empire conti settlement

V&E DRAFTDATED 8/16/01

SETTLEMENT AGREEMENT

BY AND BETWEEN

RONALD HORNBERGER, CHAPTER 11 TRUSTEE FOR THEBANKRUPTCY ESTATE OF EMPIRE FUNDING CORP.,

AND

JEFFREY H. BECK, LIQUIDATING TRUSTEEFOR THE CFN LIQUIDATING TRUST

DATED AS OF AUGUST 16, 2001



THIS SETTLEMENT AGREEMENT (the “Agreement”) dated as of

August 16, 2001, is entered into by and between Ronald Hornberger, Chapter 11

Trustee of the bankruptcy estate of Empire Funding Corp. (the “Empire Trustee”), and

Jeffrey H. Beck, the Liquidating Trustee for the CFN Liquidating Trust (the “CFN

Liquidating Trustee”) (the Empire Trustee and the CFN Liquidating Trustee are

collectively referred to herein sometimes as the “Parties” or individually as a “Party”).

R E C I T A L S :

WHEREAS, on May 15, 2000, Empire Funding Corp., an Oklahoma corporation

(“Empire”), filed its voluntary petition for relief under Chapter 11 of Title 11 of the United

States Code (the “Bankruptcy Code”), thereby initiating Case No. 00-11478-FRM-11

styled In re Empire Funding Corp., Debtor (the “Empire Case”) in the United States

Bankruptcy Court for the Western District of Texas, Austin Division (the “Texas Court”);

WHEREAS, on May 17, 2000 and thereafter, ContiTrade Services L.L.C.

(“Conti”), ContiFinancial Corporation (“CFN”), California Lending Group, Inc. (“California

Lending”) and certain of their affiliate entities (collectively, the “Conti Debtors”) filed their

respective voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the

United States Bankruptcy Court for the Southern District of New York (the “New York

Court”), such Chapter 11 cases having been jointly administered and styled In re

ContiFinancial Corporation, et al., Debtors, Case No. 00-12184-AJG-11 (the “Conti

Case”);

WHEREAS, on July 19, 2000, Conti instituted an adversary proceeding in the

Empire Case styled ContiTrade Services L.L.C. v. Empire Funding Corp., Adv. No. 00-

1106 (FRM) (the “Adversary Proceeding”) by filing its Complaint to Determine Amount


of Debt, Validity, Priority and Extent of Liens, Interest in Property, and for Declaratory

Judgment;

WHEREAS, on September 13, 2000, Empire filed its Proofs of Claim in the Conti

Case (the “Empire Proofs of Claim”) whereby Empire asserted a claim in a contingent

and unliquidated amount;

WHEREAS, on October 31, 2000, Conti, CFN, California Lending, and

ContiTrade Services Corporation (“CTSC”) collectively filed their Proof of Claim in the

Empire Case (the “Conti Proof of Claim”) whereby claims were asserted for, inter alia:

(a) the approximate amount of $78,748,286 (less credit for the value of all assets

actually transferred to Conti pursuant to the Master Agreement dated as of April 16,

1999, between CFN, CTSC, Conti, Empire, Empire Funding Holding Corp. (“Holding”)

and James Isaacs (“Isaacs”)) secured by a lien in, inter alia, Empire’s servicing and/or

sub-servicing fees; (b) the amount of $2,200,000 pursuant to an Interim Warehouse and

Security Agreement dated as of May 3, 1999, between Conti and Empire, secured by a

lien in, inter alia, certain home loans and home equity loans (the “Warehouse

Obligation”); and (c) the amount of $771,511.35 owing to California Lending pursuant to

an April 23, 1999 letter agreement between Empire and California Lending related to

the resale of certain high loan-to-value loans;

WHEREAS, on or about December 15, 2000, the Conti Debtors filed in the Conti

Case their Motion for Order Under Sections 105(a) and 502(c) of the Bankruptcy Code

Estimating Certain Claims for the Purpose of Establishing an Appropriate Reserve and

for Distribution to Holders of Such Claims (the “Conti Estimation Motion”) whereby the

Conti Debtors sought to estimate claims in the Conti Case for the purpose of (a)


establishing a “Disputed Claims Reserve Trust” as required under the Conti Plan (as

defined below), and (b) limiting the distribution to the holders of such claims;

WHEREAS, under the Conti Estimation Motion, the Conti Debtors sought an

estimation of the claims under the Empire Proofs of Claim at $0.00;

WHEREAS, on December 20, 2000, the New York Court entered an order in the

Conti Case confirming that certain Third Amended Joint Plan of Reorganization of

ContiFinancial Corporation and Affiliates under Chapter 11 of the Bankruptcy Code

dated as of December 18, 2000 (as further modified, the “Conti Plan”), pursuant to

which, inter alia, all of the claims held by CFN, Conti, and California Lending against

Empire were transferred to the CFN Liquidating Trust (herein so called) effective April

10, 2001;

WHEREAS, Jeffrey H. Beck has been appointed as the CFN Liquidating Trustee

for the CFN Liquidating Trust;

WHEREAS, upon motion of Conti, joined in by UBS Warburg Real Estate

Securities Inc. (f/k/a PaineWebber Real Estate Securities Inc.), and ultimately agreed to

by Empire, Isaacs, and the Official Committee of Unsecured Creditors appointed in the

Empire Case (the “Committee”), the Texas Court ordered the appointment of Ronald

Hornberger, as the Empire Trustee, on or about February 7, 2001, and the Empire

Trustee is now managing Empire’s affairs pursuant to Bankruptcy Code §§ 1106 and

1108;

WHEREAS, on February 15, 2001, the New York Court entered an Agreed Order

on the Conti Estimation Motion, establishing for reserve purposes, an unsecured claim


in the amount of $40,000,000 (the “Agreed Reserve”) for Empire, without prejudice to

the rights and defenses of the Conti Debtors or the CFN Liquidating Trust;

WHEREAS, the Texas Court likewise approved the Agreed Reserve for the

Empire Proofs of Claim by entering a corresponding order under Bankruptcy Rule 9019

on or about February 6, 2001;

WHEREAS, approximately $2,380,000 was escrowed with U.S. Bank National

Association (“U.S. Bank”), which funds are subject to competing claims by and between

Empire and the CFN Liquidating Trust (the “U.S. Bank Escrow”);

WHEREAS, on June 15, 2001, the Empire Trustee filed that certain Motion to

Compromise and Settle Controversies between Ronald Hornberger, the Chapter 11

Trustee of Empire Funding Corp. and Jeffrey H. Beck, Liquidating Trustee for the CFN

Liquidating Trust, successor in interest to ContiTrade Services, L.L.C., ContiFinancial

Corporation and California Lending Group, Inc. (the “9019 Motion”) whereby the Empire

Trustee requested that the Texas Court approve the compromise and settlement set

forth in this Agreement;

WHEREAS, on August 16, 2001, the Empire Trustee and the Committee filed

that certain Joint Plan of Liquidation of Empire Funding Corp. (as such plan may be

altered, amended or modified from time to time, the “Empire Plan”) whereby the Empire

Trustee and the Committee have, inter alia, requested that the Texas Court approve the

compromise and settlement set forth in this Agreement as part of confirmation; and

WHEREAS, the Empire Trustee and the CFN Liquidating Trustee in order to buy

peace, to avoid the uncertainty, cost, complexity, delay, and the inconvenience of

litigation and threatened litigation, and to fully compromise and settle all claims, hereby


agree between themselves to enter into a full and complete compromise and settlement

of all matters, disputes, and issues between them in accordance with Bankruptcy

Rule 9019.

Now, therefore, for and in consideration of the foregoing premises, the promises

and covenants of this Agreement, and for other good and valuable consideration, the

receipt and sufficiency of which is hereby mutually acknowledged, the Empire Trustee

and the CFN Liquidating Trustee each agree as follows:

1. No admissions:

1.1 This Agreement is entered into solely for the purpose of compromise and

settlement, to buy peace, and to avoid the uncertainty, cost, complexity, delay, and

inconvenience of litigation and threatened litigation. The Parties acknowledge that the

provisions of Rule 408 of the Federal Rules of Evidence apply to all negotiations and

actions taken in connection with this Agreement. By negotiating for and entering into

this Agreement, neither the Empire Trustee nor the CFN Liquidating Trustee are in any

way admitting any fact or any issue of alleged liability on account of any matter covered

by this Agreement. Rather, each of the Parties deny that any claims exist against any

of their respective estates and further deny any and all liability to the other Party. The

fact that the Parties are entering into this Agreement shall not constitute, be construed

as, nor be deemed to be evidence of liability on the part of Empire or the CFN

Liquidating Trust, respectively, or any of the persons or entities who are the

beneficiaries of the releases set forth in the Mutual Release (as hereinafter defined). In

the event the conditions precedent to the Closing (as hereinafter defined) set forth in

Section 5.1 of this Agreement do not occur or are not waived, (a) none of the positions,

promises, or covenants contained herein shall constitute, be construed as, or be


deemed to be evidence in any current or future disputes by and between any of the

Parties, and (b) the Parties shall not be precluded from asserting legal theories or

positions contrary to the positions, promises, and covenants contained herein.

2. Representations, warranties, and disclaimer:

2.1 Each Party represents and warrants to the other Party that he, she or it

has the authority to execute this Agreement and that, subject to satisfaction or waiver of

the conditions precedent set forth herein, this Agreement shall be fully binding and

enforceable against such Party.

2.2 Each of the claims, causes of action, suits, rights and/or interests which

are the subject matter of the Mutual Release are owned by the Empire bankruptcy

estate or the CFN Liquidating Trust, respectively (save and except for any claims,

causes of action, suits, rights and/or interests being released by the ContiGroup (as

defined in the Mutual Release)), and have not been assigned, transferred nor sold and

are all free of encumbrances.

2.3 Each of the Parties disclaim any reliance on any representations, actions,

or inactions of the other Parties in connection with the negotiation, drafting, and/or

execution of this Agreement, except for representations and warranties expressly set

forth in this Agreement.

3. Consideration:

3.1 The consideration for this Agreement includes, without limitation, (a) the

obligations and covenants of Empire specified in Article 6; (b) the obligations and

covenants of the CFN Liquidating Trust specified in Article 7; (c) the Mutual Release;

and/or (d) all of the other covenants and obligations set forth herein.


4. The Closing Date:

4.1 On the first business day after all of the conditions precedent specified in

Section 5.1 have been satisfied or waived in accordance with this Agreement (such day

being hereinafter referred to as the “Closing Date”), there shall occur a closing (the

“Closing”) pursuant to this Agreement at which: (a) the Empire Trustee shall make the

Conti Payment (as hereinafter defined) and pay any accrued Net Litigation Recoveries

to the CFN Liquidating Trust (which payments shall be indefeasible and free and clear

of all liens, claims, encumbrances or other interests of any creditor or party in interest

including, but not limited to, Island Wood (as hereinafter defined)); (b) the Empire

Trustee and the CFN Liquidating Trustee shall each execute and deliver the Mutual

Release; and (c) the CFN Liquidating Trustee shall execute and deliver the Lien

Assignments (as hereinafter defined).

5. Conditions precedent to the Closing of this Agreement:

5.1 The following are the conditions precedent to the obligations of the Parties

to effect the Closing of this Agreement:

5.1.1 The Texas Court shall have entered either a separate order or

an order confirming the Empire Plan, in the Empire Case in form and substance

reasonably satisfactory to the CFN Liquidating Trustee and the Empire Trustee,

approving this Agreement and the compromise and settlement contemplated hereby in

accordance with Bankruptcy Rule 9019 (the “Texas Order”) and the Texas Order shall

have become a Final Order (as hereinafter defined). The Texas Order shall also

provide: (a) that contemporaneously with the Closing of the transactions described in

Section 4.1 of this Agreement (i) any lien of the CFN Liquidating Trust on servicing or

sub-servicing fees shall be deemed avoided pursuant to Bankruptcy Code §§ 544, 547,


and/or 548 and preserved for the benefit of the Empire bankruptcy estate pursuant to

Bankruptcy Code § 551, save and except for any lien of the CFN Liquidating Trust in the

servicing or subservicing rights and/or fees associated with or related to the Empire

Funding Home Loan Owners' Trust 1999-1 and without prejudice to any claims and any

causes of action of the CFN Liquidating Trust against U.S. Bank or its affiliates, (ii) the

Adversary Proceeding shall be dismissed with prejudice and without further order of the

Texas Court (provided, however, Island Wood Investments LLC (“Island Wood”) shall

retain its right to assert a secured claim against any property of Empire not payable to

the CFN Liquidating Trust under the Settlement Agreement), (iii) the CFN Liquidating

Trust shall be assigned and granted an unencumbered beneficial ownership interest in

fifteen percent (15%) of each Net Litigation Recovery (as hereinafter defined),

(iv) Empire’s pending objection to the Conti Proof of Claim shall be dismissed as moot,

and (v) subject to the right of the CFN Liquidating Trust to receive the Net Litigation

Recoveries and all other rights of the CFN Liquidating Trust under the Settlement

Agreement and the Empire Plan, the Conti Proof of Claim shall be deemed paid and

satisfied; (b) that the Conti Payment and the Net Litigation Recoveries shall be paid to

the CFN Liquidating Trust free and clear of all liens, claims, encumbrances and other

interests of any creditor or party in interest including, but not limited to, Island Wood;

(c) that the Settlement Agreement and the Texas Order shall be binding on any

successor trustee under Chapter 11 or Chapter 7, or any successor or assign or other

representative of any or all of the Empire bankruptcy estate, including, but not limited to,

the Plan Trustee (as defined in the Empire Plan); and (d) that the Empire Plan or any

other plan of reorganization or liquidation confirmed in the Empire Case shall


acknowledge this Agreement and the Texas Order, be consistent with the terms hereof

and thereof, and in no way alter, limit or impair the rights of the Parties hereunder or of

any other persons or entities who are the beneficiaries of the releases set forth in the

Mutual Release.

5.1.2 The New York Court shall have entered an order in the Conti

Case in form and substance reasonably satisfactory to the CFN Liquidating Trustee and

the Empire Trustee approving this Agreement and the compromise and settlement

contemplated hereby in accordance with Bankruptcy Rule 9019 (the “New York Order”)

and the New York Order shall have become a Final Order. The New York Order shall

also provide that contemporaneously with the Closing of the transactions described in

Section 4.1 of this Agreement, (a) the Empire Proofs of Claim shall be disallowed, with

prejudice, in the Conti Case, and that the Empire bankruptcy estate shall not be entitled

to any distribution under the Conti Plan or from the CFN Liquidating Trust on account of

the Empire Proofs of Claim or otherwise and (b) Empire's Motion for Relief from Stay

filed in the Conti Case shall be dismissed as moot.

5.1.3 On or before the Closing Date, CTSC shall have withdrawn, with

prejudice, its claim asserted under the Conti Proof of Claim by filing the withdrawal of

claim with the Texas Court in substantially the form set forth on Exhibit A attached

hereto, or, alternatively, the CTSC claim shall be disallowed by order of the Texas

Court.

5.1.4 On or before the Closing Date, UBS Warburg Real Estate

Securities, Inc. (f/k/a PaineWebber Real Estate Securities Inc.), Mortgage Asset

Securitization Transactions, Inc. (f/k/a PaineWebber Mortgage Acceptance Corporation


IV), and UBS PaineWebber Inc. (f/k/a PaineWebber Incorporated) (collectively, “UBS

PaineWebber”) shall have executed and delivered the General, Absolute and Mutual

Release in substantially the form attached hereto as Exhibit C (the “UBS Mutual

Release”).

5.1.5 The Committee shall have approved the Texas Order as to form

and substance by signature of their counsel to such order.

5.1.6 The Texas Order shall have been entered by the Texas Court

on or before November 30, 2001 (the “Approval Deadline”).

5.1.7 The Closing shall have occurred on or before December 31,

2001 (the “Settlement Deadline”).

5.1.8 The rights and obligations of the CFN Liquidating Trust under

this Agreement and the rights and obligations of any person or entity under the Mutual

Release shall not have been amended, modified, impaired or changed in any respect

whatsoever under the Empire Plan without the prior written consent of the CFN

Liquidating Trustee.

5.2 The conditions precedent set forth in (a) Sections 5.1.1 and 5.1.2 of this

Agreement, that the Texas Order and the New York Order shall each have become a

Final Order, and (b) Section 5.1.5. of this Agreement, that the Committee approve the

Texas Order as to form and substance, may be waived with the mutual written consent

of the Empire Trustee and the CFN Liquidating Trustee without further order of either

the Texas Court or the New York Court. The condition precedent set forth in Section

5.1.4 of this Agreement may be waived by the CFN Liquidating Trustee without further

order of the Texas Court or the New York Court. In addition, (x) in the event the Texas


Order is not entered by the Texas Court on or before the Approval Deadline, or (y) in

the event the Closing has not occurred on or before the Settlement Deadline, either the

Empire Trustee or the CFN Liquidating Trustee may terminate the Settlement

Agreement; provided, however, that the Approval Deadline or the Settlement Deadline

may be extended or waived by the mutual written consent of the Empire Trustee and

the CFN Liquidating Trustee without further order of either the Texas Court or the New

York Court.

5.3 If one or more of these conditions precedent is not fulfilled or waived in

accordance with this Agreement, this Agreement shall be null and void and the

respective obligations of Empire and the CFN Liquidating Trust shall be unenforceable;

provided, however, the provisions of Article 1 shall have continuing effect and the fact

that the Parties entered into this Agreement shall not constitute an admission or waiver

of any type.

5.4 For purposes of this Agreement, “Final Order” shall mean an order or

judgment of the Texas Court or New York Court, as applicable, (a) as to which time to

appeal, petition for certiorari or move for reargument or rehearing has expired and as to

which no appeal, petition for certiorari, or other proceeding for reargument or rehearing

shall then be pending or (b) in the event an appeal, writ of certiorari, or motion for

reargument or rehearing has been filed or sought, such order or judgment shall have

been affirmed by the highest court to which such order or judgment was appealed, or

certiorari has been denied, or from which a motion for reargument or rehearing was

sought, and the time to take any further appeal, petition for certiorari, or move for

reargument or rehearing shall have expired; provided, however, that no order or


judgment shall fail to be a Final Order solely because of the filing or pendency of a

motion pursuant to Rule 60 of the Federal Rules of Civil Procedure unless such motion

shall have been filed within ten (10) days of the entry of the order or judgment at issue.

6. Obligations of Empire:

6.1 On the Closing Date, the Empire Trustee shall (a) pay to the CFN

Liquidating Trustee (the “Conti Payment”) cash in the following amount: the sum of

(i) $9,167,000, plus (ii) an additional amount calculated as follows: $50,000 per month

commencing on July 18, 2001 and continuing through and until the Closing Date, with

any partial month to be pro rated based upon a thirty (30) day month, less (iii) the net

proceeds (if any) received by the CFN Liquidating Trustee from the Empire Trustee prior

to Closing from the sale of the loans which are subject to the Warehouse Obligation,

free and clear of all liens, claims, encumbrances and other interests of any creditor or

party in interest including, but not limited to, Island Wood; and (b) execute and deliver

the General, Absolute and Mutual Release in substantially the form attached hereto as

Exhibit B (the “Mutual Release”); provided, however, the provisions providing for the

release in favor of and by the ContiGroup shall only be included if CTSC withdraws its

claim as provided in Section 5.1.3 and the ContiGroup executes the Mutual Release.

6.2 Effective as of Closing and in addition to the Conti Payment, the Plan

Trustee and the Empire Trustee (as the case may be) shall, within ten (10) business

days of receipt of any Net Litigation Recovery, pay to the CFN Liquidating Trust cash in

an amount equal to fifteen percent (15%) of such Net Litigation Recovery, such

payments to be free and clear of all liens, claims, encumbrances and other interests of

any creditor or party in interest, including, without limitation, Island Wood. As used

herein, "Net Litigation Recovery" shall mean any amount received or recovered by the


Empire Trustee, the Plan Trustee or any successor or assign, after July 18, 2001, in

litigation initiated by the Empire Trustee, the Plan Trustee or any successor or assign

(including any amounts received from any claim or cause of action asserted and

resolved (whether in the Empire Plan or otherwise) prior to the actual commencement of

litigation), against any person or entity, whether by judgment, settlement or otherwise,

less the reasonable and necessary fees and expenses incurred by the Empire Trustee

or the Plan Trustee in obtaining such amount. Prior to payment to the CFN Liquidating

Trust, the Empire Trustee and the Plan Trustee (as the case may be) shall hold each

Net Litigation Recovery in trust for the benefit of the CFN Liquidating Trust. The Empire

Trustee and the Plan Trustee shall use reasonable best efforts to (a) keep the CFN

Liquidating Trustee informed as to the status of all litigation and asserted claims or

causes of action of Empire, the Empire bankruptcy estate and/or the Plan Trust (as

defined in the Empire Plan); (b) promptly provide the CFN Liquidating Trustee any

information reasonably requested by the CFN Liquidating Trustee related to the status

of such litigation, claims and/or causes of action; and (c) promptly provide to CFN

Liquidating Trustee an accounting of each Net Litigation Recovery. All communications

described in the previous sentence shall be subject to a common interest and joint

prosecution privilege.

6.3 From and after the Closing, the Empire Trustee and the Plan Trustee shall

provide reasonable cooperation to the CFN Liquidating Trust in connection with the sale

and transfer of servicing rights associated with Empire Funding Home Loan Owners’

Trust 1999-1, the proceeds of such sale being acknowledged as the sole property of the

CFN Liquidating Trust.


6.4 The Empire Trustee and the Plan Trustee shall not object to nor interfere

with the CFN Liquidating Trust obtaining a turnover of or recovery on any claims, rights

or causes of action of the CFN Liquidating Trust against U.S. Bank or its affiliates for

excess servicing payments due Conti prior to May 15, 2000 which the CFN Liquidating

Trust asserts were not made in accordance with applicable payment instructions given

to U.S. Bank by Empire and/or Conti. Further, the Empire Trustee and the Plan Trustee

shall provide reasonable cooperation in connection with efforts by the CFN Liquidating

Trust to effect recovery on such claims, rights or causes of action including, but not

limited to, execution of appropriate stipulations disclaiming any interest in such recovery

or claim. Such cooperation shall not be interpreted however to include a requirement

that the Empire Trustee or the Plan Trustee release or forfeit Empire’s rights in the

funds previously held in the U.S. Bank Escrow which funds shall be released to the

Empire Trustee at Closing.

6.5 In the event the Texas Court denies confirmation of the Empire Plan, the

Empire Trustee shall, subject to the terms and conditions of this Agreement, seek

approval of this Agreement from the Texas Court under the 9019 Motion.

7. Obligations of CFN Liquidating Trust:

7.1 On the Closing Date, the CFN Liquidating Trustee shall (a) execute and

deliver the Mutual Release and (b) execute and deliver an assignment (the “Lien

Assignment”) of any liens and/or security interests the CFN Liquidating Trust may hold

in any and all assets of Empire’s estate, including without limitation, any security interest

asserted by the CFN Liquidating Trust in the funds from the U.S. Bank Escrow;

provided, however, the CFN Liquidating Trust shall retain all rights, claims and causes

of action against U.S. Bank and its affiliates for excess servicing payments due Conti


prior to May 15, 2000 which the CFN Liquidating Trust asserts were not made in

accordance with applicable payment instructions given to U.S. Bank by Empire and/or

Conti. The Lien Assignment shall be made without recourse, representation, or

warranty and shall be in form and substance reasonably acceptable to the Empire

Trustee and the CFN Liquidating Trustee.

8. Miscellaneous:

8.1 This Agreement and all documents executed in connection herewith shall

be interpreted and construed according to the laws of the State of Texas.

8.2 All notices required by this Agreement shall be in writing and shall be

(a) personally delivered, (b) forwarded by registered or certified mail, return receipt

requested, addressed, or (c) sent by telecopy, or other form of written communication,

to the other Party as follows:

To Empire: Empire Funding Corp.Plunkett & Gibson, Inc.6243 N.W. Expressway, 6th FloorSan Antonio, Texas 78201-7092Attn: Ronald Hornberger

with a copy to: Cox & Smith Incorporated112 East Pecan Street, Suite 1800San Antonio, Texas 78205Attn: Deborah D. Williamson

To CFN Liquidating Trust: CFN Liquidating Trust6555 North Powerline Road, Suite 408Fort Lauderdale, Florida 33309Attn: Jeffrey H. Beck

with copies to: Bilzin Sumberg Dunn Baena Price & Axelrod LLP2500 First Union Financial Center200 South Biscayne BoulevardMiami, Florida 33131-2336Attn: Scott L. Baena

Vinson & Elkins L.L.P.


2001 Ross Ave., Suite 3700Dallas, Texas 75201Attn: James J. Lee

Any Party may change the address to which any notice is to be sent by giving notice of

such change of address to the other Party in accordance with this Section 8.2. Notice

personally delivered or sent by telecopy medium shall be effective on the date of

delivery. Notice delivered by mail shall be effective on the date of receipt appearing on

the return receipt, or, in the absence of a return receipt, the date of attempted delivery.

8.3 This Agreement, together with the exhibits hereto, contain the entire

agreement of the Parties with respect to this compromise and settlement and terminates

and supersedes all prior discussions, communications, and negotiations, whether oral

or written. Each of the Parties acknowledge that this Agreement is executed after

negotiations between and among their respective representatives. Each of the Parties

have had the benefit of their own legal counsel in negotiating, drafting, and executing

this Agreement and this Agreement is the product of all counsels’ efforts. Neither this

Agreement nor any provision shall be deemed drafted by any particular Party and shall

not be construed against any particular Party. This Agreement may be waived or

modified only by a written instrument signed by the Empire Trustee and the CFN

Liquidating Trustee which specifically refers to the provisions of this Agreement that is

being waived or modified, provided that after approval hereof by the Texas Court and

New York Court and except as otherwise provided in Section 5.2, this Agreement may

be waived or modified only by such signed written instrument and with the approval of

the Texas Court and the New York Court.


8.4 The Texas Court shall have and retain jurisdiction over this Agreement

and over the Parties for the purposes of construing and enforcing this Agreement as to

the obligations of the Empire bankruptcy estate and the Empire Trustee. The New York

Court shall have and retain jurisdiction over this Agreement and the Parties for

purposes of construing and enforcing this Agreement as to the obligations of the CFN

Liquidating Trust and the CFN Liquidating Trustee.

8.5 In the event that any Party institutes an action or proceeding to enforce

this Agreement, the prevailing Party to such action or proceeding shall be entitled to

recover from the other Party(ies) to such action its, his or her reasonable and necessary

attorneys’ fees, expenses and costs and statutory interest incurred in connection with

the prosecution or defense of such action or proceeding.

8.6 This Agreement may be executed in multiple counterparts, each of which

shall be deemed an original and all of which shall constitute one and the same

instrument; and any Party may deliver his, her, or its signed counterpart by facsimile.

Words in the singular include the plural and words in the plural include the singular

8.7 The terms of this Agreement shall be binding on all creditors of Empire,

Empire, the Empire Trustee, all creditors of the CFN Liquidating Trust, the CFN

Liquidating Trust and the CFN Liquidating Trustee and any of their respective

successors, assigns, heirs, or legal representatives. In furtherance of the foregoing, all

obligations of Empire and/or the Empire Trustee hereunder shall be binding on, without

limitation, any successor Chapter 11 or Chapter 7 trustee in the Empire Case, any

successor liquidating trust or liquidating trustee (including, without limitation, the Plan

Trustee) and any representative of the Empire bankruptcy estate appointed under


Bankruptcy Code § 1123(b)(3) or otherwise (including, without limitation, the Plan

Trustee).

IN WITNESS WHEREOF, the Empire Trustee and the CFN Liquidating Trustee

have executed this Agreement, to be effective as of the date first above written, in

multiple originals.

EMPIRE FUNDING CORP.

By:___________________________________Ronald Hornberger, Chapter 11 Trustee

CFN LIQUIDATING TRUST

By:___________________________________Jeffrey H. Beck, Liquidating Trustee


EXHIBIT A

TO


CTSC WITHDRAWAL


IN THE UNITED STATES BANKRUPTCY COURTFOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

In re:

EMPIRE FUNDING CORP.,an Oklahoma corporation,

Debtor.

§§§§§§

CASE NO. 00-11478-FRMCHAPTER 11

NOTICE OF LIMITED WITHDRAWAL OF PROOF OF CLAIM NUMBER 608

Mark Baker, Director and President of ContiTrade Services Corporation

(“CTSC”), files this Notice of Limited Withdrawal of Proof of Claim Number 608 (the

“Notice”), and respectfully states to the Court:

1. On October 31, 2000, CTSC, ContiFinancial Corporation (“CFN”),

ContiTrade Services L.L.C. (“Conti”), and California Lending Group, Inc. (“CLG”)

collectively filed Proof of Claim No. 608 (the “Proof of Claim”) in the above-referenced

bankruptcy case.

2. The Proof of Claim has not been amended, supplemented or withdrawn.

3. Pursuant to Bankruptcy Rule 3006, CTSC hereby withdraws its interests in

the Proof of Claim with prejudice. This Notice does not affect the Proof of Claim as it

pertains to CFN, Conti, and CLG.

SIGNED this _____ day of ___________, 2001.

Respectfully submitted,

ContiTrade Services Corporation

277 Park Avenue, 50th FloorNew York, New York 10172Tel: (212) 207-5754Fax: (212) 207-5799

By: _________________________________Mark Baker

Its: Director and President


EXHIBIT B

TO


MUTUAL RELEASE


GENERAL, ABSOLUTE, AND MUTUAL RELEASE

This instrument of release (the “Mutual Release”) is executed on the ___ day of

October 2001 by (a) Ronald Hornberger, Chapter 11 Trustee of the bankruptcy estate of

Empire Funding Corp. (the “Empire Trustee”), (b) Jeffrey H. Beck, the Liquidating

Trustee for the CFN Liquidating Trust (the “CFN Liquidating Trustee”), and (c)

ContiGroup Companies, Inc. and ContiTrade Services Corporation (collectively, the

“ContiGroup”). The Empire Trustee, the CFN Liquidating Trustee and the ContiGroup

are sometimes collectively referred to herein as the “Parties” or individually as a “Party”.

1. The Empire Trustee is the Chapter 11 Trustee for Empire Funding Corp.

(“Empire”), debtor in that certain Chapter 11 bankruptcy case styled In re Empire

Funding Corp., Debtor, Case No. 00-11478-FRM (the “Empire Case”), pending in the

United States Bankruptcy Court for the Western District of Texas, Austin Division (the

“Texas Court”). On October ___, 2001, the Texas Court entered an order in the Empire

Case confirming that certain Joint Plan of Liquidation of Empire Funding Corp. dated as

of August ___, 2001 (the “Empire Plan”).

2. On May 17, 2000 and thereafter, ContiTrade Services L.L.C. (“Conti”),

ContiFinancial Corporation (“CFN”), California Lending Group, Inc. (“California






Case”). On December 20, 2000, the New York Court entered an order in the Conti

Case confirming that certain Third Amended Joint Plan of Reorganization of




which all of the claims held by CFN, Conti, and California Lending against Empire were

transferred to the CFN Liquidating Trust (herein so called) effective April 10, 2001.

Jeffrey H. Beck has been appointed the CFN Liquidating Trustee for the CFN

Liquidating Trust.

3. The Empire Trustee and the CFN Liquidating Trustee are parties to that

certain Settlement Agreement dated as of August 16, 2001 (the “Agreement”). A

condition to the consummation of the Agreement is the execution and delivery by the

Empire Trustee, the CFN Liquidating Trustee and the ContiGroup of this Mutual

Release.

4. The Empire Trustee, CFN Liquidating Trustee, and the ContiGroup

represent and warrant to each other that, by virtue of all necessary corporate or trust

action and, where applicable, approval of the Texas Court and New York Court, he or it

has the full and complete authority to execute this Mutual Release and to grant the

releases required hereby, that this Mutual Release shall be fully binding on behalf of the

Parties indicated, and that each of the claims, causes of action, suits, rights and/or

interests which are the subject matter of this Mutual Release are owned by Empire, the

Empire bankruptcy estate, the CFN Liquidating Trust, and the ContiGroup, respectively,

and have not been assigned, transferred, or sold, and are all free of encumbrances.

5. Each Party acknowledges receipt of consideration from the other Parties

pursuant to the Agreement in consideration and full satisfaction of all claims released

hereunder.


6. Except as expressly provided in Section 9 below, the Empire Trustee, in

his capacity as Chapter 11 Trustee for the bankruptcy estate of Empire and derivatively

on behalf of any claimant or other person or entity claiming by, through, or under Empire

or the Empire bankruptcy estate, does hereby release, acquit, and forever discharge the

CFN Liquidating Trust, the CFN Liquidating Trustee, each of the Conti Debtors, the

ContiGroup and each of their respective parent, sister, subsidiary, and affiliated

corporations, companies, partnerships or other entities (including, but not limited to, the

entities set forth on Schedule 1 attached hereto), all successors-in-interest to such

corporations, companies, partnerships or other entities, and each of their respective

owners, stockholders, officers, directors, employees, servants, agents, representatives,

attorneys, professionals, and successors and assigns (collectively, the “Conti Released

Entities”), from and against any and all claims, demands, causes of action, or liabilities,

of any and every character, kind and nature whatsoever, in law or in equity, whether

known or unknown, past, present or future, accrued or unaccrued, contingent or fixed,

whether based on the law of contracts, warranty, torts, conspiracy, fraud, breach of

fiduciary duty, negligence, gross negligence, intentional conduct, strict liability, real

property rights, personal property rights, or any other theory, whether asserted or

assertable in the Empire Case, the Conti Case or in any lawsuit or other legal

proceeding, in whole or in part arising out of, resulting from, based upon, or related in

any way to any of the Conti Released Entities’ ownership, management, operation,

status, tenure, actions, inactions, and conduct at any time as an affiliate, stockholder,

director, officer, employee, servant, agent, representative, attorney, lender, borrower,

creditor, insurer, successor, or assign or any other relationship with the Empire Trustee

or Empire, at any time that are or constitute claims in favor of and property of the


Empire Trustee, Empire, or Empire’s bankruptcy estate pursuant to Bankruptcy Code §§

541, 544, 547, 548, 549 or 550 or any other provisions of the Bankruptcy Code, arising

under any other statutory law or the common law, whether asserted or assertable in the

Empire Case, the Conti Case or in any lawsuit or other legal proceeding, in any case

including without limitation all claims, demands, causes of action, liabilities and theories

under federal law or any state’s law, whether statutory or at the common law, of and for

fraud, alter ego, instrumentality or piercing the corporate veil, fraudulent transfer or

conveyance, corporate opportunity, usurpation or denuding, breach of fiduciary duty,

joint venture or joint enterprise or other participation or co-ownership with Empire, any

form of agency for Empire, legal malpractice, RICO, conspiracy, breach of contract,

negligent or otherwise improper providing of services to Empire, negligent or otherwise

improper supervision of Empire, mismanagement, equitable subordination, violation of

corporate law, and all other similar and related claims and theories that seek relief or

recovery or arise from the same core of operative facts or for generalized harm to

creditors or for injury that is not personal and peculiar to a specific claimant.

7. Except as expressly provided in Section 9 below, the CFN Liquidating

Trust and the CFN Liquidating Trustee do hereby release, acquit, and forever discharge

the Empire Trustee and Empire and each of their respective parent, sister, subsidiary,

and affiliated corporations, companies, partnerships or other entities, all

successors-in-interest to such corporations, companies, partnerships or other entities,

and each of their respective officers, directors, employees, servants, agents,

representatives, attorneys, professionals, and successors and assigns (collectively, the

“Empire Released Entities”), from and against any and all claims, demands, causes of

action, or liabilities, of any and every character, kind and nature whatsoever, in law or in


equity, whether known or unknown, past, present or future, accrued or unaccrued,

contingent or fixed, whether based on the law of contracts, warranty, torts, conspiracy,

fraud, breach of fiduciary duty, negligence, gross negligence, intentional conduct, strict

liability, real property rights, personal property rights, or any other theory, whether

asserted or assertable in the Conti Case, the Empire Case or in any lawsuit or other

legal proceeding, in whole or in part arising out of, resulting from, based upon, or related

in any way to any of the Empire Released Entities’ ownership, management, operation,



creditor, insurer, successor, or assign or any other relationship with the CFN Liquidating

Trust, the CFN Liquidating Trustee, or any of the Conti Debtors at any time that are or

constitute claims in favor of and property of the CFN Liquidating Trust or the CFN

Liquidating Trustee, pursuant to Bankruptcy Code §§ 541, 544, 547, 548, 549 or 550 or

any other provisions of the Bankruptcy Code, arising under any other statutory law or

the common law, whether asserted or assertable in the Empire Case, the Conti Case or

in any lawsuit or other legal proceeding, in any case including without limitation all

claims, demands, causes of action, liabilities and theories under federal law or any

state’s law, whether statutory or at the common law, of and for fraud, alter ego,

instrumentality or piercing the corporate veil, fraudulent transfer or conveyance,

corporate opportunity, usurpation or denuding, breach of fiduciary duty, joint venture or

joint enterprise or other participation or co-ownership with the CFN Liquidating Trust or

any of the Conti Debtors, any form of agency for the CFN Liquidating Trust or any of the

Conti Debtors, legal malpractice, RICO, conspiracy, breach of contract, negligent or

otherwise improper providing of services to the CFN Liquidating Trust or any of the


Conti Debtors, negligent or otherwise improper supervision of any of the CFN

Liquidating Trust or the Conti Debtors, mismanagement, equitable subordination,

violation of corporate law, and all other similar and related claims and theories that seek

relief or recovery or arise from the same core of operative facts or for generalized harm

to creditors or for injury that is not personal and peculiar to a specific claimant.

8. Except as expressly provided in Section 9 below, the ContiGroup does

hereby release, acquit, and forever discharge the Empire Released Entities, from and

against any and all claims, demands, causes of action, or liabilities, of any and every

character, kind and nature whatsoever, in law or in equity, whether known or unknown,

past, present or future, accrued or unaccrued, contingent or fixed, whether based on the

law of contracts, warranty, torts, conspiracy, fraud, breach of fiduciary duty, negligence,

gross negligence, intentional conduct, strict liability, real property rights, personal

property rights, or any other theory, whether asserted or assertable in the Conti Case,

or the Empire Case or in any lawsuit or other legal proceeding, in whole or in part

arising out of, resulting from, based upon, or related in any way to any of the Empire

Released Entities’ ownership, management, operation, status, tenure, actions,

inactions, and conduct at any time as an affiliate, stockholder, director, officer,

employee, servant, agent, representative, attorney, lender, borrower, creditor, insurer,

successor, or assign or any other relationship with any of the ContiGroup at any time

that are or constitute claims in favor of and property of the ContiGroup arising under any

other statutory law or the common law, whether asserted or assertable in the Empire

Case, the Conti Case or in any lawsuit or other legal proceeding, in any case including

without limitation all claims, demands, causes of action, liabilities and theories under

federal law or any state’s law, whether statutory or at the common law, of and for fraud,


alter ego, instrumentality or piercing the corporate veil, fraudulent transfer or

conveyance, corporate opportunity, usurpation or denuding, breach of fiduciary duty,

joint venture or joint enterprise or other participation or co-ownership with any of the

ContiGroup, any form of agency for any of the ContiGroup, legal malpractice, RICO,

conspiracy, breach of contract, negligent or otherwise improper providing of services to

any of the ContiGroup, negligent or otherwise improper supervision of any of the

ContiGroup, mismanagement, equitable subordination, violation of corporate law, and

all other similar and related claims and theories that seek relief or recovery or arise from

the same core of operative facts or for generalized harm to creditors or for injury that is

not personal and peculiar to a specific claimant.

9. It is the intention of the Parties hereto that the scope of the release

provided for in this Mutual Release shall be as broad and complete as possible and

shall have the benefits of the doctrines of res judicata and collateral estoppel to the

fullest extent allowed by law and limited only by the provisions of this Section 9.

Nothing provided in Sections 6, 7 or 8 or elsewhere herein shall be deemed to release

any Party from his, her, or its obligations under the Empire Plan, the Agreement or this

Mutual Release. Nothing provided in Sections 6, 7 or 8 or elsewhere herein shall be

deemed to release any claims, demands, causes of action or liabilities held by any Party

against: (a) James Isaacs (“Isaacs”), his spouse or children; (b) Empire Funding Holding

Corporation (“Holding”), and past or present shareholders of Holding (save and except

any Conti Released Entity), (c) Island Wood Investments L.L.C. (“Island Wood”); (d) TMI

Acceptance Corp. (“TMI”); (e) any current or former relative of Isaacs; and/or (f) any

entity, including trusts, that are affiliates or that are under the direct or indirect control of

or exist for the benefit of Isaacs, his spouse, children or Isaacs’ other current or former


relatives, Holding, Island Wood or TMI (save and except for Empire, Steve Otto or Mark

Otto), all such claims, demands, causes of action and liabilities being expressly

reserved. The Empire Trustee also does not release any claims or causes of action it

may have against Dewey Ballantine LLP (“Dewey Ballantine”), save and except for any

potential claims relating to services rendered by Dewey as counsel to the Conti Debtors,

but excluding any claims for alleged conflicts of interest Empire may assert against

Dewey arising from such services. Nothing provided in Sections 6, 7 or 8 or elsewhere

herein shall be deemed to release any claims, demands, or causes of action or liabilities

held by the CFN Liquidating Trust against (i) U.S. Bank National Association or any of

its affiliates, (ii) Dewey Ballantine, in its capacity as counsel to Empire, Holding and/or

Isaacs, (iii) Dewey Ballantine and Cronin & Vris, LLP, in their capacities as attorneys for

CFN and/or its subsidiaries; the Blackstone Group, in its capacity as investment banker

to CFN and/or its subsidiaries; Arthur Andersen, in its capacities as consultants,

accountants and auditors to CFN and/or its subsidiaries, respectively, Lehman Brothers

Inc., in its capacity as investment banker to CFN and/or its subsidiaries; (iv) any other

attorneys, consultants, accountants or other professionals for CFN and/or its

subsidiaries acting solely in their capacities as such; or (v) the underwriters for CFN

and/or its subsidiaries acting solely in their capacities as such; all such claims,

demands, causes of action and liabilities being expressly reserved.

10. Each Party agrees and covenants that it shall not in the future assert, file,

or prosecute any claim, demand or cause of action that is released by this Mutual

Release against any of the Conti Released Entities or the Empire Released Entities, to

recover any damages or injunctive relief, whether on its own behalf or on behalf of an

entity or person not a signatory to this Agreement. If a Party or its successor breaches


this covenant-not-to-sue, the other Conti Released Entity or the Empire Released Entity,

as the case may be, sued by a Party or its successor shall be entitled to recover from

that Party or its successor all attorneys’ fees and costs incurred by it as a result of such

breach.

11. A subsequent violation or alleged violation of a term of this Mutual

Release (e.g., a subsequent dispute among the Parties) shall not affect the validity and

enforceability of the releases, the covenant-not-to-sue, or the indemnity granted herein

in favor of the Empire Trustee, the CFN Liquidating Trustee, the ContiGroup, and the

other persons and entities covered by this Mutual Release. The foregoing sentence

and the preceding Sections 6, 7 and 8 shall not prohibit a lawsuit for a subsequent

violation of the Empire Plan, this Mutual Release or the Settlement Agreement.

12. This Mutual Release shall be interpreted and construed according the

laws of the State of Texas.

13. This Mutual Release may be executed in multiple counterparts, each of

which shall constitute one and the same instrument; and any Party may deliver his, her

or its signed counterpart by facsimile. Words in the singular include the plural and

words in the plural include the singular.


EMPIRE FUNDING CORP.

By:___________________________________Ronald Hornberger, Chapter 11 Trustee



CONTIGROUP COMPANIES, INC.

By:___________________________________Its:______________________________

CONTITRADE SERVICES CORPORATION

By:___________________________________Its:______________________________


STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me, on this ___ day of August, 2001,by Jeffrey H. Beck, Trustee for the CFN Liquidating Trust, on behalf of said trust.

_____________________________________Notary Public in and forThe State of ______________

My Commission Expires:_______________

STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me on this ___ day of August, 2001,by ________________ as ___________ of ContiTrade Services Corporation, a_______________ corporation, on behalf of said corporation.




STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me, on this ____ day of August, 2001,by Ronald Hornberger, Chapter 11 Trustee of Empire Funding Corporation.



STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me on this ___ day of August, 2001,by _____________, as ______________, of ContiGroup Companies, Inc., a__________ corporation, on behalf of said corporation.




SCHEDULE 1

TO

MUTUTAL RELEASE

Debtors:ContiFinancial CorporationContiMortgage CorporationContiTrade Services LLCContiWest CorporationContiFinancial Services CorporationResource One Consumer Discount Company, Inc.Warminster National Abstract, Inc.Keystone Capital Group, Inc.Keystone Mortgage Investments, Inc.ZTS CorporationResource One Mortgage of Oxford Valley, Inc.Resource One Consumer Discount Co. of Minnesota, Inc.Resource One Mortgage of Delaware Valley, Inc.ResourceCorp Financial, Inc.ContiInsurance Agency, Inc.Crystal Mortgage Company, Inc.Lenders M.D., Inc.California Lending Group, Inc.ContiAsset Receivables Management L.L.C.Royal Mortgage Partners, L.P.Fidelity Mortgage Decisions Corporation

Special Purpose Entities:ContiFunding CorporationContiSecurities Residual CorporationContiSecurities Residual Corporation IIContiSecurities Residual Corporation III (CFN SPV Holding Corp.)ContiSecurities Asset Funding Corp.ContiSecurities Asset Funding L.L.C.ContiSecurities Asset Funding Corp. IIContiSecurities Asset Funding II L.L.C.ContiSecurities Asset Funding Corp. IIIContiSecurities Asset Funding Corp. IVContiSecurities Asset Funding Corp. VContiAuto Asset Funding Corp.ContiSecurities Holding Corporation


EXHIBIT C

TO


UBS MUTUAL RELEASE


GENERAL, ABSOLUTE, AND MUTUAL RELEASE

This instrument of release (the “Mutual Release”) is executed by (a) Jeffrey H.

Beck, the Liquidating Trustee for the CFN Liquidating Trust (the “CFN Liquidating

Trustee”), and (b) UBS Warburg Real Estate Securities Inc. (f/k/a PaineWebber Real

Estate Securities, Inc.), Mortgage Asset Securitization Transactions, Inc. (f/k/a

PaineWebber Mortgage Acceptance Corporation) and UBS PaineWebber Inc. (f/k/a

PaineWebber Incorporated) (collectively, UBS PaineWebber). The CFN Liquidating

Trustee and UBS PaineWebber are sometimes collectively referred to herein as the

“Parties” or individually as a “Party”.

1. On May 15, 2001, Empire Funding Corp. (“Empire”) filed a voluntary

petition for relief in Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy

Code”) in the United States Bankruptcy Court for the Western District of Texas, Austin

Division (the “Texas Court”) such Chapter 11 being styled In re Empire Funding Corp.,

Debtor, Case No. 00-11478-FRM (the “Empire Case”). On October ___, 2001, the

Texas Court entered an order in the Empire Case confirming that certain Joint Plan of

Reorganization of Empire Funding Corp. dated as of August ___, 2001 (the “Empire

Plan”).

2. On May 17, 2000 and thereafter, ContiTrade Services L.L.C. (“Conti”),

ContiFinancial Corporation (“CFN”), California Lending Group, Inc. (“California







Case”). On December 20, 2000, the New York Court entered an order in the Conti

Case confirming that certain Third Amended Joint Plan of Reorganization of



which all of the claims held by CFN, Conti, and California Lending against Empire were

transferred to the CFN Liquidating Trust (herein so called) effective April 10, 2001.

Jeffrey H. Beck has been appointed the CFN Liquidating Trustee for the CFN

Liquidating Trust.

3. The CFN Liquidating Trust and UBS PaineWebber are creditors of Empire

with disputes with respect to the claims against and the priority of security interests in

certain of Empire’s property.

4. The Empire Trustee and the CFN Liquidating Trustee are parties to that

certain Settlement Agreement dated as of August 9, 2001 (the “Agreement”). A

condition to the consummation of the Agreement is the execution and delivery by the

CFN Liquidating Trust and UBS PaineWebber of this Mutual Release.

5. The CFN Liquidating Trustee and UBS PaineWebber represent and

warrant to each other that, by virtue of all necessary corporate or trust action and,

where applicable, approval of the Texas Court and New York Court, he or it has the full

and complete authority to execute this Mutual Release and to grant the releases

required hereby, that this Mutual Release shall be fully binding on behalf of the Parties

indicated, and that each of the claims, causes of action, suits, rights and/or interests

which are the subject matter of this Mutual Release are owned by the CFN Liquidating

Trust and UBS PaineWebber, respectively, and have not been assigned, transferred, or

sold, and are all free of encumbrances.


6. Each Party acknowledges receipt of consideration from the other Parties

in consideration and full satisfaction of all claims released hereunder.

7. Except as expressly provided in Section 9 below, UBS PaineWebber,

does hereby release, acquit, and forever discharge the CFN Liquidating Trust, the CFN

Liquidating Trustee, each of the Conti Debtors and each of their respective parent,

sister, subsidiary, and affiliated corporations, companies, partnerships or other entities

(including, but not limited to, the entities set forth on Schedule 1 attached hereto), all

successors-in-interest to such corporations, companies, partnerships or other entities,

and each of their respective owners, stockholders, officers, directors, employees,

servants, agents, representatives, attorneys, and successors and assigns (collectively,

the “Conti Released Entities”), from and against any and all claims, demands, causes of

action, or liabilities, of any and every character, kind and nature whatsoever, in law or in

equity, whether known or unknown, past, present or future, accrued or unaccrued,

contingent or fixed, whether based on the law of contracts, warranty, torts, conspiracy,

fraud, breach of fiduciary duty, negligence, gross negligence, intentional conduct, strict

liability, real property rights, personal property rights, or any other theory, whether

asserted or assertable in the Empire Case, the Conti Case or in any lawsuit or other

legal proceeding, in whole or in part arising out of, resulting from, based upon, or related

in any way to any of the Conti Released Entities’ ownership, management, operation,



creditor, insurer, successor, or assign or any other relationship with Empire or UBS

PaineWebber, at any time that are or constitute claims in favor of and property of UBS

PaineWebber, arising under any statutory law or the common law, whether asserted or


assertable in the Empire Case, the Conti Case or in any lawsuit or other legal

proceeding, in any case including without limitation all claims, demands, causes of

action, liabilities and theories under federal law or any state’s law, whether statutory or

at the common law of and for fraud, alter ego, instrumentality or piercing the corporate

veil, fraudulent transfer or conveyance, corporate opportunity, usurpation or denuding,

breach of fiduciary duty, joint venture or joint enterprise or other participation or co-

ownership with UBS PaineWebber or Empire, any form of agency for UBS

PaineWebber or Empire, legal malpractice, RICO, conspiracy, breach of contract,

negligence or otherwise improper providing of services to UBS PaineWebber or Empire,

negligent or other improper supervision of UBS PaineWebber or Empire,

mismanagement, equitable subordination, violation of corporate law, and all similar

related claims and theories that seek relief or recovery or arise from the same core

operative facts or for generalized harm to the creditors or for injury that is not personal

or peculiar to a specific claimant.

8. Except as expressly provided in Section 9 below, the CFN Liquidating

Trust and the CFN Liquidating Trustee do hereby release, acquit, and forever discharge

UBS PaineWebber and each of their respective parent, sister, subsidiary, and affiliated

corporations, companies, partnerships or other entities, all successors-in-interest to

such corporations, companies, partnerships or other entities, and each of their

respective officers, directors, employees, servants, agents, representatives, attorneys,

professionals, and successors and assigns (collectively, the “UBS Released Entities”),

from and against any and all claims, demands, causes of action, or liabilities, of any and

every character, kind and nature whatsoever, in law or in equity, whether known or

unknown, past, present or future, accrued or unaccrued, contingent or fixed, whether


based on the law of contracts, warranty, torts, conspiracy, fraud, breach of fiduciary

duty, negligence, gross negligence, intentional conduct, strict liability, real property

rights, personal property rights, or any other theory, whether asserted or assertable in

the Conti Case, the Empire Case or in any lawsuit or other legal proceeding, in whole or

in part arising out of, resulting from, based upon, or related in any way to any of the

UBS Released Entities’ ownership, management, operation, status, tenure, actions,

inactions, and conduct at any time as an affiliate, stockholder, director, officer,

employee, servant, agent, representative, attorney, lender, borrower, creditor, insurer,

successor, or assign or any other relationship with Empire, the CFN Liquidating Trust,

the CFN Liquidating Trustee, or any of the Conti Debtors at any time that are or

constitute claims in favor of and property of the CFN Liquidating Trust or the CFN

Liquidating Trustee, pursuant to Bankruptcy Code §§ 541, 544, 547, 548, 549 or 550 or

any other provisions of the Bankruptcy Code, arising under any other statutory law or

the common law, whether asserted or assertable in the Empire Case, the Conti Case or

in any lawsuit or legal proceeding, in any case, including, without limitation, all claims,

demands, causes of action, and theories under federal law or any state’s law, whether

statutory or at common law of and for fraud, alter ego, instrumentality, or piercing the

corporate veil, fraudulent transfer or conveyance, corporate opportunity, usurpation or

denuding, breach of fiduciary duty, joint venture or joint enterprise or other participation

or co-ownership with the CFN Liquidating Trust or Empire, any form of agency for the

CFN Liquidating Trust or Empire, legal malpractice, RICO, conspiracy, breach of

contract, negligence or otherwise improper providing of services to the CFN Liquidating

Trust or Empire, negligent or other improper supervision of the CFN Liquidating Trust or

Empire, mismanagement, equitable subordination, violation of corporate law, and all


similar related claims and theories that seek relief or recovery or arise from the same

core operative facts for generalized harm to the creditors or for injury that is not

personal or peculiar to a specific claimant.

9. It is the intention of the Parties hereto that the scope of the release

provided for in this Mutual Release shall be as broad and complete as possible and

shall have the benefits of the doctrines of res judicata and collateral estoppel to the

fullest extent allowed by law and limited only by the provisions of this Section 9.

Nothing provided in Sections 7 or 8 or elsewhere herein shall be deemed to release any

Party from his, her, or its obligations under the Empire Plan, the Agreement or this

Mutual Release. Nothing provided in Sections 7 or 8 or elsewhere herein shall be

deemed to release any claims, demands, causes of action or liabilities held by any Party

against: (a) James Isaacs (“Isaacs”), his spouse or children; (b) Empire Funding Holding

Corporation (“Holding”) or past or present shareholders of Holding (save and except for

any Conti Released Entity); (c) Island Wood Investments L.L.C. (“Island Wood”); (d) TMI

Acceptance Corp. (“TMI”); (e) any current or former relative of Isaacs; and/or (f) any

entity, including trusts, that are affiliates or that are under the direct or indirect control of

or exist for the benefit of Isaacs, his spouse, children or Isaacs’ other current or former

relatives, Holding, Island Wood or TMI, all such claims, demands, causes of action and

liabilities being expressly reserved. Nothing provided in Sections 7 or 8 or elsewhere

herein shall be deemed to release any claims, demands or causes of action or liabilities

held by the CFN Liquidating Trust against (i) U.S. Bank National Association or any of

its affiliates, (ii) Dewey Ballantine, in its capacity as counsel to Empire, Holding and/or

Isaacs, (iii) Dewey Ballantine and Cronin & Vris, LLP, in their capacities as attorneys for

CFN and/or its subsidiaries; the Blackstone Group, in its capacity as investment banker


to CFN and/or its subsidiaries; Arthur Andersen, in its capacities as consultants,

accountants and auditors to CFN and/or its subsidiaries, respectively, Lehman Brothers

Inc., in its capacity as investment banker to CFN and/or its subsidiaries; (iv) any other

attorneys, consultants, accountants or other professionals for CFN and/or its

subsidiaries acting solely in their capacities as such; or (v) the underwriters for CFN

and/or its subsidiaries acting solely in their capacities as such; all such claims,

demands, causes of action and liabilities being expressly reserved.

10. Each Party agrees and covenants that it shall not in the future assert, file,

or prosecute any claim, demand or cause of action that is released by this Mutual

Release against any of the Conti Released Entities or the UBS Released Entities, to

recover any damages or injunctive relief, whether on its own behalf or on behalf of an

entity or person not a signatory to this Agreement. If a Party or its successor breaches

this covenant-not-to-sue, the other Conti Released Entity or UBS Released Entity, as

the case may be, sued by a Party or its successor shall be entitled to recover from that

Party or its successor all attorneys’ fees and costs incurred by it as a result of such

breach.

11. A subsequent violation or alleged violation of a term of this Mutual

Release (e.g., a subsequent dispute among the Parties) shall not affect the validity and

enforceability of the releases, the covenant-not-to-sue, or the indemnity granted herein

in favor of the CFN Liquidating Trustee, UBS PaineWebber, and the other persons and

entities covered by this Mutual Release. The foregoing sentence and the preceding

Sections 7 and 8 shall not prohibit a lawsuit for a subsequent violation of this Mutual

Release.


12. This Mutual Release shall be interpreted and construed according to the

laws of the State of Texas.

13. This Mutual Release may be executed in multiple counterparts, each of

which shall constitute one and the same instrument; and any Party may deliver his, or or

its signed counterpart by facsimile. Words in the singular include the plural and words

in the plural include the singular.



UBS WARBURG REAL ESTATESECURITIES, INC. (f/k/a _ PaineWebber Real

Estate Securities Inc.)

By:___________________________________Name:________________________________Title:_________________________________

MORTGAGE ASSET SECURITIZATIONTRANSACTIONS, INC. (f/k/a UBS WarburgMortgage Acceptance Corporation)

By:___________________________________Name:________________________________Title:_________________________________

UBS PAINEWEBBER INC. (f/k/a PaineWebberIncorporated)

By:___________________________________Name:________________________________Title:_________________________________


STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me, on this ___ day of August, 2001by Jeffrey H. Beck, Trustee for the CFN Liquidating Trust, on behalf of said trust.



STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me on this ___ day of August, 2001,by ________________ as ___________ of UBS Warburg Real Estate Securities, Inc.(f/k/a PaineWebber Real Estate Securities Inc.), a _______________ corporation, onbehalf of said corporation.




STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me, on this ____ day of August, 2001,by ________________, as _______________, of Mortgage Asset SecuritizationTransactions, Inc. (f/k/a UBS Warburg Mortgage Acceptance Corporation), a______________ corporation, on behalf of said corporation.



STATE OF _______________ ))

COUNTY OF _______________ )

This instrument was acknowledged before me on this ___ day of August, 2001,by _____________, as ______________, of UBS PaineWebber Inc. (f/k/aPaineWebber Incorporated), a ______________ corporation, on behalf of saidcorporation.




SCHEDULE 1

TO

MUTUTAL RELEASE

Debtors:ContiFinancial CorporationContiMortgage CorporationContiTrade Services LLCContiWest CorporationContiFinancial Services CorporationResource One Consumer Discount Company, Inc.Warminster National Abstract, Inc.Keystone Capital Group, Inc.Keystone Mortgage Investments, Inc.ZTS CorporationResource One Mortgage of Oxford Valley, Inc.Resource One Consumer Discount Co. of Minnesota, Inc.Resource One Mortgage of Delaware Valley, Inc.ResourceCorp Financial, Inc.ContiInsurance Agency, Inc.Crystal Mortgage Company, Inc.Lenders M.D., Inc.California Lending Group, Inc.ContiAsset Receivables Management L.L.C.Royal Mortgage Partners, L.P.Fidelity Mortgage Decisions Corporation

Special Purpose Entities:ContiFunding CorporationContiSecurities Residual CorporationContiSecurities Residual Corporation IIContiSecurities Residual Corporation III (CFN SPV Holding Corp.)ContiSecurities Asset Funding Corp.ContiSecurities Asset Funding L.L.C.ContiSecurities Asset Funding Corp. IIContiSecurities Asset Funding II L.L.C.ContiSecurities Asset Funding Corp. IIIContiSecurities Asset Funding Corp. IVContiSecurities Asset Funding Corp. VContiAuto Asset Funding Corp.ContiSecurities Holding Corporation

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empire conti settlement

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