V&E DRAFT DATED 8/16/01

SETTLEMENT AGREEMENT

BY AND BETWEEN

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

AND

JEFFREY H. BECK, LIQUIDATING TRUSTEE FOR THE CFN LIQUIDATING TRUST

DATED AS OF AUGUST 16, 2001

V&E DRAFT DATED 8/16/01 SETTLEMENT AGREEMENT 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). RECITALS: 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. 001106 (FRM) (the Adversary Proceeding) by filing its Complaint to Determine Amount

V&E DRAFT DATED 8/16/01 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, Empires 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)

V&E DRAFT DATED 8/16/01 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 Empires 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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.

V&E DRAFT DATED 8/16/01 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,

V&E DRAFT DATED 8/16/01 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) Empires 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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.

V&E DRAFT DATED 8/16/01 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 Empires 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 Empires 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

V&E DRAFT DATED 8/16/01 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 Floor San Antonio, Texas 78201-7092 Attn: Ronald Hornberger Cox & Smith Incorporated 112 East Pecan Street, Suite 1800 San Antonio, Texas 78205 Attn: Deborah D. Williamson CFN Liquidating Trust 6555 North Powerline Road, Suite 408 Fort Lauderdale, Florida 33309 Attn: Jeffrey H. Beck Bilzin Sumberg Dunn Baena Price & Axelrod LLP 2500 First Union Financial Center 200 South Biscayne Boulevard Miami, Florida 33131-2336 Attn: Scott L. Baena Vinson & Elkins L.L.P.

with a copy to:

To CFN Liquidating Trust:

with copies to:

V&E DRAFT DATED 8/16/01 2001 Ross Ave., Suite 3700 Dallas, Texas 75201 Attn: 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.

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01

EXHIBIT A TO SETTLEMENT AGREEMENT

CTSC WITHDRAWAL

V&E DRAFT DATED 8/16/01 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION In re: EMPIRE FUNDING CORP., an Oklahoma corporation, Debtor. CASE NO. 00-11478-FRM CHAPTER 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. 3. The Proof of Claim has not been amended, supplemented or withdrawn. 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 Floor New York, New York 10172 Tel: (212) 207-5754 Fax: (212) 207-5799 By: _________________________________ Mark Baker Its: Director and President

V&E DRAFT DATED 8/16/01

EXHIBIT B TO SETTLEMENT AGREEMENT MUTUAL RELEASE

V&E DRAFT DATED 8/16/01 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 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). 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

V&E DRAFT DATED 8/16/01 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 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.

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 Empire Trustee, Empire, or Empires 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 states 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

V&E DRAFT DATED 8/16/01 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, 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 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 states 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

V&E DRAFT DATED 8/16/01 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 states law, whether statutory or at the common law, of and for fraud,

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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.

V&E DRAFT DATED 8/16/01 EMPIRE FUNDING CORP.

By:___________________________________ Ronald Hornberger, Chapter 11 Trustee CFN LIQUIDATING TRUST

By:___________________________________ Jeffrey H. Beck, Liquidating Trustee CONTIGROUP COMPANIES, INC.

By:___________________________________ Its:______________________________ CONTITRADE SERVICES CORPORATION

By:___________________________________ Its:______________________________

V&E DRAFT DATED 8/16/01 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 for The 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. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

V&E DRAFT DATED 8/16/01 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. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

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. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

V&E DRAFT DATED 8/16/01

SCHEDULE 1 TO MUTUTAL RELEASE

Debtors: ContiFinancial Corporation ContiMortgage Corporation ContiTrade Services LLC ContiWest Corporation ContiFinancial Services Corporation Resource One Consumer Discount Company, Inc. Warminster National Abstract, Inc. Keystone Capital Group, Inc. Keystone Mortgage Investments, Inc. ZTS Corporation Resource 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 Corporation ContiSecurities Residual Corporation ContiSecurities Residual Corporation II ContiSecurities Residual Corporation III (CFN SPV Holding Corp.) ContiSecurities Asset Funding Corp. ContiSecurities Asset Funding L.L.C. ContiSecurities Asset Funding Corp. II ContiSecurities Asset Funding II L.L.C. ContiSecurities Asset Funding Corp. III ContiSecurities Asset Funding Corp. IV ContiSecurities Asset Funding Corp. V ContiAuto Asset Funding Corp. ContiSecurities Holding Corporation

V&E DRAFT DATED 8/16/01

EXHIBIT C TO SETTLEMENT AGREEMENT UBS MUTUAL RELEASE

V&E DRAFT DATED 8/16/01 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 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

V&E DRAFT DATED 8/16/01 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 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 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 Empires property. 4. The Empire Trustee and the CFN Liquidating Trustee are parties to that A

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

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.

V&E DRAFT DATED 8/16/01 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, 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 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

V&E DRAFT DATED 8/16/01 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 states 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 coownership 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

V&E DRAFT DATED 8/16/01 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 states 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

V&E DRAFT DATED 8/16/01 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

V&E DRAFT DATED 8/16/01 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.

V&E DRAFT DATED 8/16/01 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. CFN LIQUIDATING TRUST

By:___________________________________ Jeffrey H. Beck, Liquidating Trustee UBS WARBURG REAL ESTATE SECURITIES, INC. (f/k/a _ PaineWebber Real Estate Securities Inc.)

By:___________________________________ Name:________________________________ Title:_________________________________ MORTGAGE ASSET SECURITIZATION TRANSACTIONS, INC. (f/k/a UBS Warburg Mortgage Acceptance Corporation)

By:___________________________________ Name:________________________________ Title:_________________________________

UBS PAINEWEBBER INC. (f/k/a PaineWebber Incorporated)

By:___________________________________ Name:________________________________ Title:_________________________________

V&E DRAFT DATED 8/16/01 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 for The State of ______________ My Commission Expires:_______________

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, on behalf of said corporation. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

V&E DRAFT DATED 8/16/01 STATE OF _______________ ) ) COUNTY OF _______________ ) This instrument was acknowledged before me, on this ____ day of August, 2001, by ________________, as _______________, of Mortgage Asset Securitization Transactions, Inc. (f/k/a UBS Warburg Mortgage Acceptance Corporation), a ______________ corporation, on behalf of said corporation. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

STATE OF _______________

) ) COUNTY OF _______________ ) This instrument was acknowledged before me on this ___ day of August, 2001, by _____________, as ______________, of UBS PaineWebber Inc. (f/k/a PaineWebber Incorporated), a ______________ corporation, on behalf of said corporation. _____________________________________ Notary Public in and for The State of ______________ My Commission Expires:_______________

V&E DRAFT DATED 8/16/01

SCHEDULE 1 TO MUTUTAL RELEASE

Debtors: ContiFinancial Corporation ContiMortgage Corporation ContiTrade Services LLC ContiWest Corporation ContiFinancial Services Corporation Resource One Consumer Discount Company, Inc. Warminster National Abstract, Inc. Keystone Capital Group, Inc. Keystone Mortgage Investments, Inc. ZTS Corporation Resource 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 Corporation ContiSecurities Residual Corporation ContiSecurities Residual Corporation II ContiSecurities Residual Corporation III (CFN SPV Holding Corp.) ContiSecurities Asset Funding Corp. ContiSecurities Asset Funding L.L.C. ContiSecurities Asset Funding Corp. II ContiSecurities Asset Funding II L.L.C. ContiSecurities Asset Funding Corp. III ContiSecurities Asset Funding Corp. IV ContiSecurities Asset Funding Corp. V ContiAuto Asset Funding Corp. ContiSecurities Holding Corporation
482510_8.DOC