"herein," or similar terms, (ii) all references to the Purchase Agreement in
each agreement, instrument and other document executed or delivered in
connection with the Purchase Agreement, and (iii) all references to the Purchase
Agreement and all other related documents, shall mean and refer to the Purchase
Agreement as amended by this Amendment.

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.

                        AMITY ENTERTAINMENT, INC.

                        By: _________________________________
                            Name:
                            Title:

                        MAC FILMWORKS, INC.

                        By: _________________________________
                            Name:
                            Title:

<PAGE>

                                    EXHIBIT A

                                Schedule 3.06(a)

                                  See AttachedExecution
Copy

 

 

ASSET
PURCHASE AGREEMENT

 

 

BETWEEN

 

 

UNITED
FINANCIAL MORTGAGE CORP., 

an
Illinois corporation,

 

 

AND

 

 

AMPRO
MORTGAGE CORPORATION,

a
Delaware
corporation

 

 

Dated as
of May 4, 2005

 

 

 

TABLE
OF CONTENTS

 

	
      ARTICLE
      I
	 	
      DEFINITIONS;
      INTERPRETATION
	
      1

	 	 	 	 
	
      1.1
	 	
      Definitions
	
      1

	
      1.2
	 	
      General
      Interpretive Principles
	
      7

	 	 	 	 
	
      ARTICLE
      II
	 	
      ACQUISITION;
      PURCHASE PRICE
	
      8

	 	 	 	 
	
      2.1
	 	
      Acquisition;
      Assumption.
	
      8

	
      2.2
	 	
      Calculation
      of Purchase Price
	
      8

	
      2.3
	 	
      Payment
      of Purchase Price
	
      9

	
      2.4
	 	
      Pipeline
      Loan Adjustments
	
      9

	
      2.5
	 	
      Dispute
      Resolution
	
      9

	
      2.6
	 	
      IP
      Systems Sublicense
	
      9

	
      2.7
	 	
      Lease
      of Production Assets
	
      9

	 	 	 	 
	
      ARTICLE
      III
	 	
      CLOSING
      AND SETTLEMENT
	
      9

	 	 	 	 
	
      3.1
	 	
      Closing
	
      9

	
      3.2
	 	
      Conditions
      to the Obligations of Purchaser
	
      9

	
      3.3
	 	
      Conditions
      to the Obligations of Seller
	
      10

	
      3.4
	 	
      Conditions
      to the Obligations of the Parties
	
      11

	
      3.5
	 	
      Seller
      Effective Date Deliveries
	
      11

	
      3.6
	 	
      Purchaser
      Effective Date Deliveries
	
      12

	
      3.7
	 	
      Seller
      Closing Date Deliveries
	
      12

	
      3.8
	 	
      Purchaser
      Closing Date Deliveries
	
      13

	 	 	 	 
	
      ARTICLE
      IV
	 	
      REPRESENTATIONS
      AND WARRANTIES OF SELLER
	
      13

	 	 	 	 
	
      4.1
	 	
      Representations
      and Warranties of Seller
	
      13

	 	 	 	 
	
      ARTICLE
      V
	 	
      REPRESENTATIONS
      AND WARRANTIES OF PURCHASER
	
      20

	 	 	 	 
	
      5.1
	 	
      Representations
      and Warranties of Purchaser
	
      20

	 	 	 	 
	
      ARTICLE
      VI
	 	
      COVENANTS
	
      21

	 	 	 	 
	
      6.1
	 	
      Operation
      of the Acquired Division
	
      21

	
      6.2
	 	
      Cooperation
	
      22

	
      6.3
	 	
      Further
      Assurances
	
      22

	
      6.4
	 	
      Consents.
	
      22

	
      6.5
	 	
      Notification
	
      22

	
      6.6
	 	
      Access
      to Documents, Files, Records, Personnel, etc
	
      22

	
      6.7
	 	
      Seller’s
      Employees.
	
      23

	
      6.8
	 	
      Noncompetition.
	
      23

	
      6.9
	 	
      Seller
      Name
	
      24

	
      6.10
	 	
      WARN
      Legislation
	
      25

	
      6.11
	 	
      Mail
      and Other Communications Received After the Final Closing
    Date
	
      25

	
      6.12
	 	
      Notices
	
      25

	
      6.13
	 	
      Tax
      Matters.
	
      25

	
      6.14
	 	
      Compliance
      with Laws
	
      25

	
      6.15
	 	
      Operating
      Plan
	
      25

 

i

	
      ARTICLE
      VII
	 	
      ADDITIONAL
      AGREEMENTS
	
      25

	 	 	 	 
	
      7.1
	 	
      Production
      Payments
	
      25

	
      7.2
	 	
      Pipeline
      Expense Reimbursement
	
      26

	
      7.3
	 	
      Audit
	
      26

	
      7.4
	 	
      Dispute
      Resolution
	
      26

	
      7.5
	 	
      Premises.
	
      26

	
      7.6
	 	
      Expansion
      or Relocation of Leased Premises
	
      27

	
      7.7
	 	
      Press
      Releases
	
      27

	 	 	 	 
	
      ARTICLE
      VIII
	 	
      INDEMNIFICATION
	
      27

	 	 	 	 
	
      8.1
	 	
      Indemnification
      by Seller
	
      27

	
      8.2
	 	
      Indemnification
      by Purchaser
	
      28

	
      8.3
	 	
      Indemnification
      Procedures.
	
      28

	 	 	 	 
	
      ARTICLE
      IX
	 	
      TERMINATION
	
      30

	 	 	 	 
	
      9.1
	 	
      Termination
	
      30

	
      9.2
	 	
      Effect
      of Termination
	
      30

	
      9.3
	 	
      Expenses
	
      30

	
      9.4
	 	
      Survival
      of Agreement
	
      30

	 	 	 	 
	
      ARTICLE
      X
	 	
      MISCELLANEOUS
      PROVISIONS
	
      30

	 	 	 	 
	
      10.1
	 	
      Notices.
	
      30

	
      10.2
	 	
      Effective
      Time of Notice
	
      31

	
      10.3
	 	
      Entire
      Agreement; Amendment
	
      31

	
      10.4
	 	
      Binding
      Effect; Assignment
	
      31

	
      10.5
	 	
      Counterparts
	
      32

	
      10.6
	 	
      Exhibits
      and Schedules
	
      32

	
      10.7
	 	
      Governing
      Law
	
      32

	
      10.8
	 	
      No
      Third Party Benefit Intended
	
      32

	
      10.9
	 	
      No
      Waiver
	
      32

	
      10.10
	 	
      Time
	
      32

	
      10.11
	 	
      Construction
	
      32

	
      10.12
	 	
      Severability
	
      32

	
      10.13
	 	
      Venue
	
      32

	
      10.14
	 	
      Specific
      Performance
	
      32

	
      10.15
	 	
      Survivability
	
      33

	
      LIST
      OF EXHIBITS
	 
	 	 
	
      Exhibit
      A
	
      Correspondent
      Agreement

	
      Exhibit
      B
	
      Management
      Services Agreement

	
      Exhibit
      C
	
      Operating
      Plan

	 	 
	
      LIST
      OF SCHEDULES
	 
	 	 
	
      Schedule
      1.1(a)
	
      IP
      Systems

	
      Schedule
      1.1(b)
	
      Production
      Assets

	
      Schedule
      1.1(c)
	
      Production
      Payment

	
      Schedule
      1.1(d)
	
      Published
      Value

	
      Schedule
      1.1(e)
	
      Transition
      Period Adjustment

	
      Schedule
      1.1(f)
	
      WestWorks
      Loans

	
      Schedule
      2.1(b)
	
      Assumed
      Obligations

	
      Schedule
      3.2(i)
	
      Sublease
      Terms

 

ii

	
      Schedule
      4.1(d)
	
      Consents

	
      Schedule
      4.1(g)
	
      Litigation,
      Investigations, Regulatory Matters

	
      Schedule
      4.1(l)
	
      Pipeline
      Applications

	
      Schedule
      4.1(m)
	
      Leased
      Premises, Leases and Equipment Leases

	
      Schedule
      4.1(n)
	
      Contract
      Rights

	
      Schedule
      4.1(o)
	
      Financial
      Statements

	
      Schedule
      4.1(p)
	
      Intellectual
      Property

	
      Schedule
      4.1(q)
	
      Insurance

	
      Schedule
      4.1(t)
	
      Employee
      Matters

	
      Schedule
      4.1(v)
	
      Absence
      of Certain Changes

	
      Schedule
      4.1(w)
	
      Tax
      Matters

	
      Schedule
      6.7(a)
	
      Hired
      Employees

	
      Schedule
      6.8
	
      Non-Restricted
      Affiliates

	
      Schedule
      7.2
	
      Pipeline
      Expense Reimbursements

 

iii

 

 

ASSET
PURCHASE AGREEMENT

 

This
ASSET
PURCHASE AGREEMENT entered
into as of May 4, 2005, between AMPRO
MORTGAGE
CORPORATION, a
Delaware corporation (“Seller”), and
UNITED
FINANCIAL MORTGAGE CORP., an
Illinois corporation (“Purchaser”).

 

R
E
C I T A L S:

 

A. Seller is
a mortgage banking company that operates a division that engages in the business
of originating mortgage loans on a wholesale basis.

 

B. Seller
desires to sell and transfer to Purchaser, and Purchaser desires to purchase and
otherwise acquire from Seller, all right, title and interest in and to the
Production Assets (as hereinafter defined) in accordance with the terms and
subject to the conditions of this Agreement.

 

A
G
R E E M E N T S:

 

In
consideration of the mutual benefits to be derived from this Agreement and of
the representations, warranties, conditions and promises hereinafter contained,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Purchaser and Seller hereby agree as follows:

 

ARTICLE
I

DEFINITIONS;
INTERPRETATION

 

1.1  Definitions.
Throughout this Agreement, and any amendments hereto, whenever capitalized the
following terms shall have the meanings ascribed to them in this Article
I:

 

“Accrued
Compensation and Benefits”: All
amounts due and payable, or that have accrued with respect to the period, prior
to the Closing Date, to Seller’s employees under all incentive, bonus,
commission or other compensation arrangements or any Employee Benefit Plan
applicable to such employees, plus amounts that would have been payable by
Seller for taxes and other similar payments related thereto.

 

“Acquired
Division”: The
wholesale mortgage origination division of Seller that includes all of the
Production Assets, including all assets of, and functions and services provided
at or through the Loan Fulfillment Center.

 

“Affiliate”: Any
Person who directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified. For
purposes of this definition, the term “control” (including, with correlative
meaning, the terms “controlled by” and “under common control with”) shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Agencies” or
“Agency”: GNMA,
FNMA, FHLMC, HUD, FHA, VA, RHS and/or a State Agency, as
applicable.

 

“Agreement”: This
Asset Purchase Agreement (including all Exhibits and Schedules contemplated
herein), and all amendments hereof and supplements hereto.

 

“Asset
Payment Amount”: An
amount equal to the net book value of the Identified Assets on and as of the
Effective Date as determined in accordance with GAAP. The parties acknowledge
that as of March 31, 2005, the approximate net book value of the Identified
Assets was $1,041,886, and that such value shall be adjusted in accordance with
GAAP, including to reflect the depreciation of the Identified Assets through the
Effective Date. The estimated net book value of the Identified Assets as of the
Effective Date shall be calculated by Seller’s independent certified public
accountant as of the close of business on the fifth (5th) day
immediately preceding the Effective Date (using reasonable estimates where
actual amounts are not available) and a written calculation thereof in
reasonable detail shall be delivered to Purchaser on the third (3rd) day
immediately preceding the Effective Date (the “Estimated
Asset Payment Amount”). Such
calculation shall be subject to verification and approval prior to the Effective
Date by Purchaser. Within five (5) days after the end of the month in which the
Effective Date occurs, Seller shall deliver a written calculation of the actual
Asset Payment Amount as calculated by Seller’s independent certified public
accountant, which calculation shall be subject to verification and approval by
Purchaser no later than fourteen (14) days after receipt of such calculation.
Any dispute relating to the Asset Payment Amount shall be resolved in accordance
with Section
7.4 hereof. 

 

“Asset
Purchase”: The
series of transactions contemplated in this Agreement including and resulting in
the acquisition by Purchaser of the Acquired Division (including the purchase by
Purchaser of all of the Production Assets and the assumption by Purchaser of the
Assumed Obligations).

 

“Assumed
Obligations”: As
defined in Section
2.1(b).

 

“Business
Day”: Any
day other than a Saturday, Sunday, federal holiday or any other day on which
banking institutions in the State of Illinois are authorized or obligated by law
to be closed.

 

“Closing”: The
actions required to consummate the Asset Purchase, which shall take place as
provided in Article
II
hereof.

 

“Closing
Date”: As
defined in Section
3.1.

 

“Consent”: The
affirmative written consent or approval of any Person that is required to
consent to or approve the transfer to Purchaser by Seller of the Production
Assets at or after the Effective Date or the Closing Date, as applicable, the
conduct by Purchaser of business with the Production Assets at and after the
Effective Date or the Closing Date, as applicable, or the consummation by either
Seller or Purchaser of the transactions consummated hereby, which consents and
approvals shall be given without material adverse modification to the rights of,
and without cost or expense to, the lessee or the contracting party thereunder
(other than the costs and expenses (including without limitation professionals’
fees and expenses) incurred by such lessee or contracting party in reviewing the
Consent). 

 

“Contract
Rights”: Those
rights of Seller under agreements relating specifically to the Production Assets
(other than the Leases, the Equipment Leases and the Pipeline Applications),
including without limitation service contracts and data processing contracts.
The agreements giving rise to Contract Rights as of the relevant date are listed
on Schedule
4.1(n).

 

“Conventional
Conforming Loans”:
Mortgage Loans that are eligible for sale to FHLMC or FNMA in accordance with
their respective published guidelines.

 

“Correspondent
Agreement”: The
Correspondent Agreement in the form attached hereto as Exhibit
A.

 

“Delivery
Date”: As
defined in the definition of Pipeline Loan Difference.

 

“Effective
Date”: 11:59
p.m. West Coast Time on May 17, 2005.

 

“Eligible
Loan”: A
Mortgage Loan originated out of a Leased Premises and closed and funded during
the Production Period.

 

“Employee
Benefit Plans”: As
defined in Section
6.7(a).

 

2

“Employee-Related
Matters”: As
defined in Section
4.1(g).

 

“Estimated
Asset Payment Amount”: As
defined in the definition of Asset Payment Amount.

 

“Equipment
Leases”: All
leases for the use of any furniture, fixtures or equipment now located and used
in the Loan Fulfillment Center or any Leased Premises and otherwise related to
the Acquired Division. The Equipment Leases as of the relevant date are listed
on Schedule
4.1(m)-2.

 

“Exhibit”: An
exhibit attached hereto or delivered or to be delivered pursuant to this
Agreement.

 

“FHA”: The
Federal Housing Administration, or any successor thereof.

 

“FHLMC”: The
Federal Home Loan Mortgage Corporation, or any successor thereof.

 

“FNMA”: The
Federal National Mortgage Association, or any successor thereof. 

 

“GAAP”: U.S.
generally accepted accounting principles, as established by the Financial
Accounting Standards Board for use in the United States, consistently applied
and maintained throughout the period indicated.

 

“GNMA”: The
Government National Mortgage Association, or any successor thereof.

 

“Hazardous
Material”: As
defined in Section
4.1(s)(i).

 

“Hired
Employees”: As
defined in Section
6.7(a).

 

“HUD”: The
U.S. Department of Housing and Urban Development, or any successor
thereto.

 

“Identified
Assets”: The
Production Assets that are furniture, fixtures and equipment located at the
Leased Premises.

 

“Indemnified
Events”: The
events set forth in Article
VIII with
respect to which Losses are indemnified by a Party.

 

“Indemnified
Party”: A
Party that benefits from indemnification from the other Party pursuant to
Article
VIII.

 

"Indemnifying
Party": A
Party that is obligated to indemnify the other Party pursuant to Article
VIII.

 

“Insurer”: FHA,
VA, RHS or any private mortgage insurer that insures or guarantees all or any
portion of the risk of loss upon default by a Mortgagor under any Mortgage Loan
or any other insurer that provides policies of life, hazard, disability, title
or other insurance with respect to any of the Mortgage Loans or the collateral
securing a Mortgage Loan.

 

“Intellectual
Property”: All
(i) trademarks, trade names, service marks, trade dress, logos, and applications
and registrations therefor; (ii)  patents and applications and
registrations therefor, and patent disclosures and inventions;
(iii) copyrights, copyrightable works, and applications and registrations
therefor; (iv) computer software, data, documentation, and source code;
(v) trade secrets, proprietary and intellectual property, and as it relates
to the Acquired Division, research, business plans, product plans, products,
services, pricing information and policies, sales information, customer and
supplier lists, proposals, marketing information and plans, financial statements
and projections, budgets, litigation files, computer software, computer data,
computer documentation, object code, hardware configuration information,
developments, compositions, improvements, concepts, discoveries, inventions,
technical data, methods, systems, ideas, know-how, processes, formulas,
algorithms, technology, techniques, designs, drawings, specifications, plans,
models, engineering, devices, and equipment; (vi) goodwill;
(vii) Uniform Resource Locator addresses; (viii) all other intangible
property; and (ix) all tangible embodiments of any of the foregoing (in any
form or medium). 

 

3

“IP
Systems”: All
Intellectual Property constituting and relating to any and all
technology/systems of the Acquired Division, including: (i) the Empower Loan
Origination System; (ii) the Empower Middle-Tier Internet enabled solution;
(iii) the Intelli-Mortgage mortgage performance management system (Intelli-Mine
Data Warehouse); (iv) Lender E-Source Loan Library a/k/a ELF (Electronic Loan
Finder); (v) FICS Servicing (in accordance with Schedule
1.1(a); (vi)
Lason Imaging; (vii) Dexma Loan Pump; (viii) Cogent QA; (ix) the Seller’s
Intranet (known as “Notes and Deeds”); and (x) any and all interfaces and report
writers, either purchased or created, for any of the aforementioned, except
those IP Systems listed on Schedule
1.1(a).

 

“IP
Systems Payment Amount”: Four
Hundred Thousand Dollars ($400,000).

 

“IP
Systems Production Payment”: An
amount equal to Ten Dollars ($10) for each Mortgage Loan closed and funded by
Purchaser during the Production Period utilizing the EmpowerTM
Loan
Origination System.

 

“Investor”: FNMA,
FHLMC or GNMA, or any other Person having the beneficial interest in a Mortgage
Loan that is the subject of a Pipeline Application, or any purchaser or
prospective purchaser of a Mortgage Loan that is the subject of a Pipeline
Application.

 

“Leased
Premises”: The
locations referred to on attached Schedule
4.1(m) (or the
portions of such locations, as indicated on such Schedule) and leased by Seller
under the Leases as of the Closing Date. It is understood that Seller’s offices
and facilities (or portions of Seller’s offices and facilities) not referred to
on Schedule
4.1(m) will not
be considered “Leased Premises” and will not be acquired by Purchaser
hereunder.

 

“Leases”: The
real property leases listed on attached Schedule
4.1(m)-1.

 

“Liens”: As
defined in Section
2.1(a).

 

“Litigation”: As
defined in Section
4.1(g).

 

“Limitations”: As
defined in Section
4.1(b).

 

“Loan
Files”: All
documents, whether on hard copy, computer record, microfiche or any other
format, evidencing and pertaining or relating to the processing and origination
of the Pipeline Applications in Seller’s possession or reasonably available to
Seller, as the case may be, which shall include, in all cases, all documents in
Seller’s possession that are necessary to comply with or close a Mortgage Loan
in accordance with applicable Mortgage Loan Requirements. 

 

“Loan
Fulfillment Center”: The
loan fulfillment center located at 2133 W. Peoria Avenue, Suite 130, Phoenix,
Arizona 85029.

 

“Locked
Pipeline Applications”:
Pipeline Applications with respect to which Seller has committed to a specified
interest rate for a specified period of time. The parties acknowledge that
Schedule
4.1(l) includes
and identifies all Locked Pipeline Applications.

 

“Losses”: Any
claims, damages, liabilities, expenses, penalties, fines, forfeitures,
assessments, actions, causes of action and judgments of any kind or nature
whatsoever, including without limitation reasonable attorney’s fees and costs,
costs of investigation, defense, settlement and appeal, and
disbursements.

 

4

“Management
Services Agreement”: The
Management Services Agreement in the form attached hereto as Exhibit
B.

 

“Material
Adverse Effect”: An
effect that is or could reasonably be expected to
be
material and adverse to
the
condition (financial or otherwise), assets, properties, business, earnings or
results of operations of the
Acquired Division, as the
context might dictate, or that would reasonably be expected to
materially
and adversely affect the ability of Seller or Purchaser
to
consummate
the transactions contemplated in this Agreement.

 

“Mortgage”: The
mortgage, deed of trust, security deed and/or other instrument that creates a
first lien on real property which serves as collateral for a Note. 

 

“Mortgage
Loan”: A loan
made to a Mortgagor, evidenced by a Note, and secured by a Mortgage on a
one-to-four family residential real property.

 

“Mortgage
Loan Requirements”: The
(i) federal, state, local or foreign laws, statutes, rules, regulations,
ordinances, standards, requirements, administrative rulings, orders or processes
applicable to the processing, origination and servicing of the Pipeline
Applications, (ii) responsibilities and obligations set forth in any agreement
between Seller and an Agency, Investor or Insurer, and (iii) requirements of an
Investor, Agency or Insurer with respect to the processing or origination of the
Pipeline Applications.

 

“Mortgagor”: The
obligor(s) on a Note.

 

“Name”: The
name “AmPro Mortgage Corporation” and all derivations thereof.

 

“Non-Restricted
Affiliates”:
Seller’s institutional shareholders identified on Schedule
6.8 and
Seller’s directors designated by such institutional shareholders and identified
on Schedule
6.8.

 

“Non-Terminable
Leased Premises”: The
Leased Premises located at (i) 1860 Howe Ave., Suite 100, Sacramento,
California; and (ii) 13340 Treat Blvd., Walnut Creek, California.

 

“Note”: A
written promise to pay a sum of money at a stated interest rate, which rate may
be fixed or adjustable during the term of the obligation, executed by a
Mortgagor and secured by a Mortgage.

 

“Operating
Plan”: The
plan attached hereto as Exhibit
C setting
forth the manner in which the Parties have agreed to operate the Acquired
Division during the Transition Period.

 

“Parties”:
Purchaser and Seller. 

 

“Payment
Period”: Each
fiscal quarter of Purchaser in which any portion of the Production Period falls;
provided, however, that in the event an entire fiscal quarter of Purchaser does
not fall within the Production Period, only the portion of the Production Period
included within such fiscal quarter shall be part of the Payment Period. For
purposes hereof, the Purchaser’s fiscal quarters are: (i) the three-months
ending July 31; (ii) the three-months ending October 31; (iii) the three-months
ending January 31; and (iv) the three-months ending April 30.

 

“Permitted
Liens”: Liens
created by operation of law for the benefit of a federal, state or local
governmental taxing authority, including Liens for taxes not yet due and
payable.

 

5

“Person”: An
individual or individuals, or a partnership, joint venture, corporation, limited
liability company, unincorporated association, government (or any agency or
political subdivision thereof) or other entity.

 

“Pipeline
Applications”:
Applications for Mortgage Loans taken by approved brokers of Seller and entered
onto Seller’s pipeline tracking system prior to the Effective Date, which are
active and have not closed and funded before the close of business on the
Effective Date. The parties acknowledge that Schedule 4.1(l) includes
and identifies all Pipeline Applications.

 

“Pipeline
Expense Reimbursements”: As
defined in Section
7.2.

 

“Pipeline
Loan”: A
Mortgage Loan originated out of the Leased Premises and closed and funded after
the Effective Date substantially in accordance with the terms of the related
Locked Pipeline Application.

 

“Pipeline
Loan Difference”: With
respect to each Pipeline Loan, the difference (whether positive or negative)
between (i) the Published Value of such Pipeline Loan as of the Effective Date,
less (ii) the sum of the amount that Seller committed to pay for such Pipeline
Loan from the originating broker plus Seller’s markup for such Pipeline Loan,
such markup to be determined using Seller’s standard markup as of the date on
which such Pipeline Loan was locked. The Parties shall cooperate in calculating
the amount of the aggregate Pipeline Loan Difference for all Pipeline Loans. In
that regard, Purchaser shall deliver to Seller, at least five (5) days prior to
the Effective Date, a pro forma, non-binding calculation (the “Sample
Calculation”) of the
aggregate Pipeline Loan Difference, assuming that each of the Locked Pipeline
Applications existing as of the day immediately preceding the delivery date of
the Sample Calculation (the “Delivery
Date”) closed
and funded on the Delivery Date.

 

“Pipeline
Loan Schedule”: As
defined in Section
2.3.

 

“Premises” means
the Leased Premises and the Loan Fulfillment Center. 

 

“Production
Assets”: All of
Seller’s right, title and interest in and to the properties and assets and
rights of whatever kind and nature, real or personal, whether owned, leased or
licensed set forth on Schedule
1.1(b).

 

“Production
Payment”: The
payment described on Schedule
1.1(c).

 

“Production
Payment Rate”: The
payment rate described on Schedule
1.1(c).

 

“Production
Period”: The
thirty-six (36) month period beginning on the day following the Effective
Date.

 

“Published
Value”: The
market value of a Pipeline Loan as determined in accordance with the sources and
procedures reflected in Schedule
1.1(d).

 

“Purchase
Price”: The
amount payable by Purchaser to Seller as specified in Section 2.2 hereof
and subject to adjustment as provided in Sections
2.4 of this
Agreement.

 

“Purchaser”: As
defined in the preamble to this Agreement. 

 

“RHS”: The
Rural Housing Service of the U.S. Department of Agriculture, or any successor
thereto.

 

“Sample
Calculation”: As
defined in the definition of Pipeline Loan Difference.

 

“Schedule”: A
schedule attached hereto.

 

6

“Seller”: As
defined in the preamble to this Agreement. 

 

“Shortfall”: As
defined in Section
8.3(c).

 

“State
Agency”: Any
state agency with authority to (i) regulate the businesses of Purchaser or
Seller, as the case may be, including without limitation any state agency with
authority to determine the investment, origination, lending or servicing
requirements with regard to mortgage loans originated, purchased or serviced by
Purchaser or Seller, as the case may be, or (ii) originate, purchase, or service
mortgage loans, or otherwise promote mortgage lending, including without
limitation state and local housing finance authorities.

 

“Sublease”: As
defined in Section
3.2(i).

 

“Sub
Prime Loans”: Any
Mortgage Loan that would qualify as a sub prime loan under published guidelines
(in effect as of the date of this Agreement) of any of the following Mortgage
Loan purchasers: (i) Countrywide; (ii) HSBC; (iii) New Century; and (iv) Bear
Stearns.

 

“Transferred
Intellectual Property”: All
Production Assets that constitute Intellectual Property, including the IP
Systems, the Name and the other Intellectual Property identified on Schedule
1.1(b).

 

“Transition
Period”: The
period commencing on the Effective Date and ending on, and including, the
Closing Date, or, if earlier, the date on which this Agreement is
terminated.

 

“Transition
Period Adjustment”: The
adjustment as determined in accordance with the formula and procedures set forth
on Schedule
1.1(e).

 

“VA”: The
United States Department of Veterans Affairs, or any successor thereof.

 

“WARN”: As
defined in Section
6.10.

 

“WestWorks
Loans”:
Mortgage Loans of the type that the WestWorks division of Seller originates as
of the date of this Agreement and that are classified as sub prime Mortgage
Loans in accordance with WestWork’s guidelines set forth on Schedule
1.1(f).

 

1.2  General
Interpretive Principles. For
purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:

 

(a)  The use
of the singular form includes the plural, and the use of the plural form
includes the singular.

 

(b)  The use
of any gender herein shall be deemed to include the other gender.

 

(c)  The
captions used in this Agreement are inserted for convenience only and are in no
way intended to describe, interpret, define or limit the scope or content of
this Agreement or any provision hereof.

 

(d)  The words
“herein”, “hereof”, “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular provision. 

 

(e)  The term
“include” or “including” shall mean without limitation by reason of enumeration.

 

(f)  Each
reference to an “Article” of this
Agreement shall include all Sections of such Article. Similarly, each reference
to a Section shall include all subsections of such Section.

 

7

(g)  Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder.

 

(h)  References
to
a statute
shall refer to
the
statute and any successor statute, and to
all
regulations promulgated under or implementing the statute or successor, as in
effect at the relevant time.

 

(i)  Any
reference to
a
document or set of documents in this Agreement, and the
rights and obligations of the parties under any such documents, shall mean such
document or documents as amended from
time
to
time, and
any and all modifications, extensions, renewals, substitutions or replacements
thereof.

 

(j)  All
references to
dollars
($) shall mean United
States currency.

 

ARTICLE
II

ACQUISITION;
PURCHASE PRICE

 

2.1  Acquisition;
Assumption.

 

(a)  Production
Assets.

 

(i)  Upon the
terms and subject to the conditions of this Agreement, Seller shall sell,
transfer, assign and deliver the Production Assets (other than the Leases and
Equipment Leases) to Purchaser on the Effective Date, and Purchaser shall
purchase and accept the Production Assets (other than the Leases and Equipment
Leases) from Seller on the Effective Date.

 

(ii)   Upon the
terms and subject to the conditions of this Agreement, Seller shall sell,
transfer, assign and deliver the Leases and Equipment Leases to Purchaser on the
Closing Date, and Purchaser shall purchase and accept the Leases and Equipment
Leases from Seller on the Closing Date.

 

(iii)  Upon the
sale, transfer, assignment and delivery of any Production Assets hereunder, each
Production Asset shall be free and clear of all liens, encumbrances, security
interests, rights and charges (collectively, “Liens”) (other
than the Assumed Obligations). 

 

(b)  Assumed
Obligations. Upon
the terms and subject to the conditions of this Agreement, Seller shall assign
to Purchaser, and Purchaser shall accept and assume, only the liabilities and
obligations expressly set forth in Schedule 2.1(b) (the
“Assumed
Obligations”). Other
than the Assumed Obligations, Purchaser shall not assume, and shall not be
responsible or liable for, in any manner, in whole or in part, any liability,
obligation, repurchase obligation or contingency (each whether known or unknown)
of Seller,
including such liabilities, obligations, repurchase obligations and
contingencies arising from, in connection with, or relating to, any action or
transaction involving Seller or any approved broker of Seller or any Mortgage
Loan (without regard to whether such Mortgage Loan was funded or closed) prior
to the Closing Date. 

 

2.2  Calculation
of Purchase Price. In full
consideration for the purchase or other acquisition of the Production Assets and
upon the terms and subject to the conditions of this Agreement, Purchaser shall
pay to Seller, subject to adjustment as provided in Section
2.4 below,
the purchase price (the “Purchase
Price”), which
shall be calculated as follows:

 

(a)  The IP
Systems Payment Amount, PLUS

 

(b)  The Asset
Payment Amount, and PLUS or MINUS, as appropriate,

 

(c)  The
Transition Period Adjustment.

 

8

2.3  Payment
of Purchase Price. An
amount equal to the sum of the IP Systems Payment Amount plus the Estimated
Asset Payment Amount shall be paid by Purchaser to Seller on the Effective Date.
If the
Transition Period Adjustment is negative, Purchaser shall pay such amount to
Seller together with the Production Payment next due after the final
determination of the Transition Period Adjustment. If the Transition Period
Adjustment is positive, then Purchaser may setoff or deduct such amount from the
amount of any Production Payment due after the final determination of the
Transition Period Adjustment. If the
difference between the Asset Payment Amount less the Estimated Asset Payment
Amount is positive, Purchaser shall pay such difference to Seller together with
the Production Payment next due after the final determination of the Asset
Payment Amount. If the difference between the Asset Payment Amount less the
Estimated Asset Payment Amount is negative, then
Purchaser may setoff or deduct such difference from the amount of any Production
Payment due after the final determination of the Asset Payment
Amount. 

 

2.4  Pipeline
Loan Adjustments. The
Asset Payment Amount shall be adjusted with
respect to each Pipeline Loan that closes and funds within sixty (60) days after
the Effective Date in an amount equal to the Pipeline Loan Difference for any
such Pipeline Loan. Within
ninety (90) days after the Effective Date, Purchaser shall provide Seller with a
schedule (the “Pipeline
Loan Schedule”)
setting forth the calculation of the Pipeline Loan Difference. The Pipeline Loan
Schedule shall be consistent with the Sample Calculation in form and substance.
Purchaser will add or subtract, as applicable, the aggregate Pipeline Loan
Difference from the Asset Payment Amount and/or any Production Payment due after
delivery of the Pipeline Loan Schedule. Seller
shall have the right to retain a third party to verify Purchaser's calculations
made under this Section
2.4.
Purchaser
agrees to reasonably make available all information reasonably requested to
verify the calculations.

 

2.5  Dispute
Resolution. In the
event any dispute arises between the Parties with respect to Section 2.4, the
Parties shall attempt to resolve any such dispute in accordance with
Section
7.4.

 

2.6  IP
Systems Sublicense.
Effective upon Purchaser’s acquisition of the IP Systems from Seller in
accordance with this Agreement, Purchaser shall be deemed to have granted Seller
a non-exclusive, non-transferable, royalty-free sublicense to use all of the IP
Systems during the Transition Period. 

 

2.7  Lease
of Production Assets.
Effective upon Purchaser’s acquisition of the Production Assets (other than the
IP Systems, Leases and Equipment Leases) from Seller in accordance with this
Agreement, Purchaser shall be deemed to have leased such assets, on a rent free,
non-transferable basis, to Seller during the Transition Period.

 

ARTICLE
III

CLOSING
AND SETTLEMENT

 

3.1  Closing. Subject
to
all of
the terms and conditions of this Agreement, the
Closing
of the
Asset
Purchase shall
occur as promptly as possible following the Effective Date on a date that is
mutually agreed upon by the parties; provided, that, in the absence of an
agreement, the Closing
shall
occur on the fifth
(5th)
Business Day following
the date on which the conditions set forth in Section
3.2,
Section 3.3 and
Section
3.4 have
been satisfied or waived (the “Closing
Date”). The
Closing shall take place at the law offices of Barack
Ferrazzano, 333 West Wacker Drive,
Suite
2700, Chicago, Illinois, 60606,
at a time to
be
mutually agreed upon by the parties. The Asset
Purchase shall be
deemed effective at 11:59 p.m. West Coast Time on the Closing
Date.

 

3.2  Conditions
to
the
Obligations of Purchaser.
Notwithstanding any other provision of this Agreement, the
obligations of Purchaser
to
consummate
the Asset
Purchase are
subject to
the
following conditions precedent:

 

(a)  Each of
the representations and warranties made by Seller in this Agreement
shall be
and have been true and
correct in all respects as of the
date of this Agreement through and including on the Closing
Date.

 

9

(b)  Seller
shall
have performed in all material respects all of its obligations and shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement
to
be
performed by or complied with by Seller prior to
or at the
Closing
Date.

 

(c)  Except as
specifically contemplated herein, there shall not have been any action taken, or
any applicable law or regulation enacted, promulgated or issued or deemed
applicable to
the
Asset
Purchase that
would prohibit Purchaser’s
ownership or operation of all or a material portion of the Production Assets,
whether immediately at the Closing
Date or as of
some future date, whether specified or to
be
specified, or would compel Purchaser
to
dispose
of or hold separate all or a material portion of the Production Assets, whether
immediately at the Closing
Date or as of
some future date, whether specified or to
be
specified, or which would render Purchaser
or Seller
unable to
consummate
any aspect of the Asset
Purchase.

 

(d)  As of the
Closing
Date, there
shall not have been any change from
that
which was represented and warranted on the date of this Agreement pursuant
to
this
Agreement
and the
Schedules
provided
on the date of this Agreement that results in a Material
Adverse Effect.

 

(e)  No
Litigation shall have been instituted, made or threatened in writing by any
Person
relating
to
the
Asset
Purchase or the
validity or propriety of any aspect of the Asset
Purchase that
would make consummation of the Asset
Purchase inadvisable
in the reasonable opinion of Purchaser.

 

(f)  Purchaser
shall have received by the Closing Date all licenses, permits, franchises and
other authorizations, rights and privileges of governmental and regulatory
authorities, Agencies, Investors and Insurers, including any state mortgage
banking licenses, required to permit Purchaser to own the Production Assets and
to conduct the business of the Acquired Division. 

 

(g)  From the
date hereof
through the
Closing
Date, there
shall be and have been no change that would have or would reasonably be expected
to
have a
Material
Adverse Effect.

 

(h)  Purchaser
shall have entered into an employment agreement with Gary Plooster in form and
substance satisfactory to Purchaser.

 

(i)  Purchaser
and Seller shall have entered into a sublease with respect to the Loan
Fulfillment Center (the “Sublease”) in
form and substance satisfactory to Purchaser, which sublease shall include,
among other terms, the terms set forth in Schedule
3.2(i) of this
Agreement.

 

(j)  Seller
shall
have tendered for delivery all of the certificates, documents and other items
set forth in Section 3.7 of this
Agreement.

 

3.3  Conditions
to
the
Obligations of Seller.
Notwithstanding any other provision of this Agreement, the
obligations of Seller to
consummate
the Asset
Purchase are
subject to
the
following conditions precedent:

 

(a)  Each of
the representations and warranties made by Purchaser
in this
Agreement
shall be
and have been true and
correct in all respects as of the
date of this
Agreement through and including on the Closing
Date.

 

(b)  Purchaser
shall
have performed in all material respects all of its obligations and shall have
performed or complied in all material respects with all of the agreements and
covenants required by this Agreement
to
be
performed by or complied with by Purchaser
prior
to
or at the
Closing
Date.

 

(c)  Purchaser
shall
have tendered for delivery all of the certificates, documents and other items
set forth in
Section 3.8 of this
Agreement.

 

10

(d)  No
Litigation shall have been instituted, made or threatened in writing by any
Person relating to the Asset Purchase or the validity or propriety of any aspect
of the Asset Purchase that would make consummation of the Asset Purchase
inadvisable in the reasonable opinion of Seller.

 

(e)  Seller
shall have received by the Closing Date all licenses, permits, franchises and
other authorizations, rights and privileges of governmental and regulatory
authorities, Agencies, Investors and Insurers, including any state mortgage
banking licenses, required to permit Seller to sell the Production Assets to
Purchaser.

 

(f)  Purchaser
shall have offered employment to a sufficient number of employees working within
the Acquired Division so that Seller shall have no obligations under WARN
arising from the sale of the Acquired Division.

 

3.4  Conditions
to
the
Obligations of the Parties.
Notwithstanding any other provision of this Agreement, the
obligations of Purchaser
on the
one hand, and Seller on the other hand, to
consummate
the Asset
Purchase are
subject to
the
following conditions precedent:

 

(a)   No
preliminary or permanent injunction or other order by any federal or state court
that prevents the consummation of the Asset
Purchase shall
have been issued and shall remain in effect.

 

(b)  To the
extent the consummation of the Asset
Purchase requires
that Seller obtain the consent or waiver of any party to
any
material lease, license, or other contract or agreement that is a Production
Asset, such consent or waiver shall have been obtained.

 

3.5  Seller
Effective Date Deliveries. On the
Effective Date, Seller shall deliver to Purchaser:

 

(a)  A copy of
the resolutions of the board of directors and the stockholders of Seller
authorizing the execution and delivery of this Agreement and the consummation of
the Asset Purchase, certified by an appropriate officer of Seller;

 

(b)  Certificates
of incumbency of the officers of Seller dated as of the Effective
Date;

 

(c)  One or
more certificates signed by an authorized officer of Seller, dated as of the
Effective Date, to the effect that (i) each of Seller’s representations and
warranties made in Article
IV hereof
are true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the Effective Date and that all of the terms, covenants and
conditions of this Agreement required to be complied with and performed by
Seller at or prior to the Effective Date have been duly complied with and
performed in all material respects, and (ii) the resolutions of the board of
directors and stockholders of Seller delivered to Purchaser pursuant to this
Section have not
been amended, modified, annulled or revoked and are in full force and effect as
of the Effective Date;

 

(d)  A
certificate issued by the Secretary of State of the State of Delaware stating
that Seller is in good standing, which certificate is dated no earlier than ten
(10) Business Days prior to the Effective Date;

 

(e)  Bills of
Sale, assignments and other instruments of conveyance and transfer in form
reasonably satisfactory to Purchaser transferring to Purchaser the Production
Assets (other than the Leases and Equipment Leases), free and clear of all Liens
as of the Effective Date;

 

(f)  The
Correspondent Agreement executed by Seller; and 

 

(g)  The
Management Services Agreement executed by Seller.

 

11

3.6  Purchaser
Effective Date Deliveries. On the
Effective Date, Purchaser shall deliver to Seller: 

 

(a)  A copy of
the resolutions of the board of directors of Purchaser authorizing the execution
and delivery of this Agreement and the consummation of the Asset Purchase,
certified by or appropriate officer of Seller;

 

(b)  One or
more certificates signed by an authorized officer of Purchaser, dated as of the
Effective Date, to the effect that (i) each of Purchaser’s representations and
warranties made in Article
V hereof
are true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the Effective Date, (ii) all of the terms, covenants and
conditions of this Agreement required to be complied with and performed by
Purchaser at or prior to the Effective Date have been duly complied with and
performed in all material respects, and (iii) the resolutions of the board of
directors of Purchaser delivered to Seller by Purchaser pursuant to Section
3.6(a) have not
been amended, modified, annulled or revoked and are in full force and effect as
of the Effective Date; and

 

(c)  A
certificate issued by the Secretary of State of the State of Illinois stating
that Purchaser is in good standing, which certificate is dated no earlier than
ten (10) Business Days prior to the Effective Date; 

 

(d)  The
Correspondent Agreement executed by Purchaser; and

 

(e)  The
Management Services Agreement executed by Purchaser.

 

3.7  Seller
Closing Date Deliveries. On the
Closing Date, Seller shall deliver to Purchaser:

 

(a)  Certificates
of incumbency of the officers of Seller dated as of the Closing
Date;

 

(b)  One or
more certificates signed by an authorized officer of Seller, dated as of the
Closing Date, to the effect that (i) each of Seller’s representations and
warranties made in Article
IV hereof
are true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the Closing Date and that all of the terms, covenants and
conditions of this Agreement required to be complied with and performed by
Seller at or prior to the Closing Date have been duly complied with and
performed in all material respects, and (ii) the resolutions of the board of
directors and stockholders of Seller delivered to Purchaser pursuant to
Section
3.5(a) have not
been amended, modified, annulled or revoked and are in full force and effect as
of the Closing Date;

 

(c)  A
certificate issued by the Secretary of State of the State of Delaware stating
that Seller is in good standing, which certificate is dated no earlier than ten
(10) Business Days prior to the Closing Date;

 

(d)  The
original Loan Files related to the Pipeline Applications;

 

(e)  The
Sublease executed by Seller;

 

(f)  Bills of
Sale, assignments and other instruments of conveyance and transfer in form
reasonably satisfactory to Purchaser transferring to Purchaser the Leases and
Equipment Leases, free and clear of all Liens, as of the Closing Date;
and

 

(g)  Landlord
estoppel certificates from the landlord for each of the Premises in form and
substance reasonably satisfactory to Purchaser.

 

12

3.8  Purchaser
Closing Date Deliveries. On the
Closing Date, Purchaser shall deliver to Seller: 

 

(a)  One or
more certificates signed by an authorized officer of Purchaser, dated as of the
Closing Date, to the effect that (i) each of Purchaser’s representations and
warranties made in Article
V hereof
are true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the Closing Date, (ii) all of the terms, covenants and
conditions of this Agreement required to be complied with and performed by
Purchaser at or prior to the Closing Date have been duly complied with and
performed in all material respects, and (iii) the resolutions of the board of
directors of Purchaser delivered to Seller by Purchaser pursuant to Section
3.6(a) have not
been amended, modified, annulled or revoked and are in full force and effect as
of the Closing Date; 

 

(b)  A
certificate issued by the Secretary of State of the State of Illinois stating
that Purchaser is in good standing, which certificate is dated no earlier than
ten (10) Business Days prior to the Closing Date; and

 

(c)  The
Sublease executed by Purchaser.

 

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES OF SELLER

 

4.1  Representations
and Warranties of Seller. As an
inducement to Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller represents and warrants as follows (it
being acknowledged that each such representation and warranty is made to
Purchaser as of the date hereof, the Effective Date and the Closing Date, unless
otherwise expressly provided herein):

 

(a)  Organization
of Seller. Seller
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and is duly qualified and in good standing to
transact business in each jurisdiction in which such qualification is necessary,
except where the failure to be so qualified would not have a Material Adverse
Effect. 

 

(b)  Authority. Seller
has all requisite power, authority and capacity to execute and enter into this
Agreement and to perform the obligations required of Seller hereunder and under
the other documents, instruments and agreements required to be executed by
Seller pursuant hereto. The execution and delivery of this Agreement and all
documents, instruments and agreements required to be executed and delivered by
Seller pursuant hereto, and the consummation of the transactions contemplated
hereby and thereby, have each been duly and validly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes a valid and
legally binding agreement of Seller enforceable against Seller in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
conservatorship, receivership, moratorium and other laws affecting the rights of
creditors generally and subject to general principles of equity, including
without limitation those regarding the availability of specific
performance
(collectively, the “Limitations”). 

 

(c)  No
Conflicts. The
execution, delivery and performance of this Agreement by Seller, its compliance
with the terms hereof and consummation of the transactions contemplated hereby,
will not violate, conflict with, result in a breach of, give rise to any Lien or
any right of termination, cancellation or acceleration, constitute a default
under, be prohibited by or require any additional consent or approval (other
than the Consents specified on Schedule
4.1(d), which
will be obtained by Seller on or before the Effective Date) under (i) Seller’s
articles of incorporation or by-laws, (ii) any material contract, loan
agreement, indenture, mortgage or other undertaking to which Seller is a party
or by which Seller is bound or which affects the Production Assets, or (iii) any
law, rule, regulation, ordinance, order, injunction, judgment or decree
(including the Mortgage Loan Requirements) applicable to Seller or to the
Production Assets the effect of which violation or breach reasonably would be
expected to have a Material Adverse Effect upon Seller’s ability to comply with
its obligations under this Agreement or upon the business, operations or
financial condition of Seller. 

 

13

(d)  Consents. Except
as set forth on Schedule
4.1(d), there
is no requirement applicable to Seller to make any filing with, or to obtain any
permit, authorization, consent or approval of, any governmental or regulatory
authority, or any Agency, Investor or Insurer as a condition to the execution
and delivery by Seller of this Agreement and the consummation by Seller of the
transactions contemplated by this Agreement. 

 

(e)  Compliance
with Laws. Seller
has complied with, is not in default under and no act or omission has occurred
which reasonably could be expected to result in a violation of, any law,
ordinance, requirement, regulation, rule, judgment, decree or order applicable
to Seller, its operations, and employees (including without limitation the
Employee Benefits and Employee-Related Matters), the violation of which
reasonably would be expected to have a Material Adverse Effect. To Seller’s
knowledge, Seller has not engaged in any unfair labor practice, created a
hostile work environment, sexually harassed an employee or discriminated on the
basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices. With respect to Seller, there are no (A)
unfair labor practice or harassment charges or complaints or racial, color,
religious, sex, national origin, age or handicap discrimination charges or
complaints pending or, to the knowledge of Seller, threatened against Seller
before any governmental entity nor, to the knowledge of Seller, does any basis
therefor exist; or (B) existing or, to the knowledge of Seller, threatened labor
strikes, disputes, grievances, or controversies affecting Seller (as it relates
solely to the Acquired Division and the Production Assets), nor does any basis
therefor exist. 

 

(f)  Licenses,
Permits and Approvals. With
respect to the Acquired Division, Seller (i) has, and at all other relevant
times had, all material federal, state and local licenses, permits, franchises
and other authorizations, rights and privileges of governmental authorities,
Agencies, Investors and Insurers required to permit it to own its properties and
to conduct its business, including but not limited to any required state
mortgage banking and real estate licenses, except where such failure would not
reasonably be expected to result in a Material Adverse Effect, (ii) has not
received any notice that revocation is being considered with respect to any of
such required licenses, permits, or authorizations, (iii) is in compliance with
all and has not violated in any material respect such licenses, permits and
authorizations; and (iv) has timely filed all applications for renewal (on
substantially the same terms and conditions) of any required licenses, permits
and authorizations for which renewal applications must have been filed prior to
the Closing Date. There are no proceedings pending, or to the knowledge of
Seller, threatened, that could reasonably be expected to result in the
revocation, cancellation, modification, or suspension of any such required
licenses, permits or authorizations. Without limiting the generality of the
foregoing, Seller is an FHA approved mortgagee, a VA automatic lender, a FNMA
seller/servicer and a FHLMC seller/servicer, all in good standing and under no
material disability to participate in the program for which Seller has obtained
approval.

 

(g)  Litigation,
Investigations, Regulatory Matters. Except
as set forth on Schedule
4.1(g), there
is no claim, action, hearing, audit, defense, suit, litigation, set-off,
counterclaim, arbitration, proceeding or governmental or regulatory
investigation (collectively “Litigation”)
pending or, to Seller’s knowledge, threatened, or any order, injunction or
decree outstanding or, to the knowledge of Seller, threatened, that pertains to
or adversely affects (i) the Production Assets; (ii) the Acquired Division;
(iii) the Assumed Obligations or (iv) Seller’s or its Affiliates’ employee
benefit plans relating to any Hired Employee, including, without limitation, any
Litigation related to requirements associated with employment and employment
practices, terms and conditions of employment, overtime pay or other wage and
hour issues, failure to pay any form of compensation or employee benefit, race,
sex, age or other discrimination, harassment, or other employee-related matters
with respect to Hired Employees (such requirements, collectively, the
“Employee-Related
Matters”). To
Seller’s knowledge, there does not exist any fact or circumstance that would
reasonably be expected to give rise to any such Litigation, order, injunction or
decree. Seller is not a party to nor is it or any of the Production Assets
subject to any outstanding order, decree, agreement, memorandum of understanding
or similar supervisory arrangement with, or a commitment letter or similar
submission to, any federal, state, local or foreign governmental or regulatory
agency or authority charged with the supervision or regulation of mortgage
banking companies (including the Agencies).

 

14

(h)  Production
Assets. Except
for the Assumed Obligations, Seller owns the Production Assets free and clear of
all Liens except for Permitted Liens. Except for the Assumed Obligations, the
documents selling, assigning, conveying and otherwise transferring the
Production Assets will transfer the aforesaid items to Purchaser free and clear
of all Liens except for Permitted Liens. All
facilities, machinery, equipment, fixtures, vehicles and other properties that
are a part of the Production Assets acquired by Purchaser hereunder are in good
operating condition and repair, normal wear and tear excepted, are reasonably
fit and usable for the purposes for which they are being used. Immediately prior
to the Effective Date, Seller will own, and have legal rights to use as
currently used in its business, the Production Assets. All of the Production
Assets that are transferred and assigned by Seller to Purchaser on the Effective
Date and the Closing Date are sufficient to operate the business and affairs of
the Acquired Division in the ordinary course and consistent with the manner in
which it was conducted prior to the Effective Date and the Closing Date. All
such Production Assets have been used by Seller in all material respects in
accordance with all applicable license agreements and other requirements related
thereto. Seller is the owner of all right, title and interest in and to the
Name, free and clear of all Liens except for Permitted Liens, and has not
granted to any third party any right to license, sublicense or use the Name. The
Name is not involved in any Litigation, and no such action has been threatened
in writing or, to Seller’s knowledge, otherwise threatened with respect to the
Name. The Leased Premises are the only locations where Seller conducts wholesale
Mortgage Loan origination operations. Seller is not restricted from conducting
wholesale Mortgage Loan origination operations in any location by agreement,
court order or otherwise.

 

(i)  Mortgage
Loan Compliance. Seller
has complied in all material respects with all applicable Mortgage Loan
Requirements with respect to Seller’s operations and activities, including
without limitation the origination, processing, underwriting and credit approval
of the Pipeline Applications, such as, among others, (a) those laws relating to
real estate settlement procedures, consumer credit protection, truth in lending
laws, usury limitations, fair housing, transfers of servicing, collection
practices, equal credit opportunity and adjustable rate mortgages, and (b) the
handbooks and guides (including without limitation selling and servicing guides)
of and contracts with any Investor, except when such non-compliance would not
reasonably be expected to result in a Material Adverse Effect. Without limiting
the generality of the foregoing, the documentation in connection with the
origination, processing, underwriting and credit approval of the Pipeline
Applications satisfied all applicable Mortgage Loan Requirements in effect at
the time such Pipeline Applications were prepared and processed by Seller.

 

(j)  No
Default, Breach or Violation. To
Seller’s knowledge, there is no default, breach or violation existing under any
Pipeline Application, and no event known to Seller and not disclosed to
Purchaser which with the passage of time or with notice and the expiration of
any grace or cure period would constitute such default, breach or violation; and
Seller has not waived any such default, breach or violation.

 

(k)  Books
and Records; Loan Files. Seller
has kept and maintained books and records that are accurate in all material
respects in connection with the origination, processing, underwriting and credit
approval of the Pipeline Applications. The information contained in each Loan
File with respect to the Pipeline Applications, and other documents upon which
underwriters generally rely (such as verification of employment) are, in all
material respects, complete and accurate and are in compliance with all
applicable Mortgage Loan Requirements. 

 

(l)  Pipeline
Applications.
Schedule
4.1(l) will set
forth, as of the date hereof, the Effective Date and as of the Closing Date, the
name and address of each potential borrower who has submitted a Pipeline
Application for review, provided that the Pipeline Application is then in force
and has not resulted in a closed loan, the name of the originating broker
responsible for taking the Pipeline Application, the name of the intended
Investor, if any, the type of loan program and the rate which Seller has
committed to the related borrower, the expected loan amount, the fees Seller
expects to charge the broker or the borrower to close the underlying Mortgage
Loan, as applicable, and, if known, the closing date, and whether the Pipeline
Application has been approved by Seller and whether it constitutes a Locked
Pipeline Application. In the case of any of the Pipeline Applications that have
been approved by Seller, there are and will be no terms or conditions under the
reasonable control of Seller that will prevent Purchaser from timely making any
required redisclosures or otherwise complying with all applicable Mortgage Loan
Requirements, provided that Purchaser acts in accordance with normal mortgage
banking standards and procedures. Except as
reflected in the computer records and computer files of Seller, Seller has not
undertaken or agreed to any amendment, revision or modification of any Pipeline
Application. Any modification has been made in accordance with all applicable
Mortgage Loan Requirements.

 

15

(m)  Leases
and Equipment Leases.
Attached hereto as Schedules
4.1(m),
4.1(m)-1 and
4.1(m)-2 are
correct and complete lists of the Leased Premises and the Loan Fulfillment
Center, the Leases and Equipment Leases, respectively. Schedules
4.1(m)-1 and
4.1(m)-2 set
forth, as applicable, the name of the lessor, the property or equipment leased
or service provided, the lease rate or rent and the remaining term. True,
correct and complete copies of the Leases and the Equipment Leases have been
provided by Seller to Purchaser prior to the date hereof. With respect to each
such Lease and Equipment Lease:

 

(i)  The lease
agreement is a legal, valid, binding and enforceable obligation (subject to the
Limitations) of Seller and in full force and effect, and its transfer and
assignment to Purchaser hereunder will not change its terms (other than the
substitution of Purchaser’s name for Seller’s name as contracting party and
other than the substitution of Purchaser’s contact information for that of
Seller with respect to notice provisions) following the Closing Date;

 

(ii)  Neither
Seller (nor, to Seller’s knowledge, the other party to the lease agreement) is
in breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default on the part of Seller (or, to
Seller’s knowledge, on the part of the other party to the lease agreement) or
permit termination, modification or acceleration thereunder against Seller (or,
to Seller’s knowledge, against the other party to the lease agreement);
and

 

(iii)  Seller
has no dispute, and has no knowledge of any dispute by the other party to the
lease agreement, as to such lease agreement. There are no oral agreements in
effect as to such lease agreement. 

 

(iv)  Seller as
lessee has the right under the Leases and Equipment Leases to occupy, use,
possess and control all property leased under such Leases and Equipment Leases
as occupied, used, possessed and controlled by Seller on the date
hereof.

 

(n)  Contract
Rights.
Schedule
4.1(n) sets
forth a list of the agreements giving rise to the Contract Rights. True, correct
and complete copies of all such agreements have been made available by Seller to
Purchaser prior to the date hereof. With respect to each such
agreement: 

 

(i)  The
agreement is a legal, valid, binding and enforceable obligation (subject to the
Limitations) of Seller and in full force and effect, and its transfer and
assignment to Purchaser hereunder will not change its terms; 

 

(ii)  Neither
Seller (nor, to Seller’s knowledge, the other party to the agreement) is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default on the part of Seller (or, to
Seller’s knowledge, on the part of the other party to the agreement) or permit
termination, modification or acceleration thereunder against Seller (or, to
Seller’s knowledge, against the other party to the agreement); and 

 

(iii)  Seller
has no dispute, and has no knowledge of any dispute by the other party to the
agreement, as to such agreement. There are no oral agreements in effect as to
such agreement. 

 

16

(o)  Financial
Statements. Schedule 4.1(o) contains
true, correct and complete copies of the balance sheets of Seller as of December
31, 2004 and 2003, and the related statements of income for the years ended 2004
and 2003 (collectively, the “Financial
Statements”). The
Financial Statements are in accordance with the books and records of Seller,
have been prepared consistent with past practices, have been prepared in
accordance with GAAP and present fairly in all material respects the financial
position of Seller on the dates of such statements and the results of operations
for the periods covered. All reserves shown in the Financial Statements are
appropriate, reasonable and sufficient to provide for losses thereby
contemplated. Except
to the extent set forth in or provided for in the Financial Statements, and
except for current liabilities incurred in the ordinary course of business
consistent with past practices (and not materially different in type or amount),
the Acquired
Division
has no material liabilities or obligations of any nature, whether absolute,
contingent or otherwise, whether due or to become due, whether properly
reflected under cash basis accounting as a liability or a charge or reserve
against an asset or equity account, and whether the amount thereof is readily
ascertainable or not.

 

(p)  Intellectual
Property. To
Seller’s knowledge, Seller has all necessary Intellectual Property rights to use
all of the Transferred Intellectual Property as currently used in connection
with the Acquired Division. To Seller’s knowledge, the Transferred Intellectual
Property as currently used by Seller does not violate or infringe the
Intellectual Property or proprietary rights of any other Person. There has not
been any Litigation, and to Sellers' knowledge, no Litigation is pending or
threatened, against them concerning any claim that the Transferred Intellectual
Property infringes or violates the Intellectual Property rights of any other
Person, or that Seller has breached any Intellectual Property license. No claim
has been asserted in writing against Seller that any of the Intellectual
Property infringe or violate the Intellectual Property rights of any other
Person, or that Seller has breached any Intellectual Property license. To
Seller’s knowledge, there exists no event, condition or occurrence which, with
the giving of notice or lapse of time, or both, would constitute a material
breach by Seller, or to Sellers' knowledge, another Person, under any
Intellectual Property license related to the Transferred Intellectual Property.
No party to any Intellectual Property license related to the Transferred
Intellectual Property has given Seller notice of its intention to cancel,
terminate or fail to renew any such any Intellectual Property license related to
the Transferred Intellectual Property. To Sellers' knowledge, no Person is
infringing or violating any Intellectual Property license related to the
Transferred Intellectual Property. Schedule
4.1(p) contains
a complete and accurate list and summary description of all registered
copyrights owned by Seller that are part of the IP Systems, which registrations
are currently in compliance with all formal legal requirements, and to Sellers'
knowledge, are valid and enforceable. To Seller’s knowledge, the documentation
relating to the Transferred Intellectual Property is current, accurate and
sufficient in detail and content to identify and explain it and to allow its
full and proper use. Seller has registered the Name with the United States
Patent and Trademark Office and such registration is valid and enforceable. The
Name has not been and it is not involved as of the Effective Date in any
opposition or cancellation or any other type of Litigation challenging Seller’s
rights therein, and, to Seller’s knowledge, no such action is threatened with
respect to the Name. All Internet domain names used in connection with the
Acquired Division are subject to currently effective Internet domain name
registrations.

 

(q)  Insurance. Seller
maintains customary insurance policies with respect to the Production Assets and
the Acquired Division. Such policies are in full force and effect and all
premiums due thereon have been paid in full. Seller has complied in all material
respects with the provisions of such policies. A complete list of the insurance
policies maintained by Seller is set forth in Schedule
4.1(q). 

 

(r)  Statements
Made. None of
(i) the representations or warranties of Seller contained herein and (ii) the
information contained in Seller’s Schedules hereto is, as of the date hereof, or
will be, as of the Effective Date or the Closing Date, false or misleading in
any material respect or omits or will omit to state a fact herein or therein
required to be stated or necessary to make the statements herein or therein not
misleading in any material respect.

 

(s)  Environmental,
Health and Safety.

 

17

(i)  As to the
Loan Fulfillment Center and any real property that is the subject of any Lease,
and as to the period of time of Seller’s lease of such property, with respect to
such Premises, Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state or local
government (and all agencies thereof) concerning the environment, public health
and safety, and employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand or notice has been filed
or commenced against Seller or relating to the Premises alleging any failure to
comply with such laws or regulations. During the term of Seller’s lease of such
property, with respect to the Premises and to Seller’s knowledge, no pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or waste was
buried, stored (in violation of law), spilled, leaked, discharged, emitted or
released. Pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste shall be as those terms are identified and defined in the
comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, the Federal Water Pollution
Control Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substance Control Act of 1976, the Refuse Act of 1989, or the
Emergency Planning and community Right-to-Know Act of 1986 (each as amended), or
any other law or rule or regulation thereunder (hereinafter referred to as
“Hazardous
Material”). 

 

(ii)  As to any
predecessors in interest to the Loan Fulfillment Center or any real property
that is the subject of any Lease, to Seller’s knowledge, no Hazardous Material
has ever been buried, stored, spilled, leaked, discharged, emitted or released,
and no charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand or notice has been filed or commenced for failure to comply with
any laws or regulations concerning the environment, public health and safety,
including but not limited to those federal acts listed in the previous
subsection. 

 

(iii)  With
regard to the Loan Fulfillment Center and any real property that is the subject
of any Lease, there are no violations, in any material respect, of the Americans
With Disabilities Act.

 

(t)  Employee
Matters.
Schedule
4.1(t) sets
forth an accurate and complete list of (i) all information contained on Seller’s
employee census and payroll data report for each Hired Employee, (ii) the names
of all Hired Employees with whom Seller is a party to an employment,
compensation or other similar agreement (attached to Schedule
4.1(t) shall be
copies of all such agreements), and (iii) all severance and other payments that
have accrued or should have accrued as of the Closing Date for a Hired Employee
as a result of the termination of employment of any such Hired Employee or in
connection with the consummation of the transactions contemplated herein. Other
than as set forth on Schedule
6.7(a)-1, there
are no Accrued Compensation and Benefits for the Hired Employees. Seller has
satisfied or will have satisfied prior to the Closing Date all of its
obligations with respect to any sick leave or vacation leave that has accrued
during any period prior to the Closing Date. The information provided by Seller
in Schedule
4.1(t) and
Schedule
6.7(a)-1
shall be
true, correct and complete as of the date hereof, the Effective Date and the
Closing Date. Seller
does not have any oral agreements or arrangements with any of its employees or
approved brokers.

 

(u)  Unions. Seller
has never been a party to any agreement with any union, labor organization or
collective bargaining unit. No employees of Seller are represented by any union,
labor organization or collective bargaining unit. To the knowledge of Seller,
the employees of Seller have no intention to and have not threatened to organize
or join a union, labor organization or collective bargaining unit.

 

(v)  Absence
of Certain Changes. Except
as set forth in Schedule
4.1(v), since
December 31, 2004, Seller (with respect to the Acquired Division only) has
not: (i)
suffered any Material Adverse Effect; (ii) suffered any damage or destruction to
or loss of any assets (whether or not covered by insurance) that has adversely
affected, or could reasonably be expected to adversely affect, its business;
(iii) acquired or disposed of any assets except in the ordinary course of
business; (iv) waived any material rights or forgiven any material claims; (v)
lost, terminated or experienced any change in its relationship with any Hired
Employee, customer or supplier, which termination or change had a
Material Adverse Effect, or could reasonably be expected to have a Material
Adverse Effect, on its business or assets; (vi) entered into any material
agreement with any person or group, or modified or amended in any material
respect the terms of any such existing agreement except in the ordinary course
of business; (vii) entered into, adopted or amended any Employee Benefit Plan;
or (viii) entered into any other commitment or transaction or experienced any
other event that would reasonably be expected to have a Material Adverse Effect
on the condition (financial or otherwise), operations, assets, liabilities,
business of the Acquired Division or any of the Production Assets.

 

18

(w)  Tax
Matters. 

 

(i)  With
respect to the Acquired Division, all required foreign federal, state, local and
other tax returns, notices and reports (including, without limitation, income,
property, sales, use, franchise, capital stock, excise, added value, employees’
income withholding, social security and unemployment tax returns) of Seller have
been accurately prepared in all material respects and duly and timely filed, and
all foreign, federal, state, local and other taxes, interest, penalties and
additions to tax required to be paid with respect to the periods covered by such
returns have been paid, except for taxes being accrued and protested or not
being paid in good faith and disclosed in Schedule
4.1(w)(i). Seller
has not been delinquent in the payment of any tax, assessment or governmental
charge. 

 

(ii)  Seller
has not executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. No tax audit, action, suit,
proceeding, investigation or claim is now pending nor, to the knowledge of
Seller, threatened against Seller.

 

(iii)  Seller
has withheld or collected from each payment made to each of its employees
working in the Acquired Division, the amount of all taxes (including, but not
limited to, federal income taxes, Federal Insurance Contribution Act taxes and
Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and have paid the same to the proper tax receiving officers or
authorized depositories.

 

(iv)  There are
no Liens (other than Permitted Liens) for taxes upon any of the Production
Assets nor, to Seller’s knowledge, is any taxing authority in the process of
imposing Liens for taxes upon any of the Production Assets.

 

(x)  Certain
Payments. Neither
Seller (as it relates to the Acquired Division) nor any director, officer,
manager or employee of Seller (as it relates to the Acquired Division) has paid
or caused to be paid, directly or indirectly, in connection with the business of
Seller (as it relates to the Acquired Division): (i) to any government or agency
thereof or any agent of any supplier or customer any bribe, kick-back or other
similar payment; or (ii) any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).

 

(y)  No
Insolvency. After
giving effect to the transactions contemplated in this Agreement, including the
Asset Purchase, Seller’s assets would exceed its liabilities, all as determined
using GAAP. The Transaction will not render Seller unable to pay its debts as
they become due in the ordinary course of its operations. Seller would not
otherwise be insolvent after giving effect to the Asset Purchase.

 

(z)  Broker
Fees. Except
for fees and commissions that may be paid by Seller to Stratmor Group at or
prior to the Closing Date (for which Seller is solely responsible), neither
Seller nor any person acting on Seller’s behalf has (nor will it at any time
hereafter have) any liability to any broker, finder or agent or has agreed (nor
will it at any time hereafter agree) to pay any brokerage commission or
financial advisory fee with respect to the transactions contemplated by this
Agreement. 

 

19

ARTICLE
V

REPRESENTATIONS
AND WARRANTIES OF PURCHASER

 

5.1  Representations
and Warranties of Purchaser. As an
inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants as follows
(it being acknowledged that each such representation and warranty is made to
Seller as of the date hereof, the Effective Date and the Closing Date, except as
otherwise provided): 

 

(a)  Organization.
Purchaser is duly organized, validly existing and in good standing under the
laws of the State of Illinois Purchaser is duly qualified and in good standing
to transact business in each jurisdiction in which such qualification is
necessary, other than those jurisdictions where the failure to be so qualified
would not have a material adverse effect on the business, assets or financial
condition of Purchaser. 

 

(b)  Authority.
Purchaser has all requisite corporate power and authority and capacity to
execute and enter into this Agreement and to perform the obligations required of
it hereunder and under the other documents, instruments and agreements required
to be executed by Purchaser pursuant hereto. The execution and delivery of this
Agreement and all documents, instruments and agreements required to be executed
and delivered by Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby, and thereby, have each been duly and validly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement constitutes a valid and legally binding agreement of Purchaser
enforceable against Purchaser in accordance with its terms, subject to the
Limitations.

 

(c)  No
Conflicts. The
execution, delivery and performance of this Agreement by Purchaser, its
compliance with the terms hereof and the consummation of the transactions
contemplated hereby will not violate, conflict with, result in a breach of, give
rise to any right of termination, cancellation or acceleration, constitute a
default under, be prohibited by or require any additional consent or approval
under (i) Purchaser’s articles of incorporation or bylaws, (ii) any material
contract, loan agreement, indenture, mortgage or other undertaking to which it
is a party or by which it is bound or (iii) any law, rule, regulation,
ordinance, order, injunction or decree applicable to it the effect of which
violation or breach reasonably would be expected to have a material adverse
effect upon Purchaser’s ability to comply with its obligations under this
Agreement. 

 

(d)  Compliance
with Laws.
Purchaser is not in default under and has not violated any applicable law,
ordinance, requirement, regulation, rule or order applicable to its business or
properties, the violation of which reasonably would be expected to materially
and adversely affect Purchaser’s ability to comply with its obligations under
this Agreement. 

 

(e)  Consents. There
is no requirement applicable to Purchaser to make any filing with, or to obtain
any permit, authorization, consent or approval of, any governmental or
regulatory authority or any Agency or Insurer as a condition to the execution
and delivery by Purchaser of this Agreement and the consummation by Purchaser of
the transactions contemplated by this Agreement. 

 

(f)  Broker
Fees. Neither
Purchaser nor any Person acting on Purchaser’s behalf has (nor will it at any
time hereafter have) any liability to any broker, finder or agent or has agreed
(nor will it at any time hereafter agree) to pay any brokerage commission or
financial advisory fee with respect to the transactions contemplated by this
Agreement.

 

(g)  Litigation,
Investigations, etc. There
is no litigation, pending or, to Purchaser’s knowledge, threatened, or any
order, injunction or decree outstanding or, to the knowledge of Purchaser,
threatened, that pertains to or adversely affects or could reasonably be
expected to adversely affect the Purchaser’s ability to comply with its
obligations under this Agreement. 

 

20

(h)  Statements
Made. None of
(i) the representations or warranties of the Purchaser contained herein and (ii)
the information contained in Purchaser’s Schedules hereto, is, as of the date
hereof, or will be, as of the Effective Date or the Closing Date, false or
misleading in any material respect or omits or will omit to state a fact herein
or therein required to be stated or necessary to make the statements herein or
therein not misleading in any material respect.

 

(i)  Financial
Capability.
Purchaser has sufficient funds available to it to consummate the transactions
contemplated hereby.

 

ARTICLE
VI

COVENANTS

 

6.1  Operation
of the Acquired Division. From
the date hereof until the Closing Date, except (i) as contemplated by this
Agreement, (ii) in the ordinary course of business, (iii) as provided in the
Operating Plan or (iv) to the extent that Purchaser provides prior written
consent to do otherwise, which consent may not be unreasonably
withheld:

 

(a)  Seller
shall (i) maintain Seller’s corporate existence in good standing, (ii) maintain
the general character of the Acquired Division and conduct the Acquired Division
in a commercially reasonable manner consistent with past practice, (iii)
maintain proper business and accounting records relative to the Acquired
Division, (iv) use commercially reasonable efforts to preserve relationships
with customers, suppliers, Agencies, Investors and Insurers of the Acquired
Division, (v) maintain the Production Assets in good condition and repair,
ordinary wear and tear excepted, (vi) maintain procedures for protection of the
IP Systems, and (vii) maintain presently existing insurance coverages with
respect to the Production Assets and the Acquired Division.

 

(b)  Seller
shall not: (i) terminate or amend or modify the lease related to the Loan
Fulfillment Center or any Lease, Equipment Lease or Contract Right; (ii) enter
into or amend or renew any individual employment agreements with any Hired
Employee; (iii) grant any salary or wage increase or increase any employee
benefit for any Hired Employee (including incentive or bonus payments); (iv)
sell, transfer, assign or otherwise dispose of or encumber any of the Production
Assets; (v) cancel any debt or waive or compromise any claim or right relating
to the Acquired Division in one transaction or a series of related transactions
having a value in excess of $5,000; (vi) make any capital expenditure or
commitment relating to the Acquired Division in excess of (A) $5,000 per project
or related projects or (B) $10,000 in the aggregate other than expenditures
necessary to maintain in good repair existing assets; (vii) terminate, cancel or
amend any material insurance coverage maintained by Seller with respect to the
Production Assets or activities of the Acquired Division which is not replaced
by an adequate amount of insurance coverage at reasonable cost; (viii) merge or
consolidate with or into any other Person or permit any other Person to merge or
consolidate with or into it; (ix) transfer, mortgage, encumber or otherwise
dispose of any of the Pipeline Loans other than in the ordinary course of
business; (x) except for Mortgage Loans or commitments for Mortgage Loans that
have been previously approved by Seller prior to the Effective Date (a) or
acquire any Mortgage Loan or issue a commitment for any Mortgage Loan except for
Mortgage Loans and commitments that are made or acquired in the ordinary course
of business consistent with past practice and with an individual principal
balance of $3,000,000 or less; or (b) take any action that would result in any
discretionary releases of collateral or guarantees or otherwise restructure any
loan or commitment for any loan with a principal balance in excess of
$3,000,000; (xi) except as necessary in order to comply with Mortgage Loan
Requirements or the requirements of this Agreement or in response to competitive
or market conditions in order to preserve the value of its franchise, make any
material changes in its policies and practices with respect to (a) underwriting,
and originating of Mortgage Loans or (b) hedging the Pipeline Loans; (xii) make
any changes to its accounting methods, practices or policies, except as may be
required under law, rule, or GAAP, in each case as concurred in by Seller's
independent public accountant; (xiii) settle any action filed or otherwise
instituted against it, the Production Assets or the Acquired Division if such
settlement would contain any relief against the Production Assets or the
Acquired Division other than monetary damages; or (xiv) agree to do any of the
foregoing.

 

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6.2  Cooperation. Each of
the Parties shall use its reasonable best efforts to file and prosecute any
required regulatory applications and take other reasonable and appropriate
action to consummate the transactions contemplated by this Agreement as promptly
as possible. To the extent reasonably possible, the Parties shall cooperate with
and assist each other, as requested, in carrying out the purposes of this
Agreement and in connection with Purchaser’s filing and obtaining mortgage
banking licenses and approvals from FNMA, FHLMC, GNMA, HUD, VA, RHS (if desired)
and applicable state authorities, and they shall comply with all material laws
and Mortgage Loan Requirements in connection therewith. In all
cases where there is a conflict between the applicable laws and Mortgage Loan
Requirements and any provisions of this Agreement, the applicable laws and
Mortgage Loan Requirements shall take precedence.

 

6.3  Further
Assurances. Each
Party covenants and agrees with the other Party that it will, whenever and as
often as reasonably requested so to do by such other Party or its successors and
assigns, do, execute, acknowledge and deliver any and all such other and further
acts, assignments, limited powers of attorney, acknowledgments, acceptances and
any instruments of further assurance, approvals and consents as such other Party
or its successors and assigns, may hereinafter reasonably deem necessary or
proper in order to complete and perfect the conveyances contemplated
hereby. 

 

6.4  Consents.

 

(a)  General. Each of
Seller and Purchaser shall prepare and submit all documentation necessary to
obtain the Consents and regulatory licenses and approvals required to be
obtained by it. Purchaser and Seller shall cooperate in good faith in connection
with obtaining the Consents and such regulatory licenses and approvals. Each of
Seller and Purchaser shall use its reasonable efforts to obtain the Consents and
such regulatory licenses and approvals as soon as possible following the
Effective Date but in no event later than the Closing Date; provided, however,
that Purchaser shall use its commercially reasonable efforts to file by June 30,
2005 initial applications for regulatory licenses in each state in which it will
be required to obtain such a license to operate the Acquired Division as
operated on the date hereof. Purchaser and Seller shall take all commercially
reasonable steps to assure that Purchaser can, on and after the Effective Date
or the Closing Date, as applicable, control and operate the Production Assets
for which any required Consent has not been received prior to or on the Closing
Date such as through an appropriate sublease or other financial undertaking,
without material adverse modification to the rights of Purchaser that would have
accrued to Purchaser had such Consent been obtained and without cost or expense
to Purchaser (other than the costs and expenses incurred by Purchaser (including
professionals’ fees and expenses) in connection with the review of such
Consent). 

 

(b)  Form
of Consents. The
requests for Consent to, or notices of, the intended transfer to Purchaser of
the Production Assets, shall be in a form reasonably acceptable to Seller and
Purchaser. 

 

6.5  Notification. Each
Party shall give prompt notice to the other Party of (i) the occurrence or
failure to occur of any event or the discovery of any information, which
occurrence, failure or discovery would be likely to cause any representation or
warranty on its part contained in this Agreement to be untrue, inaccurate or
incomplete after the Effective Date or, in case of any representation or
warranty given as of a specific date, would be likely to cause any such
representation on its part contained in this Agreement to be untrue, inaccurate
or incomplete in any material respect as of such specific date and (ii) any
material failure of such Party to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder.

 

6.6  Access
to Documents, Files, Records, Personnel, etc.
Commencing as of the date hereof and continuing for a period of five (5) years
after the Closing Date, Seller will afford and cause to be afforded to Purchaser
(a) such access during normal business hours, upon prior notice, to such books
and records of Seller as Purchaser may reasonably request in connection with
matters relating to the Acquired Division or the Production Assets; and
(b) such assistance in locating and copying such books and records as
Purchaser may reasonably request. If Seller shall desire to destroy any such
books and records prior to the expiration of such five-year period, Seller
shall, prior to such destruction, give Purchaser a reasonable opportunity, at
its expense, to segregate, remove and store the books and records to be
destroyed, or any of them, as determined by Purchaser. Seller shall furnish
Purchaser such incidental information relating to the Production Assets, which
is reasonably available to Seller, supplementary to the information contained in
the documents and Schedules delivered pursuant hereto, as Purchaser may
reasonably request. 

 

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6.7  Seller’s
Employees.

 

(a)  Purchaser
shall deliver to Seller a list, within five (5) Business Days after the date
hereof on Schedule
6.7(a)-1, of
those employees to whom it intends to extend offers of employment (“Hired
Employees”).
Purchaser intends to extend offers of employment to the Hired Employees on
substantially the same terms, including compensation and benefits, as such
employees had with Seller immediately prior to the Effective Date; provided,
however, that with respect to benefits provided by Purchaser to the Hired
Employees, Purchaser shall only be obligated to provide such Hired Employees
with benefits substantially similar to those that Purchaser provides to its
similarly situated employees. Seller shall take no action that reasonably would
be expected to prevent any employee from accepting employment with Purchaser
(for instance, Seller shall not disparage Purchaser, the Acquired Division or
any Production Asset, their respective employees or management, or their
respective business plans). Purchaser will not assume and will have no
obligation with respect to any employee bonus, retirement, pension, profit
sharing, incentive, deferred compensation, medical, retiree medical, retiree
life, other insurance plan, employee severance, vacation or sick leave plan or
policy or other employee benefit plan of Seller of any kind (collectively,
“Employee
Benefit Plans”).
Purchaser shall have no responsibility for any Accrued Compensation and
Benefits. However, Purchaser agrees to use commercially reasonable efforts to
give to each employee of Seller who is hired by Purchaser on the Closing Date
credit for past service with Seller for purposes of participation in any
employee, retirement, pension, profit sharing, bonus, incentive, deferred
compensation, medical, vacation, sick leave or other employee benefit plan of
Purchaser in which such employee may be eligible to participate. Purchaser will
not be required to establish or adopt any employee benefit plan or policy to
accommodate Seller’s employees. Purchaser shall take commercially reasonable
steps to waive any applicable waiting period and pre-existing condition
exclusions related to any newly established 401(k) plan and health insurance
benefits and shall use commercially reasonable efforts to cause any Hired
Employee and their dependents to be eligible to participate in one of
Purchaser’s group health plans effective as of the Closing Date. Purchaser is
not, and shall not be deemed to be, a successor employer to Seller or any
affiliate thereof with respect to any employee benefit plan of Seller; and no
plan adopted or maintained by Purchaser after the Closing Date is or shall be
deemed to be a “successor plan” (as such term is defined in Section 4021(a) of
the Employee Retirement Income Security Act). 

 

(b)  Except as
specified in Section
6.7(a) above,
Seller shall pay for (and otherwise be responsible for) all other costs and
expenses relating to its employees (including, but not limited to, the Hired
Employees) if such cost or expense arises or accrues on or before the Closing
Date, including but not limited to salaries, commissions and other compensation,
severance payments, accrued vacation pay, unused sick leave, bonuses that are
payable for or relate to the period to and including the Closing Date, fringe
benefits, pension, health and other amounts. With respect to the Hired
Employees, Seller and its affiliates shall (i) fully vest all participants in
Seller’s 401(k) Plan and make whatever distributions to participants in those
plans as are permitted by law and (ii) provide notices concerning eligibility
for continuation health coverage under all applicable health plans pursuant to
Internal Revenue Code 4980B to eligible employees and family members and provide
such individuals with the opportunity to elect to continue their health
coverages under the applicable Seller or affiliate health and cafeteria plans,
but only as to those employees requiring such protections. 

 

6.8  Noncompetition. 

 

(a)  Each of
Seller, Ken Hickman and William Starkey covenants and agrees that it shall not
engage in, and shall cause Seller’s Affiliates (excluding the Non-Restricted
Affiliates) not to engage in, directly or indirectly, during the Production
Period and for a period of one (1) year thereafter, the wholesale mortgage
origination business in the states or other jurisdictions in which the
Production Assets are located (as of the Closing Date) or from which Mortgage
Loans were originated with the Production Assets on or prior to the Effective
Date, including but not limited to serving as a consultant, shareholder or
investor (other than as a passive investor in less than one percent (1%) of the
outstanding capital stock of a publicly traded corporation). Seller further
covenants and agrees that during the Production Period and for a period of one
(1) year thereafter, Seller will not, and Seller shall cause its Affiliates
(excluding the Non-Restricted Affiliates) not to, directly or indirectly, (i)
hire any employee of Purchaser (including Hired Employees), (ii) solicit or
induce, or attempt to solicit or induce, any employee of Purchaser (including
Hired Employees) to terminate its employment or (iii) solicit or induce, or
attempt to solicit or induce, any broker that has a business relationship with
Purchaser (including brokers that had a business relationship with Seller prior
to the Closing Date) to reduce the amount of business such broker conducts with
Purchaser or terminate such business relationship. Notwithstanding anything in
this Section
6.8 to the
contrary, this covenant shall not prohibit or limit Seller or its Affiliates
from engaging, currently or in the future, in the wholesale mortgage origination
of WestWorks Loans in any geographic location.

 

23

(b)  Each of
Seller, Ken Hickman and William Starkey hereby acknowledges that the geographic
boundaries, scope of prohibited activities and the time duration of the
provisions of this Section
6.8 are
reasonable and are no broader than are necessary to protect the legitimate
business interests of Purchaser.

 

(c)  Each of
Seller, Ken Hickman and William Starkey acknowledges that breach of any of the
provisions of this
Section 6.8 will
give rise to irreparable injury to Purchaser, inadequately compensable in
damages. Accordingly, Purchaser shall be entitled to seek injunctive relief to
prevent or cure breaches or threatened breaches of the provisions of this
Agreement and to seek specific performance of the terms and provisions hereof in
any court of competent jurisdiction, in addition to any other legal or equitable
remedies which may be available. Each of Seller, Ken Hickman, William Starkey
and Purchaser further acknowledges and agrees that the enforcement of a remedy
hereunder by way of injunction shall not prevent it from earning a reasonable
livelihood. Each of Seller, Ken Hickman, William Starkey and Purchaser further
acknowledges and agrees that the covenants contained herein are necessary for
the protection of Purchaser’s legitimate business interests and are reasonable
in scope and content.

 

(d)  Purchaser
and each of Seller, Ken Hickman and William Starkey agree and stipulate that the
agreements and covenants contained in this Section
6.8 are fair
and reasonable in light of all of the facts and circumstances of the
relationship between Purchaser and each of Seller, Ken Hickman and William
Starkey, however, Purchaser, Seller, Ken Hickman and William Starkey are aware
that in certain circumstances courts have refused to enforce certain agreements
not to compete. Therefore, in furtherance of, and not in derogation of the
provisions of
Section 6.8,
Purchaser, Seller, Ken Hickman and William Starkey agree that in the event a
court should decline to enforce the provisions of this Section
6.8, that
this Section
6.8 shall be
deemed to be modified or reformed to restrict the limitations on competition
with Purchaser to the maximum extent, as to time, geography and business scope,
which the court shall find enforceable; provided, however, in no event shall the
provisions of this Section
6.8 be
deemed to be more restrictive to Seller, Ken Hickman or William Starkey, as
applicable, than those contained herein.

 

6.9  Seller
Name.
Purchaser and Seller agree and acknowledge that Purchaser is acquiring all
rights to the Name and Seller shall have no right of any kind to use such Name
in any manner after the Closing Date except that Seller shall have the right to
continue using its manuals in existence as of the Effective Date. Immediately
following the Closing, Seller shall amend its articles of incorporation so as to
change its name to such other name which is not, in the judgment of Purchaser
acting reasonably, confusingly similar to the Name, and none of Seller or any of
its affiliates, successors or assigns shall thereafter use the Name or other
names acquired by Purchaser hereunder or names confusingly similar
thereto.

 

24

6.10  WARN
Legislation. Seller
shall provide to all of Seller’s employees all notices that would be required by
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section
2101-2109 (“WARN”) if
such employees had suffered or were deemed to have suffered an “employment
loss,” as defined in 29 U.S.C. Section 2101(a)(6) as a result of the
transactions contemplated by this Agreement. Except as expressly set forth in
this Agreement, Seller shall be responsible for any payments required to be made
to such employees as a result of the termination of their employment with
Seller. 

 

6.11  Mail
and Other Communications Received After the Final Closing
Date. On and
after the Closing Date, Purchaser may receive and open all mail or other
communications addressed to Seller which Purchaser reasonably believes relates
to the Production Assets and deal with the contents thereof to the extent such
mail or other communications and the contents thereof relate to the Production
Assets. If Seller receives mail or other communications which relate to the
Production Assets on or after the Closing Date, Seller will deliver or cause to
be delivered promptly to Purchaser such mail or other communications. If
Purchaser receives mail or other communications which do not relate to the
Production Assets on or after the Closing Date, Purchaser will deliver or cause
to be delivered promptly to Seller such mail or other communications. Each Party
agrees to keep and cause to be kept confidential the contents of any mail or
other communications that are misdirected to it.

 

6.12  Notices. Seller
shall comply with all provisions of any bulk sales, full or partial corporate
dissolution or other similar laws or regulations of any state that would protect
purchasers of assets, including any laws or regulations that provide for the
giving of notice to known or potential creditors or other interested
parties.

 

6.13  Tax
Matters.

 

(a)  Transfer
Taxes. All
stamp, transfer, excise, documentary, sales, use, registration and other such
taxes and fees (including any penalties and interest) incurred in connection
with this Agreement and the transactions contemplated hereby (collectively, the
"Transfer
Taxes") shall
be the sole obligation of Seller. 

 

(b)  Discharge
of Obligations. Seller
covenants and agrees, subsequent to the Closing, to satisfy and discharge all
obligations and liabilities of the Acquired Division, including the payment of
all taxes, which are not Assumed Obligations hereunder prior to the time at
which any of such obligations or liabilities could in any way result in or give
rise to a claim against the Production Assets or the Purchaser, result in the
imposition of any Lien on any of the Production Assets, or adversely affect the
Purchaser’s title to or use of any of the Production Assets.

 

6.14  Compliance
with Laws. During
the sixty (60) day period following the Closing Date, Purchaser shall, with
respect to the Pipeline Loans, comply with all federal, state, local or foreign
laws, statutes, rules, regulations, ordinances, standards, requirements,
administrative rulings, orders or processes applicable to the processing and
origination of Pipeline Loans.

 

6.15  Operating
Plan. Seller
and Purchaser shall comply with the Operating Plan in accordance with its
terms. 

 

ARTICLE
VII

ADDITIONAL
AGREEMENTS

 

7.1  Production
Payments. No
later than thirty (30) days after the end of each Payment Period, Purchaser
shall pay to Seller an amount equal to the Production Payment and the IP Systems
Production Payment for such Payment Period, subject to any permissible setoffs
or deductions; provided, however, that with respect to each Payment Period
ending prior to the Closing Date, the Production Payment and the IP Systems
Payment for such period shall be payable no earlier than the Closing Date;
provided, further, however, that, with respect to the last Payment Period, the
Production Payment and the IP Systems Payment for such period shall be made
within thirty (30) days of the end of Purchaser’s fiscal quarter in which such
Payment Period falls. Together with the Production Payment and the IP Systems
Production Payment for each Payment Period, Purchaser shall deliver a schedule
to Seller identifying the Mortgage Loans with respect to which the Production
Payment and the IP Systems Production Payment was made.

 

25

7.2  Pipeline
Expense Reimbursement. With
respect to each Pipeline Loan funded and closed by Purchaser within sixty (60)
days after the Effective Date, Purchaser shall reimburse Seller in the amounts
set forth in Schedule
7.2 as
payment for Seller’s reasonable and necessary expenses incurred in connection
with such Pipeline Loan (the “Pipeline
Expense Reimbursements”).
Within thirty (30) days after the end of such sixty (60) day period Purchaser
and Seller shall jointly prepare and agree upon a schedule identifying the
Pipeline Loans funded and closed within such sixty (60) day period and the
corresponding Pipeline Expense Reimbursement for such Pipeline Loan.
Purchaser shall pay to Seller the aggregate amount of such Pipeline Expense
Reimbursements within five (5) Business Days after the aggregate amount of the
Pipeline Expense Reimbursements has been finally determined, but in no event
shall Purchaser be obligated to pay such amounts prior to the Closing
Date.

 

7.3  Audit. During
the Production Period and for a period of one (1) year thereafter, Seller shall
have the right to inspect and audit (at Seller's expense) Purchaser's records
and financial information relating to any payments made or not made pursuant to
Article
VII. 

 

7.4  Dispute
Resolution. The
following procedures shall govern any dispute relating to the amount of any
payments required to be made pursuant to Article
VII or any
dispute that pursuant to the express provisions of this Agreement is subject to
the requirements of this Section
7.4. The
disputing Party shall deliver written notice to the other Party identifying the
nature of the dispute. After delivery of such notice, the Parties shall use
their commercially reasonable good faith efforts to resolve such dispute. If no
resolution has been reached within thirty (30) days from the date the disputing
Party delivers written notice to the other Party, the Parties agree that they
shall use their commercially reasonable good faith efforts to resolve such
dispute with the assistance of a mutually acceptable mediator. If a mutually
acceptable mediator cannot be identified within ten (10) days or if no
resolution has been reached within thirty (30) days after the start of such
mediation, the Parties agree that they shall resolve the dispute by an
arbitration administered by the American Arbitration Association in accordance
with the provisions of its Commercial Arbitration Rules. The decision of the
arbitrator shall be final, binding and non-appealable on the Parties for all
purposes and such decision shall be entered in either the state or federal court
having jurisdiction in the city in which the arbitration occurs. Any
mediation or arbitration undertaken pursuant to this Section
7.4 shall
take place in Chicago, Illinois.

 

7.5  Premises. 

 

(a)  Except as
otherwise set forth herein, after the Closing Date, Purchaser shall have the
right to operate the operations at the Leased Premises and the Loan Fulfillment
Center as it deems appropriate in its sole discretion. Notwithstanding the
foregoing, Purchaser shall not unreasonably cease operations at a Leased
Premises, except under the circumstances described in Section
7.5(c). The
Parties acknowledge that it shall not be deemed unreasonable for Purchaser to
cease operations at a Leased Premises in the event that the profitability or
anticipated profitability of the operations related to the Leased Premises are
not satisfactory to Purchaser.

 

(b)  During
the portion of the Production Period after the Closing Date, Purchaser shall
provide pricing and product programs for Mortgage Loans to the wholesale
operations at the Leased Premises similar to the pricing and product programs
for Mortgage Loans that Purchaser provides to its other wholesale operation
offices. If a Leased Premises is located within thirty (30) miles of another
office of Purchaser’s wholesale division, then the wholesale operations located
at such Leased Premises shall have access to equivalent pricing and loan
programs for Mortgage Loans to which the other office of Purchaser’s wholesale
division has. 

 

(c)  With
respect to any of the Non-Terminable Leased Premises, if during the eighteen
(18) month period following the Closing Date, (i) more than half of the
employees that were working at a Non-Terminable Leased Premises as of the
Closing Date cease working for Purchaser at such Non-Terminable Leased Premises
and (ii) Purchaser ceases conducting wholesale mortgage operations at such
Non-Terminable Leased Premises, then Seller shall be obligated to pay any and
all costs and expenses incurred by Purchaser in subleasing such Non-Terminable
Leased Premises (including the difference between rental payments received by
Purchaser and retail payments payable by Purchaser) or terminating the Lease for
such Non-Terminable Leased Premises. Purchaser may setoff or deduct any such
amounts from any Production Payments payable after Purchaser ceases wholesale
mortgage operations in such Non-Terminable Leased Premises.

 

26

(d)  With
respect to the Lease for the Leased Premise located at 15851 Dallas Parkway,
Addison, Texas, in the event Purchaser terminates such Lease, Seller shall
reimburse Purchaser for fifty percent (50%) of the amount of the termination
fees and other termination-related fees paid or incurred by Purchaser in
connection with the termination of such Lease.

 

7.6  Expansion
or Relocation of Leased Premises. The
Parties acknowledge that if Purchaser expands the operations at any Leased
Premises (or any premises to which such operations have been relocated), Seller
shall be entitled to receive Production Payments with respect to the entire
expanded business generated at the expanded premises. The Parties further
acknowledge that if Purchaser relocates the operations of any Leased Premises to
a new location, Seller shall be entitled to receive Production Payments with
respect to the operations that are relocated.

 

7.7  Press
Releases.
Purchaser
and
Seller shall coordinate all publicity relating to
any
aspect of the Asset
Purchase and,
except as otherwise required by applicable
laws and regulations, neither
party shall issue any press release, publicity statement or other public notice
relating to
this
Agreement or any aspect of the Asset
Purchase without
obtaining the prior consent of the other, which consent shall not be
unreasonably withheld. 

 

ARTICLE
VIII

INDEMNIFICATION

 

8.1  Indemnification
by Seller. Upon
the terms and subject to the conditions hereof, Seller shall indemnify and hold
Purchaser and its officers, directors, employees, agents and Affiliates harmless
against and in respect of, and shall reimburse such Indemnified Party for, any
and all Losses suffered or incurred by such Indemnified Party arising out of,
resulting from or relating to: 

 

(a)  Any
breach or non-performance by Seller of any representation, warranty, covenant,
obligation, requirement, agreement or undertaking of Seller contained in this
Agreement, in any agreement entered into by Seller in connection with this
Agreement, in any Schedule or Exhibit, or in any written statement or
certificate furnished by Seller pursuant to this Agreement. 

 

(b)  Litigation
pending or threatened that results from events occurring prior to the Closing
Date in connection with Seller or its assets or operations (excluding Assumed
Obligations).

 

(c)  Litigation
pending or threatened that relates to Seller’s assets or liabilities other than
the Production Assets or Assumed Obligations.

 

(d)  Errors,
omissions or fraud in the processing on or prior to the Closing Date of any of
the Pipeline Applications on the part of Seller. 

 

(e)  Any
action or failure to act by Seller or an Affiliate of Seller on or before the
Closing Date. 

 

(f)  The
operation of Seller’s business prior to the Closing Date (except with respect to
the Assumed Obligations).

 

27

(g)  Any
failure to deliver, with all required Consents, any of the Production Assets to
Purchaser on the Effective Date or the Closing Date, as applicable, free and
clear of all Liens or similar rights except for the Assumed Obligations.

 

(h)  Purchaser’s
ownership of any of the Production Assets (other than the IP Systems) during the
Transition Period.

 

8.2  Indemnification
by Purchaser. Upon
the terms and subject to the conditions hereof, Purchaser shall indemnify and
hold Seller and its officers, directors, employees, agents and Affiliates
harmless against and in respect of, and shall reimburse such Indemnified Party
for, any and all Losses suffered or incurred by such Indemnified Party arising
out of, resulting from or relating to: 

 

(a)  Any
breach or non-performance by Purchaser of any representation, warranty,
covenant, obligation, requirement, agreement or undertaking of Purchaser
contained in this Agreement, in any agreement entered into by the Parties in
connection with this Agreement, in any Schedule or Exhibit or in any written
statement or certificate furnished by Purchaser pursuant to this Agreement.

 

(b)  Litigation
pending or threatened that results from events occurring after the Closing Date
in connection with the Production Assets. 

 

(c)  Errors,
omissions or fraud in the processing after the Closing Date of any of the
Pipeline Applications on the part of Purchaser. 

 

(d)  Any
failure to pay or discharge when due any Assumed Obligation.

 

(e)  The
operation of Purchaser’s business after the Closing Date.

 

8.3  Indemnification
Procedures. 

 

(a)  General. If at
any time an Indemnified Party learns of a Loss resulting from an Indemnified
Event, the Indemnified Party shall promptly give to the Indemnifying Party
notice, describing such Loss and Indemnified Event in reasonable detail. In the
event that a demand or claim for indemnification is made hereunder with respect
to Losses the amount or extent of which is not yet known or certain, the notice
of demand for indemnification shall so state, and, where practicable, shall
include an estimate of the amount of the Losses. In the case of any notice of
indemnification hereunder involving any claim of any third party, the
Indemnifying Party shall have responsibility for, and shall assume all expense
with respect to, the defense or settlement of such claim, subject to the
following: 

 

(i)  The
Indemnified Party shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such
claim.

 

(ii)  The
Indemnifying Party shall not enter into any such settlement of such claim or
ceasing to defend against such claim unless such settlement or compromise
includes a full and unconditional release of each such Indemnified Party from
all liability arising out of such claim, action, suit or proceeding, reasonably
satisfactory in form and substance to such Indemnified Party. 

 

(iii)  If the
Indemnifying Party does not provide to the Indemnified Party within ten (10)
days after receipt of a notice of indemnification, a written acknowledgment that
the Indemnifying Party shall assume responsibility for the defense or settlement
of such claim as provided in this Section
8.3, then
the Indemnified Party shall have the right to defend and settle the claim in
such manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, and the Indemnifying Party shall promptly reimburse the
Indemnified Party therefor in accordance with Section
8.1 or
Section
8.2, as the
case may be, and this Section
8.3.

 

28

(iv)  If the
defendants in any action shall include both an Indemnified Party and an
Indemnifying Party, and any such Indemnified Party shall have reasonably
concluded, based upon the written advice of its counsel, that counsel selected
by the Indemnifying Party has a conflict of interest which under the Rules of
Professional Conduct of the relevant Bar Association would prohibit the
representation because of the availability of different or additional defenses
to any such Indemnified Party, such Indemnified Party shall have the right to
select separate counsel reasonably acceptable to the Indemnifying Party to
participate in the defense of such Indemnified Party. The foregoing shall not
eliminate or modify in any respect the obligation of the Indemnifying Party with
respect to the defense, settlement or appeal of such matter, attorney’s fees and
other Losses related thereto. 

 

(v)  In
addition to the obligations set forth above in this Section 8.3(a), if an
Investor requests that Seller repurchase a Mortgage Loan that closed on or after
the Closing Date (and for which Seller believes it has an indemnification claim
against Purchaser), Seller shall, within five (5) days of receipt of such
Investor request, notify Purchaser of such repurchase request and forward to
Purchaser a copy of the Investor request and a copy of the related Loan File (if
then in Seller’s possession or control or reasonably available to Seller). To
the extent permitted by the applicable Investor, Purchaser shall have the
opportunity, at its sole cost and expense, to cure any defects in the affected
Mortgage Loan. In the event that the applicable Investor requires that the
defense of such repurchase request come from Seller and not from Purchaser, then
Seller shall forward to Purchaser copies of all correspondence with the Investor
and Seller shall submit to the Investor the response and defense that is
prepared by Purchaser. No such Investor repurchase request may be settled
without the consent of Purchaser, which consent will not be unreasonably
withheld. 

 

(vi)  In
addition to the obligations set forth above in this Section 8.3(a), if an
Investor requests that Purchaser repurchase a Mortgage Loan that closed prior to
the Closing Date (and for which Purchaser believes it has an indemnification
claim against Seller), Purchaser shall, within five (5) days of receipt of such
Investor request, notify Seller of such repurchase request and forward to Seller
a copy of the Investor request and a copy of the related Loan File (if then in
Purchaser’s possession or control or reasonably available to Purchaser). To the
extent permitted by the applicable Investor, Seller shall have the opportunity,
at its sole cost and expense, to cure any defects in the affected Mortgage Loan.
In the event that the applicable Investor requires that the defense of such
repurchase request come from Purchaser and not from Seller, then Purchaser shall
forward to Seller copies of all correspondence with the Investor and Purchaser
shall submit to the Investor the response and defense that is prepared by
Seller. No such Investor repurchase request may be settled without the consent
of Seller, which will not be unreasonably withheld.

 

(b)  Indemnification
Basket.
Notwithstanding any other provision of this Article
VIII,
commencing with respect to claims submitted after the end of the Production
Period, an Indemnifying Party shall have no obligation under this Article
VIII to an
Indemnified Party for an Indemnified Event, and the Indemnified Party shall not
submit any claim for indemnification hereunder, unless and until all valid
claims for indemnification that are entitled to indemnification hereunder
(including claims submitted prior to the end of the Production Period) exceed an
aggregate of $50,000. Upon satisfying the $50,000 threshold described in the
immediately preceding sentence, the Indemnified Party shall submit its claim or
claims for indemnification (including claims related to Indemnified Events that
occurred prior to the satisfaction of such $50,000 threshold) in accordance with
Section
8.3(a) hereof
and the Indemnified Party shall be entitled to indemnification for Losses from
the first dollar.

 

(c)  Indemnification
During Production Period. In the
event Purchaser incurs any Losses as a result of an Indemnified Event and Seller
is required to indemnify Purchaser under Section
8.1, then
Purchaser shall have the right to setoff or deduct the amount of any such
indemnifiable Losses against any Production Payment payable by Purchaser to
Seller, provided that Purchaser provides Seller with at least ten (10) days
prior written notice of its intent to setoff or deduct the amount of any such
indemnifiable Loss. In the event any such indemnifiable Losses exceed the amount
of the next succeeding Production Payment (any such excess, a “Shortfall”),
Purchaser shall, at Purchaser’s sole discretion, either (i) setoff or deduct the
remaining portion of the indemnifiable Losses from future Production Payments or
(ii) provide written notice of such Shortfall to Seller, in which case, Seller
shall promptly, but no later than five (5) days after receipt of such notice,
pay Purchaser the amount of such Shortfall. In the
event Seller objects in writing to the setoff or deduction within five (5) days
after Purchaser delivered the applicable notice to Seller, Purchaser and Seller
shall resolve the dispute relating to the indemnifiable Loss in accordance with
Section
7.4.

 

29

ARTICLE
IX

TERMINATION

 

9.1  Termination. This
Agreement may be terminated at any time prior to the Closing Date:

 

(a)  by mutual
written consent of
Seller and Purchaser; or

 

(b)  by
Purchaser or Seller in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained herein or in any
schedule or document delivered pursuant hereto, which breach would result in the
failure to satisfy any closing conditions set forth in Section
3.2 or
Section
3.4 hereof,
in the case of Purchaser, or Section
3.3 or
Section
3.4 hereof,
in the case of Seller.

 

9.2  Effect
of Termination.
Notwithstanding
anything to the contrary contained herein, in the event this Agreement is
terminated for any reason prior to the Closing Date, Purchaser shall have no
obligation to make any payments to Seller pursuant to Article
II or
Article
VII of this
Agreement. 

 

9.3  Expenses. Except
as provided elsewhere herein, Purchaser and Seller shall each bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial or other consultants, investment bankers, accountants and counsel. In
the event one of the parties hereto files suit to enforce this Section
9.2 or a
suit seeking to recover costs and expenses or damages for breach of this
Agreement or a suit seeking to enforce the right to indemnification hereunder,
the costs, fees, charges and expenses (including attorneys’ fees and expenses)
of the prevailing party in such litigation (and any related litigation) shall be
borne by the non-prevailing party.

 

9.4  Survival
of Agreement. Except
as otherwise set forth herein, in the event of termination of this Agreement by
either Purchaser or Seller as provided in Section
9.1, this
Agreement shall forthwith become void and have no effect except that the
agreements contained in Section
9.2 hereof
shall survive the termination hereof.

 

ARTICLE
X

MISCELLANEOUS
PROVISIONS

 

10.1  Notices.

 

(a)  General. All
demands, notices or other communications permitted or required hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered, sent by overnight courier, or mailed certified mail, postage prepaid,
and return receipt requested or transmitted by facsimile and confirmed by a
similar mailed writing: 

 

If to
Seller, addressed to Seller at:

12222
Merit Drive, Suite 900

Dallas,
TX 75251

Attn:
William Starkey

Facsimile
Number: (972) 392-9440

30

With a
copy to:

Locke
Liddell & Sapp LLP

2200 Ross
Avenue

Suite
2200

Dallas,
Texas 75201

Attn:
Gina E. Betts

Facsimile
Number: (214) 740-8800

or to
such other address as Seller may have designed in writing to
Seller.

 

If to
Purchaser, addressed to Purchaser at:

815
Commerce Drive, Suite 100

Oak
Brook, IL 60523

Attn:
Steve Y. Khoshabe

Facsimile
Number: (630) 571-4736

With a
copy to:

815
Commerce Drive, Suite 100

Oak
Brook, IL 60523

Attn:
Michael A. Kraft 

Facsimile
Number: (630) 571-4736

And
to:

Barack
Ferrazzano, et al. LLP

333 West
Wacker Drive

Suite
2700

Chicago,
Illinois 60606

Attn:
Edwin S. del Hierro

Facsimile
Number: (312) 984-3150

10.2  Effective
Time of Notice. A
notice given by personal delivery, facsimile transmission or overnight courier
shall be effective as of the time and date of the receipt of such delivery or
transmission at the receiving Party’s notice address. A notice given by
certified mail shall be deemed to have been delivered on and shall be effective
as of the third (3rd)
Business Day following the date on which it was deposited in the United States
postal system. In the event the last day for giving notice or taking any other
action under this agreement falls on a day that is not a Business Day, the last
day for giving such notice or taking such other action shall be extended until
the next day that is a Business Day.

 

10.3  Entire
Agreement; Amendment. This
Agreement and the documents, instruments and agreements to be executed and
delivered pursuant to this Agreement constitute the entire agreement between the
Parties with respect to the subject of the transactions contemplated hereby and
supersede all prior letters or agreements with respect thereto. This Agreement
may be amended solely in a written instrument or agreement executed by the
Parties. Any provision of this Agreement may be waived, but only pursuant to a
writing signed by the Party against whom such amendment or waiver is sought to
be enforced. 

 

10.4  Binding
Effect; Assignment.
This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns. This Agreement is not
assignable by Seller or by Purchaser without the prior written consent of the
other Party. 

 

10.5  Counterparts. This
Agreement may be executed in counterparts, each of which, when so executed and
delivered, shall be deemed to be an original and all of which, taken together,
shall constitute one and the same agreement.

 

31

10.6  Exhibits
and Schedules. Each of
the Exhibits and Schedules is incorporated herein by reference. 

 

10.7  Governing
Law. The
Parties agree that this Agreement shall be governed by federal law and the
internal substantive laws of the State of Illinois, as applicable, without
giving effect to the principles of conflicts of law. 

 

10.8  No
Third Party Benefit Intended. This
Agreement does not create, and shall not be deemed to create, a relationship
between the Parties or either of them and any third party (including, but not
limited to, the employees of Purchaser or Seller) in the nature of a third party
beneficiary or fiduciary relationship. 

 

10.9  No
Waiver. Unless
expressly provided to the contrary, the failure of any Party to insist upon
strict performance of any covenant or obligation in this Agreement shall not be
a waiver of such Party’s right to demand strict compliance in the future or to
pursue or enforce whatever remedies may be available to such Party for any
breach or default or in such covenant or obligation (subject to applicable
statues of limitation). No consent or waiver, express or implied, to or of any
breach or default in the performance of any covenant or obligation in this
Agreement shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other covenant or obligation
hereunder. 

 

10.10  Time. Time is
of the essence of this Agreement and of each provision herein of which time is a
part.

 

10.11  Construction. This
Agreement shall be construed and interpreted fairly as to each of the Parties
and not in favor of or against any Party, regardless of which Party or Parties
prepared this Agreement. 

 

10.12  Severability. If any
provision of this Agreement, or the application thereof, shall, for any reason
and to any extent, be finally adjudicated to be invalid or unenforceable, then
the remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, but rather shall remain
valid and enforceable to the maximum extent permissible under applicable
law. 

 

10.13  Venue. Other
than with respect to claims or disputes that are, by the terms of this
Agreement, to be resolved pursuant to the provisions of Section
7.4
hereof, any claim
or other action (including, in particular, any matter brought pursuant to
Section
2.5 hereof)
instituted by Purchaser or Seller in connection with this Agreement shall be
brought exclusively in a federal or state court of appropriate jurisdiction in
Chicago, Illinois. 

 

10.14  Specific
Performance. Each of
the Parties acknowledge that breach of the obligations of the Parties to (i)
deliver all of the Production Assets to Purchaser on the date or dates required
hereunder free and clear of all Liens, (ii) make the deliveries specified in
Section
3.5,
Section
3.6,
Section
3.7 and
Section
3.8 hereof,
and (iii) perform the covenants contained in Article
VI and
Article
VII hereof,
will give rise to irreparable injury to the appropriate Party, inadequately
compensable in damages. Accordingly, the Party intended to benefit from such
provision of this Agreement shall be entitled to seek injunctive relief to
prevent or cure breaches or threatened breaches of the provisions of this
Agreement and to seek specific performance of the terms and provisions hereof in
any court of competent jurisdiction, in addition to any other legal or equitable
remedies which may be available. 

 

10.15  Survivability. The
representations, warranties, covenants and agreements contained herein shall
survive the Closing Date for a period of three (3) years from the Closing
Date.

 

[SIGNATURE
PAGES APPEAR ON FOLLOWING PAGE] 

 

32

IN
WITNESS WHEREOF, and intending to be legally bound, each of the undersigned
parties has caused this Agreement to be duly executed under seal and delivered
by its duly authorized officers, as of the date first indicated
above.

 

	 	 	 
	 	AMPRO MORTGAGE
      CORPORATION
	 
 	 
 	 
 
		By:  	/s/ Ken Hickman
	 	
      

      Its: President
      and CFO
	 	
      

       

 

	 	 	 
	 	UNITED FINANCIAL
      MORTGAGE CORP.
	 
 	 
 	 
 
		By:  	/s/ Steve
  Khoshabe
	 	
      

      Its: President
	 	
      

      

 

S-1

In
consideration for $10 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as a material inducement to
Purchaser’s agreement to execute and deliver this Agreement, each of the
undersigned, in his personal and individual capacity, hereby executes and
delivers this Agreement agreeing to become bound to the restrictions and
limitations contemplated in Section
6.8 of this
Agreement.

 

 

	 	 	 WILLIAM
      STARKEY
	 	 	 
	 	
		 	/s/ William
  Starkey
	 	
      

    

 

	 	 	KEN
      HICKMAN
	 	 	 
	 	
	 
 	 
 	 
 
			/s/ Ken Hickman

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