CONTIFINANCIAL CORP, S-3/A, 1997-03-28

CONTIFINANCIAL CORP
S-3/A, 1997-03-28
MORTGAGE BANKERS & LOAN CORRESPONDENTS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1997

REGISTRATION NO. 333-21839
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

CONTIFINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 13-3852588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

------------------------

277 PARK AVENUE
NEW YORK, NEW YORK 10172
(212) 207-2800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------

ALAN L. LANGUS, ESQ.
CHIEF COUNSEL
CONTIFINANCIAL CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172
(212) 207-2822
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C> <C>
MARK R. BAKER, ESQ. MATTHEW NIMETZ, ESQ. NORMAN D. SLONAKER, ESQ.
DEWEY BALLANTINE PAUL, WEISS, RIFKIND, BROWN & WOOD LLP
1301 AVENUE OF THE WHARTON & GARRISON ONE WORLD TRADE CENTER
AMERICAS 1285 AVENUE OF THE NEW YORK, NEW YORK
NEW YORK, NEW YORK AMERICAS 10048-0557
10019-6062 NEW YORK, NEW YORK (212) 839-5300
(212) 259-8000 10019-6064
(212) 373-3000
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / / __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / / __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: /X/
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

This Registration Statement contains three forms of prospectus: (1) a
prospectus relating to a primary offering of the common stock of the Registrant
in a United States underwritten offering (the "U.S. Primary Prospectus"); (2) a
prospectus relating to a primary offering of the common stock of the Registrant
in an international underwritten offering (the "International Primary
Prospectus" and together with the U.S. Primary Prospectus, the "Primary
Prospectuses"); and (3) a prospectus relating to shares of common stock of the
Registrant owned by an affiliate of the Registrant which may be distributed to
holders of certain Structured Yield Product Exchangeable for Stock-SM-
("STRYPES") issued by ContiFinancial STRYPES Trust (the "Trust") upon
dissolution of the Trust (the "STRYPES-related Prospectus").

The Primary Prospectuses will be identical in all respects except for the
front cover page, the section entitled "Underwriting" and the outside back cover
page. The STRYPES-related Prospectus will be identical to the Primary
Prospectuses in all respects except for the front cover page, the sub-headings
entitled "The Offering," "Relationship with Continental Grain" and "Risk
Factors" under the heading entitled "Prospectus Summary," the lack of a section
entitled "Use of Proceeds," a section entitled "Plan of Distribution" in place
of the section entitled "Underwriting," the section entitled "Legal Matters" and
the outside back cover page.

The form of the U.S. Primary Prospectus is included herein and the form of
the alternate pages of the International Primary Prospectus and the
STRYPES-related Prospectus are included herein on pages X-1 through X-5 and
pages Y-1 through Y-6, respectively.

- ------------------------

- -SM-Service mark of Merrill Lynch & Co., Inc.
<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 28, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
2,800,000 SHARES
CONTIFINANCIAL CORPORATION
COMMON STOCK
------------

All of the 2,800,000 shares of common stock, $0.01 par value (the "Common
Stock"), of ContiFinancial Corporation, a Delaware corporation (the "Company"),
offered hereby are being issued and sold by the Company. Of the shares of Common
Stock offered hereby, 2,240,000 shares initially are being offered in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering") and 560,000
shares initially are being offered in a concurrent offering outside the United
States and Canada by the International Managers (the "International Offering"
and, together with the U.S. Offering, the "Primary Offerings"). The public
offering price and the underwriting discount per share will be identical for
both of the Primary Offerings. See "Underwriting."

The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "CFN." On March 7, 1997, the last reported sale price of the Common Stock
on the NYSE was $36 7/8 per share. See "Price Range of Common Stock."

Continental Grain Company ("Continental Grain") currently owns approximately
81% of the Company's outstanding Common Stock. Upon completion of the Primary
Offerings, Continental Grain will own approximately 76% of the Company's
outstanding Common Stock (approximately 75% if the Underwriters of the Primary
Offerings exercise their over-allotment options in full). Simultaneous with the
Primary Offerings, Continental Grain is entering into a forward purchase
contract (the "Forward Contract") with ContiFinancial STRYPES Trust, a Delaware
business trust (the "Trust") pursuant to which 2,800,000 shares (or 3,220,000
shares if the Underwriters of the Structured Yield Product Exchangeable for
Stock-SM- (the "STRYPES") exercise their over-allotment option) of Common Stock
currently owned by Continental Grain may be distributed to holders of the
STRYPES issued by the Trust upon conclusion of the term of the Trust on
, 2000 or upon earlier dissolution of the Trust in certain
circumstances. Upon satisfaction of the Forward Contract, assuming Continental
Grain delivers to the Trust the maximum number of shares of Common Stock subject
thereto, and assuming no other sales of the Company's Common Stock by
Continental Grain, Continental Grain would own approximately 70% of the
outstanding Common Stock (or approximately 69% of the outstanding Common Stock
if the over-allotment options granted to the Underwriters of the Primary
Offerings and to the Underwriters of the STRYPES are exercised in full). The
STRYPES are being offered in a public offering simultaneous with the Primary
Offerings. The STRYPES are not being offered hereby. The offering of the Common
Stock in the Primary Offerings is not conditioned upon the STRYPES offering.

SEE "RISK FACTORS," BEGINNING ON PAGE 9 OF THIS PROSPECTUS, FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
---------------

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY (2)
<S> <C> <C> <C>
Per Share............................................... $ $ $
Total(3)................................................ $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $700,000.
(3) The Company has granted the U.S. Underwriters and the International Managers
30-day options to purchase up to 336,000 and 84,000 additional shares of
Common Stock, respectively, solely to cover over-allotments, if any. If all
such additional shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
----------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of certificates for the shares will be made in New York, New York
on or about , 1997.

- ---------

- -SM-Service mark of Merrill Lynch & Co., Inc.
---------------------

MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
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The date of this Prospectus is , 1997.
<PAGE>
Certain persons participating in the Primary Offerings may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Common Stock. Such transactions may include stabilizing, the purchase of Common
Stock to cover syndicate short positions and the imposition of penalty bids. For
a description of these activities, see "Underwriting."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Suite 1300, Seven World Trade Center,
New York, New York 10048, and Suite 1400, CitiCorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such materials can be obtained from
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates and electronically through the
Commission's Electronic Data Gathering, Analysis and Retrieval System at the
Commission's web site (http:\\www.sec.gov). Such materials can also be inspected
at the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is hereby made to such Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other documents are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including exhibits thereto, may be inspected and copied at the offices of the
Commission, or obtained at prescribed rates from the Public Reference Section of
the Commission, at the addresses set forth above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996 and the Company's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1996, September 30, 1996 and December 31, 1996, filed with the
Commission, are hereby incorporated by reference in this Prospectus except as
superseded or modified herein.

All documents filed with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been or
may be incorporated by reference herein (other than exhibits to such documents
which are not specifically incorporated by reference into such documents). Such
requests should be directed to ContiFinancial Corporation, 277 Park Avenue, New
York, New York 10172, Attention: Chief Counsel or by telephone at (212)
207-2800.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE.
UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES IN THIS PROSPECTUS TO THE
COMPANY INCLUDE CONTIFINANCIAL CORPORATION AND ITS SUBSIDIARIES, CONTIMORTGAGE
CORPORATION ("CONTIMORTGAGE"), CONTIWEST CORPORATION ("CONTIWEST"), CONTITRADE
SERVICES L.L.C. ("CONTITRADE"), CONTIFINANCIAL SERVICES CORPORATION
("CONTIFINANCIAL SERVICES"), CONTISECURITIES ASSET FUNDING CORP. ("CSAF"),
CONTISECURITIES ASSET FUNDING CORP. II, CONTISECURITIES ASSET FUNDING II,
L.L.C., CONTISECURITIES ASSET FUNDING CORP. III ("CSAF III"), CONTISECURITIES
ASSET FUNDING CORP. IV ("CSAF IV"), CONTIFUNDING CORPORATION, ROYAL MORTGAGE
PARTNERS, L.P. D/B/A ROYAL MORTGAGEBANC ("ROYAL"), CALIFORNIA LENDING GROUP,
INC. D/B/A UNITED LENDING GROUP ("ULG"), TRIAD FINANCIAL CORPORATION ("TRIAD"),
CONTIAUTO ASSET FUNDING CORP. ("CONTIAUTO") AND RESOURCE ONE CONSUMER DISCOUNT
COMPANY, INC. (DOING BUSINESS IN NEW YORK AS RECORE ONE) ("RESOURCE ONE") AND
ALL REFERENCES TO THE NUMBER OF SHARES OF COMMON STOCK AND PER SHARE AMOUNTS
ASSUME THAT (I) THE OVER-ALLOTMENT GRANTED TO THE UNDERWRITERS OF THE PRIMARY
OFFERINGS ARE NOT EXERCISED AND (II) OUTSTANDING EMPLOYEE AND DIRECTOR STOCK
OPTIONS ARE NOT EXERCISED. FOR A DESCRIPTION OF CERTAIN TERMS USED IN THIS
PROSPECTUS, SEE "GLOSSARY." CERTAIN STATEMENTS IN THIS PROSPECTUS (INCLUDING
THIS PROSPECTUS SUMMARY) MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM
ACT"). SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."

THE COMPANY

The Company engages in the consumer and commercial finance business by
originating and servicing home equity loans and providing financing and asset
securitization structuring and placement services to originators of a broad
range of loans, leases and receivables. Securitization provides significant
benefits, including greater operating leverage and reduced costs of funds, in
the financing of assets such as non-conforming home equity loans, equipment
leases, home improvement loans, franchise loans, commercial/ multi-family loans,
non-prime and sub-prime auto loans and leases and timeshare loans. For the nine
months ended December 31, 1996 and the year ended March 31, 1996, the Company
originated or purchased $2.8 billion and $2.3 billion, respectively, of home
equity loans through ContiMortgage. In addition, for the same periods, the
Company securitized or sold $922 million and $2.0 billion, respectively, of
loans and other assets for its clients.

Through ContiMortgage, the Company is a leading originator, purchaser,
seller and servicer of home equity loans made to borrowers whose borrowing needs
may not be met by traditional financial institutions due to credit exceptions or
other factors. Loans are made to borrowers primarily for debt consolidation,
home improvements, education or refinancing and are primarily secured by first
mortgages on one- to four-family residential properties. ContiMortgage is
devoting substantial resources and capital to: (i) increasing its market
penetration across the United States; (ii) expanding its broker loan network to
complement its existing wholesale loan network; (iii) adding new loan products;
(iv) expanding and diversifying its origination sources; and (v) investing in
information services and collection technologies.

Two distinct factors drive the expansion of the Company's home equity loan
business--growth in volume of loans and access to the capital markets to
facilitate the most efficient sale of these loans through securitization. The
Company believes it has a competitive advantage because the management of
ContiMortgage is able to focus exclusively on expanding the volume of loans
originated or purchased, enhancing loan underwriting efficiencies and building
its servicing portfolio, while relying upon the professional staff of ContiTrade
and ContiFinancial Services to focus exclusively on providing warehouse
financing, hedging and securitization structuring and placement services. This
specific industry expertise enables the Company to minimize its financing costs
and interest rate exposure and maximize the proceeds and profits from its
securitizations and its growing servicing portfolio. Through December 31, 1996,
ContiMortgage completed 25 AAA/Aaa-rated REMIC securitizations totalling $6.3
billion. As of December 31, 1996, ContiMortgage had a servicing portfolio of
$5.7 billion.

The Company, through its subsidiary, ContiTrade, provides financing and
asset securitization structuring expertise, and through its subsidiary,
ContiFinancial Services, provides placement services. In this area,

3
<PAGE>
ContiTrade's management and execution of ContiMortgage's financing, hedging and
securitization needs has served as a model for the Company's strategic alliances
with originators of a broad range of consumer and commercial loans and other
assets ("Strategic Alliances"). The Company offers Strategic Alliance clients
complete balance sheet liability management, including warehouse financing,
interest rate hedging services and the structuring and placement of asset
portfolios in the form of asset-backed securities. This allows the management of
its Strategic Alliance clients to focus on expanding and improving asset
origination and servicing. For the years ended March 31, 1996 and 1995, services
provided by ContiTrade to Strategic Alliance clients contributed $108.5 million
and $14.8 million, respectively, to the total gross income of the Company.

ContiFinancial Corporation is a Delaware corporation incorporated on
September 29, 1995. The principal executive offices of the Company are located
at 277 Park Avenue, New York, New York 10172 and its telephone number is (212)
207-2800.

INDUSTRY OVERVIEW

The home mortgage loan market is the largest consumer finance market in the
United States. Over the past several years, the non-conforming home equity loan
sector of the home mortgage loan market, which is relatively fragmented, has
grown at a faster rate than the overall market. Industry studies have estimated
that non-conforming home equity loan originations grew at an estimated compound
annual growth rate of 8.6% from $96 billion in 1990 to $145 billion in 1995.
According to studies performed by the David Olson Research Co., a group that has
been analyzing the home equity loan industry since 1969, the growth in the
volume of non-conforming home equity loans is attributable to, among other
factors: (i) a larger number of borrowers seeking to consolidate their revolving
credit debt and auto loans for a lower rate and payment; (ii) slow growth in
real estate appreciation causing an increase in the number of borrowers seeking
to make home improvements; (iii) increased entry into the home equity loan
market by commercial banks as well as the growth in the number and size of
mortgage brokers making home equity financing more readily available; and (iv)
growth in overall consumer awareness of the availability of home equity
financing. In addition, the asset-backed securitization market has provided an
important source of financing for originators of home equity loans.

BUSINESS STRATEGY

The Company's strategy is to continue its strong growth in the consumer and
commercial finance business through geographic expansion of its home equity loan
business, diversification of origination capabilities, Strategic Alliance
activities, selected acquisition opportunities ("Strategic Acquisitions") and
investments in origination, servicing and collection information systems and
technology. The Company seeks to become the most efficient low cost provider of
non-conforming home equity loans underwritten in accordance with sound criteria
which perform with excellent delinquency, default and loss experience relative
to the industry. Further, where prudent and appropriate, the Company will
diversify into business lines which are otherwise under-served by the market
presently and which can benefit from the lower cost of funds and the discipline
provided through securitization as well as from the Company's approach to growth
in originations, servicing and collections as successfully applied to
ContiMortgage.

The Company is implementing its home equity loan growth strategy through the
use of ContiMortgage as an origination, underwriting, servicing and sales
platform. The Company channels its home equity loan products from the wholesale
and small broker markets through ContiMortgage with its centralized
underwriting, servicing and collections which are utilized by ContiMortgage's
regional offices as well as the Company's home equity lending subsidiaries.
Direct retail production through branch systems has been implemented by the
acquisition of Royal and Resource One which combined have 36 branch offices
located throughout the west, the mid-west and the northeast United States. ULG,
another recent acquisition, originates home equity loans and home improvement
loans nationally through direct mail and telemarketing. The full implementation
of this growth strategy, through the completion of additional Strategic
Alliances and Strategic Acquisitions, will allow the Company to build its market
share by building a broad national penetration of all origination channels of
the home equity market in the United States.

4
<PAGE>
The Company's strategy with respect to Strategic Alliance activities is to
replicate its success with ContiMortgage by: (i) targeting classes of consumer
and commercial loans, leases and receivables that have the potential to be
financed more efficiently through securitization; (ii) identifying and
establishing Strategic Alliances with originators of these assets that have
experienced management teams, sophisticated systems and a proven track record of
originating, underwriting, servicing and collecting consumer and commercial
loans, leases and receivables; and (iii) securing from these originators a
consistent flow of securitizable assets. The Company currently has 12 active
Strategic Alliances. In addition, the Company may, from time to time, make an
equity or subordinated debt investment in a Strategic Alliance client.

In addition to substantial loan, lease, and receivable originations from
Strategic Alliance clients, the Company originated in excess of $1 billion in
commercial mortgage loans since fiscal 1995. The Company plans to expand its
market share in multi-family, healthcare, and self-storage facilities and
broaden its array of loan products in the commercial mortgage market sector.

As a key part of its growth strategy to diversify into asset classes that
can benefit from securitization, the Company has formed five Strategic Alliances
with originators of non-prime and sub-prime auto loans since fiscal 1995.
Management believes that this market benefits significantly from securitization
through reduced cost of funds, and the discipline which the regular
securitization process brings to the origination, underwriting, servicing, and
collection of auto loans and losses. Consequently, after closely monitoring the
performance and development of its Strategic Alliances in this industry, the
Company has acquired 56.0% of the outstanding common stock of Triad, a former
Strategic Alliance. The Company's strategy is to apply to Triad the same
disciplined approach to underwriting, credit grading, servicing and collections
as has been applied to ContiMortgage. The Company believes that its strategy
with respect to Triad, combined with prudent growth, will create a significant
market presence in the non-prime automobile finance industry.

The Company's strategy with respect to Strategic Acquisitions is an
extension of its Strategic Alliance strategy, which the Company believes
provides it with a unique capability to analyze and select acquisition
opportunities. Specifically, the Company has targeted the acquisition of
companies with which it has significant experience as either a Strategic
Alliance or as a broker/loan originator which has been selling home equity loans
to ContiMortgage and which will enhance the Company's geographic diversification
or method of origination. This focused approach on existing relationships, using
considerable static pool data and analysis (loan characteristics, demographics,
delinquencies, losses and prepayments), allows the Company to better judge: (i)
the management team; (ii) the quality of the origination and underwriting; (iii)
the ability to pass rating agency and/or financial guarantor scrutiny; and (iv)
product consistency. The Company has sought to align itself with management
teams which have consistently delivered securitizable product and which have
demonstrated performance histories consistent with the Company's emphasis on
quality originations rather than volume.

The Strategic Acquisitions are deliberately structured to motivate the
respective management teams to achieve goals consistent with those of the
Company, with an emphasis on operating efficiencies and immediate accretion to
earnings per share. The Company's four Strategic Acquisitions to date have all
included the following characteristics: (i) a purchase price providing for a
modest upfront payment; (ii) subsequent installments based upon profit
performance (i.e., net income, not volume); and (iii) management long-term
incentives with attractive upside if successful in achieving agreed upon goals.

RECENT DEVELOPMENTS

Since December 31, 1996, the Company has completed three additional
securitizations consisting of a $400 million and a $835 million securitization
of ContiMortgage home equity loans and a $44.2 million securitization of Triad
non-prime auto loans. The securitizations of the ContiMortgage home equity loans
were each modelled as a REMIC, non-bond insured, senior/subordinated structure.
These securitizations were notable in that they were structured utilizing
subordinated tranches as credit enhancement in lieu of ContiMortgage's previous
standard structure which made use of a surety guaranty to obtain AAA/Aaa

5
<PAGE>

rated securities. By introducing a "natural" AAA/Aaa security along with some
higher yielding subordinated tranches, ContiMortgage was able to broaden the
market for its structured securities, increase the investor demand and improve
the execution of its securitizations.

During the third quarter of fiscal 1997, the Company moved towards achieving
its strategic objectives of expanding and diversifying its loan origination
methodology and product mix by acquiring three retail home equity loan
originators. In November 1996, the Company purchased California Lending Group,
Inc. d/b/a United Lending Group, a West Coast-based home equity lender
specializing in retail origination through direct mail and telemarketing
throughout the United States, and Royal Mortgage Partners L.P.
d/b/a Royal MortgageBanc, a California-based wholesale and retail originator of
home equity loans. In December 1996, the Company purchased Resource One Consumer
Discount Company, Inc., a Pennsylvania-based home equity lender specializing in
retail origination through direct mail, television, and telemarketing throughout
the eastern and mid-western states. Combined, ULG, Royal and Resource One
originated approximately $636 million of home equity loans and home improvement
loans during calendar year 1996. The Company expects to securitize most of the
home equity loans originated by these new subsidiaries through ContiMortgage. In
each case the companies acquired were former Strategic Alliances or
ContiMortgage loan origination sources.

The Company organized ContiWest, a Nevada corporation, in September 1996 to
better administer and underwrite the Company's origination portfolio.

As part of the Company's strategic growth plan, the Company determined that
the acquisition of originators and servicers of under-served securitizable asset
classes other than home equity loans would provide diversity. The Company's
growth strategy dictated that such acquisitions would only be made in asset
classes in which the Company had significant securitization experience and the
acquisition candidate had strong and experienced management. Consequently, in
November 1996, the Company purchased 53.5% of the common stock of Triad, a
former Strategic Alliance. The Company purchased an additional 2.5% in January
1997 and has the right and obligation to purchase the remaining 44.0% over the
next 4.5 years. Triad is a California-based auto finance company specializing in
origination of non-prime auto finance contracts for new and used vehicles.
Non-prime auto loans and leases are originated to primarily "B" and "C" credit
grade borrowers as opposed to sub-prime auto loans which are usually issued on a
discount basis to "C-" and "D" credit grade borrowers. Triad's originations for
the calendar year 1996 were $85 million.

On March 7, 1997, the Company signed a purchase agreement with Bear, Stearns
& Co. Inc. and Credit Suisse First Boston Corporation, as Initial Purchasers,
obligating the Company to sell and the Initial Purchasers to purchase $200
million aggregate principal amount of 7 1/2% Senior Notes Due 2002 (the "7 1/2%
Senior Notes"), subject to certain conditions. On March 12, 1997, the offering
of the 7 1/2% Senior Notes closed. The proceeds from the sale of 7 1/2% Senior
Notes, along with other available funds, were used to repay the Intercompany
Debt. Consequently, the Intercompany Debt was retired and the Company is no
longer subject to the covenants of the Intercompany Debt.

In January 1997, the Company closed a $200 million unsecured revolving
credit facility ("Credit Facility") lead-managed by Credit Suisse and Dresdner
Bank, with participation by a group of twelve other major U.S. and foreign
banks. The Company has the option of several interest rate pricing alternatives
under this three-year facility, including those based on LIBOR and federal funds
rates.

In August 1996, the Company issued $300 million aggregate principal amount
of 8-3/8% senior notes, due 2003 (the "Notes"). The Notes were rated BB+ by
Standard & Poor's Ratings Services, Ba1 by Moody's Investors Service, Inc. and
BBB by Fitch Investors Service, L.P.

In March 1997, the Company closed a Strategic Alliance with CMG Funding
Corp. (formerly Continental Mortgage Group, LC) ("CMG") which included an
acquisition of 30% of a class of convertible preferred stock of CMG and an
investment in convertible subordinated debt of CMG. The preferred stock is
convertible in 12% of the common stock of CMG and the subordinated debt is
convertible into an additional 18% of the common stock. CMG orignates home
equity loans and conforming mortgage loans through retail channels primarily in
the southwestern and western United States.

6
<PAGE>
THE PRIMARY OFFERINGS

<TABLE>
<S> <C>
Common Stock Offered by the Company:
U.S. Offering............................................. 2,240,000 shares
International Offering.................................... 560,000 shares
Total................................................. 2,800,000 shares
Common Stock to be Outstanding after the Primary 47,186,940
Offerings............................................... shares
NYSE Symbol............................................... "CFN"
</TABLE>

RELATIONSHIP WITH CONTINENTAL GRAIN COMPANY

Prior to the Company's initial public offering of 7,130,000 shares of its
Common Stock in February 1996 (the "IPO"), the Company was a wholly-owned
subsidiary of Continental Grain. Continental Grain is a privately held,
multinational agribusiness company.

Continental Grain currently owns approximately 81% of the Company's
outstanding Common Stock. Upon completion of the Primary Offerings, Continental
Grain will continue to be the Company's largest stockholder, owning
approximately 76% of the Company's outstanding Common Stock (approximately 75%
if the Underwriters of the Primary Offerings exercise their over-allotment
options in full). Simultaneous with the Primary Offerings, Continental Grain is
entering into a forward purchase contract (the "Forward Contract") with
ContiFinancial STRYPES Trust, a Delaware business trust (the "Trust") pursuant
to which 2,800,000 shares (or 3,220,000 shares if the Underwriters of the
Structured Yield Product Exchangeable for Stock-SM- (the "STRYPES") exercise
their over-allotment option) of Common Stock currently owned by Continental
Grain may be distributed to holders of the STRYPES issued by the Trust upon
conclusion of the term of the Trust on , 2000 or upon earlier
dissolution of the Trust in certain circumstances. Upon satisfaction of the
Forward Contract, assuming Continental Grain delivers to the Trust the maximum
number of shares of Common Stock subject thereto, and assuming no other sales of
the Company's Common Stock by Continental Grain, Continental Grain would own
approximately 70% of the outstanding Common Stock (or approximately 69% of the
outstanding Common Stock if the over-allotment options granted to the
Underwriters of the Primary Offerings and to the Underwriters of the STRYPES are
exercised in full). The STRYPES are being offered in a public offering
simultaneous with the Primary Offerings. The STRYPES are not being offered
hereby. The offering of the Common Stock in the Primary Offerings is not
conditioned upon the STRYPES offering.

As a result of its ownership interest, Continental Grain has, and will
continue to have, voting control on all matters submitted to stockholders,
including the election of directors and the approval of extraordinary corporate
transactions. Except to the extent that Continental Grain may deliver shares to
satisfy its obligations under the Forward Contract, Continental Grain has
advised the Company that its current intention is to continue to hold all of the
shares of Common Stock beneficially owned by it. However, there can be no
assurance that Continental Grain will not sell all or a portion of its holdings
at some future date.

Prior to the IPO, Continental Grain provided the Company with intercompany
financing in the form of the Intercompany Debt (defined below). As of December
31, 1996, the amount of Intercompany Debt outstanding was $202 million. For a
description of the Intercompany Debt and certain other transactions between
Continental Grain and the Company, see "Certain Transactions" and "Description
of Certain Indebtedness and Financing Arrangements."

RISK FACTORS

Prior to making an investment decision, prospective investors should
carefully consider all the information set forth in this Prospectus and, in
particular, should evaluate the factors set forth in "Risk Factors."

- ------------------------

- -SM- Service mark of Merrill Lynch & Co., Inc.

7
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLAR AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS
NINE MONTHS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------- ----------
<S> <C> <C> <C>
1996 1995 1996
---------- ---------- ----------
INCOME STATEMENT DATA:
Gross income:
Gain on sale of receivables........... $ 133,773 $ 101,031 $ 146,529
Interest.............................. 109,967 61,335 91,737
Net servicing income.................. 32,386 20,266 29,298
Other income (loss)................... 4,652 2,227 4,252
---------- ---------- ----------
Total gross income.................. $ 280,778 $ 184,859 $ 271,816
---------- ---------- ----------
---------- ---------- ----------
Income before income tax expense and
minority interest....................... $ 122,787 $ 89,176 $ 126,536
Income tax expense........................ 49,192 34,689 49,096
Minority interest of subsidiary........... (379) 3,310 3,310
---------- ---------- ----------
Net income................................ $ 73,974 $ 51,177 $ 74,130
---------- ---------- ----------
---------- ---------- ----------
Primary and fully dilutive earnings per
common share (pro forma at March 31,
1996 only).............................. $ 1.68 $ 2.00

<CAPTION>
<S> <C> <C> <C> <C>
1995 1994 1993 1992
---------- ---------- ---------- ----------
INCOME STATEMENT DATA:
Gross income:
Gain on sale of receivables........... $ 67,512 $ 49,671 $ 18,587 $ 11,418
Interest.............................. 42,929 20,707 11,385 16,130
Net servicing income.................. 9,304 3,989 1,842 1,191
Other income (loss)................... 2,252 162 (147) (41)
---------- ---------- ---------- ----------
Total gross income.................. $ 121,997 $ 74,529 $ 31,667 $ 28,698
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income before income tax expense and
minority interest....................... $ 56,988 $ 35,286 $ 12,149 $ 7,765
Income tax expense........................ 22,168 13,726 4,640 2,948
Minority interest of subsidiary........... 8,728 5,076 1,600 744
---------- ---------- ---------- ----------
Net income................................ $ 26,092 $ 16,484 $ 5,909 $ 4,073
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary and fully dilutive earnings per
common share (pro forma at March 31,
1996 only)..............................
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31,
1996 -------------------- AS OF MARCH 31,
AS ADJUSTED (A) 1996 1995 1996
---------------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 136,947 $ 39,043 $ 4,592 $ 32,479
Excess spread receivables (interest-only and
residual certificates)........................ 338,012 338,012 259,045 293,218
Receivables held for sale....................... 481,596 481,596 267,648 303,679
Total assets.................................... 1,640,642 1,542,738 815,530 892,540
Notes payable to affiliates..................... 202,000 202,000 -- 324,000
Due to affiliates............................... 40,245 40,245 395,633 13,734
8- 3/8% Senior Notes Due 2003................... 299,170 299,170 -- --
Total liabilities............................... 1,167,444 1,167,444 686,438 597,721
Minority interest of subsidiary................. 1,234 1,234 -- --
Stockholders' equity (b)........................ 471,964 374,060 129,092 294,819
</TABLE>
<TABLE>
<CAPTION>
YEARS
NINE MONTHS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------- ----------
<S> <C> <C> <C>
1996 1995 1996
---------- ---------- ----------
OPERATING DATA:
Face value of loans serviced (at period
end).................................. $5,699,145 $3,427,190 $3,863,575
Securitization and sales volume:
ContiMortgage....................... 2,407,554 1,400,270 2,030,270
Non-ContiMortgage................... 922,008 1,372,680 1,962,680
---------- ---------- ----------
Total securitization and sales
volume.......................... $3,329,562 $2,772,950 $3,992,950
LOAN LOSS DATA (C):
Delinquency rate (at period end) (d).... 4.17% 3.73% 2.51%
Default rate (at period end) (e)........ 4.38% 2.04% 3.54%
Net losses as a percentage of average
amount outstanding.................... 0.18%(f) 0.09%(f) 0.13%

<S> <C> <C> <C> <C>
1995 1994 1993 1992
---------- ---------- ---------- ----------
OPERATING DATA:
Face value of loans serviced (at period
end).................................. $2,192,190 $1,105,393 $ 484,857 $ 314,260
Securitization and sales volume:
ContiMortgage....................... 1,292,691 772,324 272,544 187,720
Non-ContiMortgage................... 995,000 418,000 426,000 921,000
---------- ---------- ---------- ----------
Total securitization and sales
volume.......................... $2,287,691 $1,190,324 $ 698,544 $1,108,720
LOAN LOSS DATA (C):
Delinquency rate (at period end) (d).... 1.64% 0.97% 1.20% 3.68%
Default rate (at period end) (e)........ 1.16% 0.81% 1.70% 2.46%
Net losses as a percentage of average
amount outstanding.................... 0.08% 0.15% 0.26% 0.27%
</TABLE>

- ------------------------

(a) The as adjusted balance sheet data as of December 31, 1996 reflects the
Primary Offerings, net of $700 of estimated offering expenses. See
"Capitalization."

(b) The Company paid cash dividends to Continental Grain of $305 in fiscal year
1996.
(c) Loan loss data represents data for the home equity loan servicing portfolio
of ContiMortgage only. See "Business--Home Equity Loan Origination and
Servicing."
(d) The delinquency percentage represents, as a percentage of the aggregate
principal balance of loans in ContiMortgage's servicing portfolio as of the
relevant date, the outstanding principal balance of home equity loans for
which payments are contractually past due, exclusive of home equity loans in
foreclosure, bankruptcy, real estate owned or forbearance.
(e) The default percentage represents, as a percentage of the aggregate
principal balance of loans in the Company's portfolio as of the relevant
date, the dollar value of delinquent payments on home equity loans in
foreclosure, bankruptcy, real estate owned or forbearance.
(f) This percentage is based on data for the nine months ended December 31, 1996
and 1995 and is not necessarily indicative of an annualized percentage.

8
<PAGE>
RISK FACTORS

PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER ALL INFORMATION SET FORTH IN THIS PROSPECTUS AND, IN
PARTICULAR, SHOULD EVALUATE THE FACTORS DESCRIBED BELOW.

ECONOMIC CONDITIONS

GENERAL

The risks associated with the Company's business become more acute in any
economic slowdown or recession. Periods of economic slowdown or recession may be
accompanied by decreased demand for consumer and commercial credit and declining
real estate and other asset values. In the mortgage business, any material
decline in real estate values reduces the ability of borrowers to use home
equity to support borrowings and increases the loan-to-value ratios of loans
previously made by the Company, thereby weakening collateral coverage and
increasing the possibility of a loss in the event of a default. Delinquencies,
foreclosures and losses generally increase during economic slowdowns or
recessions. Because of the Company's focus on credit-impaired borrowers in the
home equity loan market and certain other markets, the actual rates of
delinquencies, foreclosures and losses on such loans could be higher under
adverse economic conditions than those experienced in such markets in general.
In addition, in an economic slowdown or recession, the Company's servicing costs
will increase. Any sustained period of increased delinquencies, foreclosures,
losses or increased costs could adversely affect the Company's ability to sell
loans or other assets through securitization and could increase the cost of
selling loans or other assets through securitization, which could adversely
affect the Company's financial condition and results of operations.

INTEREST RATES

Profitability may be directly affected by the level of and fluctuations in
interest rates which affect the Company's ability to earn a spread between
interest received on its loans and the costs of its liabilities. While the
Company monitors the interest rate environment and employs a hedging strategy
designed to mitigate the impact of changes in interest rates, there can be no
assurance that the profitability of the Company would not be adversely affected
during any period of changes in interest rates. During periods of increasing
interest rates, the Company generally experiences market pressure to reduce
servicing spreads. In addition, an increase in interest rates may decrease the
demand for consumer or commercial credit. A substantial and sustained increase
in interest rates could, among other things: (i) adversely affect the ability of
the Company to purchase or originate loans or other assets; (ii) reduce the
average size of loans underwritten by the Company; and (iii) reduce the gains
recognized by the Company upon their securitization and sale. A decline in
interest rates could decrease the size of the Company's loan servicing portfolio
by increasing the level of loan prepayments, thereby shortening the life and
impairing the value of the Excess Spread Receivables. Fluctuating interest rates
also may affect the net interest income earned by the Company resulting from the
difference between the yield to the Company on loans held pending sale and the
cost of funds obtained by the Company to finance such loans. In addition,
inverse or flattened interest yield curves could have an adverse impact on the
profitability of the Company because the loans or assets pooled and sold by the
Company are priced based on long-term interest rates while the senior interests
in the related REMIC, owner trust or grantor trust are priced on the basis of
intermediate term United States Treasury rates.

NEGATIVE CASHFLOWS AND CAPITAL NEEDS

In a securitization, the Company recognizes a gain on sale for the loans or
assets securitized upon the closing of the securitization, but does not receive
the cash representing such gain until it receives the Excess Spread, which is
payable over the actual life of the loan or other assets securitized. The
Company incurs significant expenses in connection with a securitization and
incurs both current and deferred tax

9
<PAGE>
liabilities as a result of the gain on sale. Net cash used in operating
activities for the nine months ended December 31, 1996 and fiscal 1996, 1995 and
1994 was $155.2 million, $300.5 million, $35.3 million and $32.4 million,
respectively. Therefore, the Company requires continued access to short- and
long-term external sources of cash to fund its operations.

The Company has operated, and expects to continue to operate, on the
negative cash flow basis described above, which is expected to increase as the
volume of the Company's loan and asset purchases and originations increases and
its securitization program grows. The Company's primary cash requirements are
expected to include the funding of: (i) mortgage, loan and lease originations
and purchases pending their pooling and sale; (ii) the points and other expenses
paid in connection with the acquisition of wholesale loans; (iii) fees and
expenses incurred in connection with its securitization program; (iv)
overcollateralization or reserve account requirements in connection with loans
and leases pooled and sold; (v) ongoing administrative and other operating
expenses; (vi) payments related to its federal tax obligations under a tax
sharing agreement with Continental Grain (the "Tax Sharing Agreement") and,
where necessary, direct payments of its federal and state tax obligations; (vii)
interest and principal payments under the Intercompany Debt, the Notes (defined
below) and the Credit Facility and the costs of the Company's Purchase and Sale
Facilities; and (viii) Strategic Acquisitions and investments in Strategic
Alliance clients. The Company's primary sources of liquidity in the future are
expected to be existing cash, sales of the loans, leases and other assets
through securitization, the sale of loans under the Purchase and Sale
Facilities, the sale of Excess Spread Receivables, cash servicing income, net
interest income, draws under the Credit Facility and further issuances of debt
(subject to the covenants of the Company's existing debt). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

The Company's primary sources of liquidity as described in the paragraph
above are expected to be sufficient to fund the Company's liquidity requirements
for at least the next 12 months if the Company's future operations are
consistent with management's current growth expectations. Subsequently, the
Company anticipates that it may need to arrange for additional external cash
financing. The Company has no commitments for additional financing and there can
be no assurance that the Company will be successful in consummating any such
financing transactions in the future on terms the Company would consider to be
favorable, if at all.

DEPENDENCE ON SECURITIZATION PROGRAM

Since 1991, the Company has pooled and sold substantially all loans or other
assets which it originates or purchases through securitization. Accordingly,
adverse changes in the securitization market could impair the Company's ability
to originate, purchase and sell loans or other assets on a favorable or timely
basis. Any such impairment could have a material adverse effect upon the
Company's business and results of operations. In addition, the securitization
market for many types of assets is relatively undeveloped and may be more
susceptible to market fluctuations or other adverse changes than more developed
capital markets. Finally, any delay in the sale of a loan or other asset pool
would postpone the recognition of gain on such loans until their sale. Such
delays could cause the Company's earnings to fluctuate from quarter to quarter.

In addition, in order to gain access to the securitization market for home
equity loans and certain other classes of assets, the Company has primarily
relied on four monoline insurance companies to provide guarantees on outstanding
senior interests in the related REMIC, owner trust or grantor trust to enable it
to obtain an AAA/Aaa rating for such interests. An unwillingness of the monoline
insurance companies to guarantee the senior interests in the Company's home
equity loan or other asset pools could have a material adverse effect on the
Company's financial position and results of operations.

10
<PAGE>
DEPENDENCE ON PURCHASE AND SALE FACILITIES

In order to fund new loan and asset originations and purchases, the Company
is dependent upon its ability to sell loans and other assets through CSAF III
and CSAF IV under the Purchase and Sale Facilities with certain financial
institutions. The Purchase and Sale Facilities allow CSAF III and CSAF IV to
sell, with limited recourse, interests in designated pools of loans and other
assets. A portion of the purchase price for any assets (typically 5% to 10%) is
generally deposited by CSAF III or CSAF IV into an account held by the financial
institution on behalf of CSAF III or CSAF IV, against which the financial
institution may set off any losses incurred in the resale of such assets. In
each Purchase and Sale Facility the financial institution has granted CSAF III
and CSAF IV a right of first refusal based on a bona fide third-party offer to
repurchase the loans and other assets purchased by the financial institution
under the facility. CSAF III and CSAF IV also have a call option that may be
exercised at any time to repurchase assets that are substantially similar.
Unless waived, each Purchase and Sale Facility will terminate upon the
occurrence of certain events, which include: (i) failure of CSAF III or CSAF IV
or the Company (as guarantor) to perform under the terms and covenants of the
Purchase and Sale Facility (including payment obligations), to make true
representations and warranties regarding the assets sold and certain other
matters, to make material scheduled payments under all indebtedness or to
perform under any other agreement with the financial institution; (ii) any
material adverse change in the financial condition of CSAF III or CSAF IV or the
Company (as guarantor); and (iii) certain bankruptcy events of CSAF III or CSAF
IV or the Company (as guarantor). The Company has guaranteed CSAF III's and CSAF
IV's obligations under the Purchase and Sale Facilities.

As of December 31, 1996, the Company had $2.0 billion of committed and an
additional $950 million of uncommitted capacity under the Purchase and Sale
Facilities and had utilized $1.3 billion of such capacity. The Company utilized
the Purchase and Sale Facilities to sell and repurchase assets totaling $4.8
billion, $5.7 billion, $2.5 billion and $1.2 billion in the nine months ended
December 31, 1996 and fiscal 1996, 1995, and 1994, respectively. The Company's
need for capacity under the Purchase and Sale Facilities or from other third
party financing will increase as its volume of loan origination and purchasing
grows.

Although the Company expects to be able to obtain replacement financing or
asset purchase commitments when the Company's current Purchase and Sale
Facilities expire or additional financing or asset purchase commitments when
such agreements become fully utilized, there can be no assurance that such
financing will be obtainable on as favorable terms, if at all. To the extent
that the Company is unable to arrange any third party or other financing, the
Company's loan origination and purchasing activities would be adversely
affected, which could have a material adverse effect on the Company's
operations, financial results and cash position.

EFFECT OF CERTAIN DEBT OBLIGATIONS ON THE COMPANY

EFFECT OF THE SENIOR NOTES DUE 2003

In August 1996, the Company issued $300 million aggregate principal amount
of 8-3/8% Senior Notes, due 2003. The indenture pursuant to which the Notes were
issued (the "Indenture") also places certain restrictions on the Company which
may limit the Company's operating flexibility. Such restrictions include the
following: (i) limitations on indebtedness; (ii) limitations on liens; (iii)
limitations on restricted payments such as dividends, repurchases of the
Company's stock and repurchase of subordinated obligations; (iv) limitations on
restrictions on distributions from subsidiaries; (v) limitations on sales of
assets and subsidiary stock; and (vi) limitations on merger and consolidation.
Upon receiving investment grade ratings from Moody's Investors Service, Inc. and
Standard & Poor's Ratings Services with respect to the Notes, all restrictions
described above, other than the limitations on liens, will be suspended. No
assurance can be given that the Notes will receive investment grade ratings at
any time in the future.

In addition, upon a "change of control," the holders of the Notes may cause
the Company to repurchase the Notes. A "change of control" as defined in the
Indenture includes the occurrence of: (i) the

11
<PAGE>
acquisition of 35% of the outstanding Common Stock by a person other than
Continental Grain or its shareholders at a time when Continental Grain or its
shareholders own less than such amount owned by such greater than 35%
shareholder; (ii) a change in the composition of a majority of the Board of
Directors during any two consecutive years; and (iii) certain mergers and
consolidations or sale of all or substantially all of the assets of the Company.

The occurrence of an event of default under the Indenture or a "change of
control" could have a material adverse effect upon the Company. See "Description
of Certain Indebtedness and Financing Arrangements."

EFFECT OF CREDIT FACILITY

The Company's $200 million Credit Facility contains a number of restrictive
covenants including: (i) limitations on indebtedness; (ii) limitations on liens;
(iii) minimum net worth requirements; (iv) limitations on restrictions on
distributions from subsidiaries; (v) limitations on sales of assets and
subsidiary stock; and (vi) limitations on merger and consolidations. The Credit
Facility also includes a monthly asset coverage test to determine availability
under the Credit Facility. Currently the Company has full use of the Credit
Facility based on this test. See "Description of Certain Indebtedness and
Financing Arrangements."

EFFECT OF CONTINENTAL GRAIN'S DEBT AGREEMENTS

Continental Grain's debt agreements with its lenders and certain guarantees
provided by Continental Grain for the benefit of the Company (the "Continental
Grain Debt Agreements") place certain restrictions on Continental Grain and the
Company which will limit the Company's operating flexibility. Certain of the
Continental Grain Debt Agreements require the consent of the lenders in
connection with any equity financing by the Company. In order to comply with the
other financial covenants applicable to Continental Grain and its subsidiaries
under the Continental Grain Debt Agreements, Continental Grain will place
limitations upon the Company's ability to incur debt, to sell its assets, to
incur liens, to make acquisitions, investments and capital expenditures, to
incur off-balance sheet contingent obligations, to reduce its working capital
and to otherwise expand the Company's business in a manner that would be
possible in the absence of such restrictions. The presence of such financial
covenants in the Continental Grain Debt Agreements could present situations
involving potential conflicts of interest for those members of the board of
directors of the Company who also owe fiduciary duties to Continental Grain by
virtue of their positions as officers or directors of Continental Grain. There
can be no assurance that such conflicts of interest will be resolved in favor of
the Company. Although it is Continental Grain's intention to seek to exclude the
Company from the application of all or many of the covenants of Continental
Grain's future debt agreements, there can be no assurance that the future debt
agreements of Continental Grain will not continue to impose substantial
limitations upon the Company.

FINANCIAL COVENANTS OF THE INTERCOMPANY DEBT AGREEMENTS

In order to fund the Company's past growth, Continental Grain has provided
and currently provides the Company with intercompany financing ("Intercompany
Debt"). The Intercompany Debt places certain restrictions on the Company which
may limit the Company's operating flexibility. The Intercompany Debt includes
the following financial covenants for the Company: (i) a minimum current ratio
(current assets to current liabilities); (ii) a maximum total liabilities to
equity ratio; (iii) a maximum long-term debt to equity ratio; (iv) a minimum net
worth requirement; (v) a limitation on incurring certain liens; and (vi) a
limitation on acquisitions, investments or capital expenditures of the Company.
From time to time in the past, the Company has sought and received amendments or
waivers relating to certain financial covenants with respect to its Intercompany
Debt from Continental Grain. Should the Company be unable to comply with the
financial covenants under the Intercompany Debt in the future, there can be no
assurance that

12
<PAGE>
Continental Grain would agree to appropriate amendments or waivers. In such a
case, the failure to obtain appropriate amendments or waivers could have a
material adverse effect upon the Company.

EXCESS SPREAD RECEIVABLES

As a fundamental part of its business and financing strategy, the Company
sells substantially all of its loans or other assets through securitization. In
a securitization, the Company sells loans or other assets that it has originated
or purchased to a trust for a cash purchase price and an interest in the loans
or other assets securitized in the form of the Excess Spread. The cash purchase
price is raised through an offering of pass-through certificates by the trust.
Following the securitization, the purchasers of the pass-through certificates
receive the principal collected and the investor pass-through interest rate on
the certificate balance, while the Company receives the Excess Spread. The
Excess Spread generally represents, over the life of the loans or other assets,
the excess of the weighted average coupon on each pool of loans or other assets
sold over the sum of the pass-through interest rate plus a normal servicing fee,
a trustee fee, an insurance fee and an estimate of annual future credit losses
related to the loans or other assets securitized.

The majority of the Company's gross income is recognized as gain on sale of
loans or other assets, which represents the present value of the Excess Spread,
less origination and underwriting costs (the "Excess Spread Receivable"). The
Company recognizes the gain on sale of loans or other assets in the fiscal year
in which such loans or other assets are sold, although cash (representing the
Excess Spread and servicing fees) is received by the Company over the life of
the loans or other assets. Concurrent with recognizing such gain on sale, the
Company records the Excess Spread Receivable as an asset on its consolidated
balance sheet.

In 1994, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), which requires fair value accounting for these
securities. In accordance with the provisions of SFAS 115, the Company
classifies subordinated classes of REMICs, owner trusts and grantor trusts as
"trading securities" and, as such, they are recorded at fair value with the
resultant unrealized gain or loss recorded in the results of operations in the
period of the change in fair value. The Company determines fair value on a
quarterly basis based on a discounted cash flow analysis. The cash flows are
estimated as the excess of the weighted average coupon on each pool of consumer
and commercial loans, leases and receivables (collectively, the "Receivables")
sold over the sum of the pass-through interest rates plus a normal servicing
fee, a trustee fee, an insurance fee and an estimate of annual future credit
losses related to the Receivables securitized, over the life of the Receivables.
These cash flows are projected over the life of the Receivables using
prepayment, default, and interest rate assumptions that the Company believes
market participants would use for similar financial instruments subject to
prepayment, credit and interest rate risk and are discounted using an interest
rate that the Company believes a purchaser unrelated to the seller of such a
financial instrument would demand. Higher than anticipated rates of loan
prepayments or credit losses on the loans or other assets underlying the Excess
Spread Receivables would require the Company to write down the value of the
Excess Spread Receivables, which could have a material adverse impact on the
Company's financial position and results of operations.

At December 31, 1996, the Company's consolidated balance sheet reflected
Excess Spread Receivables of $338.0 million. While the Company has consummated
contingent recourse sales of Excess Spread Receivables from time to time, there
is no liquid market for such Excess Spread Receivables. In fiscal 1995, CSAF
began to sell certain Excess Spread Receivables. In connection with such sales,
CSAF retains negotiated levels of recourse obligations in the event the
purchaser does not realize expected cash flows from the Excess Spread
Receivables that have been sold. Continental Grain has guaranteed, for a fee,
CSAF's performance obligations under such sales, but is under no obligation to
provide such guarantees for future transactions. If Continental Grain does not
provide such guarantees in the future, the Company's ability to raise cash
through CSAF by entering into future sales of its Excess Spread Receivables with
retained recourse could be impaired. CSAF's recourse obligations under the sales

13
<PAGE>
transactions could result in losses in the event cash flow from the Excess
Spread Receivables that have been sold is significantly less than was
anticipated at the time of the related sale. ContiFinancial Corporation, as well
as Continental Grain, have guaranteed CSAF's performance obligations under each
such sale. The cash proceeds from such sales for the nine months ended December
31, 1996 and in fiscal 1996 and 1995 aggregated $96.5 million, $54.5 million and
$50 million, respectively. Of the Company's $293.2 million of Excess Spread
Receivables at March 31, 1996, $56.4 million represented the fair value of
subordinated retained interests in Excess Spread Receivables which the Company
sold pursuant to contingent recourse sales. Of the Company's $338.0 million of
Excess Spread Receivables at December 31, 1996, $95.2 million represented the
fair value of subordinated retained interests in Excess Spread Receivables which
the Company sold pursuant to contingent recourse sales. Since subordinated
retained interests are designed to absorb changes in both the residual interest
and the recourse sale amount, their value may be more adversely impacted than
unsold Excess Spread Receivables under certain circumstances.

In addition, for the nine months ended December 31, 1996 and for fiscal
years 1996, 1995 and 1994, the Company sold without recourse $58.1 million,
$53.5 million, $26.3 million and $17.6 million, respectively, of interest-only
certificates which the Company generated from its securitization activities.
These sales represent an important source of liquidity for the Company. Any
impairment of the Company's ability to sell these interest-only certificates
would require the Company to obtain the liquidity from other sources and thus
could have a materially adverse impact on the Company's financial position or
results of operations.

Although the Company intends to continue to pursue opportunities to sell
Excess Spread Receivables, no assurance can be given that such opportunities
will be available in the future or that all or any portion of Excess Spread
Receivables could in fact be sold at their stated value on the balance sheet, if
at all. The Intercompany Debt, the Indenture, the Credit Facility, and the
Continental Grain Debt Agreements place certain limitations on the Company's
ability to incur indebtedness secured by its Excess Spread Receivables. Although
the Company may seek in the future to negotiate such financing within the terms
of such limitations, there can be no assurance that the Company will be able to
identify sources of such financing or whether the terms of any such financing,
if available, would be on terms the Company would consider favorable.

SIGNIFICANCE OF SERVICING INCOME

At December 31, 1996, the Company had a $5.7 billion servicing portfolio on
which it earned servicing fees for its obligations/performance as servicer of
its servicing portfolio of approximately 50 basis points (per annum), or $21.4
million of cash income for the nine months ended December 31, 1996. At March 31,
1996, the Company had a $3.9 billion servicing portfolio on which it earned
approximately 50 basis points (per annum), or $19.5 million of cash income, in
fiscal 1996. If prepayments on this portfolio were to significantly exceed
management's estimate, there would be a material adverse effect on the Company's
future cashflow. In addition, effective April 1, 1995, the Company adopted SFAS
No. 122 "Accounting for Mortgage Servicing Rights" ("SFAS 122") which requires
that upon sale or securitization of servicing retained mortgages, companies
capitalize the cost associated with the right to service mortgage loans based on
its relative fair value. Higher than anticipated rates of loan prepayments,
including repayments due to foreclosures or charge-offs, would require the
Company to write down the value of capitalized servicing rights, which could
have a material adverse impact on the Company's financial position or results of
operations.

FINANCING EXCESS SPREAD RECEIVABLES FOR STRATEGIC ALLIANCE CLIENTS

The Company finances the Excess Spread Receivables of certain Strategic
Alliance clients through loans secured by such Excess Spread Receivables or by a
pledge of the stock of the special purpose corporation holding such Excess
Spread Receivables. In a similar manner, the Company also finances the

14
<PAGE>

related Excess Spread, prior to the related securitization, of certain Strategic
Alliance clients. As of December 31, 1996 and March 31, 1996, the total
committed amount of such financings was $66.1 million and $57.6 million,
respectively, and the amount outstanding in connection with such financings was
$32.7 million and $32.4 million, respectively. The financed Excess Spread
Receivables are generated through securitizations of home equity and home
improvement loans. While all financed Excess Spread Receivables were issued in
securitizations which yielded securities rated investment grade by nationally
recognized statistical rating organizations, and all are financed at a discount
to fair value determined after application of discounts for expected loss,
prepayment and interest rate factors, the Strategic Alliance clients are often
companies with limited operating histories and capital and have not been rated
or have a non-investment grade credit rating. The value of the financed Excess
Spread Receivables or Excess Spread is dependent on, among other things, the
ability of the Strategic Alliance client to service its securitized assets in
accordance with the specifications of the related pooling and servicing
agreements. If a Strategic Alliance client were unable to meet its obligations
under the pooling and servicing agreement pertaining to the financed Excess
Spread Receivables, the value of such Excess Spread Receivables could decline to
less than the amount of the loan it secures. In such cases, the Company would
suffer losses.

COMPETITION

The home equity loan market is highly competitive. The Company faces
competition from other consumer finance lenders, mortgage lenders, mortgage
brokers, commercial banks, mortgage banks, large securities firms, smaller
boutique securities firms, credit unions, thrift institutions, credit card
issuers and finance companies. Many of these competitors are substantially
larger and have more capital and other resources than the Company. Competition
can take many forms, including convenience in obtaining a loan, customer
service, marketing and distribution channels, terms provided and interest rates
charged to borrowers. Heightened competition could contribute to higher
prepayments. In addition, the current level of gains realized by the Company and
its competitors on the sale of their home equity loans could attract additional
competitors into this market with the possible effect of lowering gains that may
be realized on the Company's future loan sales.

For the nine months ended December 31, 1996, 78% of the total home equity
loans purchased and originated by ContiMortgage were wholesale loans. Although
the Company has recently diversified its origination capabilities with the
acquisition of home equity companies with retail capabilities, wholesale loans
are expected to remain a significant part of the Company's home equity loan
production program. As a purchaser of wholesale loans, the Company is exposed to
fluctuations in the volume and cost of wholesale loans resulting from
competition from other purchasers of such loans, market conditions and other
factors.

CONTINGENT RISKS

Although the Company sells substantially all loans or other assets which it
originates or purchases, the Company retains some degree of risk on
substantially all loans or other assets sold. During the period of time that
loans or other assets are held pending sale, the Company is subject to the
various business risks associated with the lending business including the risk
of borrower default, the risk of foreclosure and the risk that an increase in
interest rates would result in a decline in the value of loans or other assets.
The Company continues to be subject to the risks of default and foreclosure
following the sale of the loans or other assets through securitization to the
extent that actual losses exceed the loss assumption made by the Company in
valuing the Excess Spread received from its securitizations. The documents
governing the Company's securitization program require (i) the Company to
establish deposit accounts or (ii) the related trust to build
overcollateralization levels by retaining Excess Spread distributions or
applying Excess Spread distributions to reduce the principal balances of the
senior interests issued by the trust. These actions serve as credit enhancement
for the related trust and are therefore available to fund losses realized on
loans or other assets held by such trust. At December 31, 1996,
credit-enhancement amounts (in the

15
<PAGE>
form of deposit accounts and overcollateralization levels) aggregated
approximately $173.1 million. In addition, documents governing the Company's
securitization programs require the Company to commit to repurchase or replace
loans or other assets which do not conform to the representations and warranties
made by the Company at the time of sale. When borrowers are delinquent in making
monthly payments on loans included in a REMIC, owner trust or grantor trust, the
Company is required, if it is the servicer of such loans, to advance amounts
equal to the delinquent interest on such loans to the extent that the Company
deems such advances ultimately recoverable. These advances may require funding
from the Company's capital resources but have priority of repayment out of the
trust from the succeeding month's payments on loans in the trust. The Company
also has contingent risk with respect to financing through its Purchase and Sale
Facilities and the sale of Excess Spread Receivables. See "--Negative Cashflows
and Capital Needs--Dependence on Purchase and Sale Facilities" and "--Excess
Spread Receivables."

CONCENTRATION OF OPERATIONS

For the nine months ended December 31, 1996, approximately 49% (by dollar
volume) of the home equity loans originated by the Company were secured by
properties located in six states (Michigan, Ohio, Illinois, New York, New Jersey
and Pennsylvania). Although the Company has expanded its mortgage origination
network outside these states, the Company's origination business is likely to
remain concentrated in these states for the near future. In addition, a
substantial majority of the loans in the existing securitization pools are
secured by properties located in these states. Consequently, the Company's
results of operations and financial condition are dependent upon general trends
in the economy and the residential real estate market in these states.

RIGHT TO TERMINATE SERVICING

At December 31, 1996 and March 31, 1996, approximately 79% and 89% (by
dollar volume), respectively, of the Company's servicing portfolio consisted of
loans securitized by the Company and sold to REMICs. The Company's form of
pooling and servicing agreement for each of these trusts provides that the
monoline insurance company insuring the senior interests in the related REMIC
may terminate the Company's servicing rights if, among other things, the number
of loans included in the REMIC which are delinquent for 90 days or more
(including properties acquired upon foreclosure and not sold) exceeds 10% of the
aggregate number of the loans included in such trust in four consecutive months.
The delinquency rates with respect to five of the Company-sponsored pools has
exceeded this rate, and although there can be no assurance that the Company will
not have its servicing rights terminated, the Company presently does not expect
such a termination will occur. There can be no assurance that delinquency rates
with respect to other Company-sponsored pools will not exceed this rate in the
future or, if exceeded, that the servicing rights would not be terminated. See
"Business--Home Equity Loan Origination and Servicing -- Loan Servicing."

ENVIRONMENTAL LIABILITIES

In the course of its business, the Company has acquired, and may in the
future acquire, properties securing loans that are in default. There is a risk
that hazardous substances or waste, contaminants, pollutants or source thereof
could be discovered on such properties after acquisition by the Company. In such
event, the Company might be required to remove such substances from the affected
properties at its sole cost and expense. There can be no assurances that the
cost of such removal would not substantially exceed the value of the affected
properties or the loans secured by the properties or that the Company would have
adequate remedies against the prior owner or other responsible parties, or that
the Company would not find it difficult or impossible to sell the affected
properties either prior to or following any such removal.

16
<PAGE>
GOVERNMENT REGULATION

The home equity loan and financing operations of the Company are subject to
regulation by federal, state and local government authorities, as well as to
various laws and judicial and administrative decisions, that impose requirements
and restrictions affecting, among other things, the Company's loan originations,
credit activities, maximum interest rates, finance and other charges,
disclosures to customers, the terms of secured transactions, collection,
repossession and claims-handling procedures, multiple qualification and
licensing requirements for doing business in various jurisdictions and other
trade practices. Although the Company believes that it is in compliance in all
material respects with applicable local, state and federal laws, rules and
regulations, there can be no assurance that more restrictive laws, rules and
regulations will not be adopted in the future that could make compliance much
more difficult or expensive, restrict the Company's ability to originate,
purchase or sell loans, further limit or restrict the amount of interest and
other charges earned on loans originated or purchased by the Company, further
limit or restrict the terms of loan agreements, or otherwise adversely affect
the business of the Company. In addition, changes in government sponsored loan
programs, such as the Title I home improvement loan program, could adversely
affect the business of the Company.

In September 1994, the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "Riegle Act") was enacted. Among other things, the
Riegle Act makes certain amendments to the Truth in Lending Act. Because the
Riegle Act became effective in October 1995 the Company has limited experience
and historical data to determine its impact. Although the Company believes that
the Riegle Act will not have a material impact on its business, no assurance can
be given. See "Regulation."

As part of the Company's financing and asset securitization business,
ContiFinancial Services is required to register as a broker-dealer with certain
Federal and state securities regulatory agencies and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"). As a registered broker-
dealer, ContiFinancial Services is subject to certain minimum net capital rules
and certain other requirements. Any changes in such requirements or the loss of
the broker-dealer license of ContiFinancial Services, for any reason, could have
a material adverse effect on the Company.

INVESTMENT COMPANY ACT CONSIDERATIONS

The Company believes that it is not, and after giving effect to the Primary
Offerings and use of proceeds therefrom will not be, an investment company as
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"). Among other things, under the Investment Company Act, an
investment company is prohibited from engaging in certain activities, is
restricted from entering into certain transactions with affiliated persons and
interested persons, is governed by certain laws that limit the issuance of debt
securities, preferred stock, warrants and rights to subscribe or purchase a
security and is subject to certain restrictions on the payment of dividends, the
making of loans and the purchase and redemption of its securities.

The Company intends to continue its business and to conduct its operations
so as not to become regulated as an investment company under the Investment
Company Act. The Company's business strategy includes acquiring equity or debt
interests in Strategic Alliance clients and investing in loans, other assets and
Excess Spread Receivables. In order to avoid becoming an investment company, the
Company will have to limit certain types of its investments or its activities.
If the Company were to become an investment company for any reason, the Company
could be required either (i) to change significantly the manner in which it
conducts its operations to avoid being required to register as an investment
company or (ii) to register as an investment company, either of which could have
a material adverse effect on the Company and the market prices for the Common
Stock.

17
<PAGE>
CONTROL OF THE COMPANY

Continental Grain currently owns approximately 81% of the Company's
outstanding Common Stock. Upon completion of the Primary Offerings, Continental
Grain will continue to be the Company's largest stockholder, owning
approximately 76% of the Company's outstanding Common Stock (approximately 75%
if the Underwriters of the Primary Offerings exercise their over-allotment
options in full). Upon satisfaction of the Forward Contract, assuming
Continental Grain delivers to the Trust the maximum number of shares of Common
Stock subject thereto, and assuming no other sales of the Company's Common Stock
by Continental Grain, Continental Grain would own approximately 70% of the
outstanding Common Stock (or approximately 69% of the outstanding Common Stock
if the over-allotment options granted to the Underwriters of the Primary
Offerings and to the Underwriters of the STRYPES are exercised in full). As a
result, upon completion of the Primary Offerings and upon satisfaction of the
Forward Contract (even assuming the maximum number of shares of Common Stock are
delivered thereunder), Continental Grain will continue to be able to elect all
of the directors of the Company and to determine the outcome of any matter
submitted to a vote of the Company's stockholders for approval. Except to the
extent that it may deliver shares of Common Stock in satisfaction of its
obligations under the Forward Contract, Continental Grain has advised the
Company that its current intention is to continue to hold all shares of Common
Stock beneficially owned by it. However, there can be no assurance that
Continental Grain will not decide to sell all or a portion of its holdings at
some future date. See also "Certain Transactions."

SHARES AVAILABLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock in the public
market, whether by purchasers in the Primary Offerings or Continental Grain,
could adversely affect the prevailing market price of the Common Stock and could
impair the Company's future ability to raise capital through an offering of its
equity securities. Upon the closing of the Primary Offerings, the Company will
have 47,186,940 shares of Common Stock outstanding, of which 10,001,190 shares
will be freely tradable. All other shares will be "restricted shares" for
purposes of the Securities Act. The Company and Continental Grain are parties to
an agreement which provides Continental Grain with certain registration rights.
See "Certain Transactions." Each of the Company and Continental Grain has agreed
that, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, it will not offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a period of 90 days after the date of the
Primary Offerings, subject to certain limited exceptions.

The Company has filed a registration statement covering the sale of up to
4,487,895 shares of Common Stock reserved for issuance under the 1995 Stock Plan
and the Directors Plan (as defined herein). Under the 1995 Stock Plan, the
Company granted certain employees of the Company awards of 1,330,532 shares of
"restricted" Common Stock and nonqualified stock options representing the right
to acquire 2,445,412 shares of Common Stock, which will vest in full by March
31, 2000. Generally, upon vesting, the shares of Common Stock representing such
restricted stock or stock options will be freely tradeable.

18
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Common
Stock in the Primary Offerings are estimated to be approximately $97.9 million.

The net proceeds from the Primary Offerings will be used by the Company for
general corporate purposes, including funding loan originations and purchases,
supporting securitization transactions (including the retention of Excess Spread
Receivables) and other working capital needs. See "Capitalization."

The Company will not receive any proceeds from the sale of the STRYPES or,
if Continental Grain were to satisfy its obligations under the Forward Contract
by delivery of Common Stock, the delivery of such Common Stock.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded publicly on the New York Stock Exchange
under the symbol "CFN." The table below sets forth the quarterly intra-day high
and low sales prices of the Common Stock as reported by the New York Stock
Exchange during the periods indicated.

<TABLE>
<CAPTION>
PRICE RANGE
-----------------
<S> <C> <C> <C> <C>
HIGH LOW
------ ------
1996
- -----------------------------------------------------------------------------
First Quarter (from February 9, 1996)...................................... $ 31 1/2 $ 25 1/8
Second Quarter............................................................. 33 28
Third Quarter.............................................................. 30 3/8 22 3/4
Fourth Quarter............................................................. 39 1/4 28 5/8
1997
- -----------------------------------------------------------------------------
First Quarter (through March 7, 1997)...................................... 39 3/8 33 3/8
</TABLE>

As of February 28, 1997, there were approximately 88 holders of record of
the Common Stock including Cede & Co., a nominee of The Depository Trust
Company, which holds shares of Common Stock on behalf of an indeterminate number
of beneficial holders. On March 7, 1997, the last price reported on the New York
Stock Exchange for the Common Stock was $36 7/8 per share.

DIVIDEND POLICY

The Company has no current intention to pay cash dividends on its Common
Stock. As a holding company, the ability of the Company to pay dividends is
dependent upon the receipt of dividends or other payments from its subsidiaries.
Any future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's operating results, financial condition and capital requirements,
contractual restrictions, general business conditions and such other factors as
the Company's Board of Directors deems relevant. Furthermore, covenants in the
Indenture, the Credit Facility and the Intercompany Debt restrict the payment of
dividends by the Company. There can be no assurance that the Company will have
earnings sufficient to pay a dividend on its Common Stock or that, even if there
are sufficient earnings, dividends will be permitted under applicable law. See
"Risk Factors -- Effect of Certain Debt Obligations on the Company."

19
<PAGE>
CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, and as adjusted to give effect to (i) the sale
by the Company of 2,800,000 shares of Common Stock offered in the Primary
Offerings at an assumed offering price of $36 7/8 per share, after deducting the
underwriting discounts and commission and estimated expenses, and (ii) the
application of the estimated net proceeds therefrom. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness and Financing Arrangements" and the Consolidated Financial
Statements incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------

<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT PORTION OF LONG-TERM DEBT:
Capitalized leases..................................................................... $ 284 $ 284
---------- -----------
---------- -----------
LONG-TERM DEBT:
Capitalized leases..................................................................... 303 303
Four Year Note (a)..................................................................... 77,000 77,000
Indenture Note (b)..................................................................... 125,000 125,000
8- 3/8% Senior Notes Due 2003 (c)...................................................... 299,170 299,170
---------- -----------
Total long-term debt............................................................... $ 501,473 $ 501,473
---------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par value) 25,000,000 shares authorized; none issued and
outstanding.......................................................................... -- --
Common stock ($0.01 par value) 250,000,000 shares authorized; 44,380,949 shares issued
and outstanding (47,186,940 shares issued and outstanding, as adjusted).............. 444 472
Paid-in capital........................................................................ 294,742 392,618
Treasury stock......................................................................... (713) (713)
Retained earnings...................................................................... 96,622 96,622
Deferred compensation.................................................................. (17,035) (17,035)
---------- -----------
Total stockholders' equity........................................................... 374,060 471,964
---------- -----------
Total capitalization............................................................... $ 875,533 $ 973,437
---------- -----------
---------- -----------
</TABLE>

- ------------------------

(a) The Four Year Note will mature on February 14, 2000 and pays interest
semi-annually at a fixed rate of 8.02% per annum. Until February 14, 1998,
interest on the Four Year Note will not be paid in cash but will accrue and
be added to the principal amount of the Four Year Note. After February 14,
1998, interest on the Four Year Note will be payable in cash.

(b) The Indenture Note will mature on February 14, 2001 and bears interest at a
rate of 7.96% per annum. The principal amount of the Indenture Note is
required to be repaid in four equal annual installments commencing on
February 14, 1998.

20
<PAGE>
SELECTED FINANCIAL DATA

(DOLLAR AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)

The historical financial data set forth below for fiscal years 1993 and 1992
have not been separately audited but have been derived from Continental Grain
audited financial statements which are not included herein. The historical
financial data set forth below for fiscal years 1996, 1995 and 1994 have been
derived from, and should be read in conjunction with, the audited Consolidated
Financial Statements of the Company incorporated by reference. The historical
financial data set forth below for the nine months ended December 31, 1996 and
1995 have been derived from, and should be read in conjunction with, the
unaudited Consolidated Financial Statements of the Company incorporated by
reference. In the opinion of the Company, such unaudited financial statements
reflect all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the results for such periods. Results for the nine
months ended December 31, 1996 are not necessarily indicative of results for the
full year and are subject to year end adjustments. The following table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
INCOME STATEMENT DATA:
Gross income:
Gain on sale of receivables............. $ 133,773 $ 101,031 $ 146,529 $ 67,512 $ 49,671 $ 18,587 $ 11,418
Interest................................ 109,967 61,335 91,737 42,929 20,707 11,385 16,130
Net servicing income.................... 32,386 20,266 29,298 9,304 3,989 1,842 1,191
Other income (loss)..................... 4,652 2,227 4,252 2,252 162 (147) (41)
--------- --------- --------- --------- --------- --------- ---------
Total gross income.................... $ 280,778 $ 184,859 $ 271,816 $ 121,997 $ 74,529 $ 31,667 $ 28,698
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income before income tax expense and
minority interest....................... $ 122,787 $ 89,176 $ 126,536 $ 56,988 $ 35,286 $ 12,149 $ 7,765
Income tax expense........................ 49,192 34,689 49,096 22,168 13,726 4,640 2,948
Minority interest of subsidiary........... (379) 3,310 3,310 8,728 5,076 1,600 744
--------- --------- --------- --------- --------- --------- ---------
Net income................................ $ 73,974 $ 51,177 $ 74,130 $ 26,092 $ 16,484 $ 5,909 $ 4,073
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Primary and fully dilutive earnings per
common share (pro forma at March 31,
1996 only).............................. $ 1.68 $ 2.00
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996 AS OF DECEMBER 31, AS OF MARCH 31,
--------------------
<S> <C> <C> <C> <C>
AS ADJUSTED (A) 1996 1995 1996
---------------------- --------- --------- ---------------
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 136,947 $ 39,043 $ 4,592 $ 32,479
Excess spread receivables (interest-only and
residual certificates)........................ 338,012 338,012 259,045 293,218
Receivables held for sale....................... 481,596 481,596 267,648 303,679
Total assets.................................... 1,640,642 1,542,738 815,530 892,540
Notes payable to affiliates..................... 202,000 202,000 -- 324,000
Due to affiliates............................... 40,245 40,245 395,633 13,734
8- 3/8% Senior Notes Due 2003................... 299,170 299,170 -- --
Total liabilities............................... 1,167,444 1,167,444 686,438 597,721
Minority interest of subsidiary................. 1,234 1,234 -- --
Stockholders' equity (b)........................ 471,964 374,060 129,092 294,819
</TABLE>

21
<PAGE>

- ------------------------------

(a) The as adjusted balance sheet data as of December 31, 1996 reflects the
Primary Offerings, net of $700 of estimated offering expenses. See
"Capitalization."

(b) The Company paid cash dividends to Continental Grain of $305 in fiscal year
1996.

(c) Loan loss data represents data for the home equity loan servicing portfolio
of ContiMortgage only. See "Business--Home Equity Loan Origination and
Servicing."

(d) The delinquency percentage represents, as a percentage of the aggregate
principal balance of loans in ContiMortgage's servicing portfolio as of the
relevant date, the outstanding principal balance of home equity loans for
which payments are contractually past due, exclusive of home equity loans in
foreclosure, bankruptcy, real estate owned or forbearance.

(e) The default percentage represents, as a percentage of the aggregate
principal balance of loans in the Company's portfolio as of the relevant
date, the dollar value of delinquent payments on home equity loans in
foreclosure, bankruptcy, real estate owned or forbearance.

(f) This percentage is based on data for the nine months ended December 31, 1996
and 1995 and is not necessarily indicative of an annualized percentage.

22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with "Selected Financial Data"
and the Company's Consolidated Financial Statements and the notes thereto
incorporated by reference herein.

GENERAL

The Company is engaged in the consumer and commercial finance business by
originating and servicing home equity loans and providing financing and asset
securitization expertise to originators of a broad range of loans, leases and
receivables. Through ContiMortgage, the Company is a leading originator,
purchaser, seller and servicer of home equity loans made to borrowers whose
borrowing needs may not be met by traditional financial institutions due to
credit exceptions or other factors. The Company, through its subsidiary,
ContiTrade, provides financing and asset securitization structuring expertise,
and through its subsidiary, ContiFinancial Services, an NASD registered
broker/dealer, provides placement services. In September 1996, the Company
established ContiWest Corporation, a Nevada corporation, to administer and
underwrite a portion of the Company's origination portfolio.

The Company closed an initial public offering in the United States and
internationally of 7,130,000 shares of its common stock on February 14, 1996.
Proceeds to the Company from the IPO were approximately $138.1 million, net of
related expenses. Prior to the IPO, the Company was wholly-owned by Continental
Grain. Following the IPO and the grant of "restricted" common stock to certain
key ContiFinancial employees, 81% of the Company's common stock was held by
Continental Grain. See "Certain Transactions."

The Company's Strategic Alliance clients are originators of consumer and
commercial loans, leases and receivables. The Company provides financing and
asset securitization execution and expertise to the Strategic Alliance client
while the client provides a consistent flow of securitizable assets to the
Company. In certain Strategic Alliances, the Company had received Strategic
Alliance Equity Interests in the Strategic Alliance client. Those Strategic
Alliance Equity Interests received from Strategic Alliances prior to the IPO
were retained by Continental Grain while Strategic Alliance Equity Interests
received after the IPO have been retained by the Company. The realization of
value on such Strategic Alliance Equity Interests is subject to many factors,
including the future growth and profitability of the Strategic Alliance clients
and the completion of initial public offerings or other corporate transactions
by such Strategic Alliance clients.

In the third quarter of fiscal 1997, the Company acquired three home equity
companies and one auto finance company to satisfy growth strategies of expanding
into the western United States, diversifying into retail origination and owning
other asset origination platforms with assets with which it has significant
securitization experience. The four new loan origination subsidiaries are ULG,
Royal, Triad and Resource One (collectively, the "Acquisitions"). See
"Prospectus Summary--Recent Developments."

The Acquisitions have been accounted for as purchases, and the results of
operations have been included with the Company's results of operations since the
effective acquisition dates. The cumulative purchase price was $37.5 million,
resulting in $33.0 millon of cost in excess of minority interest equity which
will be amortized on a straight-line basis over a 25 year useful life. Certain
acquisition's terms contain payments which are contingent upon future earnings
or employment of key management. Such contingent payments will be recorded as
purchase price or compensation as is appropriate for the nature of the payments.
The Company has a right and obligation to purchase the remaining 44.0% of the
common stock of Triad at any time subsequent to the effective date of the
acquisition. The purchase price will be based upon the future earnings of Triad
and will be recorded when determinable. The excess of fair value over net assets
acquired will be recorded as an increase in cost in excess of minority interest
equity. The Acquisitions are not material to the financial position or results
of operations of the Company.

23
<PAGE>
On a percentage basis, the following table sets forth the composition of the
Company's results as a percentage of total gross income for the nine months
ended December 31, 1996 and 1995 and for fiscal 1996, 1995 and 1994:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1994
--------- --------- --------- --------- ---------
Gross income:
Gain on sale of receivables............................. 47.64% 54.65% 53.91% 55.34% 66.65%
Interest................................................ 39.17 33.18 33.75 35.19 27.78
Net servicing income.................................... 11.53 10.96 10.78 7.63 5.35
Other income............................................ 1.66 1.21 1.56 1.84 0.22
--------- --------- --------- --------- ---------
Total gross income.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
--------- --------- --------- --------- ---------
Expenses:
Compensation and benefits............................... 18.47% 17.91% 19.21% 19.52% 19.69%
Interest................................................ 28.50 27.72 27.51 24.29 16.27
Provision for loan losses............................... 0.46 0.20 0.10 1.59 6.03
General and administrative.............................. 8.84 5.93 6.63 7.89 10.66
--------- --------- --------- --------- ---------
Total expenses........................................ 56.27% 51.76% 53.45% 53.29% 52.65%
--------- --------- --------- --------- ---------
Income before income taxes and minority interest.......... 43.73% 48.24% 46.55% 46.71% 47.35%
Income taxes.............................................. 17.52 18.77 18.06 18.17 18.42
Minority interest of subsidiary........................... (0.13) 1.79 1.22 7.15 6.81
--------- --------- --------- --------- ---------
Net income............................................ 26.34% 27.68% 27.27% 21.39% 22.12%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

CERTAIN ACCOUNTING CONSIDERATIONS

As a fundamental part of its business and financing strategy, the Company
sells substantially all of its loans or other assets through securitization in
the form of REMICs, owner trusts or grantor trusts. In a securitization, the
Company sells loans or other assets that it has originated or purchased to a
trust for a cash purchase price and an interest in the loans or other assets
securitized (in the form of the "excess spread"). The cash purchase price is
raised through an offering of pass-through certificates by the trust. Following
the securitization, the purchasers of the pass-through certificates receive the
principal collected and the investor pass-through interest rate on the
certificate balance, while the Company receives the excess spread. The excess
spread represents, over the life of the loans or other assets, the excess of the
weighted average coupon on each pool of loans or other assets sold over the sum
of the pass-through interest rate plus a normal servicing fee, a trustee fee, an
insurance fee and an estimate of annual future credit losses related to the
loans or other assets securitized (the "Excess Spread"). The majority of the
Company's gross income is recognized as gain on sale of loans or other assets,
which represents the value of the Excess Spread less origination and
underwriting costs. The present value of the Excess Spread is the Excess Spread
receivable (the "Excess Spread Receivable"). The Excess Spread Receivable is
either a contractual right or a certificated security generally in the form of
an interest-only or residual certificate. The majority of the Company's Excess
Spread Receivable at December 31, 1996, March 31, 1996 and 1995 is interest-only
and residual certificates. Consequently, the Company's consolidated balance
sheets designate Excess Spread Receivable as "interest-only and residual
certificates."

The Company recognizes the gain on sale of loans or other assets in the
fiscal year in which such loans or other assets are sold, although cash
(representing the Excess Spread and servicing fees) is received by the Company
over the life of the loans or other assets. Concurrent with recognizing such
gain on sale, the Company records the Excess Spread Receivable as an asset on
its consolidated balance sheets. The Excess Spread Receivable is reduced as cash
distributions are received from the securitization.

24
<PAGE>
Due to the fact that the gain recognized in the year of sale is equal to the
present value of the estimated future cash flows from the Excess Spread, the
amount of cash actually received over the lives of the loans or other assets
normally exceeds the gain previously recognized at the time the loans or other
assets were sold and therefore interest income is recognized over the life of
the loans or other assets securitized. In periods subsequent to the sale, the
Company may recognize an increase in fair value of Excess Spread Receivables as
gain on sale of receivables to the extent that estimates of the loan pool's
future remaining lives exceed those originally projected. This estimate of
extended life is performed by reviewing past prepayment experience and
estimating future prepayment experience by considering numerous factors which
include current market assumptions, the interest rate environment and economic
factors. If actual prepayments with respect to sold loans occur faster or credit
experience is worse than projected at the time such loans were sold, the
carrying value of the Excess Spread Receivable may have to be written down
through a charge to earnings in the period of adjustment. To date, the Company
has not been required to record such a downward adjustment on its portfolio as a
whole. The Company believes that one factor contributing to this positive
experience is the Company's determination that over time home equity loan
prepayments have been less volatile than conventional mortgage prepayments. See
also Note 3 to Consolidated Financial Statements of the Company incorporated by
reference herein.

Additionally, upon sale or securitization of servicing retained mortgages,
the Company capitalizes the cost associated with the right to service mortgage
loans based on its relative fair value. The Company determines fair value based
on the present value of estimated net future cash flows related to servicing
income. The cost allocated to the servicing rights is amortized in proportion to
and over the period of estimated net future servicing fee income. The Company
periodically reviews capitalized servicing fees receivable for valuation
impairment. This review is performed on a disaggregated basis for the
predominant risk characteristics of the underlying loans which are loan type,
term and credit quality. The Company generally makes loans to credit impaired
borrowers whose borrowing needs may not be met by traditional financial
institutions due to credit exceptions. The Company has found that credit
impaired borrowers are payment sensitive rather than interest rate sensitive. As
such the Company does not consider interest rates a predominant risk
characteristic for purposes of valuation impairment. Impairment is recognized in
a valuation allowance for each disaggregated stratum in the period of
impairment.

FINANCIAL CONDITION

DECEMBER 31, 1996

Securities purchased under agreements to resell increased $329.1 million
from $179.9 million at March 31, 1996 to $509.0 million at December 31, 1996.
The Company hedges its interest rate exposure on its receivables held for sale
and loans and other assets sold, with recourse, under its Purchase and Sale
Facilities with certain financial institutions, through the use of United States
Treasury securities and futures contracts. Securities purchased under agreements
to resell are part of this hedging strategy. The increase in securities
purchased under agreements to resell was primarily due to the increase in the
receivables held for sale.

Interest-only and residual certificates increased $44.8 million from $293.2
million at March 31, 1996 to $338.0 million at December 31, 1996. Excluding the
Acquisitions during the third quarter of fiscal 1997, interest-only and residual
certificates increased by $43.7 million. This increase represented $150.2
million recorded during the nine months ended December 31, 1996 related to new
securitizations and recorded interest income of $23.9 million partially offset
by $96.5 million of sales of such certificates and $33.9 million of collections.

Capitalized servicing fees receivable increased $12.1 million from $11.7
million at March 31, 1996 to $23.8 million at December 31, 1996. This balance
reflected the capitalization of $17.1 million of servicing rights offset by
amortization of $5.0 million.

25
<PAGE>
Trade receivables, net increased by $199.8 million from $352.3 million at
March 31, 1996 to $552.1 million at December 31, 1996. Excluding the
Acquisitions during the third quarter of fiscal 1997, trade receivables
increased by $114.2 million. This increase was primarily due to a net increase
in receivables held for sale from $303.7 million as of March 31, 1996 to $394.6
million at December 31, 1996. The net increase in receivables held for sale was
primarily due to the investment of the net cash proceeds available from the
Company's IPO in February 1996, the sale of the $300.0 million Senior Notes and
the sale of certain Excess Spread Receivables, partially offset by the repayment
of the $125.0 million term note (the "Term Note") payable to Continental Grain,
in addition to the investment in the Acquisitions.

Premises and equipment, net of accumulated depreciation, increased $3.0
million from $3.9 million at March 31, 1996 to $6.9 million at December 31,
1996. Excluding the Acquisitions during the third quarter of fiscal 1997,
premises and equipment decreased by $0.04 million. This decrease was primarily
as a result of office equipment acquisitions which were more than offset by the
normal periodic depreciation of owned equipment.

Cost in excess of minority interest equity increased by $32.4 million from
$14.6 million at March 31, 1996 to $47.0 million at December 31, 1996. The
increase was primarily due to the Acquisitions during the third quarter of
fiscal 1997.

Other assets increased $19.7 million from $3.9 million at March 31, 1996 to
$23.6 million at December 31, 1996. Excluding the Acquisitions during the third
quarter of fiscal 1997, other assets increased by $17.9 million. This increase
is primarily due to an increase of approximately $10.6 million of deferred
issuance costs on the Senior Notes and an increase of $4.2 million in escrow
deposits.

Accounts payable and accrued expenses increased $34.4 million from $73.5
million at March 31, 1996 to $107.9 million at December 31, 1996. Excluding the
Acquisitions during the third quarter of fiscal 1997, accounts payable and
accrued expenses increased by $29.2 million. The balance increased primarily due
to an increase in accrued interest payable due to the issuance of the Senior
Notes, an increase in amounts due to brokers in relation to the purchase of
loans and an increase in general accounts payable due to the increase in volume.

Securities sold but not yet purchased increased $326.3 million from $180.7
million at March 31, 1996 to $507.0 million at December 31, 1996. The Company
hedges its interest rate exposure on its receivables held for sale, loans and
other assets sold with recourse under its Purchase and Sale Facilities through
the use of United States Treasury securities and futures contracts. Securities
sold but not yet purchased are part of this hedging strategy. This increase in
securities sold but not yet purchased was primarily due to the increase in
receivables held for sale.

On August 14, 1996 the Company issued the $300.0 million senior notes and
received net proceeds of $293.1 million, after underwriting fees and market
discount, resulting in the balance sheet increase from March 31, 1996. The Notes
were issued at a discount which is being amortized over the life of the Notes,
resulting in the balance of $299.2 million as of December 31, 1996.

Payables to affiliates decreased $95.5 million from $337.7 million at March
31, 1996 to $242.2 million at December 31, 1996. The decrease was primarily due
to the prepayment of the $125.0 million Term Note payable to Continental Grain
upon receipt of the proceeds from the issuance of the Notes offset by an
increase in taxes payable to Continental Grain under the Company's tax sharing
agreement due to increased pre-tax income.

Other liabilities increased $5.4 million from $5.8 million at March 31, 1996
to $11.2 million at December 31, 1996. The increase was primarily due to amounts
recorded as deferred purchase price liabilities of the Acquisitions. Excluding
the Acquisitions during the third quarter of fiscal 1997, other liabilities
decreased by $0.7 million. The decrease is primarily due to a decrease in
deferred income in connection with the origination and securitization of loans
and other assets.

26
<PAGE>
Stockholders' equity increased $79.2 million from $294.8 million at March
31, 1996 to $374.0 million at December 31, 1996 due to net income of $74.0
million and the amortization of deferred compensation of $5.2 million.

MARCH 31, 1996

Securities purchased under agreements to resell increased $95.2 million from
$84.7 million at March 31, 1995 to $179.9 million at March 31, 1996. The Company
hedges its interest rate exposure on its receivables held for sale and loans and
other assets sold, with recourse, under its Purchase and Sale Facilities,
through the use of treasury futures and securities. Securities purchased under
agreements to resell are part of this hedging strategy. This increase was due
primarily to the increase in the Company's securitization volume as of March 31,
1996 as compared to March 31, 1995.

Interest-only and residual certificates increased $150.2 million from $143.0
million at March 31, 1995 to $293.2 million at March 31, 1996. This increase
represents $271.3 million recorded during fiscal 1996 relating to new
securitizations and recorded interest income of $20.9 million partially offset
by $115.2 million of sales and $26.8 million of collections.

Capitalized servicing fees receivable was $11.7 million at March 31, 1996.
This balance reflects the capitalization under SFAS 122 of $13.8 million of
servicing rights partially offset by amortization of $2.1 million.

Trade receivables, net increased $260.2 million from $92.1 million at March
31, 1995 to $352.3 million at March 31, 1996. This increase was due primarily to
a net increase in receivables held for sale from $77.3 million as of March 31,
1995 to $296.2 million at March 31, 1996.

Premises and equipment, net increased $1.4 million from $2.5 million at
March 31, 1995 to $3.9 million at March 31, 1996 primarily as a result of
acquisition of office furniture and equipment to support the increase in staff
from 234 at March 31, 1995 to 455 at March 31, 1996.

Cost in excess of minority interest equity was $14.6 million at March 31,
1996. On June 19, 1995, ContiTrade Services effectively acquired control of the
remaining 20% minority interest in ContiMortgage, which became a wholly-owned
subsidiary of ContiTrade Services. The purchase price exceeded the recorded
minority interest by $15.1 million which was partially offset by amortization of
$0.5 million.

Other assets increased $2.0 million from $1.9 million at March 31, 1995 to
$3.9 million at March 31, 1996. Other assets represents prepaid expenses, margin
deposits and other real estate owned. The increase in the balance is related to
the increase in the Company's securitization volume.

Accounts payable and accrued expenses increased $31.9 million from $41.6
million at March 31, 1995 to $73.5 million at March 31, 1996. The balance
increased primarily due to amounts payable under the Company's Purchase and Sale
Facilities, accruals for securitization obligations and incentive accruals.

Securities sold but not yet purchased increased $99.0 million from $81.7
million at March 31, 1995 to $180.7 million at March 31, 1996. The Company
hedges its interest rate exposure on its receivables held for sale and loans and
other assets sold with recourse under its Purchase and Sale agreements through
the use of treasury futures and securities. Securities sold but not yet
purchased are part of this hedging strategy. This increase was due primarily to
the increase in the Company's securitization volume.

Payables to affiliates increased $222.8 million from $114.9 million at March
31, 1995 to $337.7 million at March 31, 1996. Prior to the IPO, Continental
Grain provided the Company with short-term intercompany financing. On February
14, 1996, the Company refinanced a portion of the short-term financing with
three notes totaling $324.0 million. The primary use of the proceeds from
borrowing was to fund the increase in trade receivables between March 31, 1995
and March 31, 1996.

27
<PAGE>
Other liabilities of $5.8 million at March 31, 1996 primarily represents
deferred income in connection with the origination and securitization of loans
and other assets.

Stockholders' equity increased $226.9 million from $67.9 million at March
31, 1995 to $294.8 million at March 31, 1996 due to net income of $74.1 million,
the net proceeds from the IPO of $138.1 million, Continental Grain's $10 million
capital contribution to ContiTrade and the amortization of deferred compensation
of $5.0 million, net of $0.3 million of dividends paid to Continental Grain.

RESULTS OF OPERATIONS

The Company's total gross income increased from $184.9 million for the nine
months ended December 31, 1995 to $280.8 million for the nine months ended
December 31, 1996, representing a 52% increase. Excluding the Acquisitions
during the third quarter of fiscal 1997, gross income increased by $85.2 million
or 46%. The Company's total gross income increased from $74.5 million in fiscal
year 1994 to $271.8 million in fiscal year 1996, representing a 91% annual
compound growth rate. Net income increased from $51.2 million for the nine
months ended December 31, 1995 to $74.0 million for the nine months ended
December 31, 1996, representing a 45% increase. Excluding the Acquisitions
during the third quarter of fiscal 1997, net income increased by $24.0 million
or 47%. Net income increased from $16.5 million for the year ended March 31,
1994 to $74.1 million for the year ended March 31, 1996, representing a 112%
annual compound growth rate.

The following table sets forth the components of the Company's total gross
income for the nine months ended December 31, 1996 and 1995 and for fiscal 1996,
1995 and 1994:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
---------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1994
---------- ---------- ---------- ---------- ---------

<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gain on sale of receivables........................... $ 133,773 $ 101,031 $ 146,529 $ 67,512 $ 49,671
Interest.............................................. 109,967 61,335 91,737 42,929 20,707
Net servicing income.................................. 32,386 20,266 29,298 9,304 3,989
Other income.......................................... 4,652 2,227 4,252 2,252 162
---------- ---------- ---------- ---------- ---------
Total gross income................................ $ 280,778 $ 184,859 $ 271,816 $ 121,997 $ 74,529
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>

The following table sets forth the components of the Company's expenses for
the nine months ended December 31, 1996 and 1995 and for fiscal 1996, 1995 and
1994:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED MARCH 31,
---------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1994
---------- ---------- ---------- ---------- ---------

<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Compensation and benefits............................. $ 51,870 $ 33,101 $ 52,203 $ 23,812 $ 14,674
Interest.............................................. 79,989 51,255 74,770 29,635 12,124
Provision for loan losses............................. 1,302 367 285 1,935 4,499
General and administrative............................ 24,830 10,960 18,022 9,627 7,946
---------- ---------- ---------- ---------- ---------
Total expenses.................................... $ 157,991 $ 95,683 $ 145,280 $ 65,009 $ 39,243
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>

NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1995

INCOME. The increase in total gross income was due to a greater volume of
loans originated as a result of the expansion of the Company's wholesale and
broker origination sources.

28
<PAGE>
Gain on sale of receivables was the primary component of total gross income,
comprising 48% and 55% of total gross income in the nine months ended December
31, 1996 and 1995, respectively. Gain on sale of receivables as a percentage of
total gross income was lower for the nine months ended December 31, 1996 due to
an increase in servicing income associated with a larger servicing portfolio and
balance of interest earning assets. Gain on sale of receivables increased $32.7
million or 32% for the nine months ended December 31, 1996 as compared to the
corresponding period in 1995. Excluding the Acquisitions during the third
quarter of fiscal 1997, gain on sale of receivables increased by $24.4 million,
or 24%.

The increase in the amount of gain on sale of receivables was due primarily
to an increase in securitization volume in addition to a larger gain on sale
percentage in the nine months ended December 31, 1996. The Company structured
and sold $3.3 billion of mortgages and leases in the nine months ended December
31, 1996, an increase of $0.5 billion from the nine months ended December 31,
1995, which contributed $16.0 million of the increase in gain on sale of
receivables.

The larger gain on sale percentage was due to an increased proportion of
ContiMortgage securitizations which yield higher gain on sale percentages than
securitizations and placements for Strategic Alliance clients. For the nine
months ended December 31, 1996, ContiMortgage represented 72% of total volume as
compared to 50% for the nine months ended December 31, 1995. This shift in
securitization type resulted in a gain of 30 basis points in Excess Spread or an
$8.4 million increase in gain on sale of receivables in the nine months ended
December 31, 1996 as compared to the corresponding period in 1995. The
combination of the $8.4 million increase due to the gain on the sale percentage
and the $16.0 million increase due to increased securitization volume resulted
in a total increase in gain on sale of receivables, excluding the Acquisitions
during the third quarter of fiscal 1997, of $24.4 million. The gain on sale of
receivables as a percentage of loans securitized and sold for the nine months
ended December 31, 1996 and 1995 was 4.0% and 3.6%, respectively.

Interest income increased $48.6 million or 79% for the nine months ended
December 31, 1996 from the corresponding period in 1995. Excluding the
Acquisitions during the third quarter of fiscal 1997, interest income increased
by $47.2 million, or 77%. Interest income represents interest earned on loans
originated or purchased by the Company during the period from their origination
or purchase until the actual sale of the loans, as well as the recognition of
the increased value of the discounted Excess Spread Receivables over time. The
interest earned on loans originated and purchased contributed $36.5 million to
the increase between the nine months ended December 31, 1996 and 1995. The
increase in interest earned on loans originated and purchased was due primarily
to the increase in the average balance of loans originated and purchased but not
yet securitized during the periods, an increase of $801.0 million in the nine
months ended December 31, 1996 as compared to the corresponding period in 1995.
The recognition of the increased value of the discounted Excess Spread
Receivables over time accounted for $10.7 million of the increase in interest
income, which was due to the increase in the average investment in Excess Spread
Receivables in the nine months ended December 31, 1996 as compared to the
corresponding period in 1995.

Net servicing income increased $12.1 million or 60% for the nine months
ended December 31, 1996 compared to the corresponding period in 1995 due to the
increase in the size of the servicing portfolio and the volume of loan sales and
securitizations. The Company's loan servicing portfolio increased $2.3 billion
or 66% to $5.7 billion from December 31, 1995 to December 31, 1996, contributing
$8.7 million or 72% of the increase between the nine months ended December 31,
1996 and 1995. Additionally, net servicing income increased by $3.3 million in
the nine months ended December 31, 1996 as compared to the nine months ended
December 31, 1995 due to capitalized servicing income associated with the 72%
increase in the volume of ContiMortgage loan sales and securitizations for the
nine months ended December 31, 1996 as compared to the corresponding period in
1995.

Other income increased $2.4 million or 109% for the nine months ended
December 31, 1996 compared to the corresponding period in 1995. Excluding the
Acquisitions during the third quarter of

29
<PAGE>
fiscal 1997, other income increased by $1.6 million, or 72%. Other income
consists primarily of "purchase premium refunds" received from certain
origination sources related to loans that prepay within a contractually set time
period. Upon origination of a loan, the Company will pay a wholesale originator
a purchase premium for the loan or pools of loans. The Company negotiates
agreements with wholesale originators that provide that a portion of such
purchase premium will be repaid if individual loans are repaid within a
contractually set time period. The income from "purchase premium refunds"
increased due to increases in origination volume.

EXPENSES. Total expenses for the nine months ended December 31, 1996
increased $62.3 million or 65% from the corresponding period in 1995. Excluding
the Acquisitions during the third quarter of fiscal 1997, total expenses
increased $49.6 million or 52%. This increase in total expenses was due to the
increase in number of employees, the granting of "restricted" common stock and
the costs associated with increased home equity loan volume.

Compensation and benefits expenses increased $18.8 million or 57% for the
nine months ended December 31, 1996 compared to the corresponding period in 1995
due to the addition of new personnel, change in incentive compensation plans and
the granting of restricted common stock. Excluding the Acquisitions during the
third quarter of fiscal 1997, compensation and benefits expense increased by
$11.7 million, or 35%. On December 31, 1996, the Company had 1,346 employees,
692 from the Acquisitions, as compared to 332 employees on December 31, 1995,
which primarily contributed to a $20.9 million increase in salary, $7.0 million
due to the Acquisitions, offset by a $7.3 million decrease in incentive
compensation for the nine months ended December 31, 1996 as compared to the
corresponding period in 1995. In connection with the IPO, shares of "restricted"
common stock were granted to certain key employees. The "restricted" common
stock granted, subject to the employee's continued employment with the Company,
vest between February 14, 1996 and March 31, 2000. The granting of "restricted"
common stock increased the compensation expense for the nine months ended
December 31, 1996 by $5.2 million. Compensation and benefits expenses
represented 18% of total gross income for each of the nine months ended December
31, 1996 and 1995.

Interest expense increased $28.7 million or 56% to $80.0 million for the
nine months ended December 31, 1996 as compared to $51.3 million for the
corresponding period in 1995 primarily as a result of interest expense incurred
in connection with the issuance of the Notes, the costs of the sale, with
limited recourse, of certain Excess Spread Receivables and an overall increase
in the cost of borrowing offset by decreased expenses from the Purchase and Sale
Facilities and decreased borrowing from Continental Grain. The Acquisitions did
not affect interest expense as the external financing arrangements for the
Acquisitions were terminated upon acquisition. The average borrowings from
Continental Grain, Purchase and Sale Facilities, the Notes and Excess Spread
Receivables sold, with limited recourse, increased by $533 million for the nine
months ended December 31, 1996 as compared to the corresponding period in 1995
resulting in a $28.1 million increase in interest expense. The increase in the
Company's combined interest rates by 5 basis points increased interest expense
by $0.6 million for the nine months ended December 31, 1996 as compared to the
corresponding period in 1995. The combination of the $0.6 million increase due
to a higher combined interest rate and the $28.1 million increase due to
increased balances resulted in a total increase of $28.7 million in interest
expense for the nine months ended December 31, 1996 compared to the
corresponding period in 1995.

Provision for loan losses increased from $0.9 million to $1.3 million for
the nine months ended December 31, 1996 as compared to $0.4 million for the nine
months ended December 31, 1995. Excluding the Acquisitions during the third
quarter of fiscal 1997, provision for loan loss increased by $0.1 million, or
16%. Provision for loan losses is recorded in sufficient amounts to maintain an
allowance at a level considered adequate to cover anticipated losses resulting
from liquidation of receivables held for sale and receivables sold with limited
recourse under Purchase and Sale Facilities, prior to securitization. Provision
for credit losses recorded at securitization is reserved in the value of
interests-only and residual certificates.

30
<PAGE>
The slight increase in the nine months ended December 31, 1996 as compared to
the corresponding period in 1995 resulted from a determination of adequate
reserves in light of actual loss experience.

General and administrative expenses increased $13.9 million or 126% for the
nine months ended December 31, 1996 compared to the corresponding period in
1995, and represented 9% and 6% of total gross income for the nine months ended
December 31, 1996 and 1995, respectively. Excluding the Acquisitions during the
third quarter of fiscal 1997, general and administrative expenses increased by
$9.2 million, or 84%. Other than the Acquisitions, the primary cause of the
increase was a $4.8 million increase in costs associated with underwriting,
originating and servicing higher loan volumes. In the nine months ended December
31, 1996, the origination volume increased 73% as compared to the nine months
ended December 31, 1995. Expenses related to the implementation of collection
technology accounted for approximately $1.0 million of the increase. The
remaining increase was due primarily to an increase in general and
administrative expenses related to the increase in the number of employees to
654 on December 31, 1996, excluding employees of the Acquisitions, as compared
to 332 on December 31, 1995, of approximately $3.4 million.

INCOME TAXES. The Company is included in the consolidated Federal income
tax return of Continental Grain. The Company's provision for income taxes was
$49.2 million and $34.7 million for the nine months ended December 31, 1996 and
1995, respectively. The increase in taxes of 42% for the nine months ended
December 31, 1996 compared to the corresponding period in 1995 was substantially
related to the increase in income before taxes and minority interest over the
same period. The effective tax rate for the nine months ended December 31, 1996
increased to 40% from 39% in the comparable period in fiscal 1996 due to a
change in the provision for state income taxes.

MINORITY INTEREST. In fiscal 1996, minority interest represents the portion
of income before taxes and minority interest due to the 20% minority
shareholders of ContiMortgage. Minority interest was $3.3 million for the nine
months ended December 31, 1995. The change in minority interest was directly
related to the change in the Company's ownership percentage of ContiMortgage. On
June 19, 1995, ContiTrade Services Corporation effectively acquired control of
the remaining 20% minority interest in ContiMortgage, which became a
wholly-owned subsidiary of ContiTrade Services Corporation. Accordingly, the
results of operations for the nine months ended December 31, 1995 include
approximately three months of minority interest of $3.3 million, while the
comparable period of fiscal 1997 reflected 100% ownership of ContiMortgage
during the period.

In fiscal 1997, minority interest represents the portion of income before
taxes and minority interest due to the 46.5% minority shareholders of Triad. On
November 21, 1996, the Company acquired 53.5% of the common stock of Triad.
Minority interest was ($0.4) million for the nine months ended December 31,
1996.

YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995 AND YEAR ENDED
MARCH 31, 1994

The Company's total gross income increased $149.8 million or 123% to $271.8
million in fiscal 1996 as compared to $122.0 million of total gross income in
fiscal 1995 which in turn increased $47.5 million or 64% from total gross income
of $74.5 million for fiscal 1994. The Company's total expenses as a percentage
of total gross income remained stable at 53% in fiscal 1994, 1995 and 1996. As a
result, net income for fiscal 1996 increased $57.6 million or 350% to $74.1
million compared to net income of $16.5 million in fiscal 1994.

INCOME. The increases in total gross income were due to a greater volume of
loans originated as a result of the expansion of the Company's wholesale and
broker origination sources (including the opening of two regional branch
offices), and the Company's development of Strategic Alliances.

Gain on sale of receivables was the primary component of total gross income,
comprising 54%, 55% and 67% of total gross income in fiscal 1996, 1995 and 1994,
respectively. The reduction in the contribution

31
<PAGE>
of gain on sale of receivables to total gross income was due to an increasing
servicing portfolio and balance of interest earning assets. Gain on sale of
receivables increased $79.0 million or 117% in fiscal 1996 as compared to fiscal
1995 which in turn increased by $17.8 million or 36% from fiscal 1994. Gain on
sale of receivables represents income primarily from the structuring and sale of
pools of fixed rate home equity loans originated by ContiMortgage and Strategic
Alliance clients of the Company in REMICs, owner trusts and grantor trusts. In
addition to home equity loans sold into REMICs, owner trusts and grantor trusts
and whole loan sales, gains on sale of receivables are earned from the
securitization of adjustable rate home equity loans, commercial and multi-family
loans, self-storage facilities, Title I home improvement loans, franchise loans,
small business loans and equipment leases which are sold into REMICs and whole
loan and other trust structures (collectively, "Structured Finance
Transactions"). The increase in income earned from gain on sale of receivables
was due to an increased volume of loans and leases structured and a wider
differential between the interest rate earned on underlying securitized loans
and leases and the pass-through rate paid to the securitization investors. The
Company structured and sold $4.0 billion of mortgages, loans and leases in
fiscal 1996, an increase of $1.7 billion from fiscal 1995, which contributed
$62.6 million of the increase in gain on sale of receivables and structured and
sold $2.3 billion of mortgages, loans and leases in fiscal 1995, an increase of
$1.1 million from fiscal 1994 which contributed $32.4 million of the increase in
gain on sale of receivables. The increase in gain on sale of receivables was
also due to the yield curve. The yield curve is the relationship between
interest rates and maturity. As the Company originates and sells loans and
leases based on the interpolated United States Treasury interest rate plus a
negotiated additional interest rate, the gain on sale of receivables is affected
by unequal movements in interest rates at various maturities. The interpolated
Treasury interest rate is based on the Company's estimate of the average life of
the pool of loans or leases. In fiscal 1996 as compared to fiscal 1995, the
yield curve steepened which contributed an additional 72 basis points to Excess
Spread or $16.4 million of the increase in gain on sale of receivables. In
fiscal 1995, mortgage rates moved to the level of pass-through rates resulting
in a smaller difference between medium term rates and long term rates. This
smaller difference resulted in a loss of 121 basis points in Excess Spread or
$14.6 million reduction of gain on sale of receivables in fiscal 1995 as
compared to fiscal 1994. The combination of the $14.6 million decline due to a
smaller rate differential and the $32.4 million increase due to increased volume
netted to a total increase in gain on sale of receivables from fiscal 1994 to
fiscal 1995 of $17.8 million. The gain on sale as a percentage of loans
securitized and sold for fiscal 1996, 1995 and 1994 was 3.7%, 3.0% and 4.2%,
respectively.

Interest income increased $48.8 million or 114% in fiscal 1996 from fiscal
1995 and $22.2 million or 107% in fiscal 1995 from fiscal 1994. Interest income
represents interest earned on loans originated or purchased by the Company
during the period from origination or purchases of the loans until their actual
sale and the recognition of the increased value of the discounted Excess Spread
Receivables over time. The interest earned on loans originated and purchased
contributed $35.5 million to the increase between fiscal 1995 and fiscal 1996
and $19.0 million to the increase between fiscal 1994 and fiscal 1995. The
increase in interest earned on loans originated and purchased was due primarily
to the increase in the average balance of loans originated and purchased but not
yet securitized during the periods, an increase of $591 million in fiscal 1996
as compared to fiscal 1995 and an increase of $179 million in fiscal 1995 as
compared to fiscal 1994. The recognition of the increased value of the
discounted Excess Spread Receivables over time accounted for $13.3 million of
the increase in interest income between fiscal 1995 and fiscal 1996 and $3.2
million of the increase between fiscal 1994 and fiscal 1995.

Net servicing income increased $20.0 million or 215% in fiscal 1996 compared
to fiscal 1995 and $5.3 million or 133% in fiscal 1995 compared to fiscal 1994.
These increases were due to the increase in the size of the servicing portfolio
in each fiscal year and a change in accounting principle in fiscal 1996. The
Company's loan servicing portfolio increased $1.7 billion or 76% to $3.9 billion
from March 31, 1995 to March 31, 1996 contributing $8.3 million of the increase
between fiscal 1995 and fiscal 1996. Additionally, the adoption of SFAS 122 in
the beginning of fiscal 1996 increased servicing income by $11.7 million as

32
<PAGE>
compared to fiscal 1995. The March 31, 1995 loan servicing portfolio balance of
$2.2 billion represented a 98% increase over the March 31, 1994 portfolio
balance.

Other income increased $2.0 million to $4.3 million in fiscal 1996 as
compared to fiscal 1995 and increased $2.1 million to $2.3 million in fiscal
1995 as compared to fiscal 1994. Other income consists primarily of "purchase
premium refunds" received from certain origination sources related to loans that
prepay within a contractually set time period. Upon origination of a loan, the
Company will pay a wholesale originator a purchase premium for the loan or pools
of loans. The Company negotiates agreements with wholesale originators that
provide that a portion of such purchase premium will be repaid if individual
loans are repaid within a contractually set time period. The increase in
"purchase premium refunds" is primarily due to the increases in origination
volume. In fiscal 1996, origination volume increased 74% as compared to fiscal
1995 and 68% in fiscal 1995 as compared to fiscal 1994.

EXPENSES. Total expenses for fiscal 1996 increased $80.3 million or 123%
from fiscal 1995 which in turn increased $25.8 million or 66% from fiscal 1994.
These increases in total expenses were due to the increase in number of
employees, increased accruals for incentive compensation related to increased
profits and costs associated with increased mortgage volume.

Compensation and benefits increased $28.4 million or 119% in fiscal 1996
compared to fiscal 1995 due to the accrual of incentive compensation under a
formula based on pre-tax income, the restricted stock awards, the addition of
new personnel and commissions paid to certain employees on volume of loan
originations. The fiscal 1996 accrual for incentive compensation was $28.0
million as compared to $12.4 million in fiscal 1995 contributing $15.6 million
to the increase between the years. In connection with the IPO, shares of
"restricted" common stock were granted to certain key employees. The
"restricted" common stock granted, subject to the employee's continued
employment with the Company, vests between February 14, 1996 and March 31, 2000.
The granting of "restricted" common stock increased fiscal 1996 compensation
expense by $5.0 million. On March 31, 1996, the Company had 455 employees as
compared to 234 employees on March 31, 1995 and 163 employees on March 31, 1994,
which primarily contributed to a $6.4 million increase in compensation costs in
fiscal 1996 as compared to fiscal 1995. The commissions paid to certain
ContiMortgage employees increased $1.4 million from fiscal 1995 to fiscal 1996.
Compensation and related expenses increased $9.1 million or 62% in fiscal 1995
as compared to fiscal 1994 due to the accrual of incentive compensation under a
formula based on pre-tax income, the addition of new personnel and commissions
paid to certain employees on volume of loan originations. The fiscal 1995
accrual for incentive compensation was $12.4 million as compared to $7.6 million
for fiscal 1994 contributing $4.8 million to the increase between the periods.
The addition of 71 new personnel primarily contributed $3.5 million to the
increase in compensation costs from fiscal 1994 to fiscal 1995 while the
commissions paid to certain employees on volume of loans originated increased
$0.8 million during the same period. Compensation and related expenses represent
19%, 20% and 20% of total gross income for fiscal 1996, 1995 and 1994,
respectively.

Interest expense increased to $74.8 million in fiscal 1996 as compared to
$29.6 million in fiscal 1995 and $12.1 million in fiscal 1994 primarily as a
result of increased borrowings from Continental Grain and costs of various
Purchase and Sale Facilities with financial institutions. The average borrowings
from Continental Grain and amounts sold (but not yet resold by the respective
financial institution) under the Company's Purchase and Sale Facilities
increased $627.4 million in fiscal 1996 as compared to fiscal 1995 resulting in
a $43.0 million increase in interest expense, while such average increased
$198.8 million in fiscal 1995 as compared to fiscal 1994 resulting in a $12.7
million increase in interest expense. The increase in interest rates contributed
$2.2 million to the increase in interest expense between fiscal 1996 as compared
to fiscal 1995 and $4.8 million in fiscal 1995 as compared to fiscal 1994.

33
<PAGE>
Provision for loan losses decreased to $0.3 million in fiscal 1996 as
compared to $1.9 million in fiscal 1995 and $4.5 million in fiscal 1994.
Provision for loan losses is recorded in sufficient amounts to maintain an
allowance at a level considered adequate to cover anticipated losses resulting
from liquidation of outstanding receivables. The decrease in fiscal 1996 as
compared to fiscal 1995 and fiscal 1995 as compared to fiscal 1994 resulted from
a determination of adequate reserves in light of actual loss experience.

General and administrative expenses increased $8.4 million or 87% in fiscal
1996 compared to fiscal 1995, and represented 7% and 8% of total gross income in
fiscal 1996 and 1995, respectively. The increase is due to an increase in volume
related expenses. In fiscal 1996, the origination volume increased 74% as
compared to fiscal 1995. General and administrative expenses increased $1.7
million or 21% in fiscal 1995 compared to fiscal 1994, and represented 8% and
11% of total gross income in fiscal 1995 and 1994, respectively. The overall
dollar increases were primarily due to the increase in costs associated with
underwriting, originating and servicing higher volumes of loans and the
expansion of ContiMortgage's headquarters and branch offices. The increase
associated with higher volumes was $1.1 million in general and administrative
expenses in fiscal 1995 as compared to fiscal 1994. The expansion of
ContiMortgage's facilities contributed $0.6 million to the increased general and
administrative expenses in fiscal 1995 as compared to fiscal 1994. The
percentage decrease was primarily due to increases in the above-mentioned volume
related expenses partially offset by ContiMortgage's reversal of overallotments
of servicing costs. In fiscal 1994, the Company implemented a risk management
program with an insurer under which the insurer indemnifies the Company against
certain contingencies related to its mortgage servicing operation, thus allowing
the Company to eliminate accruals of losses as well as accruals to third party
service providers resulting in a variation in fiscal 1995 compared to 1994.

INCOME TAXES. The Company's provision for income taxes was $49.1 million,
$22.2 million and $13.7 million for the years ended March 31, 1996, 1995 and
1994, respectively. The Company is included in the consolidated Federal income
tax return of Continental Grain. The increase in taxes over the three fiscal
years is directly related to the increase in income before taxes and minority
interest over the same period. The effective tax rate for each year remained
relatively consistent at 38% to 39%.

MINORITY INTEREST. Minority interest represents the portion of income
before taxes and minority interest due to the 20% minority shareholders of
ContiMortgage. Minority interest decreased $5.4 million or 62% in fiscal 1996
compared to fiscal 1995 and increased $3.6 million or 72% in fiscal 1995
compared to fiscal 1994. This fiscal 1996 decrease in minority interest was
directly related to the change in the Company's ownership percentage of
ContiMortgage. On June 19, 1995, ContiTrade Services effectively acquired
control of the remaining 20% minority interest in ContiMortgage, which became a
wholly-owned subsidiary of ContiTrade Services. Accordingly, the results of
operations for fiscal 1996 include approximately three months of minority
interest of $3.3 million, while the comparable period of fiscal 1995 and 1994
included 12 months of minority interest of $8.7 million and $5.1 million,
respectively. The fiscal 1995 increase in minority interest as compared to
fiscal 1994 was directly related to the increase in ContiMortgage's net income
before taxes and minority interest.

LIQUIDITY AND CAPITAL RESOURCES

In a securitization, the Company recognizes a gain on the sale of loans or
assets securitized upon the closing of the securitization, but does not receive
the cash representing such gain until it receives the Excess Spread, which is
payable over the actual life of the loan or other assets securitized. The
Company incurs significant expenses in connection with a securitization and
incurs both current and deferred tax liabilities as a result of the gain on
sale. Therefore, the Company requires continued access to short and long term
external sources of cash to fund its operations. The Company's primary cash
requirements are expected to include the funding of: (i) mortgage, loan and
lease originations and purchases pending their pooling and sale; (ii) the points
and expenses paid in connection with the acquisition of wholesale loans; (iii)
fees and expenses incurred in connection with its securitization program; (iv)
over-collateralization or

34
<PAGE>
reserve account requirements in connection with loans and leases pooled and
sold; (v) ongoing administrative and other operating expenses; (vi) payments
related to its federal tax obligations under a tax sharing agreement with
Continental Grain and, where necessary, direct payments of its federal and state
tax obligations; (vii) interest and principal payments under the payables to
affiliates and the Notes; (viii) the costs of the Purchase and Sale Facilities;
(ix) interest payments under the Credit Facility; and (x) the cost of any new
acquisitions that the Company may pursue. See "Special Note Regarding
Forward-Looking Statements."

As a result of its growing securitization program, the Company has operated,
and expects to continue to operate, on a negative cash flow basis, which is
expected to increase as the volume of its loan and asset purchases and
originations increases and its securitization program grows. See "Special Note
Regarding Forward-Looking Statements." The Company securitized and sold in the
secondary market $3.3 billion of loans in the nine months ended December 31,
1996 compared to $2.8 billion in the nine months ended December 31, 1995. The
Company used $155.2 million of cash in operations during the nine months ended
December 31, 1996. During fiscal 1996, 1995 and 1994, the Company securitized
and sold in the secondary market $4.0 billion, $2.3 billion and $1.2 billion of
loans, respectively. The Company used $300.5 million, $35.3 million and $32.4
million of cash in operations during fiscal 1996, 1995 and 1994, respectively.

During the life of the REMICs, owner trusts or grantor trusts, the Company
subordinates to the rights of holders of senior interests a portion of the
Excess Spread otherwise due to the Company as a credit enhancement to support
the sale of senior interests. The terms of the REMICs, owner trusts and grantor
trusts generally require that the Excess Spread otherwise payable to the Company
during the early months of the trusts be used to increase the cash reserve
account, or to repay the senior interests in order to increase
overcollateralization to specified maximums. The value of such "deposit"
accounts is included in the value of Excess Spread Receivables and the related
gain on sale of receivables, net of necessary reserves for credit losses, if
applicable.

In addition, the increased use of securitization transactions as a funding
source by the Company has resulted in a significant increase in the amount of
gain on sale of receivables recognized by the Company. During the nine months
ended December 31, 1996, the Company recognized gain on sale of receivables in
the amount of $133.8 million compared to $101.0 million for the corresponding
period in 1995. During fiscal 1996, 1995 and 1994, the Company recognized gain
on sale of receivables in the amounts of $146.5 million, $67.5 million, and
$49.7 million, respectively. The recognition of gain on sale of receivables will
have a negative impact on the cash flows of the Company to the extent the
Company is required to pay state and Federal income taxes on these amounts in
the period recognized notwithstanding that the Company does not receive the cash
representing the gain until later periods as the related loans are repaid or
otherwise collected.

The Company's primary sources of liquidity are sales of loans, leases and
other assets through securitization, the sale of loans, leases and other assets
under the Purchase and Sale Facilities, the sale of Excess Spread Receivables,
the sale of $300 million of Notes, the Credit Facility and the financing
provided by Continental Grain. While the Company sells Excess Spread Receivables
from time to time, there is no liquid market for such Excess Spread Receivables.

Through ContiTrade, the Company has $2.0 billion of committed sale capacity
under its Purchase and Sale Facilities with various financial institutions as of
December 31, 1996. The Purchase and Sale Facilities allow ContiTrade to sell,
with limited recourse, interests in designated pools of loans and other assets.
The Company has guaranteed ContiTrade's obligations under the Purchase and Sale
Facilities. These agreements generally have one year renewable terms (one
Purchase and Sale Facility has a two-year term), all of which will expire
between February 1997 and June 1998. On December 31, 1996, the Company had
utilized $1.3 billion of the capacity under these facilities. The Company
currently anticipates that it will be able to renew these agreements when they
expire and to obtain additional agreements.

35
<PAGE>
Since fiscal 1995, CSAF has been selling certain Excess Spread Receivables,
with limited recourse, to provide cash to fund the Company's securitization
program. These sales aggregated $50.0 million in fiscal 1995 and $54.5 million
in fiscal 1996. On March 31, 1995, $91.0 million of these sales were
outstanding. On April 1, 1996, CSAF sold $96.5 million of certain interest-only
and residual certificates, and ContiFinancial, as well as Continental Grain,
guaranteed CSAF's performance thereunder. On December 31, 1996, $155.4 million
of these sales were outstanding. Under the recourse provisions of the
agreements, CSAF is responsible for losses incurred by the purchaser within an
agreed-upon range. CSAF's performance obligations in these transactions are
guaranteed by Continental Grain for an agreed-upon fee. Although the Company
intends to continue to pursue opportunities to sell Excess Spread Receivables,
no assurance can be given that such opportunities will be available in the
future.

On August 14, 1996, the Company issued $300 million of unsecured senior
notes maturing August 15, 2003. The Notes bear interest at 8.375% payable
semiannually on February 15 and August 15 commencing February 15, 1997. The
Notes are redeemable as a whole or in part, at the option of the Company, at any
time or from time to time, at a redemption price equal to the greater of (i)
100% of their principal amount and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis at the treasury yield plus 50 basis
points, plus in each case accrued interest to the date of redemption. Proceeds
to the Company, net of underwriting fees and market discount were $293.1
million. Of this amount, $125.0 million was used by the Company to repay in full
the Term Note payable to Continental Grain and the remaining funds have been
used for general corporate purposes, including finding loan originations and
purchases, supporting securitization transactions and other working capital
needs.

On January 8, 1997, the Company closed a $200 million unsecured revolving
credit facility. The three-year facility has several interest rate pricing
alternatives, including those based on LIBOR and federal funds rates. The
facility will be used for general corporate and liquidity purposes.

In order to fund the Company's growth prior to the IPO, Continental Grain
provided the Company with intercompany financing. To refinance such intercompany
financing, simultaneously with the completion of the IPO, Continental Grain
purchased from the Company a $125 million five-year note issued under an
indenture (the "Indenture Note"), a $74 million four-year note (the "Four Year
Note") and the $125 million Term Note for $324 million in aggregate
(collectively, the "Intercompany Debt"). The Term Note was prepaid in full on
August 19, 1996 after the Company's issuance of $300 million of unsecured Notes
as discussed above. The Company's ability to refinance the Intercompany Debt is
subject to limitations contained in the Continental Grain debt agreements such
as restrictions on the incurrence of debt and liens and other financial
covenants.

The net proceeds from the IPO and the issuance of Notes were used by the
Company for general corporate purposes, including funding loan originations and
purchases, supporting securitization transactions (including the retention of
Excess Spread Receivables) and other working capital needs. Sales of the loans,
leases and other assets through securitizations, the sale of loans under the
Purchase and Sale Facilities, the sale of Excess Spread Receivables and further
issuances of debt (subject to the covenants of the Intercompany Debt, the Credit
Facility and the Notes), together with cash on hand, are expected to be
sufficient to fund the Company's liquidity requirements for at least the next 12
months if the Company's future operations are consistent with management's
current growth expectations. The Company has no commitments for additional
external financing and there can be no assurance that the Company will be
successful in consummating any such financing transactions in the future on
terms that the Company would consider to be favorable. Furthermore, no assurance
can be given that Continental Grain will provide such financing if the Company
is unable to obtain third party financing or that the terms of the Continental
Grain debt agreements will permit the Company to obtain such financing. See
"Special Note Regarding Forward-Looking Statements."

36
<PAGE>
EFFECTS OF ACCOUNTING PRONOUNCEMENTS

In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
which addresses the accounting and reporting for investment in equity securities
that have readily determinable fair values and for all investment in debt
securities. The statement was adopted in fiscal 1995 and did not have a material
impact on the Company's financial position or results of operations.

In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Post-employment Benefits". This statement was adopted by Continental Grain in
fiscal 1995. The adoption did not have a material impact on the Company's
financial position or results of operations.

In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" ("SFAS 114"). SFAS 114 was amended by SFAS No. 118
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" ("SFAS 118") issued in October 1994. As the Company generally sells
its loans within a relatively short period, the adoption of SFAS 114, as amended
by SFAS 118, did not have a material impact on the Company's financial position
or results of operations.

SFAS No. 105, "Disclosure of Information about Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit
Risk" and SFAS No. 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments" require the disclosure of the notional
amount or contractual amounts of financial instruments. In managing its interest
rate exposure, the Company may use financial instruments. These instruments are
used for the express purpose of managing interest rate risk related to loans
purchased prior to securitization, and are not used for any trading or
speculative purposes. As of March 31, 1996, 1995 and 1994, and December 31, 1996
all of the Company's financial instruments were designated as hedges and
accounted for as such.

In February 1992, the FASB issued SFAS No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires a change from the deferred method under
Accounting Principles Board Opinion 11 to the balance sheet method of accounting
for income taxes. SFAS 109 was adopted in fiscal 1994. The adoption did not have
a material impact on the financial position or results of operations.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which was adopted on April 1, 1996. SFAS 123 allows
companies either to continue to account for stock-based employee compensation
plans under existing accounting standards or adopt a fair value based method of
accounting for stock options as compensation expense over the service period
(generally the vesting period) as defined in the new standard. SFAS 123 requires
that if a company continues to account for stock options under Accounting
Principles Board ("APB") Opinion No. 25, it must provide annual pro forma net
income and earnings per share information "as if" the new fair value approach
had been adopted. The Company will continue to account for stock-based
compensation under APB Opinion No. 25 and will make the required disclosures at
March 31, 1997. As a result, the adoption of this standard did not have an
impact on the Company's financial position or results of operations.

On January 1, 1997 the Company adopted the FASB SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities" ("SFAS 125") which addresses the accounting for transfers of
financial assets in which the transferor has some continuing involvement either
with the assets transferred or with the transferee. A transfer of financial
assets in which the transferor surrenders control over those assets is accounted
for as a sale to the extent that consideration other than beneficial interest in
the transferred assets is received in exchange. SFAS 125 requires that
liabilities and derivatives incurred or obtained by transferors as part of a
transfer of financial assets be initially measured at fair value, if
practicable. In addition, SFAS 125 requires that servicing assets and
liabilities be subsequently measured by the amortization over their estimated
life and assessment of asset impairment be based on such assets' fair value.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. The

37
<PAGE>
adoption of this standard did not have a material impact on the Company's
financial position or results of operations. However, the Company expects that
certain of the assets that it had financed under the Purchase and Sale
Facilities prior to January 1, 1997 will not qualify for sale treatment under
SFAS 125 and as a result will be accounted for on the balance sheet of the
Company. SFAS 125 does not in any way affect the ability of the Company to
finance these assets. The Company expects to replace the Purchase and Sale
Facilities with repurchase agreements for those asset types which do not qualify
for sale treatment. On December 31, 1996, approximately $398 million of such
assets not qualifying for sale treatment would have been accounted for on the
balance sheet of the Company.

ANALYSIS OF OPERATING CASH FLOW

The table below summarizes cash flow generated by operating activities. This
analysis segregates cash income, cash expenses, sales and transfers of Excess
Spread Receivables, cash invested in receivables held for sale, and the cash
impact of changes in other assets and liabilities.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------------
<S> <C> <C> <C>
1996 1995 1994
----------- ---------- ----------

<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING CASH INCOME:
Excess cash flows received from securitization trusts...................... $ 40,214 $ 17,182 $ 12,165
Cash servicing fees........................................................ 19,487 10,761 6,144
Interest received.......................................................... 66,281 32,948 15,817
Other cash income.......................................................... 3,481 2,056 146
----------- ---------- ----------
Total Operating Cash Income.............................................. 129,463 62,947 34,272
----------- ---------- ----------
OPERATING CASH EXPENSES:
Securitization and loan acquisition costs.................................. (193,558) (68,417) (21,136)
Cash operating expenses.................................................... (44,897) (28,293) (16,684)
Taxes paid (including tax payments to affiliates).......................... (44,696) (24,607) (11,383)
Interest paid on Purchase and Sale Facilities.............................. (51,197) (18,834) (6,952)
Interest paid on funded debt............................................... (20,586) (10,234) (5,140)
----------- ---------- ----------
Total Operating Cash Expenses............................................ (354,934) (150,385) (61,295)
----------- ---------- ----------
Cash flow before sales of Excess Spread Receivables.......................... (225,471) (87,438) (27,023)
Proceeds from sales of Excess Spread Receivables(a).......................... 54,500 50,000 --
Proceeds from transfer of certain Excess Spread Receivables to Continental
Grain...................................................................... 60,701 -- --
Proceeds from sale of securitizations at a premium over par of interest-only
certificates from such securitizations..................................... 53,475 26,310 17,583
----------- ---------- ----------
Cash flow after sales of Excess Spread Receivables(a)........................ (56,795) (11,128) (9,440)
Cash (used in) provided by other payables and receivables.................... (23,162) 11,126 (1,304)
Cash used in receivables held for sale....................................... (220,500) (35,334) (21,616)
----------- ---------- ----------
Net Cash Used in Operating Activities.................................... $ (300,457) $ (35,336) $ (32,360)
----------- ---------- ----------
----------- ---------- ----------
</TABLE>

- ------------------------

(a) On April 1, 1996, the Company sold, with limited recourse, Excess Spread
Receivables for total cash proceeds of $96.5 million.

38
<PAGE>
BUSINESS

GENERAL

ContiFinancial Corporation engages in the consumer and commercial finance
business by originating and servicing home equity loans and by providing
financing and asset securitization structuring and placement services to
originators of a broad range of loans, leases and receivables. Securitization
provides significant benefits, including greater operating leverage and reduced
costs of funds, in the financing of assets, such as non-conforming home equity
loans, equipment leases, home improvement loans, franchise loans,
commercial/multi-family loans, non-prime and sub-prime auto loans and leases,
and timeshare loans. For the nine months ended December 31, 1996 and the year
ended March 31, 1996, the Company originated or purchased $2.8 billion and $2.3
billion, respectively, of home equity loans through ContiMortgage. In addition,
for the same periods, the Company securitized or sold $922 million and $2.0
billion, respectively, of loans and other assets for its clients. For the year
ended March 31, 1996, approximately 72% of the Company's net income was derived
from ContiMortgage's home equity lending business, while the remainder was
derived from the Company's financing and asset securitization business.

Two distinct factors drive the expansion of the Company's home equity loan
business--growth in volume of loans and access to the capital markets to
facilitate the most efficient sale of these loans through securitization. The
Company believes it has a competitive advantage because the management of Conti-
Mortgage is able to focus exclusively on expanding the volume of loans
originated or purchased, enhancing loan underwriting efficiencies and building
its servicing portfolio while relying upon the professional staff of ContiTrade
and ContiFinancial Services to focus exclusively on providing warehouse
financing, hedging and securitization structuring and placement services. This
specific industry expertise enables the Company to minimize its financing costs
and interest rate exposure and maximize the proceeds and profits from its
securitizations and growing servicing portfolio. Through December 31, 1996,
ContiMortgage completed 25 AAA/Aaa-rated REMIC securitizations totalling $6.3
billion. As of December 31, 1996, ContiMortgage had a servicing portfolio of
$5.7 billion.

The Company, through its subsidiary, ContiTrade, provides financing and
asset securitization structuring expertise and through its subsidiary,
ContiFinancial Services, provides placement services. In this area, ContiTrade's
management and execution of ContiMortgage's financing, hedging and
securitization needs has served as a model for the Company's Strategic
Alliances. The Company's strategy is to replicate its success with ContiMortgage
by: (i) targeting classes of consumer and commercial loans, leases and
receivables that have the potential to be financed more efficiently through
securitization; (ii) identifying and establishing Strategic Alliances with
originators of these assets that have experienced management teams,
sophisticated systems and a proven track record of originating, underwriting,
servicing and collecting consumer and commercial loans, leases, and receivables;
and (iii) securing from these originators a consistent flow of securitizable
assets. The Company offers Strategic Alliance clients complete balance sheet
liability management, including warehouse financing, interest rate hedging
services and the structuring and placement of asset portfolios in the form of
asset-backed securities. This allows the management of its Strategic Alliance
clients to focus on expanding and improving asset origination and servicing. For
the years ended March 31, 1996 and 1995, services provided by ContiTrade to
Strategic Alliance clients contributed $108.5 million and $14.8 million,
respectively, to the total gross income of the Company.

39
<PAGE>
The Company earns fees for the financing and asset securitization services
provided to its Strategic Alliance clients. In addition, in order to support its
Strategic Alliance clients and to further enhance its returns, the Company may
take what it believes to be manageable risk positions in its Strategic Alliances
by purchasing whole loans (and issuing asset-backed securities and thus
recognizing gain on sale) and providing financing of the Excess Spread
Receivables owned by its clients. In certain of its Strategic Alliances, the
Company may receive Strategic Alliance Equity Interests. The Company believes
that its Strategic Alliance strategy results in the Company being less
transaction oriented and more focused on increasing the long-term value of its
Strategic Alliance clients. All Strategic Alliance Equity Interests existing
prior to the consummation of the IPO were retained by Continental Grain, and
therefore, these assets are not reflected in the Company's Consolidated
Financial Statements incorporated by reference herein. The Company currently
holds four Strategic Alliance Equity Interests. Based on its prior experience,
the Company does not anticipate that any Strategic Alliance Equity Interest that
it may acquire in the future will have any effect on the Company's financial
position or results of operations until the business of the Strategic Alliance
client matures, which typically takes several years.

The Company's successful execution of its Strategic Alliance strategy to
date has resulted in the addition of the following new business lines and
securitization volume from 1991 through December 31, 1996: 27 home equity loan
securitizations representing $2.1 billion (for clients other than
ContiMortgage), 18 equipment lease securitizations for $1.4 billion, five
adjustable rate mortgage securitizations for $642 million, seven Title I home
improvement loan securitizations for $245 million, five franchise loan
securitizations for $312 million, five commercial/multi-family whole loan
portfolio sales for $712 million, four sub-prime auto securitizations for $248
million and one small business loan securitization for $20 million. The Company
currently has 12 active Strategic Alliances. Two specialize in home equity
loans, two focus on auto loans and leases, three concentrate on equipment leases
and the remainder focus on other asset classes.

In certain circumstances where the Company has had a business or a Strategic
Alliance relationship, the Company has acquired some or all of the equity of
consumer finance companies that would broaden the Company's product lines,
diversify its origination capabilities and further its growth strategy. In the
third quarter of fiscal 1997, the Company acquired four such enterprises--ULG,
Royal, Resource One and Triad. See "Prospectus Summary--Recent Developments."

INDUSTRY OVERVIEW

The home mortgage market is the largest consumer finance market in the
United States. Industry studies have estimated that home mortgage originations
grew at an estimated 6.2% compound annual growth from $589 billion of home
mortgages originated in 1990 to $797 billion of home mortgages originated in
1995. The non-conforming home equity loan sector of the home mortgage loan
market has grown at a faster rate than the overall market. Industry studies have
estimated that the non-conforming home equity loan originations grew at an
estimated compound annual growth rate of 8.6% from $96 billion in 1990 to $145
billion in 1995. Despite the rapid growth and the size of this market, it is a
relatively fragmented industry. The Company believes that the top five
non-conforming home equity lenders accounted for only 9% of total non-conforming
origination volume in calendar 1995.

According to studies performed by David Olson Research Co., a group that has
been analyzing the home equity loan industry since 1969, the growth in the
volume of non-conforming home equity loans is attributable to, among other
factors: (i) a larger number of borrowers seeking to consolidate their revolving
credit debt and auto loans for a lower rate and payment; (ii) slow growth in
real estate appreciation causing an increase in the number of borrowers seeking
to make home improvements; (iii) increased entry into the home equity loan
market by commercial banks as well as the growth in number and size of mortgage
brokers making home equity financing more readily available; and (iv) growth in
overall consumer awareness of the availability of home equity financing. In
addition, the asset-backed securitization market has provided an important
source of financing for originators of home

40
<PAGE>
equity loans. Industry publications report that asset-backed issuance of
securities collateralized by home equity loans accounted for 24.7% or $38.6
billion, of the $156.0 billion asset-backed securities issued in calendar 1996.

THE COMPANY'S BUSINESS STRATEGY

The Company's strategy is to continue its strong growth in the consumer and
commercial finance business through geographic expansion of its home equity loan
business, diversification of origination capabilities, Strategic Alliance
activities, Strategic Acquisitions and investments in origination, servicing and
collection information systems and technology. The Company seeks to become the
most efficient low cost provider of non-conforming home equity loans
underwritten in accordance with sound criteria and which perform with excellent
delinquency, default and loss experience. Further, where prudent and
appropriate, the Company will diversify into business lines which are otherwise
under-served by the market presently and which can benefit from the lower cost
of funds and the discipline provided through securitization as well as from the
Company's approach to growth in originations, servicing and collections as
successfully applied to ContiMortgage.

The Company's strategy with respect to Strategic Alliance activities is to
replicate its success with ContiMortgage by: (i) targeting classes of consumer
and commercial loans, leases and receivables that have the potential to be
financed more efficiently through securitization; (ii) identifying and
establishing Strategic Alliances with originators of these assets that have
experienced management teams, sophisticated systems and a proven track record of
originating, underwriting, servicing and collecting consumer and commercial
loans, leases and receivables; and (iii) securing from these originators a
consistent flow of securitizable assets. The Company currently has 12 active
Strategic Alliances. In addition, the Company may, from time to time, make an
equity or subordinated debt investment in a Strategic Alliance client.

As a key part of its growth strategy to diversify into asset classes that
can benefit from securitization, the Company has formed five Strategic Alliances
with originators of non-prime and sub-prime auto loans since fiscal 1995.
Management believes that this market benefits significantly from securitization
through reduced cost of funds, and the discipline which the regular
securitization process brings to the origination, underwriting, servicing, and
collection of auto loans and losses. Consequently, after closely monitoring the
performance and development of its Strategic Alliances in this industry, the
Company acquired 56.0% of the outstanding common stock of Triad, a former
Strategic Alliance. The Company's strategy is to apply to Triad the same
disciplined approach to underwriting, credit grading, servicing and collections
as had been applied to ContiMortgage. The Company believes that its strategy
with respect to Triad, combined with prudent growth, will create a significant
market presence in the non-prime automobile finance industry.

41
<PAGE>
The Company's strategy with respect to Strategic Acquisitions is an
extension of its Strategic Alliance Strategy, which the Company believes
provides it with a unique capability to analyze and select acquisition
opportunities. Specifically, the Company has targeted the acquisition of
companies with which it has significant experience as either a Strategic
Alliance or as a broker/loan originator which has been selling home equity loans
to ContiMortgage and which will enhance the Company's geographic diversification
or method of origination. This focused approach on existing relationships, using
considerable static pool data and analysis (loan characteristics, demographics,
delinquencies, losses and prepayments), allows the Company to better judge: (i)
the management team; (ii) the quality of the origination and underwriting; (iii)
the ability to pass rating agency and/or financial guarantor scrutiny; and (iv)
product consistency.

The Company has sought to align itself with management teams which have
consistently delivered securitizable product and which have demonstrated
performance histories consistent with the Company's emphasis on quality
originations rather than volume.

The Strategic Acquisitions are deliberately structured to motivate the
respective management teams to achieve goals consistent with those of the
Company, with an emphasis on operating efficiencies and immediate accretion to
earning per share. The Company's four Strategic Acquisitions to date have all
included the following characteristics: (i) a purchase price providing for a
modest upfront payment; (ii) subsequent installments based upon profit
performance (i.e., net income, not volume); and (iii) management long-term
incentives with attractive upside if successful in achieving agreed upon goals.

HOME EQUITY LOAN ORIGINATION AND SERVICING

Through ContiMortgage, the Company is a leading originator, purchaser,
seller and servicer of non-conforming home equity loans. ContiMortgage's home
equity loan production has increased from $161.5 million for the year ended
March 31, 1992 (its first full year of operations under the Company) to $2.3
billion for the year ended March 31, 1996, representing a 95% annual compound
growth rate.

In September 1996, the Company organized ContiWest Corporation to better
administer and underwrite the Company's origination portfolio.

LOAN PRODUCTION

ORIGINATION. ContiMortgage's and ContiWest's principal loan product is a
non-conforming home equity loan with a fixed principal amount, interest rate,
and term to maturity which is typically secured by a first mortgage on the
borrower's residence. Currently, over 90% of originations are secured by a first
lien mortgage. Non-conforming home equity loans are home equity loans made to
borrowers whose borrowing needs may not be met by traditional financial
institutions due to credit exceptions or other factors and that cannot be
marketed to agencies, such as Ginnie Mae, Fannie Mae and Freddie Mac. In fiscal
1994, ContiMortgage introduced an adjustable rate mortgage as part of its
strategy to expand its product lines and service a broader range of borrower
needs. The Company originates or purchases loans through ContiMortgage's
headquarters in Horsham, Pennsylvania, ContiWest's headquarters in Las Vegas,
Nevada and five regional offices nationwide. ContiMortgage and ContiWest obtain
their loans through two primary sources in 47 states and the District of
Columbia: wholesale, which represents loans purchased from mortgage bankers and
commercial banks; and broker, which represents loans referred by brokers and are
funded directly by ContiMortgage and ContiWest. New wholesale and broker
relationships are subject to a thorough due diligence and approval process to
ensure quality sources of new business. Once approved, loans from these new
sources are initially subject to a higher level of scrutiny and quality control.
See
"--Quality Control."

For the nine months ended December 31, 1996, wholesale originations
accounted for approximately 78% of ContiMortgage's and ContiWest's loan
production. The Company believes that wholesale loan sourcing provides a cost
effective means of growing and sustaining origination volumes. Because wholesale
sources underwrite loans to ContiMortgage's and ContiWest's underwriting
guidelines and fund those

42
<PAGE>
loans in their own name, wholesale sources deliver pre-approved loan packages to
ContiMortgage and ContiWest typically in excess of $1.0 million in size. As a
result, the general and administrative expenses of the Company associated with
wholesale loan purchases are significantly less than when loans are purchased or
originated on a loan-by-loan basis. For the nine months ended December 31, 1996,
ContiMortgage and ContiWest purchased loans from over 100 wholesale sources with
no one source accounting for more than 10% and the top five wholesale sources
accounting for 20% of total wholesale loan production.

The following table illustrates the sources of ContiMortgage's and
ContiWest's loan production:

SOURCES OF LOAN ORIGINATIONS AND PURCHASES

<TABLE>
<CAPTION>
AS OF AS OF MARCH 31,
DECEMBER 31, --------------------------------------
1996 1996 1995 1994
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Independent Mortgage Brokers:
Principal Balance........................................ $ 621,319 $ 574,354 $ 304,196 $ 144,897
Number of Loans.......................................... 9,054 8,465 4,862 2,112
Average Principal Balance per Loan....................... $68.6 $67.9 $62.6 $68.6

Wholesale Correspondents:
Principal Balance........................................ $ 2,138,755 $ 1,737,117 $ 1,024,779 $ 641,913
Number of Loans.......................................... 33,896 28,268 17,759 10,390
Average Principal Balance per Loan....................... $63.1 $61.5 $57.7 $61.8

Total Loan Originations and Purchases:
Principal Balance........................................ $ 2,760,074 $ 2,311,471 $ 1,328,975 $ 786,810
Number of Loans.......................................... 42,950 36,733 22,621 12,502
Average Principal Balance per Loan....................... $64.3 $62.9 $58.7 $62.9
</TABLE>

Towards achieving its strategic objective of expanding and diversifying its
sources of home equity loan production, the Company recently acquired three home
equity lenders involved in retail home equity loan production. In November 1996,
the Company purchased ULG, a West Coast-based home equity lender specializing in
retail origination via direct mail and telemarketing throughout the United
States and Royal, a California-based wholesale and retail originator of home
equity loans. In December 1996, the Company purchased Resource One, a
Pennsylvania-based home equity lender specializing in retail origination via
direct mail, television, and telemarketing throughout the eastern and
mid-western states. Combined, ULG, Royal and Resource One originated
approximately $636 million of home equity loans and home improvement loans in
calendar year 1996. The Company will securitize most of the home equity loans
originated by these new subsidiaries through ContiMortgage. The Company believes
these operations will contribute significantly to the Company's home equity loan
production growth in the future.

43
<PAGE>
The Company's current origination volumes by state are delineated as
follows:

GEOGRAPHIC DISTRIBUTION OF U.S. LOAN ORIGINATIONS AND PURCHASES

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
NINE MONTHS ENDED -------------------------------------
DECEMBER 31, 1996 1996 1995 1994
--------------------- ----- ----- -----
<S> <C> <C> <C> <C>
States:
Michigan......................................................... 15% 11% 7% 5%
Ohio............................................................. 8 8 7 6
Illinois......................................................... 7 7 7 6
New York......................................................... 7 9 10 16
New Jersey....................................................... 6 9 12 14
Pennsylvania..................................................... 5 7 8 8
North Carolina................................................... 5 5 7 6
California....................................................... 5 2 0 0
Florida.......................................................... 4 5 7 6
Maryland......................................................... 4 5 4 4
Massachusetts.................................................... 3 4 4 3
Indiana.......................................................... 3 4 4 3
Georgia.......................................................... 2 3 4 5
Connecticut...................................................... 2 2 2 2
Virginia......................................................... 2 2 2 1
South Carolina................................................... 2 2 2 2
All other States................................................. 20 15 13 13
--- --- --- ---
Total.......................................................... 100% 100% 100% 100%
--- --- --- ---
--- --- --- ---
</TABLE>

UNDERWRITING. All loans are underwritten to the Company's underwriting
guidelines. The underwriting process is intended to assess both the prospective
borrower's ability to repay the loan and the adequacy of the real property
security as collateral for the loan. In the underwriting process, a credit
package is submitted to the Company which includes a current appraisal from an
independent appraiser, a property inspection, a credit report and a verification
of employment. On a case-by-case basis, after review and approval by the
Company's underwriters, home equity loans may be made or purchased which vary
from the underwriting guidelines. However, any variations from guidelines must
be approved by a senior underwriter or by a chief executive officer of
ContiMortgage or ContiWest.

The Company generally purchases or originates loans which either fully
amortize over a period not to exceed 360 months or provide for amortization over
a 360-month schedule with a "balloon" payment required at the maturity date,
which will not be less than five years after origination. The loan amounts
generally range from a minimum of $10,000 to a maximum of $350,000 unless a
higher amount is specifically approved by the Chief Executive Officer of
ContiMortgage or ContiWest. Management estimates that the current average home
equity loan purchased or originated by ContiMortgage and ContiWest is
approximately $65,000. ContiMortgage and ContiWest primarily purchase or
originate non-purchase money first or second mortgage loans although
ContiMortgage and ContiWest have programs for origination of certain purchase
money first mortgages.

The homes used for collateral to secure the loans may be either residential
(mostly primary residences, but also second and vacation homes) or
investor-owned one- to four-family homes, condominiums or townhouses. Generally,
each home must have a minimum appraised value of $35,000. Mobile housing or
agricultural land are not accepted as collateral. In addition, mixed-use loans
secured by owner-

44
<PAGE>
occupied properties, including one- to four-family and small multi-family
residences, are made where the proceeds may be used for business purposes.

Each property proposed as security for a loan must be appraised not more
than six months prior to the date of such loan. The combined loan-to-value ratio
of the first and second mortgages generally may not exceed 85%. If a prior
mortgage exists, the Company reviews the first mortgage history. If it contains
open end, advance or negative amortization provisions, the maximum potential
first mortgage balance is used in calculating the combined loan-to-value ratio
which determines the maximum loan amount. The Company does not purchase or
originate loans where the first mortgage contains a shared appreciation clause.

The Company also requires a credit report by an independent credit reporting
agency which describes the applicant's credit history. Such credit reports
typically reflect all delinquencies of 30 days or more, repossessions,
judgments, foreclosures, garnishments, bankruptcies, divorce actions and similar
adverse credit events that can be discovered by a search of public records.
Written verification is obtained on any first mortgage balance, its status and
whether local taxes, interest, insurance and assessments are included in the
applicant's monthly payment on the first mortgage. All taxes and assessments not
included in the monthly payment must be verified as current.

Each loan applicant is required to secure property insurance in an amount
sufficient to cover the new loan and any prior mortgage. If the sum of the
outstanding first mortgage, if any, and the home equity loan exceeds replacement
value, insurance at least equal to replacement value may be accepted.

QUALITY CONTROL. The purpose of the Company's quality control program is:
(i) to monitor and improve the overall quality of loan production generated by
ContiMortgage's regional offices, ContiWest and wholesale sources; and (ii) to
identify and communicate to management existing or potential underwriting and
loan file packaging problems or areas of concern. Each month, the following
sample of funded loans are examined: (i) a 10% random sample of all funded
loans; (ii) a 1-3% random sample of loans underwritten at the maximum
loan-to-value ratios for such risk class of loans; (iii) a 1-3% random sample of
loans with a debt-to-income ratio greater than 50%; (iv) a minimum of the first
five loans from any new origination source; and (v) loans selected in accordance
with such other criteria as may be determined by management. The quality control
file review examines compliance with underwriting guidelines and federal and
state regulations. This is accomplished through a focus on: (i) accuracy of all
credit and legal information; (ii) collateral analysis including re-appraisal of
property (field or desk) and review of the original appraisal; (iii) employment
and income verification; and (iv) legal document review to ensure that the
appropriate documents are in place.

PURCHASE AND SALE FACILITIES

As of December 31, 1996, through CSAF III and CSAF IV, the Company had $2.0
billion of committed and an additional $950 million of uncommitted sale capacity
under its Purchase and Sale Facilities. The Purchase and Sale Facilities allow
CSAF III and CSAF IV to sell, with limited recourse, interests in designated
pools of loans and other assets. The Company utilized the facilities to sell
assets totalling $4.8 billion, $5.7 billion, $2.5 billion, $1.2 billion in the
nine months ended December 31, 1996 and fiscal years 1996, 1995 and 1994,
respectively. As of December 31, 1996, the Company had utilized $1.3 billion of
the sale capacity under the Purchase and Sale Facilities. See "Risk
Factors--Negative Cashflows and Capital Needs--Dependence on Purchase and Sale
Facilities," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

LOAN SECURITIZATION

GENERAL. The primary funding strategy of the Company is to securitize loans
purchased or originated. The Company's origination sources: ContiMortgage,
ContiWest, ULG, Royal and Resource One (collectively, the "Home Equity
Companies"), benefit from the reduced cost of funds and greater leverage
provided through securitization. Through December 31, 1996, including its first
$31 million AAA/Aaa-

45
<PAGE>
rated REMIC pass-through certificate offering, which was privately placed by
ContiFinancial Services in March 1991, ContiMortgage had completed 25
AAA/Aaa-rated REMIC securitizations totalling $6.3 billion. Management has
structured the operations and processes of the Home Equity Companies
specifically for the purpose of efficiently originating and underwriting for
securitization in order to meet the requirements of rating agencies, credit
enhancers and AAA/Aaa-rated REMIC pass-through investors. Additionally, the
Company has determined that it is most efficient to have one home equity
servicing and sales platform. Consequently, the Company has designated
ContiMortgage to be the servicing provider for the Home Equity Companies.
ContiMortgage is one of the leading servicers of non-conforming home equity
loans in the United States. Since June 1994, ContiMortgage has completed 11
public REMIC securitizations for $5.2 billion and is a recognized and respected
name in the asset-backed market. The Company plans to leverage off this market
presence by securitizing the production of the Home Equity Companies through
ContiMortgage. ContiMortgage generally seeks to enter the public securitization
market at a minimum on a quarterly basis. In connection with these
securitizations, ContiTrade and ContiFinancial Services provide securitization
structuring and placement services, respectively.

In a securitization, the Company sells the loans that it has purchased or
originated to a REMIC, owner trust or grantor trust for a cash purchase price
and an interest in the loans or other assets securitized (in the form of the
Excess Spread). The cash purchase price is raised through an offering of
pass-through certificates by the trust. Following the securitization, the
purchasers of the pass-through certificates receive the principal collected and
the investor pass-through interest rate on the certificate balance, while the
Company receives the Excess Spread. The Excess Spread is either a contractual
right or a certificated security generally in the form of an interest-only or
residual certificate.

The purchasers of the pass-through certificates receive a credit-enhanced
security. Credit enhancement is generally achieved through two sources: (i)
subordination of an amount of Excess Spread retained by the Company; and (ii) an
insurance policy provided by an AAA/Aaa-rated monoline insurance company. As a
result, each offering of senior REMIC pass-through certificates receives ratings
of AAA from Standard & Poor's Ratings Services and Fitch Investors Service, L.P.
and Aaa from Moody's Investors Service, Inc.

The pooling and servicing agreements that govern the distribution of cash
flows from the loans included in the REMIC require either (i) the establishment
of a reserve account that may be funded by cash or a letter of credit deposited
by the Company or (ii) the overcollateralization of the REMIC, which is intended
to result in receipts and collections on the loans exceeding the amounts
required to be distributed to the holders of the senior REMIC pass-through
certificates. If payment defaults exceed the amount in the reserve account or
the amount of overcollateralization, as applicable, the monoline insurance
company policy will pay any losses thereafter experienced by holders of the
senior interests in the related REMIC. To date, there have been no claims on any
monoline insurance company policy obtained in any of the Company's
securitizations.

HEDGING. A fixed rate loan inventory held for sale will have a smaller
Excess Spread if interest rates rise before the loans are sold. Conversely,
falling rates expand the Excess Spread. As such, it is the Company's policy to
actively monitor its exposure to interest rates and hedge this exposure through
the use of United States Treasury securities and futures contracts.

WHOLE LOAN SALES. From time to time, the Company will sell loans on a whole
loan basis when and where pricing is more attractive than that available through
securitization. For the years ended March 31, 1996 and 1995 whole loan sales
accounted for less than 3% of ContiMortgage's total volume of loan sales and
securitizations. Because cash is received when the loans are sold, the full gain
on sale is recorded at the time of sale. In the nine months ended December 31,
1996, ContiMortgage and ContiWest sold $453 million of home equity loans in
whole loan sales generating $22.9 million of cash proceeds.

46
<PAGE>
LOAN SERVICING

OVERVIEW. The Company generally retains the right to service the home
equity loans it originates or purchases. Servicing includes collecting payments
from borrowers, remitting payments to investors who have purchased the loans,
investor reporting, accounting for principal and interest, contacting delinquent
borrowers, conducting foreclosure proceedings and disposing of foreclosed
properties. As of March 31, 1996, ContiMortgage was servicing 65,121 loans in 44
states and the District of Columbia with an outstanding balance of $3.9 billion,
an increase in outstanding balance of 76% from March 31, 1995. As of December
31, 1996, ContiMortgage's servicing portfolio has increased to 93,372 loans with
an outstanding balance of $5.7 billion. As the servicing portfolio grows, the
Company expects to recognize increasing economies of scale and cash flow. As of
December 31, 1996, ContiMortgage's $5.7 billion servicing portfolio was earning
a servicing fee of approximately 50 basis points per annum.

ContiMortgage has developed a sophisticated computer-based mortgage
servicing operation that enables the Company to provide effective and efficient
processing of home equity loans. The key elements of any servicing operation are
the quality and experience of the staff and the effectiveness of the computer
software.

The servicing system is an on-line real time system. It provides
payment-processing and cashiering functions, automated payoff statements,
on-line collections, hazard insurance and tax monitoring and a full range of
investor-reporting requirements for both fixed rate and adjustable rate loans.
The monthly investor-reporting package includes a trial balance, accrued
interest report, remittance report and delinquency reports.

Formal written procedures have been established for payment processing, new
loan set-up, customer service, tax and insurance monitoring. The servicing
system is documented by vendor-supplied instructional material, as well as by
in-house instructional documentation.

ContiMortgage is a Fannie Mae/Freddie Mac approved seller/servicer. As such,
ContiMortgage is subject to thorough scrutiny of its policies, procedures and
business, and is qualified to underwrite, sell and service loans on behalf of
both Fannie Mae and Freddie Mac. This designation is typically a prerequisite
for loan securitization.

The pooling and servicing agreements which govern the distribution of cash
flows within the REMIC trusts generally require that ContiMortgage, as servicer,
advance interest (but not principal) on any delinquent loans to the holders of
the senior interests in the related REMIC trust until satisfaction of the note,
liquidation of the mortgaged property or charge-off of the loan to the extent
ContiMortgage deems such advances of interest to be ultimately recoverable. To
the extent there are any realized losses on loans, such losses are paid out of
the related reserve account, out of principal and interest payments on
overcollateralized amounts or, if necessary, from the related monoline insurance
company policy.

COLLECTIONS. The ContiMortgage collection department, which consists of 161
employees, is organized into three divisions (two collection divisions and one
default division), each led by a collection supervisor. The collection divisions
are each comprised of six teams, consisting of one team leader and seven loan
counselors, whose responsibilities include contacting first payment defaults
that are one to ten days delinquent and post-30 day delinquent accounts. In
March 1996, each collection division was restructured to include an auto-dial
team of collectors to handle pre-30 day delinquent accounts. In addition, there
is a loss mitigation team which generally contacts mortgagors who are three
payments in arrears to determine if a special forbearance repayment agreement
can be arranged or if legal action needs to be initiated. In certain cases,
delinquent loans are forwarded to the default division for legal action by a
foreclosure or bankruptcy team. If a property is acquired through foreclosure,
the Company will market the property for liquidation of the asset and recovery.

Generally, collection activity will commence once a loan has not paid within
five days of the due date. Once a loan becomes 30 days past due, a collection
supervisor generally analyzes the account to determine the appropriate course of
action. On or about the 45th day of delinquency, each property is typically
inspected. The inspection indicates if the property is occupied or vacant, the
general condition of the

47
<PAGE>
property, whether the condition is deteriorating, and a recommendation for
securing, repair or maintenance. Borrowers usually will be contacted by
telephone at least five times and also by written correspondence before the loan
becomes more than 60 days delinquent. Collection activity on accounts 60 days or
more delinquent typically emphasize curing the delinquency, including the use of
formal forbearance, refinance and voluntary liquidation and other means directed
at completely curing the delinquency. In most cases, accounts that cannot be
cured by reasonable means will be moved to foreclosure as soon as all legal
documentation permits.

Depending upon the circumstances surrounding the delinquent account, a
temporary suspension of payments or a repayment plan to return the account to an
up-to-date status may be authorized by the collection supervisor. In any event,
it is the Company's policy to work with the delinquent customer to resolve the
past due balance before legal action is initiated.

Mortgaged properties securing loans that are more than 60 days delinquent,
including loans in foreclosure, are typically inspected on a monthly basis. In
most cases, the cost of these inspections will be advanced by ContiMortgage and
charged to the individual escrow accounts of the borrowers. The Company expects
that the cost of inspections generally will be recovered through reinstatement,
liquidation or payoff. The collection supervisor generally reviews each
inspection report and takes whatever corrective action is necessary. The cost to
secure, winterize or maintain a property are typically charged to the borrower's
escrow account. If and when a property moves to foreclosure status, a
foreclosure coordinator will review all previous inspection reports, evaluate
the lien and equity position and obtain any additional information as necessary.
The ultimate decision to foreclose, after all necessary information is obtained,
is made by an officer of ContiMortgage.

Foreclosure regulations and practices and the rights of the owner in default
vary from state to state, but generally formal legal action may be initiated if:
(i) the loan is 90 days or more delinquent; (ii) a notice of default on a senior
lien is received; or (iii) ContiMortgage discovers circumstances indicating
potential loss exposure.

TECHNOLOGY. ContiMortgage believes that the effective use of technology
will lead to greater servicing efficiencies and economies of scale, thus
reducing costs and increasing overall profitability. ContiMortgage uses
technology in the areas of origination processing, loan servicing and investor
reporting, collections and foreclosure management. As part of ContiMortgage's
technology strategy, management is continually evaluating system requirements to
ensure adequate systems and processing capacity are available.

ContiMortgage uses an IBM AS/400 computer system to serve as the hardware
platform for its origination and servicing software. The mortgage origination
system used by ContiMortgage provides database management and automated document
production necessary for loan originating and processing. The system provides
distributed processing to ContiMortgage's regional offices and ContiWest,
centralized management over its databases, and automatically produces all
necessary mortgage documents.

The Company's computer system provides all the standard processing functions
necessary to service a loan and report loan activity. The system provides
information on mortgage originations and pipeline processing, funding and wiring
of funds to closing agents, and automated loan delivery including REMIC
processing and reporting.

The system also provides an on-line collections system that automatically
prompts collectors to make collection calls and logs and displays the results of
previous conversations with borrowers regarding their delinquency history. In
fiscal 1997, ContiMortgage integrated the on-line collections system with a
state of the art predictive power dialer. The predictive dialer is a tool which
utilizes past payment history and other information to determine when the
customer needs to be called, the type of collection call to be made and then
provides collectors with an automated connection to that borrower. Further, the
predictive dialer is used for all borrowers 5 to 60 days delinquent. Upon
transfer of a delinquent account to the default status, The Problem Loan System
establishes and monitors all actions of the foreclosure process and prompts
foreclosure staff to execute appropriate actions on the appropriate date.

48
<PAGE>
CREDIT QUALITY OF HOME EQUITY LOAN SERVICING PORTFOLIO. The following table
illustrates ContiMortgage's delinquency and charge-off experience with respect
to its home equity loan portfolio:

DELINQUENCY AND DEFAULT EXPERIENCE OF
CONTIMORTGAGE'S SERVICING PORTFOLIO
OF HOME EQUITY LOANS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
----------------------- -------------------------------------------------------------------------
1996 1996 1995 1994
----------------------- ----------------------- ----------------------- -----------------------
NUMBER NUMBER NUMBER NUMBER
OF PRINCIPAL OF PRINCIPAL OF PRINCIPAL OF PRINCIPAL
LOANS BALANCE LOANS BALANCE LOANS BALANCE LOANS BALANCE
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio....................... 93,372 $5,699,145 65,121 $3,863,575 38,740 $2,192,190 20,146 $1,105,393
Delinquency percentage(a)
30-59 days.................... 3.31% 3.09% 2.01% 1.81% 0.89% 0.83% 0.57% 0.51%
60-89 days.................... 0.74% 0.72% 0.48% 0.47% 0.30% 0.36% 0.18% 0.19%
90 days and over.............. 0.33% 0.36% 0.15% 0.23% 0.44% 0.45% 0.30% 0.27%
Total delinquency........... 4.38% 4.17% 2.64% 2.51% 1.63% 1.64% 1.05% 0.97%
Total delinquency amount.... 4,088 $ 237,642 1,721 $ 97,082 633 $ 35,980 199 $ 10,036
Default percentage(b)
Foreclosure................... 2.51% 2.62% 2.30% 2.42% 0.42% 0.46% 0.50% 0.53%
Bankruptcy.................... 1.12% 1.12% 0.78% 0.74% 0.39% 0.41% 0.26% 0.23%
Real estate owned............. 0.43% 0.49% 0.11% 0.13% 0.09% 0.09% 0.05% 0.05%
Forbearance................... 0.14% 0.15% 0.24% 0.25% 0.20% 0.20% N/A N/A
Total default............... 4.20% 4.38% 3.43% 3.54% 1.10% 1.16% 0.81% 0.81%
Total default amount........ 3,926 $ 249,714 2,232 $ 136,796 426 $ 25,486 177 $ 9,615

1993 1992
------------------------ ------------------------
NUMBER NUMBER
OF PRINCIPAL OF PRINCIPAL
LOANS BALANCE LOANS BALANCE
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Portfolio....................... 11,093 $ 484,857 8,797 $ 307,164
Delinquency percentage(a)
30-59 days.................... 0.54% 0.49% 1.82% 2.08%
60-89 days.................... 0.29% 0.27% 0.59% 0.77%
90 days and over.............. 0.42% 0.44% 0.54% 0.83%
Total delinquency........... 1.25% 1.20% 2.95% 3.68%
Total delinquency amount.... 139 $ 5,794 260 $ 11,596
Default percentage(b)
Foreclosure................... 0.68% 0.83% 0.66% 1.14%
Bankruptcy.................... 0.54% 0.69% 0.51% 0.89%
Real estate owned............. 0.15% 0.18% 0.18% 0.43%
Forbearance................... N/A N/A N/A N/A
Total default............... 1.37% 1.70% 1.35% 2.46%
Total default amount........ 152 $ 8,263 119 $ 7,755
</TABLE>

- ------------------------

(a) The delinquency percentage represents, as a percentage of the total number
and aggregate principal balance of loans as of the relevant date, the number
and outstanding principal balance of home equity loans for which payments
are contractually past due, exclusive of home equity loans in foreclosure,
bankruptcy, real estate owned or forbearance.

(b) The default percentage represents, as a percentage of the total number and
aggregate principal balance of loans as of the relevant date, the number and
dollar value of delinquent payments on home equity loans in foreclosure,
bankruptcy, real estate owned or forbearance.

The following table illustrates ContiMortgage's loan loss experience with
respect to its home equity loan portfolio:

LOAN LOSS EXPERIENCE ON
CONTIMORTGAGE'S SERVICING PORTFOLIO
OF HOME EQUITY LOANS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED MARCH 31,
DECEMBER 31, ----------------------------------------------
1996 1996 1995 1994 1993
------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Average Amount Outstanding (a).................................... $4,472,732 $ 2,858,790 $ 1,663,865 $ 745,351 $ 396,910
Net Losses (b).................................................... $ 8,211 $ 3,781 $ 1,313 $ 1,108 $ 1,076
Net Losses after Recoveries (c)................................... $ 8,170 $ 3,686 $ 1,308 $ 1,108 $ 1,036
Net Losses as a Percentage of Average Amount Outstanding.......... 0.18%(d) 0.13% 0.08% 0.15% 0.26%

1992
---------
<S> <C>

Average Amount Outstanding (a).................................... $ 237,979
Net Losses (b).................................................... $ 911
Net Losses after Recoveries (c)................................... $ 647
Net Losses as a Percentage of Average Amount Outstanding.......... 0.27%
</TABLE>

- ------------------------

(a) The average of the aggregate principal balances of the home equity loans
outstanding on the last business day of each month during the period.

(b) Actual losses incurred on liquidated properties for each respective period.
Losses include all principal, foreclosure costs and all accrued interest.

(d) This percentage is based on data for the nine months ended December 31, 1996
and is not necessarily indicative of an annualized percentage.

49
<PAGE>
In fiscal 1994, the Company made a strategic decision to increase its mix of
higher yielding, lower loan-to-value B, C and D grade loans. The ratings are
those employed by the Company in its grading system, which the Company believes
is similar to grading systems used in the non-conforming home equity loan
industry. As a result of this strategic decision, delinquency levels have
increased as anticipated and are expected to continue to increase as the loan
mix shifts toward more B, C and D loans and such types of loans in the portfolio
become more seasoned. The Company believes that this increase in delinquency
levels is more than offset by the higher yields associated with B, C and D loans
and the lower loan-to-value ratios which provide a larger equity cushion against
loss in the event of foreclosure. The Company will closely monitor the expected
increase in delinquency rates.

The following chart generally outlines certain parameters of the credit
grades of ContiMortgage's and ContiWest's current underwriting guidelines:

DESCRIPTION OF CREDIT GRADES

<TABLE>
<CAPTION>
"A" CREDIT GRADE "B" CREDIT GRADE "C" CREDIT GRADE "D" CREDIT GRADE
<S> <C> <C> <C> <C>

GENERAL REPAYMENT Has good credit but Pays the majority of Marginal credit history Designed to provide a
might have some minor accounts on time but which is offset by borrower with poor
delinquency. has some 30- and/or other positive credit history an
60-day delinquency. attributes. opportunity to correct
past credit problems
through lower monthly
payments.

EXISTING MORTGAGE LOANS Current at application Current at application Cannot exceed four Must be paid in full
time and a maximum of time and a maximum of 30-day delinquencies or from loan proceeds and
two 30-day three 30-day one 60-day no more than 119 days'
delinquencies in the delinquencies in the delinquencies in the delinquency.
past 12 months. past 12 months. past 12 months.

NON-MORTGAGE CREDIT Major credit and Major credit and Major credit and Major and minor credit
installment debt should installment debt can installment debt can delinquency is
be current but may exhibit some minor exhibit some minor acceptable, but must
exhibit some minor 30-and/or 60-day 30-and/or 90-day demonstrate some
30-day delinquency. delinquency. Minor delinquency. Minor payment regularity.
Minor credit may credit may exhibit up credit may exhibit more
exhibit some minor to 90-day delinquency. serious delinquency.
delinquency.

BANKRUPTCY FILINGS Charge-offs, judgments, Discharged more than Discharged more than Discharged prior to
liens, and former two years with two years with closing.
bankruptcies are reestablished credit. reestablished credit.
unacceptable.

DEBT SERVICE-TO-INCOME Generally not to exceed Generally not to exceed Generally not to exceed Generally not to exceed
RATIO 45%. 45%. 45%. 50%.

MAXIMUM LOAN-TO-VALUE
RATIO:

OWNER OCCUPIED Generally 80% (or 90%) Generally 80% (or 85%) Generally 75% (or 85%) Generally 65% (or 70%)
for a 1 to 4 family for a 1 to 4 family for a 1 to 4 family for a 1 to 4 family
dwelling residence; 70% dwelling residence; 65% dwelling residence; 65% dwelling.
for a condominium. for a condominium. for a condominium.

NON-OWNER OCCUPIED Generally 70% for a 1 Generally 65% for a 1 Generally 65% for a 1 N/A
to 2 family dwelling, to 2 family dwelling, to 2 family dwelling,
65% for a 3 to 4 60% for a 3 to 4 65% for a 3 to 4
family. family. family.
</TABLE>

50
<PAGE>
The following tables illustrate the mix of credit grades of loans in the
Company's servicing portfolio as of December 31, 1996 and March 31, 1996:

CONTIMORTGAGE SERVICING PORTFOLIOS AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 3,042,155 53.4% 10.58% 75.58%
"B" Loan............................................................... 1,568,530 27.5 11.55 74.07
"C" Loan............................................................... 828,932 14.5 12.68 70.42
"D" Loan............................................................... 216,511 3.8 14.44 57.47
Other.................................................................. 43,017 0.8 13.60 57.15
------------ --------- ----- -----
Total.............................................................. $ 5,699,145 100.0% 11.32% 73.59%
</TABLE>

CONTIMORTGAGE SERVICING PORTFOLIOS AS OF MARCH 31, 1996

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 2,054,985 53.2% 10.28% 73.9%
"B" Loan............................................................... 1,104,117 28.6 11.47 73.2
"C" Loan............................................................... 509,839 13.2 12.85 69.1
"D" Loan............................................................... 157,540 4.1 14.56 55.2
Other.................................................................. 37,094 0.9 13.60 57.2
------------ --------- ----- ---
Total.............................................................. $ 3,863,575 100.0% 11.16% 72.1%
</TABLE>

51
<PAGE>
The following tables show how the mix of credit grades of loans that the
Company originated has changed for the nine months ended December 31, 1996 and
fiscal 1996, 1995 and 1994:

CONTIMORTGAGE AND CONTIWEST LOAN ORIGINATIONS BY CREDIT GRADE
FOR NINE MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 1,408,849 51.1% 11.69% 77.3%
"B" Loan............................................................... 742,601 26.9 11.53 74.8
"C" Loan............................................................... 476,073 17.2 12.42 71.2
"D" Loan............................................................... 119,719 4.3 14.22 59.4
Other.................................................................. 12,832 0.5 12.66 57.7
------------ --------- ----- ---
Total.............................................................. $ 2,760,074 100.0% 11.89% 74.7%
</TABLE>

FOR YEAR ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 1,101,261 47.7% 10.65% 76.0%
"B" Loan............................................................... 682,568 29.5 11.49 74.2
"C" Loan............................................................... 363,399 15.7 12.69 70.9
"D" Loan............................................................... 136,354 5.9 14.41 55.1
Other.................................................................. 27,889 1.2 13.29 55.2
------------ --------- ----- ---
Total.............................................................. $ 2,311,471 100.0% 11.47% 73.2%
</TABLE>

FOR YEAR ENDED MARCH 31, 1995

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 675,823 50.8% 11.01% 73.0%
"B" Loan............................................................... 417,741 31.4 12.00 72.7
"C" Loan............................................................... 169,578 12.8 13.70 64.3
"D" Loan............................................................... 45,244 3.4 15.44 55.2
Other.................................................................. 20,974 1.6 14.61 55.5
------------ --------- ----- ---
Total.............................................................. $ 1,329,360 100.0% 11.87% 70.9%
</TABLE>

FOR YEAR ENDED MARCH 31, 1994

<TABLE>
<CAPTION>
TOTAL WEIGHTED WEIGHTED
(DOLLARS IN % OF AVERAGE AVERAGE
CREDIT GRADE THOUSANDS) TOTAL COUPON LOAN-TO-VALUE
- ----------------------------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
"A" Loan............................................................... $ 487,216 61.9% 9.45% 71.8%
"B" Loan............................................................... 217,684 27.7 10.83 69.4
"C" Loan............................................................... 68,531 8.7 12.72 63.7
"D" Loan............................................................... 9,380 1.2 14.74 50.2
Other.................................................................. 3,999 0.5 14.92 53.1
------------ --------- ----- ---
Total.............................................................. $ 786,810 100.0% 10.21% 70.1%
</TABLE>

52
<PAGE>
FINANCING AND ASSET SECURITIZATION SERVICES

GENERAL

The Company provides financing and asset securitization structuring and
placement services to originators of a broad range of consumer and commercial
loans, leases and receivables. Through the activities of its other two principal
operating entities--ContiTrade and ContiFinancial Services--the Company focuses
on providing financing and asset securitization services to both ContiMortgage
and Strategic Alliance clients. ContiTrade provides financing, hedging and
structuring of asset-backed securities. ContiFinancial Services, an NASD member
and broker-dealer, privately places or underwrites offerings of asset-backed
securities on behalf of the Company and its Strategic Alliance clients.

HISTORY

In 1988, the Company structured and placed the first home equity loan
asset-backed security utilizing a third party AAA/Aaa-rated financial guarantor.
This structure became the industry standard for the securitization of home
equity loans. Subsequently, the Company structured a number of home equity loan
securitizations for other third parties and earned fees for placing the
securities. The fees for placing securities, however, were far less significant
than the gain on sale recognized by the issuers of the asset-backed securities.
Therefore, in 1990, the Company decided to pursue the acquisition of a mortgage
company in order to recognize the full financial benefits of securitization. In
October 1990, the Company acquired ContiMortgage. Since 1991, on behalf of
ContiMortgage and the Company's clients, the Company has structured and placed
$12.9 billion of asset-backed securities representing 102 transactions.

TARGETING OPPORTUNITIES

As described above, the Company seeks to identify consumer and commercial
loans, leases or receivables that have the potential to be more efficiently
financed through securitization and to form Strategic Alliances with the
originators of such assets. Identifying such assets involves a thorough analysis
and due diligence of: (i) the asset (loan, lease, or receivable); (ii) the
management team of the potential Strategic Alliance client; and (iii) the
servicing systems of the potential Strategic Alliance client. The credit review
process of the Company seeks to determine whether or not a new asset is
securitizable to investment grade and whether there exists a ready and
interested investor base for the new product.

ASSET. The asset is analyzed by the Company from a cash flow perspective to
ascertain the means by which it can be structured into an asset-backed security
providing timely principal and interest payments to an investor. Rating agencies
and financial guarantors are brought into the process early and prior to any
commitment from the Company to ensure that the asset can earn an investment
grade rating in a structure that is economically attractive to the issuer and
investor. Under certain circumstances, potential investors in the new product
are also consulted to determine market interest and acceptance. A significant
component of the analysis is the review of the assets' delinquency and loss
performance to date and the comparison of those levels to industry standards.

MANAGEMENT. The Company conducts extensive due diligence on the asset
originator and its management. The Company seeks to ensure that the management
team has (i) the depth, resources, infrastructure and ability to grow its
business prudently and (ii) the ability to manage the credit quality of its loan
portfolio and maintain a prudent risk/reward relationship. The Company will not
enter into a Strategic Alliance unless the Company and its potential Strategic
Alliance client have a similar management philosophy.

SERVICING SYSTEMS. The examination of a potential client's servicing
systems is a critical component of the Company's due diligence effort. The
ability to track payment performance by borrowers, and the distribution of
payments when received, is essential to securitization. The Company seeks to
ensure that

53
<PAGE>
the servicing and management reporting systems are of high quality and
efficiency and can be easily upgraded to accommodate growth in volume. Further,
prior to the advance of any funds by the Company and prior to any
securitization, the Company requires that a back-up servicer exist in the event
of a loss of servicing quality or capability.

APPROVAL PROCESS. The due diligence process and its results are outlined in
a risk memorandum which serves as the basis for the decision to pursue a
Strategic Alliance or other purchase of assets. The preparation of the risk
memorandum is an intensive process, managed by the Company's Chief Credit
Officer, and focuses on four areas: (i) background on company, management, asset
and industry; (ii) risks and mitigating factors; (iii) projected profitability;
and (iv) balance sheet and cash impact. Once the risk memorandum is completed,
the decision to securitize a new class of assets with a new client is subject to
approval by a credit committee consisting of senior executive officers of the
Company. After the credit process is completed for a new client, each subsequent
securitization transaction by that client will be subject to an abridged credit
review process.

CLIENT SERVICES

Through ContiTrade, the Company provides warehouse financing, whole loan
purchasing, hedging, credit enhancement and Excess Spread Receivables financing
services to both ContiMortgage and the Company's Strategic Alliance clients.

WAREHOUSE FINANCING. The Company makes financing available to its
securitization clients through secured loans or purchase commitments to
facilitate the accumulation of securitizable assets prior to securitization
("warehouse financing"). As of December 31, 1996 and March 31, 1996, through
ContiTrade, the Company had committed $1.2 billion and $982 million,
respectively, of financing to its third party clients, of which $614 million and
$425 million, respectively, was drawn. Warehouse financing commitments are
typically for a term of one year or less and are designed to fund only
securitizable assets. Assets from a particular client typically remain in the
warehouse for a period of 30 to 120 days at which point they are securitized and
sold to institutional investors, in most cases, through ContiFinancial Services,
the Company's NASD broker-dealer. The Company utilizes its Purchase and Sale
Facilities to finance this warehouse financing. See "--Home Equity Loan
Origination and Servicing--Purchase and Sale Facilities."

WHOLE LOAN PURCHASING. The Company seeks opportunities to purchase assets
for sale into securitized trusts and to recognize gain on sale. The Company's
Strategic Alliance clients often seek to raise additional cash to cover the
expenses and the negative cash flow associated with securitization. Therefore,
whole loan pools of assets may be purchased by the Company from a Strategic
Alliance client and then securitized under the Company's name or the name of its
Strategic Alliance client. The Company will typically invest its capital in the
transaction through the purchase of loans at a premium and the assumption of
certain costs of securitization.

CONDUITS. The Company also executes its loan purchase strategy through a
loan conduit. Conduits are stand-alone securitization vehicles where the
originator(s), underwriter(s), servicer(s) and seller(s) may all be different
parties coming together to generate loans to be serviced and securitized.
Conduits allow smaller originators to sell their product into a single
securitizable pool, thus benefitting from the economies of scale and the ability
to share the fixed transaction costs associated with securitization. The Company
has established a conduit for commercial/multi-family mortgages ("ContiMAP").
The Company's role is to provide capital through warehouse financing and/or the
purchase of loans at a premium and to ensure that the loans are underwritten to
the conduit's underwriting guidelines and are thus securitizable. In addition,
the Company also manages the ultimate sale or securitization of the loans
originated through ContiMAP. The Company had previously also operated an
adjustable rate mortgage conduit which has been recently closed due to the
strategic acquisition of Royal, previously the major participant of the conduit.

54
<PAGE>
HEDGING. As certain assets are accumulated for securitization, they are
exposed to fluctuations in interest rates. This is because the securitization of
each asset class is priced to the investor utilizing the United States Treasury
Security with a maturity most closely matching the assets' average lives.
Therefore, at the client's discretion, the Company will hedge the specific
United States Treasury Security in the cash market.

CREDIT ENHANCEMENT. To the extent that the securitization of a particular
asset class requires credit enhancement in addition to the Excess Spread, the
Company will consider providing that additional support in the form of (i) an
initial deposit to be reimbursed from the cash flow of the assets securitized or
(ii) the purchase of a mezzanine security.

EXCESS SPREAD RECEIVABLES FINANCING. In certain cases, the Company finances
a client's Excess Spread Receivables or Excess Spread in order to provide the
client with cash to cover the expenses and negative cash flow associated with
securitization. The financing is typically in the form of a secured loan. The
Company commits to provide such financing only to its Strategic Alliance
clients. In each case, in return for the financing, the Company typically
receives ownership participations either in the Strategic Alliance clients or in
the portfolio of loans securitized. As of December 31, 1996 and March 31, 1996,
the total committed amount of such financings was $66.1 million and $57.6
million, respectively, and the amount outstanding of such financing was $32.7
million and $32.4 million, respectively.

CONTIFINANCIAL SERVICES

Through ContiFinancial Services, the Company's registered NASD
broker-dealer, the Company provides placement services. Since 1991, the Company
has structured or placed $12.9 billion of securitized assets representing 102
transactions both for ContiMortgage and other clients.

ContiFinancial Services' placement capabilities accomplish two objectives:
(i) generating fee income; and (ii) providing a controlled exit strategy for
assets purchased or financed by allowing the Company and its Strategic Alliance
clients to manage more effectively when and how transactions are brought to
market. While ContiFinancial Services' placement capabilities have been
primarily focused on private placements, to the extent opportunities exist in
the public market, ContiFinancial Services will bid out the public underwriting
business to other investment banks and manage the process on behalf of itself
and its clients. The Company has filed a shelf registration statement with the
Securities and Exchange Commission for up to $5.0 billion of certain
asset-backed securities.

If the Company is successful in a Strategic Alliance (earning fees for
warehousing, gain on sale for whole loan purchases and sales, and fees for the
placement of asset-backed securities) while its client experiences significant
growth and profitability, the Strategic Alliance client will ultimately need the
services of a larger full service investment bank. The Company's strategy,
however, contemplates this evolution through: (i) continuing to purchase whole
loans from the Strategic Alliance client; (ii) creating new loan conduits; (iii)
recognizing the value of any Strategic Alliance Equity Interests, and, most
importantly; (iv) continuing to develop new securitizable assets and Strategic
Alliances.

ASSET CLASSES

Since 1991, the range of the Company's products has included home equity
loans, adjustable rate mortgages, equipment leases, Title I home improvement
loans, franchise loans, commercial/multi-family loans, non-prime and sub-prime
auto loans and leases, small business loans and timeshare loans.

55
<PAGE>
The following table illustrates the Company's securitization volume and the
addition of its new asset classes:

THE COMPANY'S SECURITIZATION VOLUME

BY ASSET CLASSES

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED MARCH 31, TOTAL BY
DECEMBER 31, ----------------------------------------------------- ASSET
1996 1996 1995 1994 1993 1992 CLASS
------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Home equity loans:
ContiMortgage.......................... $ 2,408 $ 2,030 $ 1,293 $ 772 $ 273 $ 188 $ 6,964
Other.................................. 250 755 340 60 148 519 2,072
------ --------- --------- --------- --------- --------- ---------
Total.................................. $ 2,658 $ 2,785 $ 1,633 $ 832 $ 421 $ 707 $ 9,036
Commercial/multi-family loans............ 437 186 89 -- -- -- 712
Title I home improvement loans........... -- -- 149 96 -- -- 245
ARMs..................................... -- 505 101 36 -- -- 642
Equipment leasing........................ 167 190 179 178 278 402 1,394
Franchise loans.......................... 21 145 98 48 -- -- 312
Sub-prime auto........................... 47 162 39 -- -- -- 248
Small business loans..................... -- 20 -- -- -- -- 20
------ --------- --------- --------- --------- --------- ---------
Total securitization volume.............. $ 3,330 $ 3,993 $ 2,288 $ 1,190 $ 699 $ 1,109 $ 12,609
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
</TABLE>

HOME EQUITY LOANS. The home equity loan product is the flagship business
for the Company. Having set the standard for the securitization of home equity
loans at the inception of the market in 1988, the Company leveraged its
financing capabilities and structured finance expertise by acquiring
ContiMortgage in 1990 and establishing Strategic Alliances with other clients in
the home equity loan industry. In addition to providing its financing, hedging
and securitization services to ContiMortgage, resulting in 25 securitizations
for $6.3 billion through December 31, 1996, the Company also provided its
services to other clients, resulting in 27 securitizations for $2.1 billion
since 1991 through December 31, 1996.

In the home equity loan market, the Company's Strategic Alliance
relationships vary in terms of products and services offered. Certain of these
Strategic Alliances include the provision of warehouse financing and hedging in
return for a committed flow of securitizable product for which it earns
placement fees and gains on sale. Other Strategic Alliances include the
provision of warehouse financing and hedging in return for a guaranteed flow of
securitizable product as well as minority ownership in the form of warrants or
warrant-like instruments.

As part of its strategy of working closely with its Strategic Alliances and
utilizing that relationship as a basis for monitoring growth and asset
performance, the Company acquired ULG, a former Strategic Alliance.

COMMERCIAL/MULTI-FAMILY LOANS. In 1993, the Company established a
commercial real estate conduit, ContiMAP, to satisfy a need in the marketplace
for the financing of $0.5 to $25 million loans secured by commercial properties,
such as multi-family dwellings, self storage facilities, assisted living and
other health related facilities, retail and industrial buildings.

ContiMAP purchases commercial real estate loans suitable for securitization
and sale into the capital markets. The Company manages the aggregation and
underwriting of the loans through correspondent relationships with established
lending companies. The Company structured and placed these loans in two whole
loan sales which at the time of sale provided more favorable pricing than
securitization. In total, the Company has securitizations and sales totaling
$712 million, representing 5 transactions. The Company's strategy is to grow
ContiMAP by continuing to add additional qualified commercial lenders and by
continuing to enhance its product offerings.

56
<PAGE>
TITLE I AND CONVENTIONAL HOME IMPROVEMENT LOANS. Home improvement loans
represent loans to homeowners, a portion of which may be guaranteed by the U.S.
Government in the case of Title I home improvement loans for the purpose of
certain pre-qualified home improvements. The Company decided to pursue this
business line, which was a natural extension of its home equity loan business,
because of its highly fragmented nature and the higher cost of funds through
which these assets are typically being financed.

The Company executed its first securitization in October 1993 in the form of
a conduit where it financed and placed Title I and conventional home improvement
loans on behalf of conduit participants. In addition to executing several
additional conduit transactions, the Company established a Strategic Alliance
with one of the conduit participants. Including three securitizations for its
Strategic Alliance client, the Company had executed seven Title I and
conventional home improvement loan securitizations for $245 million through
December 31, 1996, including the first such securitization to be rated AAA/Aaa
utilizing a third party financial guarantor. The Company's strategy is to
facilitate the growth of its Strategic Alliance client through securitization,
expanding its presence nationwide, building economies of scale and helping to
create a low cost, high volume producer in an otherwise fragmented industry.

The Company, through its newly acquired subsidiary, ULG, also originates
Title I and conventional home improvement loans through retail origination
channels. ULG currently obtains home improvement loan inquiries through a direct
mail and telemarketing approach, reaching borrowers not contacted by the
Company's other Strategic Alliance.

ADJUSTABLE RATE MORTGAGES. The Company established its Adjustable Rate
Mortgage Conduit ("ARM Conduit") in 1994 in order to: (i) leverage its expertise
in the closely related fixed-rate home equity loan market and the relationships
it developed in building that business; (ii) establish a more significant
presence in the western United States which is primarily an ARM market; and
(iii) offer its current Strategic Alliance clients an outlet for a new product
to offer its borrowers. The Company's ARM Conduit allowed smaller originators to
sell their loan product into a single securitizable pool and to benefit from the
economies of scale not otherwise available to them on a stand-alone basis. In
1996, the Company acquired Royal, the largest contributor to the ARM Conduit.

EQUIPMENT LEASING. The equipment leasing industry is a highly fragmented
industry which leases a wide array of equipment to predominately commercial
users. The typical leasing company provides a specialized service to a
relatively specific asset class (e.g., office equipment or medical equipment).
The Company has financed various assets for several equipment lease company
clients ranging from $300 fax machines to $3 million MRI machines.

As of December 31, 1996, the equipment lease business line had resulted in
the Company structuring and placing 18 securitizations on behalf of 10 issuers
representing $1.4 billion in volume. While these relationships historically have
been transaction oriented, the Company is actively pursuing Strategic Alliance
opportunities to leverage its capabilities, product and market knowledge and
establish a long-term, equity participation.

FRANCHISE LOANS. Franchise loans represent loans to franchisees of top tier
national restaurant chains and other franchise chains. In the Company's
securitization of franchise loans, the underwriting process focuses on the
franchisee borrower's ability to generate cash flow from the particular
restaurant as opposed to more traditional financing, which is based upon hard
collateral values or the credit rating of the franchisor.

In 1993, the Company identified this niche opportunity and developed this
business line in conjunction with a Strategic Alliance client. The Company
believes that its warehouse financing, hedging, structured finance and placement
capabilities combined with its unique approach to underwriting and credit
analysis, will provide it with a competitive advantage. The Company's first
securitization of this asset class was in January 1994 for $48 million and was
rated A- by Duff and Phelps Credit Rating Co. The three

57
<PAGE>
subsequent deals were rated AAA/Aaa and represented the first securitizations of
franchise loans to utilize a third party financial guarantor. Since 1993, the
$312 million of franchise loans financed, securitized and placed by the Company
have experienced no losses.

NON-PRIME AND SUB-PRIME AUTO LOANS AND LEASES. Non-prime and sub-prime
automobile lending represents loans to credit-impaired borrowers. Like the home
equity loan market, the Company believes that prudent loan underwriting and
pricing, coupled with strong servicing and collections, mitigates the risk of
the non-prime and sub-prime credit borrower. Non-prime auto loans and leases are
originated to primarily "B" and "C" credit grade borrowers as opposed to
sub-prime auto loans which are usually issued on a discount basis to "C-" and
"D" credit grade borrowers.

In November 1993, the Company established a Strategic Alliance with an auto
finance company with extensive management experience in originating,
underwriting and servicing securitized non-prime auto loans. The Company helped
finance the start-up by providing an attractively priced warehouse line and
access to capital to credit enhance this client's first securitization. In
return, the Company received a warrant and participated in the client's first
auto loan securitization of $39 million in September 1994.

Since fiscal 1995, the Company has formed five Strategic Alliances with
originators of non-prime and sub-prime auto loans. Management believes that this
market benefits significantly from securitization through reduced cost of funds,
and the discipline which the regular securitization process brings to the
origination, underwriting, servicing, collection and monitoring of non-prime and
sub-prime auto loans. Consequently, given the Company's experience in this
industry, and having closely monitored the development of its Strategic
Alliances, in November 1996, the Company purchased 53.5% of the common stock of
Triad Financial Corporation, a California-based auto finance company
specializing in origination of non-prime auto finance contracts for used and new
vehicles. Triad has relationships with approximately 1,600 dealerships in 15
states, with California currently representing approximately 50% of loan
originations. Triad's originations for the calendar year 1996 were $85 million.
As with ContiMortgage, Triad utilizes centralized origination, underwriting and
servicing techniques. In January 1997, the Company purchased an additional 2.5%
of Triad. ContiFinancial will eventually acquire the remaining outstanding stock
of Triad.

The Company believes that significant opportunities still exist in the
non-prime and sub-prime auto loan and lease market due to: (i) the higher cost
of funds through which these assets are typically being financed; (ii) the
discipline which the regular securitization process brings to the origination,
underwriting, servicing, collection and monitoring of auto loans and leases;
(iii) consolidation in the industry; and (iv) the Company's ability to identify
strong management teams and provide its unique mix of products and services.

TIMESHARE LOANS. Timeshare loans are made to borrowers for the purchase of
a real property interest in specific units at vacation resort properties. A
number of major corporations have become involved in the industry in recent
years, and through their advertising and marketing efforts, are increasing the
public's awareness of the benefits of timesharing. Because timeshare financing
is still a relatively new and fragmented industry, the Company believes that it
provides significant growth potential to the extent that (i) the credit analysis
and cash flow characteristics are similar to traditional home equity loans and
(ii) the lower cost of funds and greater operating leverage from securitization
can be applied successfully.

The Company has a Strategic Alliance client that develops resort properties
for timeshare sales, finances ownership interests in such properties and manages
the operations of the resort properties and their related homeowner's
associations. The Company has provided a warehouse facility in return for a
committed flow of securitizable timeshare loans and anticipates bringing its
first transaction to market in 1997.

58
<PAGE>
WARRANTS AND STOCK OWNERSHIP

In certain of its Strategic Alliances, the Company may receive Strategic
Alliance Equity Interests. All Strategic Alliance Equity Interests existing
prior to the consummation of the IPO were retained by Continental Grain, and
therefore, these assets are not reflected in the Company's Consolidated
Financial Statements included herein. The Company currently holds four Strategic
Alliance Equity Interests. Based on its prior experience, the Company does not
anticipate that any Strategic Alliance Equity Interest that it holds or may
acquire in the future will have any effect on the Company's financial position
or results of operations until the business of the Strategic Alliance client
matures, which typically takes several years. In addition, the Company may, from
time to time, make a direct cash equity or subordinated debt investment in a
Strategic Alliance client.

COMPETITION

Currently, some traditional financial institutions are aggressively
promoting and pricing home equity loans. The Company does not believe that this
trend has had a material impact on its competitive position because the
Company's success is tied to its emphasis on timely customer service, on
attracting borrowers whose needs are not met by traditional financial
institutions and on the equity value of the property securing various types of
loans. Nevertheless, there can be no assurance that the Company will not face
increased competition from traditional financial institutions attempting to
enter into the Company's market.

In fiscal 1996, 78% of the total home equity loans purchased and originated
by ContiMortgage were wholesale loans. Wholesale loans are expected to remain a
significant part of the Company's home equity loans production program. As a
purchaser of wholesale loans, the Company is exposed to fluctuations in the
volume and cost of wholesale loans resulting from competition from other
purchasers of such loans, market conditions and other factors.

EMPLOYEES

At December 31, 1996 the Company had an aggregate of 1,346 employees. None
of the Company's employees is represented by a labor union. The Company believes
that its relations with its employees are good.

LEGAL PROCEEDINGS

The Company has been named as a defendant in various legal actions arising
from the conduct of its normal business activities. Although the amount of any
liability that could arise with respect to these actions cannot be accurately
predicted, in the opinion of the Company, any such liability will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company.

59
<PAGE>
REGULATION

GENERAL. The Company's businesses are subject to extensive regulation in
the U.S. at both the Federal and state level. In the Company's home equity loan
and financing businesses, regulated matters include loan origination, credit
activities, maximum interest rates and finance and other charges, disclosure to
customers, the terms of secured transactions, the collection, repossession and
claims-handling procedures utilized by the Company, multiple qualification and
licensing requirements for doing business in various jurisdictions and other
trade practices. As part of the Company's financing and asset securitization
business, ContiFinancial Services is required to register as a broker-dealer
with certain Federal and state securities regulatory agencies and is a member of
the NASD.

TRUTH IN LENDING. The Truth in Lending Act ("TILA") and Regulation Z
promulgated thereunder contain disclosure requirements designed to provide
consumers with uniform, understandable information with respect to the terms and
conditions of loans and credit transactions in order to give them the ability to
compare credit terms. TILA also guarantees consumers a three day right to cancel
certain credit transactions including loans of the type originated by the
Company. Management of the Company believes that it is in compliance with TILA
in all material respects. If the Company were found not to be in compliance with
TILA, aggrieved borrowers could have the right to rescind their mortgage loan
transactions and to demand the return of finance charges paid to the Company.

In September 1994, the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "Riegle Act") was enacted. Among other things, the
Riegle Act makes certain amendments to TILA. The Riegle Act generally applies to
mortgage loans (other than mortgage loans to finance the acquisition or initial
construction of a dwelling) with (i) total points and fees upon origination
exceeding eight percent of the loan amount (as adjusted for changes in the
Consumer Price Index) or (ii) an annual percentage rate of more than ten
percentage points higher than comparably maturing United States Treasury
securities ("Covered Loans"). The Company estimates that approximately 15% of
the loans originated or purchased by the Company are Covered Loans.

The Riegle Act imposes additional disclosure requirements on lenders
originating Covered Loans and prohibits lenders from originating Covered Loans
that are underwritten solely on the basis of the borrower's home equity without
regard to the borrower's ability to repay the loan. The Company believes that
only a small portion of loans originated in fiscal 1996 were of the type that,
unless modified, are prohibited by the Riegle Act. The Company is currently
applying underwriting criteria to all Covered Loans that take into consideration
the borrower's ability to repay.

The Riegle Act also prohibits lenders from including prepayment fee clauses
in Covered Loans to borrowers with a debt-to-income ratio in excess of 50% or
Covered Loans used to refinance existing loans originated by the same lender.
The Company reported $1.4 million, $0.4 million and $0.2 million in prepayment
fee revenue in fiscal 1996, 1995 and 1994, respectively. The Company will
continue to collect prepayment fees on loans originated prior to the October
1995 effectiveness of the Riegle Act and on non-Covered Loans as well as on
Covered Loans in permitted circumstances. Because the Riegle Act did not become
effective until October 1995, the level of prepayment fee revenue was not
substantially affected in fiscal 1996, but the level of prepayment fee revenue
may decline in future years. The Riegle Act imposes other restrictions on
Covered Loans, including restrictions on balloon payments and negative
amortization features, which the Company does not believe will have a material
impact on its operations.

OTHER LENDING LAWS. The Company is also required to comply with the Equal
Credit Opportunity Act of 1974, as amended ("ECOA"), which prohibits creditors
from discriminating against applicants on the basis of race, color, sex, age or
marital status. Regulation B promulgated under ECOA restricts creditors from
obtaining certain types of information from loan applicants. It also requires
certain disclosures by the lender regarding consumer rights and requires lenders
to advise applicants of the reasons for any credit denial. In instances where
the applicant is denied credit or the rate or charge for

60
<PAGE>
loans increases as a result of information obtained from a consumer credit
agency, another statute, the Fair Credit Reporting Act of 1970, as amended,
requires lenders to supply the applicant with the name and address of the
reporting agency. The Company is also subject to the Real Estate Settlement
Procedures Act of 1974, as amended, and is required to file an annual report
with the Department of Housing and Urban Development pursuant to the Home
Mortgage Disclosure Act.

In addition, the Company is subject to various other federal and state laws,
rules and regulations governing, among other things, the licensing of, and
procedures which must be followed by, mortgage lenders and servicers, and
disclosures which must be made to consumer borrowers. Failure to comply with
such laws may result in civil and criminal liability and may, in some cases,
give consumer borrowers the right to rescind their mortgage loan transactions
and to demand the return of finance charges paid to the Company.

In addition, certain of the loans purchased by the Company, such as Title I
home improvement loans, are insured by an agency of the federal government. Such
loans are subject to extensive government regulation.

ENVIRONMENTAL LIABILITY. In the course of its business, the Company may
acquire properties securing loans that are in default. There is a risk that
hazardous or toxic waste could be found on such properties. In such event, the
Company could be held responsible for the cost of cleaning up or removing such
waste, and such cost could exceed the value of the underlying properties.

BROKER/DEALER. In the Company's capital management services business,
ContiFinancial Services acts as a placement agent and underwriter for public and
private offerings of asset-backed securities. As a result, ContiFinancial
Services is registered as a broker-dealer with the Commission, the State of
California and the State of New York and is a member of the NASD. ContiFinancial
Services is subject to regulation by the Commission, by the NASD and by state
securities administrators in matters relating to the conduct of its securities
business, including record keeping and reporting requirements, supervision and
licensing of employees and obligations to customers. Additional legislation and
regulations, including those relating to the activities of affiliates of
broker-dealers, changes in rules promulgated by the Commission or other
regulatory authorities and the NASD, changes in the interpretation or
enforcement of existing laws and rules or changes in the special exemption of
ContiFinancial Services may adversely affect the manner of operation and
profitability of the Company.

As a registered broker-dealer, ContiFinancial Services is subject to the
Commission's net capital rules. These rules, which specify minimum net capital
requirements for registered broker-dealers, are designed to ensure that
broker-dealers maintain adequate regulatory capital in relation to their
liabilities and the size of their customer business and have the effect of
requiring that a substantial portion of their assets be kept in cash or highly
liquid investments. Because it acts primarily as a private placement agent in
asset-backed securities offerings, ContiFinancial Services operates under a less
restrictive net capital standard. To the extent that the Company elects to
expand its public underwriting capacity, it would be required to substantially
increase the net capital of ContiFinancial Services. Under such circumstances,
there can be no assurance that the Company will have the capital necessary to
increase such net capital.

FUTURE LAWS. Because each of the Company's businesses is highly regulated,
the laws, rules and regulations applicable to the Company are subject to regular
modification and change. There are currently proposed various laws, rules and
regulations which, if adopted, could impact the Company. There can be no
assurance that these proposed laws, rules and regulations, or other such laws,
rules or regulations, will not be adopted in the future which could make
compliance much more difficult or expensive, restrict the Company's ability to
originate, broker, purchase or sell loans, further limit or restrict the amount
of commissions, interest and other charges earned on loans originated, brokered,
purchased or sold by the Company, or otherwise adversely affect the business or
prospects of the Company.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The directors and executive officers of the Company and their respective
ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------- --- -----------------------------------------------
<S> <C> <C>
James E. Moore................................. 50 President, Chief Executive Officer and Director
Robert A. Major................................ 50 Executive Vice President of the Company and
President and Chief Executive Officer of
ContiMortgage
Peter Abeles................................... 42 Senior Vice President of the Company and
Managing Director of ContiFinancial Services
Robert J. Babjak............................... 54 Senior Vice President of the Company and
Executive Vice President and Chief Operating
Officer of ContiMortgage
A. John Banu................................... 42 Senior Vice President of the Company and
Managing Director of ContiFinancial Services
Daniel J. Egan................................. 41 Senior Vice President of the Company and Senior
Vice President of ContiMortgage
Glenn S. Goldman............................... 34 Senior Vice President of the Company and
Managing Director of ContiFinancial Services
Scott M. Mannes................................ 38 Senior Vice President of the Company and
Managing Director of ContiFinancial Services
Daniel J. Willett.............................. 47 Senior Vice President and Chief Financial
Officer
Jerome M. Perelson............................. 58 Senior Vice President and Chief Credit Officer
Michael J. Festo............................... 45 Senior Vice President, Human Resources
Alan L. Langus................................. 49 Senior Vice President, Chief Counsel and
Secretary
Susan E. O'Donovan............................. 35 Vice President and Controller
James J. Bigham................................ 59 Director and Chairman of the Board
Paul J. Fribourg............................... 43 Director
Donald L. Staheli.............................. 65 Director
Lawrence G. Weppler............................ 52 Director
John W. Spiegel................................ 56 Director
John P. Tierney................................ 65 Director
Michael J. Zimmerman........................... 46 Director
</TABLE>

JAMES E. MOORE. Mr. Moore has been President, Chief Executive Officer and a
Director of the Company since October 1995. He has been President and Managing
Director of ContiFinancial Services since 1988 and Chairman of ContiMortgage
since 1990. Mr. Moore joined ContiFinancial Services in 1983 as an investment
banker. He is also a Director of Student Loan Marketing Association (a non-bank
finance company).

ROBERT A. MAJOR. Mr. Major has been Executive Vice President of the Company
since October 1995, President and a Director of ContiMortgage since July 1995
and Chief Executive Officer of ContiMortgage since June 1996. Prior to becoming
Chief Executive Officer, Mr. Major was the Chief Operating Officer, a position
he had held since July 1995. From February 1993 to July 1995, Mr. Major was
Chief Operating Officer for NationsCredit Corporation (a diversified financial
services company). From April 1990 to February 1993, Mr. Major was Chief
Executive Officer of Chrysler First (a consumer finance company acquired by
NationsBank Corporation in February 1993).

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<PAGE>
PETER ABELES. Mr. Abeles has been Senior Vice President of the Company
since October 1995. He joined ContiFinancial Services in 1989 and was appointed
Managing Director of ContiFinancial Services in August 1992 after serving as
Vice President, Corporate Finance from October 1989 to August 1992.

ROBERT J. BABJAK. Mr. Babjak has been Senior Vice President of the Company
since October 1995. He was appointed Executive Vice President and Chief
Operating Officer of ContiMortgage in June 1996 prior to which he was Senior
Vice President, Chief Credit Officer, a position he had held since October 1995
when he was also appointed as a Director of ContiMortgage. Prior to October 1995
he was Vice President, Chief Credit Officer of ContiMortgage, a position he had
held since April 1992. Mr. Babjak joined ContiMortgage in June 1991 as Chief
Credit Officer. From 1989 to June 1991, Mr. Babjak was a Senior Loan Officer of
Mutual Mortgages Services, Inc.

A. JOHN BANU. Mr. Banu has been Senior Vice President of the Company since
October 1995. He joined ContiFinancial Services in 1984 as Vice President, Debt
Placement and was appointed Managing Director of ContiFinancial Services in
August 1992.

DANIEL J. EGAN. Mr. Egan has been Senior Vice President of the Company
since October 1995. He was appointed Senior Vice President, Chief Financial
Officer and a Director of ContiMortgage in 1995, prior to which he was Vice
President, Chief Financial Officer of ContiMortgage, a position he had held
since April 1991. From October 1990 to April 1991, Mr. Egan was Controller of
ContiMortgage.

GLENN S. GOLDMAN. Mr. Goldman has been Senior Vice President of the Company
since October 1995. He joined ContiFinancial Services in April 1990 and was
appointed Managing Director of ContiFinancial Services in August 1992 after
holding the position of Vice President, Corporate Finance. From 1986 to 1990,
Mr. Goldman was an Assistant Vice President of Merrill Lynch & Company.

SCOTT M. MANNES. Mr. Mannes has been Senior Vice President of the Company
since October 1995. He joined ContiFinancial Services in September 1990 and was
appointed Managing Director of ContiFinancial Services in August 1992 after
holding the position of Vice President, Corporate Finance. Prior to joining
ContiFinancial Services, Mr. Mannes was associated with the Financial Guarantee
Insurance Company.

DANIEL J. WILLETT. Mr. Willett has been Senior Vice President and Chief
Financial Officer of the Company since January 1997. He was also a Director of
the Company from October 1995 until January 1997. Mr. Willett also was a Vice
President and Treasurer of Continental Grain from March 1990 to January 1997.

JEROME M. PERELSON. Mr. Perelson has been Senior Vice President and Chief
Credit Officer of the Company since February 1997 prior to which he held the
position of Senior Vice President and Chief Financial Officer of the Company
from October 1995. Mr. Perelson joined Continental Grain in 1971. He was
appointed Managing Director and Chief Credit Officer of ContiTrade Services
Corporation in August 1989 and President in November 1993, after serving as
Corporate Deputy Treasurer of Continental Grain. Mr. Perelson also is a Director
of ContiMortgage and ContiFinancial Services.

MICHAEL J. FESTO. Mr. Festo has been Senior Vice President, Human Resources
of the Company since September 1996, prior to which he held the position of Vice
President, Human Resources of the Company from October 1995. He was appointed
Vice President, Human Resources of ContiTrade Services Corporation in July 1990.
Mr. Festo held a number of staff and executive human resources positions within
Continental Grain since joining Continental Grain in 1974.

ALAN L. LANGUS. Mr. Langus has been Senior Vice President, Chief Counsel
and Secretary of the Company since September 1996, prior to which he held the
position of Vice President, Chief Counsel and Secretary of the Company from
October 1995. He was Vice President and Chief Counsel of ContiTrade Services
Corporation between December 1989 and October 1995.

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<PAGE>
SUSAN E. O'DONOVAN. Ms. O'Donovan has been Vice President and Controller of
the Company since October 1995. She joined ContiFinancial Services as Controller
in April 1991. From August 1983 until March 1991, Ms. O'Donovan was an auditor
at Price Waterhouse LLP.

JAMES J. BIGHAM. Mr. Bigham has been a Director of the Company since
October 1995. He also has been a Director, Executive Vice President and Chief
Financial Officer of Continental Grain since August 1989 and a Director of
ContiMortgage since 1990.

PAUL J. FRIBOURG. Mr. Fribourg has been a Director of the Company since
October 1995. He has been President and Chief Operating Officer of Continental
Grain since June 1994. From April 1990 to June 1994, Mr. Fribourg served as
Executive Vice President of the Bulk Commodities Group of Continental Grain. Mr.
Fribourg is the son of Michel Fribourg.

DONALD L. STAHELI. Mr. Staheli has been a Director of the Company since
October 1995 and Chairman of the Compensation Committee since February 1996. He
has been Chairman of the Board of Directors of Continental Grain since June 1994
and Chief Executive Officer of Continental Grain since 1988. From 1988 until
June 1994, Mr. Staheli served as President and a Director of Continental Grain.
Mr. Staheli serves as a Director of Prudential Life Insurance Company of America
and Bankers Trust Company. Since October 21, 1996, Mr. Staheli has served as a
member of the Supervisory Board of Directors of Frensenius Medical Care A.G.

LAWRENCE G. WEPPLER. Mr. Weppler has been a Director of the Company since
October 1995. He also has been Vice President and General Counsel-Corporate of
Continental Grain since April 1993. From 1980 to April 1993, Mr. Weppler served
as Deputy General Counsel of Continental Grain.

JOHN W. SPIEGEL. Mr. Spiegel has been a Director of the Company and
Chairman of the Audit Committee since February 1996. Mr. Spiegel has been
Executive Vice President and Chief Financial Officer of SunTrust Banks, Inc.
since 1985 and Treasurer of Trust Company of Georgia since 1978. Mr. Spiegel
also is currently a member of the Boards of Directors of Rock-Tenn Company (a
manufacturer of paperboard products) and Student Loan Marketing Association (a
non-bank finance company).

JOHN P. TIERNEY. Mr. Tierney has been a Director of the Company and
Chairman of the Independent Directors' Committee since February 1996. From 1987
until his retirement in December 1994, Mr. Tierney was the Chairman of the Board
and Chief Executive Officer of Chrysler Financial Corporation (a non-bank
finance company). Mr. Tierney serves as a Director of RCSB Financial, Inc. (the
holding company for Rochester Community Savings Bank, a consumer banking and
lending company).

MICHAEL J. ZIMMERMAN. Mr. Zimmerman has been a Director of the Company
since February 1997. He also was a Senior Vice President-Investments and
Strategy of Continental Grain since May 1996. From January 1985 to April 1996,
Mr. Zimmerman was a managing director at Salomon Brothers. Mr. Zimmerman is also
currently a member of the Board of Directors of U.S. Can Corporation (a
manufacturing company).

The Company has compensated its officers and directors in part through the
issuance of restricted Common Stock and the granting of stock options. The
directors and executive officers as a group (20 persons total) own 1,250,773
shares of Common Stock, or 3% as a percentage of the total outstanding Common
Stock immediately prior to the Primary Offerings.

CERTAIN TRANSACTIONS

Continental Grain is the Company's largest stockholder, currently owning
approximately 81% of the Company's outstanding Common Stock. Continental Grain
effectively has voting control on all matters submitted to stockholders,
including the election of directors and the approval of extraordinary corporate
transactions. Five of the directors of the Company are officers of Continental
Grain and such directors constitute a majority of the Board of Directors.

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Upon completion of the Primary Offerings, Continental Grain will continue to
be the Company's largest stockholder, owning approximately 76% of the Company's
outstanding Common Stock (approximately 75% if the Underwriters of the Primary
Offerings exercise their over-allotment options in full). Upon satisfaction of
the Forward Contract, assuming Continental Grain delivers to the Trust the
maximum number of shares of Common Stock subject thereto, and assuming no other
sales of the Company's Common Stock by Continental Grain, Continental Grain
would own approximately 70% of the outstanding Common Stock (or approximately
69% of the outstanding Common Stock if the over-allotment options granted to the
Underwriters of the Primary Offerings and to the Underwriters of the STRYPES are
exercised in full). As a result, upon completion of the Primary Offerings and
upon subsequent satisfaction of the Forward Contract (even assuming the maximum
number of shares of Common Stock are delivered thereunder), Continental Grain
will continue to be able to elect all of the directors of the Company and to
determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval.

Prior to the IPO, Continental Grain directly or indirectly owned the shares
or members' interests of ContiMortgage, ContiTrade, ContiFinancial Services,
CSAF, ContiSecurities Asset Funding II, L.L.C. and ContiFunding Corporation (the
"Subsidiaries"). The Company was formed as a Delaware corporation on September
29, 1995.

In the reorganization prior to the IPO: (i) ContiTrade Services transferred
certain of its assets (excluding those related to its trade finance business) to
ContiTrade; (ii) ContiTrade Services transferred the common stock of its
subsidiaries, ContiMortgage and ContiFinancial Services, and its Excess Spread
Receivables to Continental Grain; and (iii) Continental Grain transferred all of
the common stock of, or its members' interests in, the subsidiaries and the
Excess Spread Receivables, to the Company in exchange for 35,918,421 shares of
Common Stock. As a result, the Company owns all of the common stock or members'
interests of the subsidiaries. Continental Grain retained all Strategic Alliance
Equity Interests that were acquired prior to the IPO, which do not appear in the
Company's Consolidated Financial Statements.

PAST TRANSACTIONS WITH CONTINENTAL GRAIN

CSAF, a subsidiary of the Company (and prior to the IPO a direct subsidiary
of Continental Grain), paid dividends to Continental Grain in fiscal year 1995
of $30 million. Immediately prior to the IPO, the Company paid a $305,000
dividend to Continental Grain to reduce the Company's stockholder's equity to
$129.1 million.

The Company's subsidiaries had intercompany borrowings from Continental
Grain (including borrowings that were deemed equity by Continental Grain) of
$114.9 million at March 31, 1995 and $49.8 million at March 31, 1994.

The Company occupies approximately one and a third floors of space leased by
Continental Grain. ContiTrade Services was allocated a proportionate amount of
the lease rental for this space aggregating $876,000, $832,000 and $579,000 in
fiscal years 1996, 1995 and 1994. ContiMortgage's leasehold obligations for its
national and regional office in Horsham, Pennsylvania are guaranteed by
Continental Grain. This guarantee will continue for the term of the lease.

In sales of Excess Spread Receivables by a subsidiary of the Company,
Continental Grain guaranteed the performance obligations of such subsidiary.
This guarantee will continue for the term of the sale agreements.

In addition, from time to time, Continental Grain has guaranteed certain
indemnification obligations of the Company's subsidiaries in connection with its
asset securitization business and otherwise.

Prior to the IPO, Continental Grain provided various corporate services to
ContiTrade including tax and personnel administration, communications,
insurance, treasury, legal, internal audit, accounting, audit and other
corporate services. The allocated costs for these services were $700,000, $1.1
million and $950,000 in fiscal 1996, 1995 and 1994, respectively. Personnel of
ContiTrade participated in Continental

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Grain pension, savings, medical and dental, disability, life, deferred
compensation and other employee benefit plans.

Simultaneously with the completion of the IPO, the Company transferred
certain of its Excess Spread Receivables, with a book value of $60.7 million to
Continental Grain in order to reduce the amount of the Intercompany Debt to $324
million. In the Excess Spread Receivable transfer, the consideration received by
the Company equaled the book value of the Excess Spread Receivables transferred.
Based upon the Company's valuation of these Excess Spread Receivables and other
sales transactions with unrelated third parties, the Company believes that the
book value of such Excess Spread Receivables represented the fair value of such
Excess Spread Receivables.

CURRENT RELATIONSHIPS WITH CONTINENTAL GRAIN

The following are summaries of the various agreements between the Company
(or one of its wholly-owned subsidiaries) and Continental Grain (or one of its
subsidiaries), which summaries are qualified in their entirety by reference to
such agreements, each of which is incorporated by reference herein.

The Company has adopted a policy that all future material agreements between
the Company and Continental Grain and its affiliates will be reviewed and passed
on for fairness by a committee of the Board of Directors comprised of
independent directors.

INDEMNIFICATION AGREEMENT

Continental Grain and the Company have entered into an agreement (the
"Indemnification Agreement"). Subject to certain exceptions, the Indemnification
Agreement places financial responsibility for the liabilities related to the
business of the Company and its subsidiaries with the Company and financial
responsibility for the liabilities related to the business of Continental Grain
and its other subsidiaries with Continental Grain. Under the Indemnification
Agreement, each of Continental Grain and the Company indemnifies the other in
the event of certain liabilities, including liabilities under the Securities Act
or the Exchange Act. The Company is not aware of any material payments that it
will be required to make, or that it may be entitled to receive, under the
Indemnification Agreement. No amounts were paid under the Indemnification
Agreement in fiscal 1996.

TAX SHARING AGREEMENT

The Company is a member of the Continental Grain Group which files a
consolidated Federal income tax return and combined state tax returns in certain
states. The Company and Continental Grain have entered into a Tax Sharing
Agreement which (i) defines their respective rights and obligations with respect
to Federal, state, local and all other taxes for all taxable periods both prior
to and after the IPO and (ii) governs the conduct of all audits and other tax
controversies relating to the Company. Prior to the IPO, the Company had an
informal tax sharing arrangement.

Pursuant to the Tax Sharing Agreement, the Company is charged or credited,
as the case may be, for its Federal income tax liability or refund that would
have been payable or received by the Company for such year, or portion thereof,
determined as if the Company had filed a separate Federal income tax return
computed in accordance with prevailing Federal income tax laws and regulations
as applied to the Company as if it were a separate taxpayer. The Company paid or
accrued $42.0 million in Federal taxes to Continental Grain under its formal and
informal tax sharing arrangements in fiscal 1996.

When Continental Grain's ownership interest in the Company falls below 80%,
the Company will file its own federal tax returns.

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EMPLOYEE BENEFIT ALLOCATION AGREEMENT

Employees of the Company are eligible to participate in Continental Grain
employee benefit plans. Pursuant to the Employee Benefit Allocation Agreement,
the cost of the Company's employees' participation in these programs is
allocated to the Company based on the actual cost incurred by its employees plus
an allocated cost of administration of the plans and overhead. Prior to the IPO,
the Company had an informal employee benefit allocation arrangement. Under the
Employee Benefit Allocation Agreement, Continental Grain provides payroll and
compensation administration, including access to Continental Grain's licensed
personnel software, to the Company. The Company reimburses Continental Grain for
all actual costs and administrative expenses incurred by Continental Grain on
connection with such services. The Company reimburses Continental Grain for all
costs incurred in connection with pension benefits to employees on a stand-alone
company basis. The Company paid $2.1 million to Continental Grain under its
formal and informal employee benefit allocation arrangements in fiscal 1996.

SERVICES AGREEMENT

Pursuant to an agreement between Continental Grain and the Company (the
"Services Agreement"), Continental Grain provides the Company certain corporate
services, including treasury administration, risk management, internal audit,
Federal and state tax (including payroll) administration, management information
and communications support services, public affairs, and facilities management
through March 31, 1999 and from year to year thereafter unless terminated by
either party upon 90 days' prior written notice. Prior to the IPO, the Company
had an informal services arrangement. With 90 days prior written notice, the
Company is permitted to terminate the Services Agreement at March 31, 1998. The
costs for services provided pursuant to the Services Agreement are determined at
the beginning of each fiscal year of the Company, based on Continental Grain's
estimate of the percentage of its annual overall costs for providing such
services attributable to the Company. The Company paid or accrued $1.9 million
for such services (which does not include the guarantee fees described in the
next paragraph) in fiscal 1996.

The Services Agreement also provides that Continental Grain may, but is not
obligated to, provide guarantees of obligations due third parties. Prior to the
IPO, the Company had an informal guarantee fee arrangement. For these
guarantees, the Company will pay Continental Grain annual fees of: (i) 0.05% of
the daily average of the utilized sale capacity under any loan or Purchase and
Sale Facility guaranteed by Continental Grain; (ii) 0.25% of the (x) daily
average amount at risk to Continental Grain under any Excess Spread Receivables
or similar structured sale of Excess Spread Receivables guaranteed by
Continental Grain; (y) daily average amount of the outstanding debt under any
loan agreements or other debt instruments guaranteed by Continental Grain; and
(z) annual average amount remaining to be paid by the Company under any leases
and other payment obligations guaranteed by Continental Grain and not described
in clauses (x) and (y) of this sub-clause (ii); (iii) 0.005% of the amount of
proceeds received by the Company in any underwriting agreement guaranteed by
Continental Grain; and (iv) with respect to any other indemnification and
performance obligations guaranteed by Continental Grain, 0.25% of the lesser of
(a) the daily average of the maximum amount payable by the Company under such
indemnity or performance obligation and (b) the amount of proceeds received by
the Company in the related transaction. Any guarantee fee ceases to be payable
when the Company is no longer legally required to make any such indemnification
or performance payment. The Company paid or accrued $35,600 in guarantee fees
for such services in fiscal 1996.

Pursuant to the Services Agreement, the Company has agreed that if, and at
such time when, Continental Grain owns less than 20% of the voting stock of the
Company, the Company will, at the request of Continental Grain, change the names
of the Company and its subsidiaries to names that are not the same as, or
confusingly similar to, Continental Grain's current corporate name, including
eliminating the term "Conti" from such names.

Finally, the Services Agreement provides that the Company may request
Continental Grain to provide such other corporate services as it routinely
provides to other subsidiaries and divisions.

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SUBLEASE

The Company and Continental Grain have entered into a sublease agreement
(the "Sublease") pursuant to which the Company subleases from Continental Grain
office space at 277 Park Avenue, New York, New York. Prior to the IPO, the
Company had an informal sublease arrangement. Under the terms of the Sublease,
the Company pays Continental Grain its costs for the office space. As a
subtenant, the Company assumes its proportionate share of the additional rental
expenses paid by Continental Grain as a lessee under the terms of its lease. The
term of the Sublease extends through February 28, 2000. The Company paid
$876,000 under the Sublease to Continental Grain under its formal and informal
sublease arrangements in fiscal 1996.

INTERCOMPANY DEBT

The Company has intercompany financing provided by Continental Grain in the
form of the Intercompany Debt. Prior to the IPO, the Company had an informal
intercompany financing arrangement. The Intercompany Debt is described in
"Description of Certain Indebtedness and Financing Arrangements--Certain
Indebtedness." From April 1, 1995 through February 13, 1996, the Company paid
$19.6 million of interest under the informal intercompany financing and from
February 14, 1996 through March 31, 1996, the Company paid or accrued $3.1
million of interest under the Intercompany Debt. For the nine months ended
December 31, 1996, the Company paid or accrued $15.4 million of interest under
the Intercompany Debt.

REGISTRATION RIGHTS

Under a Common Stock Registration Rights Agreement (the "Common Stock
Registration Rights Agreement") between the Company and Continental Grain, the
Company has granted Continental Grain the right to require the Company to
register shares of Common Stock held by Continental Grain for sale in accordance
with Continental Grain's intended method of disposition thereof (a "demand
registration"). Continental Grain may require up to six such demand
registrations, with no more than one every six months. Additionally, the Company
has granted to Continental Grain the right, subject to certain exceptions, to
participate in registrations of Common Stock initiated by the Company on its own
behalf or on behalf of its stockholders (a "piggy-back registration"). The
Company is required to pay expenses (other than underwriting discounts and
commissions) incurred by Continental Grain in connection with the demand and
piggy-back registrations. Subject to certain limitations specified in the Common
Stock Registration Rights Agreement, Continental Grain's registration rights are
assignable to third parties. The Common Stock Registration Rights Agreement
contains indemnification and contribution provisions by the Company for the
benefit of Continental Grain and permitted assigns and their related persons.

Under an Indenture Note Registration Rights Agreement (the "Indenture Note
Registration Rights Agreement") between the Company and Continental Grain for
its assignees, the Company has granted Continental Grain the right to demand one
registration with respect to the Indenture Note (or a portion thereof). The
Company is required to pay expenses (other than underwriting discounts and
commissions) incurred by Continental Grain in connection with the demand
registration. Subject to certain limitations specified in the Indenture Note
Registration Rights Agreement, Continental Grain's registration rights are
assignable to third parties. The Indenture Note Registration Rights Agreement
contains indemnification and contribution provisions by the Company for the
benefit of Continental Grain and permitted assigns and their related persons.
Continental Grain assigned the Indenture Note Registration Rights Agreement to a
wholly-owned subsidiary in March 1996.

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DESCRIPTION OF CERTAIN INDEBTEDNESS AND FINANCING ARRANGEMENTS

CERTAIN INDEBTEDNESS

SENIOR NOTES DUE 2003

In August 1996, the Company issued $300 million aggregate principal amount
of 8-3/8% Senior Notes, due 2003. The Indenture contains a number of significant
restrictive covenants including: (i) limitations on indebtedness; (ii)
limitations on liens; (iii) limitations on restricted payments such as
dividends, repurchases of the Company's stock and repurchase of subordinated
obligations; (iv) limitations on restrictions on distributions from
subsidiaries; (v) limitations on sales of assets and subsidiary stock; and (vi)
limitations on merger and consolidation. Upon receiving investment grade ratings
from Moody's Investors Service, Inc. and Standard & Poor's Ratings Services with
respect to the Notes, except for the limitations on liens, all other
restrictions described above will be suspended. No assurance can be given that
the Company will receive an investment grade rating at any time in the future.
The Indenture also contains customary events of default relating to the Company
and its subsidiaries. The Notes are redeemable at the option of the holders of
the Notes upon the occurrence of a "change of control." A "change of control" as
defined in the Indenture includes the occurrence of: (i) the acquisition of 35%
of the outstanding Common Stock by a person other than Continental Grain or its
shareholders at a time when Continental Grain or its shareholders own less than
such amount owned by such greater than 35% shareholder; (ii) a change in the
composition of a majority of the Board of Directors during any two consecutive
years; and (iii) certain mergers and consolidations or sale of all or
substantially all of the assets of the Company.

CREDIT FACILITY

In January 1997, the Company entered into the Credit Facility, a $200
million unsecured revolving credit facility lead-managed by Credit Suisse and
Dresdner Bank, with participation by a group of twelve other major U.S. and
foreign banks. The Company has the option of several interest rate pricing
alternatives under this three-year facility, including those based on LIBOR and
the federal funds rates. The Credit Facility also contains a number of
restrictive covenants including (i) limitations on indebtedness; (ii)
limitations on liens; (iii) minimum net worth requirements; (iv) limitations on
restrictions on distributions from subsidiaries; (v) limitations on sales of
assets and subsidiary stock; and (vi) limitations on merger and consolidations.
The Credit Facility also includes a monthly asset coverage test to determine
availability under the Credit Facility. Currently the Company has full use of
the facility based on this test.

INTERCOMPANY DEBT

As of December 31, 1996, the Intercompany Debt consists of a $125 million
five-year note issued pursuant to the Indenture Note and the $77 million Four
Year Note. The Indenture Note will mature on February 14, 2001 and bears
interest at a rate of 7.96% per annum. The principal of the Indenture Note is
required to be repaid in four equal annual installments commencing on February
14, 1998. The Four Year Note will mature on February 14, 2000 and bears interest
semi-annually at a rate of 8.02% per annum. Until February 14, 1998, interest on
the Four Year Note will not be paid in cash but will accrue and be added to the
principal amount of the Four Year Note. After February 14, 1998, interest on the
Four Year Note will be payable in cash. The Intercompany Debt may be prepaid in
whole or in part at any time without premium or penalty. Continental Grain
assigned all of the Intercompany Debt to one of its wholly-owned subsidiaries in
March 1996. The Intercompany Debt is freely assignable without the consent of
the Company.

The Intercompany Debt contains a number of significant covenants that, among
other things, require that the Company and its subsidiaries on a consolidated
basis maintain a minimum current ratio (current assets to current liabilities)
of 1.1:1, a maximum "Consolidated Total Liabilities" to "Consolidated Net Worth"
ratio of 3:1, a maximum ratio of "Consolidated Long Term Debt" (excluding the
Intercompany

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Debt) to "Consolidated Adjusted Net Worth" of 1.1:1 at any time prior to
September 30, 1997 and 1:1 at any time thereafter, a minimum tangible net worth
of $225 million, a limitation on incurring certain liens, and a limitation on
acquisitions, investments or capital expenditures of the Company in excess of
$10 million per fiscal year. The agreements governing the Intercompany Debt were
amended in August, 1996 to exclude the Company's investment in ULG and again in
November 1996 to exclude the investments in Resource One and Triad. The
Intercompany Debt also contains customary events of default relating to the
Company and its subsidiaries, including but not limited to, the failure of the
Company to pay principal and interest when due, covenant defaults and bankruptcy
event defaults.

FINANCING ARRANGEMENTS

Through CSAF III and CSAF IV, as of December 31, 1996 the Company had $2.0
billion of committed and an additional $950 million of uncommitted sale capacity
under its Purchase and Sale Facilities of which $1.3 billion was utilized. The
Purchase and Sale Facilities allow CSAF III and CSAF IV to sell, with limited
recourse, interests in designated pools of loans and other assets. Under these
agreements, CSAF III or CSAF IV submits a purchase request to the financial
institution specifying the assets to be sold and the terms of the proposed sale
(including the sale price for the loans and other assets). If the proposed terms
and assets are accepted, the financial institution is obligated to purchase the
assets as long as the aggregate amount of assets bought and not yet resold by
the financial institution has not exceeded the committed sale capacity under the
Purchase and Sale Facility. The parties may agree to exceed the committed sale
capacity under the Purchase and Sale Facility. A portion of the purchase price
for any assets (typically 5% to 10%) is typically deposited by CSAF III or CSAF
IV into an account held by the financial institution on behalf of CSAF III or
CSAF IV, against which the financial institution may set off any losses incurred
in a resale of assets, up to the recourse amount described below. If any assets
purchased by the financial institution should decrease in value beyond an
agreed-upon allowance, the financial institution may resell the assets, with
limited recourse to CSAF III or CSAF IV for any losses incurred as a result up
to an agreed-upon amount (5% to 10% of such assets held by the financial
institution on the date the assets may first be resold as a result of a decrease
in value). In each Purchase and Sale Facility, the financial institution has
granted CSAF III and CSAF IV a right of first refusal based on a bona fide offer
from a third-party to repurchase the loans and other assets purchased by the
financial institution under the facility. CSAF III and CSAF IV also have a call
option that can be exercised at any time to repurchase assets that are
substantially similar. The Purchase and Sale Facilities generally have one-year
renewable terms (one Purchase and Sale Facility has a two-year term), all of
which will expire between February 1997 and June 1998. The Company has
guaranteed CSAF III's and CSAF IV's obligations under the Purchase and Sale
Facilities. Unless waived, each Purchase and Sale Facility will terminate upon
the occurrence of certain events, which include: (i) failure of CSAF III or CSAF
IV or the Company (as guarantor) to perform under the terms and covenants of the
Purchase and Sale Facility (including payment obligations), to make true
representations and warranties regarding the assets sold and certain other
matters, to make material scheduled payments under any indebtedness or to
perform under any other agreement with the financial institution; (ii) any
material adverse change in the financial condition of CSAF III or CSAF IV or the
Company (as guarantor); and (iii) certain bankruptcy events of CSAF III or CSAF
IV or the Company (as guarantor). The Company utilized the facilities to sell
assets totaling $5.7 billion, $2.5 billion and $1.2 billion in fiscal years
1996, 1995 and 1994, respectively. See "Risk Factors--Negative Cashflows and
Capital Needs--Dependence on Purchase and Sale Facilities" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of the Primary Offerings, the Company will have 47,186,940
shares of Common Stock outstanding, of which the 10,001,190 shares offered
hereby will be freely tradeable. All other shares will be "restricted shares"
for purposes of the Securities Act, subject to the volume and other limitations

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set forth in Rule 144 promulgated under the Securities Act. The Company and
Continental Grain are parties to an agreement which provides Continental Grain
with certain registration rights. See "Certain Transactions--Future
Relationships with Continental Grain--Registration Rights." Each of the Company
and Continental Grain has also agreed that, without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, it will not offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a period of 90 days after the date of this Prospectus, subject to certain
limited exceptions. See "Underwriting." The Company has filed a registration
statement covering the sale of up to 4,487,895 shares of Common Stock reserved
for issuance under the 1995 Stock Plan and the Directors Plan. Under the 1995
Stock Plan, the Company granted certain employees of the Company awards of
1,330,532 shares of "restricted" Common Stock and nonqualified stock options
representing the right to acquire 2,445,412 shares of Common Stock, which will
vest in full by March 31, 2000. Upon vesting, the shares of Common Stock
representing such restricted stock or stock options will be freely tradeable,
except for any such shares beneficially owned by an "affiliate" of the Company,
as such term is defined in the Securities Act (the sale of which will be subject
to timing, volume, manner of sale and other restrictions under Rule 144).

In general, under the revised Rule 144 effective as of April 1997, if one
year has elapsed since the later of the date of acquisition of restricted shares
from the Company or any "affiliate" of the Company, the acquiror or subsequent
holder thereof is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
the Company's Common Stock (471,869 shares immediately after the Primary
Offerings or 476,069 shares if the Underwriters of the Primary Offerings
exercise their over-allotment options in full) or the average weekly trading
volume of the Company's Common Stock on all exchanges and/or reported through
the automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain manner of sales
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the later of the
date of acquisition of restricted shares from the Company or from any affiliate
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an affiliate of the Company at any time during the 90 days preceding a
sale, such person would be entitled to sell such shares in the public market
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 250,000,000 shares
of Common Stock, par value $0.01 per share and 25,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). As of December 31,
1996, the Company had 44,380,949 shares of Common Stock outstanding. Upon the
consummation of the Primary Offerings, there will be 47,186,940 shares of Common
Stock outstanding and 2,445,412 shares of Common Stock issuable upon exercise of
employee stock options. The following summary description of the capital stock
of the Company is qualified in its entirety by reference to the Restated
Certificate of Incorporation and the By-laws of the Company, copies of which are
incorporated by reference herein.

COMMON STOCK

Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to

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a vote of stockholders, including the election of directors. Holders of Common
Stock have no cumulative voting rights or preemptive rights to purchase or
subscribe for any stock or other securities and there are no conversion rights
or redemption or sinking fund provisions with respect to such stock. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be when issued, fully paid and nonassessable.

The Common Stock is listed on the NYSE under the symbol "CFN."

The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.

PREFERRED STOCK

The Company's Board of Directors is authorized to issue up to 25,000,000
shares of Preferred Stock from time to time in one or more classes or series and
with such voting powers, full or limited, or without voting powers, and with
such designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, as
the Board of Directors may be permitted to fix under the laws of the State of
Delaware as in effect at the time such class or series is created.

The authorized but unissued shares of Common Stock and Preferred Stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
Common Stock and Preferred Stock may enable the Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger, or otherwise, and thereby protect the
continuity of the Company's management.

DIRECTOR'S LIABILITY

The Company has included in its Restated Certificate of Incorporation
provisions to eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty. This provision does not
eliminate liability for breaches of the duty of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, violations under Section 174 of the Delaware General Corporation Law (the
"Delaware Law") concerning the unlawful payment of dividends or stock
redemptions or repurchases or for any transaction from which the director
derived an improper personal benefit. These provisions will not limit the
liability of the Company's directors under the Federal securities laws. The
Company believes that these provisions are necessary to attract and retain
qualified persons as directors and officers.

SECTION 203 OF THE DELAWARE LAW

The Company is subject to Section 203 of the Delaware Law. Section 203
prohibits publicly held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date of the transaction in which the person or entity became an
interested stockholder, unless (i) prior to such date, either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder is approved by the Board of Directors of the corporation,
(ii) upon the consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the outstanding voting stock of the corporation (excluding for this
purpose certain shares owned by persons who are directors and also officers of
the corporation and by certain employee benefit plans) or (iii) on or after such
date the business combination is approved by the Board of Directors of the
corporation and by the affirmative vote (and not by written consent) of at least
66% of the outstanding voting stock which is not owned by the interested
stockholder. For the purposes of Section 203, a "business combination" is

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broadly defined to include mergers, asset sales and other transactions resulting
in the financial benefit to the "interested stockholder." An interested
stockholder is a person who together with affiliates and associates, owns (or
within the immediately preceding three years did own) 15% or more of the
corporation's voting stock.

CERTIFICATE AND BY-LAW PROVISIONS

Certain provisions of the Restated Certificate of Incorporation and By-laws
of the Company summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by stockholders.

CLASSIFIED BOARD OF DIRECTORS. The Restated Certificate of Incorporation
provides for the Board of Directors to be divided into three classes of
directors serving staggered three-year terms. As a result, approximately
one-third of the Board of Directors will be elected each year. Moreover, under
Delaware Law, in the case of a corporation having a classified board,
stockholders may remove a director only for cause. This provision, when coupled
with the provision of the Restated Certificate of Incorporation authorizing only
the Board of Directors to fill vacant directorships, will preclude a stockholder
from removing incumbent directors without cause and simultaneously gaining
control of the Board of Directors by filling the vacancies created by such
removal with its own nominees.

SPECIAL MEETING OF STOCKHOLDERS. The Restated Certificate of Incorporation
and By-laws provide that special meetings of stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board of Directors or
the Chief Executive Officer. This provision will make it more difficult for
stockholders to take actions opposed by the Board of Directors.

STOCKHOLDER ACTION BY WRITTEN CONSENT. The Restated Certificate of
Incorporation and By-laws provide that no action required or permitted to be
taken at any annual or special meeting of the stockholders of the Company may be
taken without a meeting, and the power of stockholders of the Company to consent
in writing, without a meeting, to the taking of any action is specifically
denied.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The By-laws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. The By-laws also
specify certain requirements for a stockholder's notice to be in proper written
form. In addition, no business may be transacted at any special meeting of the
Board of Directors other than (i) such business stated in a notice of meeting or
waiver of notice (approved by the Company) or (ii) such business as is related
to the purpose of such meeting and which is properly brought before the meeting
by or at the direction of the Board of Directors. These provisions may preclude
some stockholders from bringing matters before the stockholders at an annual or
special meeting or from making nominations for directors at an annual or special
meeting.

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CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS

The following is a general discussion of certain U.S. Federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
"Non-United States Holder." A "Non-United States Holder" is a person or entity
that, for U.S. Federal income tax purposes, is (i) a non-resident alien
individual, (ii) a foreign corporation or partnership, or (iii) a foreign estate
or trust.

This discussion is based on the Internal Revenue Code of 1986, as amended,
and administrative interpretations as of the date hereof, all of which may be
changed either retroactively or prospectively. This discussion does not address
all aspects of U.S. Federal income and estate taxation that may be relevant to
Non-United States Holders in light of their particular circumstances and does
not address any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.

Prospective holders should consult their tax advisors with respect to the
United States Federal, state, local and non-United States income and other tax
consequences to them of holding and disposing of Common Stock.

DIVIDENDS

Subject to the discussion below, dividends paid to a Non-United States
Holder of Common Stock generally will be subject to withholding of United States
Federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty unless the dividend is effectively connected with
the conduct of a trade or business within the United States or, if an income tax
treaty applies, is attributable to a United States permanent establishment of
the non-United States Holder. For purposes of determining the applicability of a
tax treaty providing for a reduced rate of withholding, dividends paid to an
address in a foreign country are presumed under current United States Treasury
Regulations to be paid to a resident of such country absent knowledge that such
presumption is not warranted. However, under proposed United States Treasury
regulations which have not yet been put into effect, to claim the benefits of a
tax treaty, a Non-United States Holder of Common Stock would be required to file
certain forms accompanied by a statement from a competent authority of the
treaty country.

Dividends that are effectively connected with such holders' U.S. trade or
business will be subject to regular U.S. income tax in the same manner as if the
Non-United States Holder were a United States resident and generally are not
subject to withholding if the Non-United States Holder files Internal Revenue
Service Form 4224 with the payor of the dividend. A non-United States
corporation receiving effectively connected dividends also may be subject to an
additional branch profits tax which is imposed, under certain circumstances, at
a rate of 30% (or such lower rate as may be specified by an applicable treaty)
of the non-United States corporation's "effectively connected earnings and
profits," subject to certain adjustments.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to U.S. Federal
income tax with respect to gain realized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of such Non-United States Holder in the U.S., (ii) in the case of
certain Non-United States Holders who are non-resident alien individuals and
hold the Common Stock as a capital asset, such individuals are present in the
U.S. for 183 or more days in the taxable year of the disposition and either (a)
such individuals have a "tax home" (as defined for United States Federal income
tax purposes) in the U.S., or (b) the gain is attributable to an office or other
fixed place of business maintained by such individuals in the U.S., (iii) the
Non-United States Holder is subject to tax, pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates whose loss of U.S. citizenship
has as one of its principal purposes the avoidance of U.S. taxes, or (iv) the
Company is or has been a "United States real property holding corporation"
within the meaning of section 897(c)(2) of the Code and, assuming that the

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Common Stock is regularly traded on an established securities market for tax
purposes, the Non-United States Holder held, directly or indirectly, at any time
within the five-year period preceding such disposition more than 5% of the
outstanding Common Stock. The Company is not, and does not anticipate becoming,
a United States real property holding corporation.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK

Information reporting and backup withholding tax (which generally is a
withholding tax imposed at the rate of 31% on certain payments to persons that
fail to furnish certain information under the United States reporting
requirements) generally will not apply to dividends paid to a Non-United States
Holder at an address outside the United States.

The payment of the proceeds of the disposition of Common Stock to or through
the U.S. office of a broker is subject to information reporting unless the
disposing holder, under penalty of perjury, certifies its non-U.S. status or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the U.S. through a non-U.S. office of a non-United
States broker. However, information reporting requirements (but not backup
withholding) will apply to a payment of disposition proceeds outside the U.S. if
(A) the payment is made through an office outside the U.S. of a broker that is
either (i) a U.S. person, (ii) a foreign person which derives 50% or more of its
gross income for certain periods from the conduct of a trade or business in the
U.S. or (iii) a "controlled foreign corporation" for U.S. Federal income tax
purposes and (B) the broker fails to maintain documentary evidence that the
holder is a Non-United States Holder and that certain conditions are met, or
that the holder otherwise is entitled to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.

FEDERAL ESTATE TAX

An individual Non-United States Holder who is treated as the owner of or has
made certain lifetime transfers of an interest in the Common Stock will be
required to include the value thereof in his gross estate for U.S. Federal
estate tax purposes, and may be subject to U.S. Federal estate tax unless an
applicable estate tax treaty provides otherwise. Estates of non-resident aliens
are generally allowed a statutory credit which generally has the effect of
offsetting the U.S. Federal estate tax imposed on the first $60,000 of the
taxable estate.

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UNDERWRITING

Subject to the terms and conditions set forth in the purchase agreement (the
"U.S. Purchase Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "U.S. Underwriters"), and each of the U.S.
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Bear, Stearns & Co. Inc. are acting as representatives (the "U.S.
Representatives"), has severally agreed to purchase, the aggregate number of
shares of Common Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................................
Bear, Stearns & Co. Inc..........................................................

----------
Total.................................................................. 2,240,000
----------
----------
</TABLE>

The Company has also entered into an international purchase agreement (the
"International Purchase Agreement" and, together with the U.S. Purchase
Agreement, the "Purchase Agreements") with Merrill Lynch International and Bear,
Stearns International Limited, acting as lead managers (the "Lead Managers"),
and certain other underwriters outside the United States and Canada
(collectively, the "International Managers" and, together with the U.S.
Underwriters, the "Underwriters"). Subject to the terms and conditions set forth
in the International Purchase Agreement, the Company has agreed to sell to the
International Managers, and the International Managers have severally agreed to
purchase, an aggregate of 560,000 shares of Common Stock.

In each Purchase Agreement, the Underwriters named therein have agreed,
subject to the terms and conditions set forth in such Purchase Agreement, to
purchase all of the shares of Common Stock being sold pursuant to such Purchase
Agreement if any of the shares of Common Stock being sold pursuant to such
Purchase Agreement are purchased. Under certain circumstances under the Purchase
Agreements, the commitments of non-defaulting Underwriters may be increased.
Each Purchase Agreement provides that the Company is not obligated to sell, and
the Underwriters named therein are not obligated to purchase, the shares of
Common Stock under the terms of the Purchase Agreement unless all of the shares
of Common Stock to be sold pursuant to the Purchase Agreements are
contemporaneously sold.

The U.S. Representatives have advised the Company that the U.S. Underwriters
propose to offer the shares of Common Stock offered hereby to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock, and that the U.S. Underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.

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The public offering price per share of Common Stock and the underwriting
discount per share of Common Stock will be identical for both Primary Offerings.

The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional 336,000 and 84,000 shares of
Common Stock, respectively, at the public offering price less the underwriting
discount. Such options, which expire 30 days after the date of this Prospectus,
may be exercised solely to cover over-allotments. To the extent that the
Underwriters exercise such options, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage of the option shares that the number of shares to be purchased
initially by that Underwriter is of the 2,800,000 shares of Common Stock
initially purchased by the Underwriters.

The Company has been informed that the Underwriters have entered into an
agreement (the "Intersyndicate Agreement") providing for the coordination of
their activities. Pursuant to the Intersyndicate Agreement, the U.S.
Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the public offering price,
less an amount not greater than the selling concession.

The Company has been informed that, under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or resell shares of Common Stock to persons
who are non-U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any bank, broker or dealer to whom they sell shares
of Common Stock will not offer to sell or resell shares of Common Stock to U.S.
persons or to Canadian persons or to persons they believe intend to resell to
U.S. persons or to Canadian persons, except in each case for transactions
pursuant to the Intersyndicate Agreement which, among other things, permits the
Underwriters to purchase from each other and offer for resale such number of
shares of Common Stock as the selling Underwriter or Underwriters and the
purchasing Underwriter or Underwriters may agree.

The Company and Continental Grain and certain members of management of the
Company have agreed not to sell or otherwise dispose of any shares of Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock (except for the shares offered hereby), without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, for a period of 90 days
after the date of this Prospectus, except that the Company may, without such
consent, grant options, issue shares of Common Stock upon the exercise of
outstanding options, or otherwise issue shares of Common Stock pursuant to its
employee benefit plans. See "Shares Eligible for Future Sale."

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

Certain of the Underwriters have in the past and each of the Underwriters
may in the future (i) provide underwriting, financial advisory or other services
to the Company or Continental Grain or (ii) purchase from or sell to the Company
loans, securities, Excess Spread Receivables or other assets. In addition,
affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated and of Bear,
Stearns & Co. Inc. are purchasers under Purchase and Sale Facilities with the
Company.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Primary Offerings, I.E., if they sell more shares of Common
Stock than are set forth on the cover page of this

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Prospectus, the U.S. Representatives may reduce that short position by
purchasing shares of Common Stock in the open market. The U.S. Representatives
may also elect to reduce any short position by exercising all or part of the
over-allotment options described above.

The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters and any
selling group members who sold those shares of Common Stock as part of the
Primary Offerings.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters in connection with the Offering will be passed upon for the Company by
Dewey Ballantine, New York, New York. Certain legal matters will be passed upon
for the Underwriters by Brown & Wood LLP New York, New York.

EXPERTS

The Consolidated Financial Statements incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended March 31, 1996 have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said report.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements under the headings "Prospectus Summary," Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this Prospectus constitute "forward-looking
statements" within the meaning of the Reform Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performances or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. There are many
important factors that could cause the Company's actual results to differ
materially from those indicated in the forward-looking statements. Such factors
include, but are not limited to, general economic conditions, including interest
rate risk, prepayment, delinquency and default rates, changes (legislative and
otherwise) in the asset securitization industry, demand for the Company's
services, the impact of certain covenants in loan agreements of the Company and
Continental Grain, the degree to which the Company is leveraged, the Company's
needs for financing, and other risks identified in the Company's filings with
the Commission.

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GLOSSARY

<TABLE>
<CAPTION>
Adjustable Rate Mortgages or
ARMs....................... Mortgages with a variable interest rate which typically
adjust off LIBOR or U.S. treasury rates.

<S> <C>
"A", "B", "C" and "D" Credit
Grades..................... A grading system used in the finance industry to reflect a
borrower's overall credit quality. The grade assigned by a
lender to each borrower is a function of the borrower's
historical payment performance on his or her outstanding
consumer debt. Such debt may include credit cards and
automobile loans. The Company establishes the prices it will
pay for loans based on the borrower's credit profile,
prevailing market conditions and other factors.

Broker Loans................. Loans referred to the Company by brokers.

Commercial/Multi-family
Loans...................... Loans secured by commercial properties including
multi-family dwellings, self-storage facilities, assisted
living and other health-related facilities, and retail and
industrial buildings.

Conduits..................... Stand-alone securitization vehicles where the originator(s),
underwriter(s), servicer(s) and seller(s) may all be
different parties coming together to generate loans or other
assets to be serviced and securitized. Conduits allow
smaller originators to sell their assets into a single
securitizable pool, thus benefitting from economies of scale
and the ability to share the fixed transaction costs
associated with securitization.

Covered Loans................ Mortgage loans (other than mortgage loans to finance the
acquisition or initial construction of a dwelling) with (i)
total points and fees upon origination in excess of eight
percent of the loan amount or (ii) an annual percentage rate
of more than ten percentage points higher than comparably
maturing U.S. Treasury Securities. The Riegle Act generally
applies to such loans. See "Regulation."

Debt-to-Income Ratio......... The ratio of a borrower's monthly debt service requirements
to his or her monthly income.

Equipment Leases............. Leases of assets primarily to commercial users. Leased
assets may include office equipment and medical equipment.

Excess Spread................ In a securitization, generally, the excess of the weighted
average coupon on each pool of loans or other assets sold
over the sum of the investor pass-through rate plus a normal
servicing fee, a trustee fee, an insurance fee, if any, and
an estimate of annual future credit losses related to the
loans or other assets sold over the life of the loans or
other assets. The Excess Spread is either a contractual
right or a certificated security.
</TABLE>

i
<PAGE>
<TABLE>
<S> <C>
Excess Spread Receivables.... The present value of the Excess Spread. When the Company
completes a securitization, it recognizes a gain on sale of
the loans or other assets sold equal to the amount of the
Excess Spread Receivable less the origination and
underwriting costs in the related securitization and records
the Excess Spread Receivable as an asset on its balance
sheet. On the Company's consolidated balance sheet, the
Excess Spread Receivable is reduced as cash distributions
are received over the actual life of the loans or other
assets securitized. The Excess Spread Receivables represent
interest-only and residual certificates.

Franchise Loans.............. Loans to franchisees of national restaurant chains or other
service chains. The loans are secured by fixtures, equipment
and cash flows.

Gain on Sale of
Receivables................ The gross income from the structuring and sale of loans and
other assets into REMICs, owner trusts and grantor trusts.
Gain on sale of receivables represents the Excess Spread
Receivables less cost of originating and structuring the
loans and other assets.

Ginnie Mae ("GNMA"),
Fannie Mae ("FNMA"),
Freddie Mac ("FHLMC")...... Government National Mortgage Association, Federal National
Mortgage Association and Federal Home Loan Mortgage
Corporation.

Home Equity Loans............ Loans made to borrowers typically for debt consolidation,
home improvements, education or refinancing and secured by a
first or second mortgage on one- to four-family residential
properties.

Interest-only Certificate.... Represents Excess Spread Receivables which represent the
right to receive interest payments on a securitization
trust's underlying assets and is subject to changes in value
due to changes in prepayment rates. Generally, the
Interest-Only Certificate is senior to the Residual
Certificate(s).

Non-conforming Home Equity
Loans...................... Home equity loans made to borrowers whose financing needs
cannot be met by traditional financial institutions due to
credit exceptions or other factors and cannot be marketed to
agencies such as Ginnie Mae, Fannie Mae and Freddie Mac.

Non-prime Auto Loans and
Leases..................... Automobile loans or leases secured by new or used
automobiles made generally to "B" or "C" Credit Grade
borrowers.

Overcollateralization........ The amount by which the outstanding principal balance of
assets which have been securitized exceeds the outstanding
principal balance of the certificates issued by the related
trust. The surplus principal of the assets is available to
absorb losses. The amount of overcollateralization required
for a securitization is specified for each issuance.
Overcollateralization is developed by applying Excess Spread
as an accelerated payment of principal on the certificates.
Once the required level of overcollateralization is reached,
and for so long as such level is maintained, the Excess
Spread flows through to the Company.
</TABLE>

ii
<PAGE>
<TABLE>
<S> <C>
Purchase and Sale
Facilities................. Agreements pursuant to which the Company sells certain of
its qualifying securitizable assets with limited recourse to
certain financial institutions subject to rights of first
refusal for the Company to repurchase the assets.

Purchase Premium Refunds..... That portion of the premium paid by the Company to a
wholesale originator upon purchase of a loan which is
required to be repaid by the originator if the loan prepays
before a contractually set time.

REMIC........................ Real Estate Mortgage Investment Conduit.

REMICs, Owner Trusts and
Grantor Trusts............. Trusts formed to purchase securitizable assets, issue
pass-through certificates and make distributions to
investors. Such trusts are organized in accordance with the
Internal Revenue Code so as to not be subject to corporate
tax at the entity level.

Reserve Account.............. A reserve account serves the same purpose as
Overcollateralization. However, instead of applying Excess
Spread as a payment of principal on the certificates, it is
accumulated in an account until a required amount is
reached. Funds from this account are available to cover
losses realized on loans or other assets held by a trust.

Residual Certificates........ Represent Excess Spread Receivables which are subject to
change in value due to prepayment rates and credit losses.
The Residual Certificates are subordinate certificates and
are in a first loss position.

Securitization............... The sale by the Company of loans or other assets it has
originated or purchased to a trust (or other special purpose
entity). Concurrently, the trust issues securities (usually
pass-through certificates) to investors in a private
placement or a public offering. The Company is paid a
purchase price consisting of cash from the proceeds of the
sale of the securities and an interest in the loans or other
assets securitized generally in the form of Interest-only
Certificates and/or Residual Certificates (i.e., the Excess
Spread Receivable).

Small Business Loans......... Loans to small businesses collateralized primarily by
accounts receivable. Such loans are not guaranteed by the
Small Business Administration or any other government
agency.

Strategic Alliance........... A relationship between the Company and an originator of
consumer and commercial loans, leases and receivables. In
the relationship, the Company provides financing and asset
securitization expertise (including warehouse financing,
interest rate hedging services and the structuring and
placement of the asset portfolio in the form of asset-backed
securities) to the asset originator and the asset originator
provides a consistent flow of securitizable assets to the
Company. In certain of its Strategic Alliances, the Company
may receive warrants or warrant-like equity participations
in Strategic Alliance clients or may otherwise seek to make
equity investments in its Strategic Alliance clients.

Strategic Alliance Equity
Interests.................. Warrants, warrant-like equity participations or other equity
investments in Strategic Alliance clients.
</TABLE>

iii
<PAGE>
<TABLE>
<S> <C>
Structured Finance
Transactions............... The securitization of consumer and commercial loans, leases
and other receivables, including home equity loans, which
are sold through REMICs or other trust structures or in
whole loan sales.

Sub-prime Auto Loans and
Leases..................... Automobile loans or leases made generally to "C-" or "D"
Credit Grade borrowers.

Timeshare Loans.............. Loans made to purchase a real property interest in specific
units at vacation resort properties. Typically, the
borrowers' rights to use and occupy the real property are
subject to limitations.

Title I Home Improvement
Loans...................... Loans to homeowners, a portion of which is guaranteed by the
U.S. government, for the purpose of certain pre-qualified
home improvements.

Warehouse Financing.......... Secured loan facilities or purchase commitments provided to
asset originators to facilitate the accumulation of
securitizable assets prior to securitization. Commitments
are typically for one year or less and are designed to fund
only securitizable assets.

Wholesale Loans.............. Loans purchased by the Company in bulk sales from mortgage
bankers and commercial banks.
</TABLE>

iv
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary.............................. 3
Risk Factors.................................... 9
Use of Proceeds................................. 19
Price Range of Common Stock..................... 19
Dividend Policy................................. 19
Capitalization.................................. 20
Selected Financial Data......................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 23
Analysis of Operating Cash Flow................. 38
Business........................................ 39
Regulation...................................... 60
Management...................................... 62
Certain Transactions............................ 64
Description of Certain Indebtedness and
Financing Arrangements........................ 69
Shares Eligible for Future Sale................. 70
Description of Capital Stock.................... 71
Certain United States Tax Consequences for
Non-U.S. Holders.............................. 74
Underwriting.................................... 76
Legal Matters................................... 78
Experts......................................... 78
Special Note Regarding Forward-Looking
Statements.................................... 78
Glossary........................................ i
</TABLE>

2,800,000 SHARES

CONTIFINANCIAL

CORPORATION

COMMON STOCK

---------------------

PROSPECTUS

------------------------

MERRILL LYNCH & CO.

BEAR, STEARNS & CO. INC.

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 28, 1997
PROSPECTUS
2,800,000 SHARES
CONTIFINANCIAL CORPORATION
COMMON STOCK
--------------

All of the 2,800,000 shares of common stock, $0.01 par value (the "Common
Stock"), of ContiFinancial Corporation, a Delaware corporation (the "Company"),
offered hereby are being issued and sold by the Company. Of the shares of Common
Stock offered hereby, 560,000 shares initially are being offered outside the
United States and Canada by the International Managers (the "International
Offering") and 2,240,000 shares initially are being offered in a concurrent
offering in the United States and Canada by the U.S. Underwriters (the "U.S.
Offering", and together with the International Offering, the "Primary
Offerings"). The offering price and the underwriting discount per share will be
identical for both of the Primary Offerings. See "Underwriting."

Continental Grain Company ("Continental Grain") currently owns approximately
81% of the Company's outstanding Common Stock. Upon completion of the Primary
Offerings, Continental Grain will own approximately 76% of the Company's
outstanding Common Stock (approximately 75% if the Underwriters of the Primary
Offerings exercise their over-allotment options in full). Simultaneous with the
Primary Offerings, Continental Grain is entering into a forward purchase
contract (the "Forward Contract") with the ContiFinancial STRYPES Trust, a
Delaware business trust (the "Trust") pursuant to which 2,800,000 shares (or
3,220,000 shares if the Underwriters of the Structured Yield Product
Exchangeable for Stock-SM- (the "STRYPES") exercise their over-allotment option)
of Common Stock currently owned by Continental Grain may be distributed to
holders of the STRYPES issued by the Trust upon conclusion of the term of the
Trust on , 2000 or upon earlier dissolution of the Trust in certain
circumstances. Upon satisfaction of the Forward Contract, assuming Continental
Grain delivers to the Trust the maximum number of shares of Common Stock subject
thereto, and assuming no other sales of the Company's Common Stock by
Continental Grain, Continental Grain would own approximately 70% of the
outstanding Common Stock (or approximately 69% of the outstanding Common Stock
if the over-allotment options granted to the Underwriters of the Primary
Offerings and to the Underwriters of the STRYPES are exercised in full). The
STRYPES are being offered in a public offering simultaneous with the Primary
Offerings. The STRYPES are not being offered hereby. The offering of the Common
Stock in the Primary Offerings is not conditioned upon the STRYPES offering.

SEE "RISK FACTORS," BEGINNING ON PAGE 9 OF THIS PROSPECTUS, FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
-------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING
PUBLIC DISCOUNT(1)
<S> <C> <C>
Per Share......................................................... $ $
Total(3).......................................................... $ $

<CAPTION>
PROCEEDS TO
COMPANY(2)
<S> <C>
Per Share......................................................... $
Total(3).......................................................... $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated at $700,000.

(3) The Company has granted the International Managers and the U.S. Underwriters
30-day options to purchase up to 84,000 and 336,000 additional shares of
Common Stock, respectively, solely to cover over-allotments, if any. If all
such additional shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-------------------

- -SM-Service mark of Merrill Lynch & Co., Inc.
------------------------

MERRILL LYNCH INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED
------------

The date of this Prospectus is , 1997.
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"International Purchase Agreement"), the Company has agreed to sell to each of
the underwriters named below (the "International Managers"), and each of the
International Managers, for whom Merrill Lynch International and Bear, Stearns
International Limited are acting as lead managers (the "Lead Managers"), has
severally agreed to purchase, the aggregate number of shares of Common Stock set
forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
- ------------------------------------------------------------------------------------------------------- -----------
<S> <C>
Merrill Lynch International............................................................................
Bear, Stearns International Limited....................................................................
-----------
Total........................................................................................ 560,000
-----------
-----------
</TABLE>

The Company has also entered into a purchase agreement (the "U.S. Purchase
Agreement" and, together with the International Purchase Agreement, the
"Purchase Agreements") with Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Bear, Stearns & Co. Inc., acting as representatives (the "U.S.
Representatives"), and certain other underwriters in the United States and
Canada (collectively, the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters"). Subject to the terms and conditions
set forth in the U.S. Purchase Agreement, the Company has agreed to sell to the
U.S. Underwriters, and the U.S. Underwriters have severally agreed to purchase,
an aggregate of 2,240,000 shares of Common Stock.

In each Purchase Agreement, the Underwriters named therein have agreed,
subject to the terms and conditions set forth in such Purchase Agreement, to
purchase all of the shares of Common Stock being sold pursuant to such Purchase
Agreement if any of the shares of Common Stock being sold pursuant to such
Purchase Agreement are purchased. Under certain circumstances, under the
Purchase Agreements, the commitments of non-defaulting Underwriters may be
increased. Each Purchase Agreement provides that the Company is not obligated to
sell, and the Underwriters named therein are not obligated to purchase, the
shares of Common Stock under the terms of the Purchase Agreement unless all of
the shares of Common Stock to be sold pursuant to the Purchase Agreements are
contemporaneously sold.

The Lead Managers have advised the Company that the International Managers
propose to offer the shares of Common Stock offered hereby to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock, and that the International Managers may
allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.

The public offering price per share of Common Stock and the underwriting
discount per share of Common Stock will be identical for both Primary Offerings.

The Company has granted to the International Managers and the U.S.
Underwriters options to purchase up to an additional 84,000 and 336,000 public
offering price less the underwriting discount. Such options, which expire 30
days after the date of this Prospectus, may be exercised solely to cover over-
allotments. To the extent that the Underwriters exercise such options, each of
the Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of the option shares that the number
of shares to be purchased initially by that Underwriter is of the 2,800,000
shares of Common Stock initially purchased by the Underwriters.

The Company has been informed that the Underwriters have entered into an
agreement (the "Intersyndicate Agreement") providing for the coordination of
their activities. Pursuant to the Intersyndicate Agreement, the International
Managers and the U.S. Underwriters are permitted to sell shares of Common Stock
to each other for purposes of resale at the public offering price, less an
amount not greater than the selling concession.

76
<PAGE>
The Company has been informed that, under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or resell shares of Common Stock to persons
who are non-U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any bank, broker or dealer to whom they sell shares
of Common Stock will not offer to sell or resell shares of Common Stock to U.S.
persons or to Canadian persons or to persons they believe intend to resell to
U.S. persons or to Canadian persons, except in each case for transactions
pursuant to the Intersyndicate Agreement which, among other things, permits the
Underwriters to purchase from each other and offer for resale such number of
shares of Common Stock as the selling Underwriter or Underwriters and the
purchasing Underwriter or Underwriters may agree.

Each International Manager has agreed that (i) it has not offered or sold,
and it will not offer or sell, directly or indirectly, any shares of Common
Stock offered hereby to persons in the United Kingdom prior to the expiration of
the period of six months from the closing date except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public within the meaning of the Public Offers of Securities
Regulations 1995, (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Common Stock in, from, or otherwise involving the United
Kingdom, and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in connection
with the issuance of the Common Stock if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may otherwise
lawfully be issued or passed on.

Certain of the Underwriters have in the past and each of the Underwriters
may in the future (i) provide underwriting, financial advisory or other services
to the Company or Continental Grain or (ii) purchase from or sell to the Company
loans, securities, Excess Spread Receivables or other assets. In addition, an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated and of Bear,
Stearns & Co. Inc. are purchasers under Purchase and Sale Facilities with the
Company.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the Lead Managers are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Primary Offerings, I.E., if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus, the Lead Managers
may reduce that short position by purchasing shares of Common Stock in the open
market. The Lead Managers may also elect to reduce any short position by
exercising all or part of the over-allotment options described above.

77
<PAGE>
The Lead Managers may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Lead Managers purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and any selling group members who sold
those shares of Common Stock as part of the Primary Offerings.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the Lead
Managers will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase, in addition to the offering price set forth on the cover page hereof.

LEGAL MATTERS

EXPERTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

78
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information............................ 2
Incorporation of Certain Documents by
Reference...................................... 2
Prospectus Summary............................... 3
Risk Factors..................................... 9
Use of Proceeds.................................. 19
Price Range of Common Stock...................... 19
Dividend Policy.................................. 19
Capitalization................................... 20
Selected Financial Data.......................... 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 23
Analysis of Operating Cash Flow.................. 38
Business......................................... 39
Regulation....................................... 60
Management....................................... 62
Certain Transactions............................. 64
Description of Certain Indebtedness and Financing
Arrangements................................... 69
Shares Eligible for Future Sale.................. 70
Description of Capital Stock..................... 71
Certain United States Tax Consequences for
Non-U.S. Holders............................... 74
Underwriting..................................... 76
Legal Matters.................................... 78
Experts.......................................... 78
Special Note Regarding Forward-Looking
Statements..................................... 78
Glossary......................................... i
</TABLE>

2,800,000 SHARES

CONTIFINANCIAL
CORPORATION
COMMON STOCK

------------------------
PROSPECTUS
---------------------

MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS
INTERNATIONAL LIMITED

, 1997

This Prospectus relates to 2,800,000 shares of common stock, $0.01 par value
(the "Common Stock"),
of ContiFinancial Corporation, a Delaware corporation (the "Company"), which may
be distributed to holders of the Structured Yield Product Exchangeable for
Stock-SM- (each, a "STRYPES") of ContiFinancial STRYPES Trust, a Delaware
business trust (the "Trust"), upon conclusion of the term of the Trust on
, 2000 (the "Exchange Date") or upon earlier dissolution of the Trust
in certain circumstances (such Common Stock, along with any Common Stock
available for distribution upon exercise of the Underwriters' over-allotment
option, the "STRYPES-Related Common Stock"). The Trust has granted the
Underwriters of the STRYPES a 30-day option to purchase additional STRYPES,
solely to cover over-allotments, if any. Up to an additional 420,000 shares of
Common Stock to which this Prospectus also relates may be distributed by the
Trust to the holders of such additional STRYPES on the Exchange Date or upon
earlier dissolution of the Trust.

All of the shares of Common Stock covered hereby are beneficially owned by
Continental Grain Company ("Continental Grain"), which may deliver such Common
Stock to the Trust pursuant to a forward purchase contract (the "Forward
Contract") between Continental Grain and the Trust. In lieu of delivering shares
of Common Stock, Continental Grain has the right to satisfy its obligations
under the Forward Contract by delivering cash with an equal value. Such right,
if exercised by Continental Grain, must be exercised with respect to all shares
of Common Stock deliverable pursuant to the Forward Contract. The Company will
not receive any of the proceeds from the sale of the STRYPES or as a result of
the distribution of the Common Stock in connection therewith.

The STRYPES are offered by a separate prospectus of the Trust (the "STRYPES
Prospectus"). This Prospectus relates only to the STRYPES-Related Common Stock
covered hereby and does not relate to the STRYPES. THE COMPANY TAKES NO
RESPONSIBILITY FOR ANY INFORMATION INCLUDED IN OR OMITTED FROM THE STRYPES
PROSPECTUS. THE STRYPES PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN. Because the STRYPES are
a separate security issued by the Trust for which the Company has no
responsibility, an investment in the STRYPES may have materially different
characteristics from a direct investment in the Common Stock.

SEE "RISK FACTORS," BEGINNING ON PAGE 9 OF THIS PROSPECTUS, FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.

The Common Stock is traded on the New York Stock Exchange ("NYSE") under the
trading symbol "CFN." On March 7, 1997, the last reported sale price of the
Common Stock on the NYSE was $36 7/8 per share. See "Price Range of Common
Stock."

-------------------

- -SM- Service mark of Merrill Lynch & Co., Inc.

The date of this Prospectus is , 1997.
<PAGE>
Certain persons participating in the offering of the STRYPES may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Common Stock. Such transactions may include stabilizing the purchase of Common
Stock to cover syndicate short positions and the imposition of penalty bids. For
a description of these activities, see "Plan of Distribution."

AVAILABLE INFORMATION

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

2
<PAGE>
THE OFFERING

The Common Stock covered by this Prospectus may be distributed to holders of
the STRYPES of the Trust upon conclusion of the term of the Trust on the
Exchange Date or upon earlier termination of the Trust in certain circumstances.

Simultaneous with the offering of the STRYPES, the Company will issue and
sell directly 2,800,000 shares of Common Stock (or 3,220,000 shares if the
Underwriters exercise their over-allotment option in full) (the "Primary
Offerings"). The consummation of the Primary Offerings and the offering of the
STRYPES are not conditioned upon each other.

RELATIONSHIP WITH CONTINENTAL GRAIN

As a result of its ownership interest, Continental Grain has voting control
on all matters submitted to stockholders, including the election of directors
and the approval of extraordinary corporate transactions. Except to the extent
that Continental Grain may deliver shares to satisfy its obligations under the
Forward Contract, Continental Grain has advised the Company that its current
intention is to continue to hold all of the shares of Common Stock beneficially
owned by it. However, there can be no assurance that Continental Grain will not
sell all or a portion of its holdings at some future date.

Continental Grain provided the Company with intercompany financing in the
form of the Intercompany Debt (defined below). As of December 31, 1996, the
amount of Intercompany Debt outstanding was $202 million. For a description of
the Intercompany Debt and certain other transactions between Continental Grain
and the Company, see "Certain Transactions" and "Description of Certain
Indebtedness and Financing Arrangements."

RISK FACTORS

7
<PAGE>
PRICE RANGE OF COMMON STOCK

<TABLE>
<CAPTION>
PRICE RANGE
------------------
<S> <C> <C>
HIGH LOW
------- -------
1996
- ------------------------------------------------------------
First Quarter (from February 9, 1996)..................... $31 1/2 $25 1/8
Second Quarter............................................ 33 28
Third Quarter............................................. 30 3/8 22 3/4
Fourth Quarter............................................ 39 1/4 28 5/8

1997
- ------------------------------------------------------------
First Quarter (through March 7, 1997)..................... 39 3/8 33 3/8
</TABLE>

As of February 28, 1997, there were approximately 88 holders of record of
the Common Stock including Cede & Co., a nominee of the Depository Trust
Company, which holds shares of Common Stock on behalf of an indeterminate number
of beneficial holders. On March 7, 1997, the last price reported on the New York
Stock Exchange for the Common Stock was $36 7/8 per share.

DIVIDEND POLICY

19
<PAGE>
PLAN OF DISTRIBUTION

The Company is advised that it is the investment objective of the Trust to
distribute to the holders of the STRYPES on the Exchange Date a specified number
of shares of Common Stock. The Company is advised that pursuant to the terms of
the Forward Contract, Continental Grain is obligated to deliver to the Trust
immediately prior to the Exchange Date a number of shares of Common Stock
covered by this Prospectus equal to the number required by the Trust in order to
exchange all of the STRYPES (including STRYPES issued pursuant to the
over-allotment option of the Underwriters of the STRYPES) on the Exchange Date
in accordance with its investment objective, subject to Continental Grain's
option to satisfy such obligation by delivering, in lieu of such shares, cash
with an equal value. The Company is not a party to the Forward Contract and has
no obligation thereunder or with respect to the STRYPES, which are securities of
the Trust and are not securities of the Company.

The Company and certain members of management of the Company have agreed not
to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file or cause to be filed a registration statement under the
Securities Act with respect to, any shares of Common Stock, securities
convertible into, exchangeable for or repayable with such shares or rights or
warrants to acquire such shares, for a period of 90 days after the date of this
Prospectus without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, except that the Company may, without such consent, grant
options, issue shares of Common Stock upon the exercise of outstanding options,
or otherwise issue shares of Common Stock pursuant to its employee benefit
plans. The Company is advised that Continental Grain has agreed not to offer,
sell, contract to sell or otherwise dispose of, directly or indirectly, or cause
to be filed a registration statement under the Securities Act with respect to,
any shares of Common Stock, securities convertible into, exchangeable for or
repayable with such shares or rights or warrants to acquire such shares, for a
period of 90 days after the date of this Prospectus without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.

The Company has agreed to indemnify the Trust and the Underwriters of the
STRYPES against certain liabilities, including liabilities under the Securities
Act, with respect to the information in this Prospectus (including the documents
incorporated by reference herein) other than information furnished to the
Company in writing by the Trust or the Underwriter of the STRYPES expressly for
use herein.

Until the distribution of the STRYPES is completed, rules of the Commission
may limit the ability of the Underwriters of the STRYPES and any selling group
members to bid for and purchase the STRYPES or the shares of Common Stock. As an
exception to these rules, the representatives of the Underwriters of the STRYPES
(the "Representatives") are permitted to engage in certain transactions that
stabilize the price of the STRYPES or the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the STRYPES or the Common Stock.

If the Underwriters of the STRYPES create a short position in the STRYPES in
connection with the Offering, I.E., if they sell more STRYPES than are set forth
on the cover page of the STRYPES Prospectus, the Representatives may reduce that
short position by purchasing STRYPES in the open market. The Representatives may
also elect to reduce any short position by exercising all or part of the
over-allotment options described above.

The Representatives may also impose a penalty bid on certain Underwriters of
the STRYPES and selling group members. This means that if the Representatives
purchase STRYPES in the open market to reduce the short position of the
Underwriters of the STRYPES or to stabilize the price of STRYPES, they may
reclaim the amount of the selling concession from the Underwriters of the
STRYPES and any selling group members who sold those STRYPES as part of the
Offering.

76
<PAGE>
Neither the Trust nor any of the Underwriters of the STRYPES makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the STRYPES or the
Common Stock. In addition, neither the Trust nor any of the Underwriters of the
STRYPES makes any representation that the Representatives will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Dewey Ballantine, New York, New York.

EXPERTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

77
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information............................ 2
Incorporation of Certain Documents by
Reference...................................... 2
Prospectus Summary............................... 3
Risk Factors..................................... 9
Price Range of Common Stock...................... 19
Dividend Policy.................................. 19
Capitalization................................... 20
Selected Financial Data.......................... 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 23
Analysis of Operating Cash Flow.................. 38
Business......................................... 39
Regulation....................................... 60
Management....................................... 62
Certain Transactions............................. 64
Description of Certain Indebtedness and Financing
Arrangements................................... 69
Shares Eligible for Future Sale.................. 70
Description of Capital Stock..................... 71
Certain United States Tax Consequences for
Non-U.S. Holders............................... 74
Plan of Distribution............................. 76
Legal Matters.................................... 77
Experts.......................................... 77
Special Note Regarding Forward-Looking
Statements..................................... 77
Glossary......................................... i
</TABLE>

2,800,000 SHARES

CONTIFINANCIAL
CORPORATION

COMMON STOCK

------------------------
PROSPECTUS
------------------------

, 1997

ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION

The following table sets forth the fees and expenses payable by the Company
in connection with the issuance and distribution of the securities other than
underwriting discounts and commissions. All of such expenses except the
Securities and Exchange Commission (the "Commission") registration fee and the
NASD filing fee are estimated:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $66,605.21
NASD filing fee................................................ 30,500.00
Blue Sky fees and expenses..................................... 4,050.00
Printing expense............................................... 200,000.00
Accounting fees and expenses................................... 125,000.00
Legal fees and expenses........................................ 225,000.00
Miscellaneous.................................................. 48,844.79
----------
Total.......................................................... $700,000.00
----------
----------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine that despite the adjudication of liability,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.

Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under such Section 145.

II-1
<PAGE>
Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal, or obtaining an improper
personal benefit. A provision of this type has no effect on the availability of
equitable remedies, such as injunction or rescission, for breach of fiduciary
duty. The Company's Restated Certificate of Incorporation contains such a
provision.

The Company's Restated Certificate of Incorporation provides that, to the
extent not prohibited by law, the Company shall indemnify any person who is or
was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Company to procure a judgment in its favor, by reason of the
fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Company, or is or was
serving as a director, officer, employee or agent or in any other capacity at
the request of the Company for any other company, partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity") while
serving as a director or officer of the Company, against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees and disbursements) actually and reasonably
incurred by such person in connection with such Proceeding if such person acted
in good faith and in a manner such person believed to be in or not opposed to
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
To the extent specified by the Board of Directors of the Company at any time and
to the extent not prohibited by law, the Company may indemnify any person who is
or was made, or threatened to be made, a party to any threatened, pending or
completed Proceeding, whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that such person is or
was an employee or agent of the Company, or is or was serving as a director,
officer, employee or agent or in any other capacity at the request of the
Company for any Other Entity, against judgment, fines, penalties, excise taxes,
amounts paid in settlement and costs, charges and expenses (including attorneys'
fees and disbursements) actually and reasonably incurred by such person in
connection with such Proceeding if such person acted in good faith and in a
manner such person believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In addition, the
Restated Certificate of Incorporation also permits the Board of Directors to
authorize the Company to purchase and maintain insurance against any liability
asserted against any director, officer, employee or agent of the Company arising
out of his capacity as such.

Pursuant to the Registration Rights Agreement between Continental Grain and
the Company, in connection with any future registration of the shares of Common
Stock held by Continental Grain, Continental Grain has agreed to indemnify,
under certain conditions, the Company, its officers, directors, employees,
agents and each person, if any, who controls the Company within the meaning of
the Securities Act, against certain liabilities.

Pursuant to the Indemnification Agreement between Continental Grain and the
Company, each of Continental Grain and the Company has agreed to indemnify the
other in the event of certain liabilities, including liabilities under the
Securities Act or the Exchange Act.

The form of underwriting agreement, filed as Exhibit 1.1 hereto, contains
provisions by which each of the Underwriters agrees to indemnify the Company,
its officers and directors and each person who controls the Company within the
meaning of the Securities Act against certain liabilities.

II-2
<PAGE>
ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of U.S. Purchase Agreement dated , 1997 between the Company and the U.S. Underwriters+
1.2 Form of International Purchase Agreement dated , 1997 between the Company and the International
Managers+
1.3 Form of Registration Agreement+
5.1 Opinion of Dewey Ballantine+
23.1 Consent of Dewey Ballantine (included in Exhibit 5.1)+
23.2 Consent of Arthur Andersen LLP*
24.1 Powers of Attorney, included on signature page*
</TABLE>

- ------------------------

* Previously filed.

+ Filed herewith.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment
no. 2 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York, New York, on
the 28th day of March, 1997.

CONTIFINANCIAL CORPORATION

BY: /S/ JAMES E. MOORE
-----------------------------------------
Name: James E. Moore
Title: President, Chief Executive
Officer and Director

Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment no. 2 to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

President, Chief Executive
/s/ JAMES E. MOORE Officer and Director
- ------------------------------ (Principal Executive March 28, 1997
James E. Moore Officer)

Senior Vice President and
* Chief Financial Officer
- ------------------------------ (Principal Financial March 28, 1997
Daniel J. Willett Officer)

* Vice President and
- ------------------------------ Controller (Principal March 28, 1997
Susan E. O'Donovan Accounting Officer)

* Director and Chairman of
- ------------------------------ the Board March 28, 1997
James J. Bigham

* Director
- ------------------------------ March 28, 1997
Paul J. Fribourg

II-4
<PAGE>

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

* Director
- ------------------------------ March 28, 1997
Donald L. Staheli

* Director
- ------------------------------ March 28, 1997
John W. Spiegel

* Director
- ------------------------------ March 28, 1997
John P. Tierney

* Director
- ------------------------------ March 28, 1997
Lawrence G. Weppler

* Director
- ------------------------------ March 28, 1997
Michael J. Zimmerman

*By: /s/ JAMES E. MOORE
- ------------------------------
James E. Moore
Attorney-in-Fact

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>

1.1 Form of U.S. Purchase Agreement dated , 1997 between the Company and the U.S. Underwriters+

1.2 Form of International Purchase Agreement dated , 1997 between the Company and the International
Managers+

1.3 Form of Registration Agreement+

5.1 Opinion of Dewey Ballantine+

23.1 Consent of Dewey Ballantine (included in Exhibit 5.1)+

23.2 Consent of Arthur Andersen LLP*

24.1 Powers of Attorney, included on signature page*
</TABLE>

- ------------------------

* Previously filed.

+ Filed herewith.

<PAGE>

------------------------------------------------------------------------------

CONTIFINANCIAL CORPORATION

(a Delaware corporation)

2,240,000 Shares of Common Stock

U.S. PURCHASE AGREEMENT

Dated: __________, 1997

------------------------------------------------------------------------------

<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
U.S. PURCHASE AGREEMENT......................................................................................... 1
SECTION 1. Representations and Warranties................................................................ 3
(a) Representations and Warranties by the Company...................................... 3
(i) Compliance with Registration Requirements............................ 3
(ii) Incorporated Documents............................................... 4
(iii) Independent Accountants.............................................. 5
(iv) Financial Statements................................................. 5
(v) No Material Adverse Change in Business............................... 5
(vi) Good Standing of the Company......................................... 5
(vii) Good Standing of Subsidiaries........................................ 6
(viii) Capitalization....................................................... 6
(ix) Description of Common Stock.......................................... 6
(x) Authorization of Agreement........................................... 6
(xi) Authorization and Description of Securities.......................... 6
(xii) Absence of Defaults and Conflicts.................................... 6
(xiii) Absence of Labor Dispute............................................. 7
(xiv) Absence of Proceedings............................................... 7
(xv) Accuracy of Exhibits................................................. 8
(xvi) Possession of Intellectual Property.................................. 8
(xvii) Absence of Further Requirements...................................... 8
(xviii) Possession of Licenses and Permits................................... 8
(xix) Title to Property.................................................... 9
(xx) Investment Company Act............................................... 9
(xxi) Environmental Laws................................................... 9
(xxii) Compliance with Laws................................................. 10
(xxiii) Registration Rights.................................................. 10
(xxiv) Options and Warrants................................................. 10
(xxv) Taxes................................................................ 10
(xxvi) Insurance............................................................ 11
(xxvii) Accounting Control................................................... 11
(xxviii)Restriction on Sale of Securities.......................................... 11
(xxix) Accuracy of Information.............................................. 11
(b) Officer's Certificates............................................................. 11
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing............................................... 11
(a) Initial Securities................................................................. 11
(b) Option Securities.................................................................. 12
(c) Payment............................................................................ 12
(d) Denominations; Registration........................................................ 13
SECTION 3. Covenants of the Company...................................................................... 13
(a) Compliance with Securities Regulations and Commission Requests..................... 13
(b) Filing of Amendments............................................................... 13
(c) Delivery of Registration Statements................................................ 14
(d) Delivery of Prospectuses........................................................... 14
(e) Continued Compliance with Securities Laws.......................................... 14

</TABLE>

<PAGE>
<TABLE>
<S> <C>
(f) Blue Sky Qualifications............................................................ 14
(g) Rule 158........................................................................... 15
(h) Use of Proceeds.................................................................... 15
(i) Listing............................................................................ 15
(j) Restriction on Sale of Securities.................................................. 15
(k) Reporting Requirements............................................................. 15
SECTION 4. Payment of Expenses........................................................................... 16
(a) Expenses................................................................................. 16
(b) Termination of Agreement................................................................. 16
SECTION 5. Conditions.................................................................................... 16
(a) Conditions of U.S. Underwriters' Obligations....................................... 16
(i) Effectiveness of Registration Statement.............................. 16
(ii) Opinions of Counsel for the Company.................................. 17
(iii) Opinion of Counsel for U.S. Underwriters............................. 17
(iv) Officers' Certificate................................................ 17
(v) Accountant's Comfort Letter.......................................... 17
(vi) Accountant's Bring-down Comfort Letter............................... 18
(vii) Approval of Listing.................................................. 18
(viii) No Objection......................................................... 18
(ix) Lock-up Agreements................................................... 18
(x) Purchase of Initial International Securities......................... 18
(xi) Conditions to Purchase of U.S. Option Securities..................... 18
(xii) Additional Documents................................................. 19
(b) Termination of Agreement........................................................... 19
SECTION 6. Indemnification............................................................................... 19
(a) Indemnification of U.S. Underwriters............................................... 19
(b) Indemnification of Company, Directors and Officers................................. 20
(c) Actions against Parties; Notification.............................................. 21
(d) Settlement without Consent if Failure to Reimburse................................. 21
SECTION 7. Contribution.................................................................................. 22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery................................ 23
SECTION 9. Termination of Agreement...................................................................... 23
(a) Termination; General............................................................... 23
(b) Liabilities........................................................................ 24
SECTION 10. Default by One or More of the U.S. Underwriters............................................... 24
SECTION 11. Notices....................................................................................... 24
SECTION 12. Parties....................................................................................... 25
SECTION 13. GOVERNING LAW AND TIME........................................................................ 25
SECTION 14. Effect of Headings............................................................................ 25

SCHEDULE A List of Underwriters....................................................................Sch A - 1

SCHEDULE B Price per share of Common Stock.........................................................Sch B - 1

SCHEDULE C List of Subsidiaries....................................................................Sch C - 1

</TABLE>

<PAGE>
<TABLE>
<S> <C>
SCHEDULE D List of Persons Subject to Lock-up......................................................Sch D - 1

EXHIBIT A Form of Lock-up Letter....................................................................Exh A-1

</TABLE>

iii

<PAGE>
CONTIFINANCIAL CORPORATION

(a Delaware corporation)

2,240,000 Shares of Common Stock
(Par Value $.01 Per Share)

U.S. PURCHASE AGREEMENT

__________ __, 1997

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BEAR, STEARNS & CO. INC.
as U.S. Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

ContiFinancial Corporation, a Delaware corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and each of the
other U.S. Underwriters named in Schedule A hereto (collectively, the "U.S.
Underwriters", which term shall also include any underwriter substituted as
provided in Section 10 hereof, for whom Merrill Lynch and Bear, Stearns & Co.
Inc. are acting as representatives (in such capacity, the "U.S.
Representatives"), with respect to (i) the issue and sale by the Company to the
U.S. Underwriters, acting severally and not jointly, of the respective numbers
of shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock") set forth in Schedule A hereto and (ii) the grant by the Company to the
U.S. Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 336,000 additional shares of
Common Stock to cover over-allotments, if any. The aforesaid 2,240,000 shares of
Common Stock (the "Initial U.S. Securities") to be purchased by the U.S.
Underwriters pursuant to this Agreement and all or any part of the 336,000
shares of Common Stock subject to the option described in Section

<PAGE>

2(b) hereof (the "U.S. Option Securities") are hereinafter called, collectively,
the "U.S. Securities".

It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 560,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for which Merrill Lynch International and Bear, Stearns International
Limited are acting as lead managers (the "Lead Managers") and the grant by the
Company to the International Managers, acting severally and not jointly, of an
option to purchase all or any part of the 84,000 additional shares of Common
Stock subject to the option described in Section 2(b) of the International
Purchase Agreement to cover over-allotments, if any (the "International Option
Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International Option
Securities are hereinafter called the "International Securities". It is
understood that the Company is not obligated to sell, and the U.S. Underwriters
are not obligated to purchase, any Initial U.S. Securities unless all of the
Initial International Securities are contemporaneously purchased by the
International Managers.

The U.S. Underwriters and the International Managers are
hereinafter collectively called the "Underwriters", the Initial U.S. Securities
and the Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".

The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.

The Company understands that the U.S. Underwriters propose to make a
public offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-21839) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. Two forms of prospectus are to be used in connection
with the offering and sale of the Securities: one relating to the U.S.
Securities (the "Form of U.S. Prospectus") and one relating to the International
Securities (the "Form of International Prospectus"). The Form of International
Prospectus is identical to the Form of U.S. Prospectus, except for the front
cover and back cover pages and the information under the caption "Underwriting".
The information included in any

<PAGE>

such prospectus that was omitted from such registration statement at the time it
became effective but that is deemed to be part of such registration statement at
the time it became effective pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information." Each Form of U.S. Prospectus and Form of
International Prospectus relating to the offering of the Securities used before
such registration statement became effective, and any prospectus relating to the
offering of the Securities that omitted the Rule 430A Information that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, the schedules thereto, if any, and
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the 430A
Information, is herein called the "Registration Statement." Any registration
statement filed by the Company pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final Form of U.S. Prospectus and the final
Form of International Prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
forms first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "U.S. Prospectus" and the
"International Prospectus," respectively, and collectively, the "Prospectuses."
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any amendment or supplement to any of the foregoing shall be deemed to include
the copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectuses, as the case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof and as of
the Closing Time referred to in Section 2(c) hereof, and agrees with each U.S.
Underwriter, as follows:

(i) Compliance with Registration Requirements. The
Company meets the requirements for the use of Form S-3 under the 1933
Act. Each of the Registration

<PAGE>

Statement and any Rule 462(b) Registration Statement has become
effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any U.S. Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither of the Prospectuses nor any amendments or supplements thereto,
at the time the Prospectuses or such amendments or supplements thereto
were issued and at the Closing Time (and, if any U.S. Option Securities
are purchased, at the Date of Delivery), included or will include an
untrue statement of a material fact or omitted or will omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or U.S.
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the
U.S. Representatives expressly for use in the Registration Statement or
the U.S. Prospectus.

Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424(b) under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectuses delivered to the Underwriters for use in connection with
the offering of the Securities was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectuses, when they became effective or at the time they
were or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations or the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"),
as applicable, and, when read together with the other information in
the Prospectuses, at the time the Registration Statement became
effective, at the time the Prospectuses were issued and at the Closing
Time (and, if any U.S. Option Securities are purchased, at the Date of
Delivery), did not

<PAGE>
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.

(iii) Independent Accountants. The accountants who
certified the financial statements and supporting schedules of the
Company included in the Registration Statement are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The financial statements of the
Company included in the Registration Statement and the Prospectuses,
together with the related schedules and notes, present fairly the
financial position of the Company and its consolidated subsidiaries at
the dates indicated and the statement of operations, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP") in
the United States applied on a consistent basis throughout the periods
involved except for changes in GAAP during such periods. The supporting
schedules, if any, included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectuses present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, operations or business of the Company
and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.

(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.

<PAGE>
(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each, a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are the
subsidiaries listed on Schedule C hereto.

(viii) Capitalization. The shares of outstanding capital stock
of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.

(ix) Description of Common Stock. The Common Stock
conforms to the statements relating thereto contained in the
Prospectuses.

(x) Authorization of Agreement. This Agreement and
the International Purchase Agreement have been duly authorized,
executed and delivered by the Company.

(xi) Authorization and Description of Securities. The
Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for
issuance and sale to the U.S. Underwriters pursuant to this Agreement
and the International Managers pursuant to the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to this Agreement and the International Purchase Agreement,
respectively, against payment of the consideration set forth herein and
the International Purchase Agreement, respectively, will be validly
issued, fully paid and non-assessable; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.

<PAGE>
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the International
Purchase Agreement and the consummation of the transactions
contemplated in this Agreement, the International Purchase Agreement
and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under "Use of Proceeds")
and compliance by the Company with its obligations under this Agreement
and the International Purchase Agreement have been duly authorized by
all necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or bylaws or
limited liability company agreement of the Company or any subsidiary or
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or
any of their assets, properties or operations (except for such
violations of law, statute, rule regulation, judgment, order writ or
decree that would not result in a Material Adverse Effect). As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness of
the Company or any subsidiary (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
As used herein, a "subsidiary" means a subsidiary more than a majority
of whose outstanding securities representing the right, other than as
affected by events of default, to vote for the election of directors of
such subsidiary or to direct or cause the direction of the management
and policies of such subsidiary, is owned, directly or indirectly, by
the Company.

(xiii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any Subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

<PAGE>
process, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary, which is required to be
disclosed in the Registration Statement (other than as disclosed
therein), or which might, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, or which might,
individually or in the aggregate, reasonably be expected to materially
and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated by this Agreement and the
International Purchase Agreement or the performance by the Company of
its obligations hereunder or thereunder; the aggregate of all pending
legal or governmental proceedings (with respect to which the Company
has received service of process) to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.

(xv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to
be filed as exhibits thereto which have not been so described or filed
as required.

(xvi) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any reasonably likely unfavorable decision, ruling or
finding) or invalidity or inadequacy, singly or in the aggregate, would
result in a Material Adverse Effect.

(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except such as have
been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or the 1934 Act or the 1934 Act Regulations and
foreign or state securities laws.

(xviii) Possession of Licenses and Permits. The Company
and its subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively,

<PAGE>
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them, except where the failure to possess any
such Governmental Licenses would not, singly or in the aggregate,
result in a Material Adverse Effect; the Company and its subsidiaries
are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except
where the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of any reasonably likely
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.

(xix) Title to Property. The Company and its subsidiaries have
good and marketable title to all real property owned by the Company and
its subsidiaries and good title to all other properties owned by them,
in each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectuses or (b) do not, singly or in
the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectuses, are in
full force and effect, and neither the Company nor any subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.

(xx) Investment Company Act. The Company is not and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
controlled by an investment company as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").

<PAGE>
laws and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) to the Company's knowledge, there are no
pending (with respect to which the Company has received service of
process) or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries and
(D) to the Company's knowledge, there are no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
any Environmental Laws.

(xxii) Compliance with Laws. Except as set forth in the
Registration Statement or the Prospectuses, the Company and its
Subsidiaries are in compliance in all material respects with all
applicable laws, statutes, ordinances, rules or regulations, the
enforcement of which, individually or in the aggregate, would be
reasonably expected to result in a Material Adverse Effect.

(xxiii) Registration Rights. Except as set forth in the
Registration Statement or the Prospectus, there are no persons with
registration or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.

(xxiv) Options and Warrants. Except as disclosed in the
Registration Statement or the Prospectus, there are no outstanding
options, warrants, or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any, shares of capital
stock of the Company or any of its Subsidiaries or any security
convertible into or exchangeable for capital stock of the Company or
any of its Subsidiaries.

(xxv) Taxes. The Company and its Subsidiaries have filed all
federal, state, local and foreign tax returns that are required to be
filed or have duly requested extensions thereof and have paid all taxes
required to be paid by any of them and any related assessments, fines
or penalties, except for any such tax, assessment, fine or penalty that
is being contested in good faith and by appropriate proceedings; and
adequate charges, accruals and reserves have been provided for in the
financial statements referred to in Section 1 (a)(iv) above in respect
of all federal, state, local and foreign taxes for all periods as to
which the tax liability of the Company or any of its Subsidiaries has
not been finally determined or remains open to examination by
applicable taxing authorities.

<PAGE>
(xxvi) Insurance. The Company and its Subsidiaries carry or
are entitled to the benefits of insurance in such amounts and covering
such risks as is, in the Company's opinion, reasonably adequate for its
purposes.

(xxvii) Accounting Control. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general and specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of
financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

(xxviii) Restriction on Sale of Securities. The Company has
obtained and delivered to the U.S. Representatives the agreements of
the persons and entities named in Schedule D annexed hereto to the
effect that each such person will not, for a period of 90 days from the
date hereof and except as otherwise provided therein, without the prior
written consent of Merrill Lynch directly or indirectly, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares
of Common Stock or any securities convertible into or exercisable for
Common Stock owned by such person or entity or with respect to which
such person has the power of disposition.

(xxix) Accuracy of Information. The information in the U.S.
Prospectus regarding delinquencies and foreclosures, loan losses, the
value of the servicing portfolios and Excess Spread Receivables (as
such term is defined in the Registration Statement) is accurate and
complete in all material respects.

(b) Officer's Certificates. Any certificate signed by any officer
of the Company and delivered to the U.S. Representatives or counsel for the U.S.
Underwriters in connection with the offering of the Securities shall be deemed
a representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.

SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in Schedule B, the
number of Initial U.S. Securities set forth in Schedule A opposite the name of
such U.S. Underwriter, plus any additional number of Initial U.S. Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.

<PAGE>
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 336,000 shares of
Common Stock at the price per share set forth in Schedule B. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial U.S. Securities upon notice by the U.S. Representatives to the Company
setting forth the number of Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment and
delivery for such U.S. Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the U.S. Representatives, but shall
not be later than seven full business days after the exercise of said option,
nor in any event prior to the Closing Time, as hereinafter defined. If the
option is exercised as to all or any portion of the U.S. Option Securities, each
of the U.S. Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the U.S. Representatives
in their discretion shall make to eliminate any sales or purchases of fractional
shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the U.S. Representatives and the Company, at
9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10 hereof), or such other
time not later than ten business days after such date as shall be agreed upon by
the U.S. Representatives and the Company (such time and date of payment and
delivery being herein called "Closing Time"). In addition, in the event that any
or all of the U.S. Option Securities are purchased by the U.S. Underwriters,
payment of the purchase price for, and delivery of certificates for, such U.S.
Option Securities shall be made at the above-mentioned offices, or at such other
place as shall be agreed upon by the U.S. Representatives and the Company, on
each Date of Delivery as specified in the notice from the U.S. Representatives
to the Company.

Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of

<PAGE>
Delivery, as the case may be, but such payment shall not relieve such U.S.
Underwriter from its obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants with each U.S.
Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify the U.S. Representatives immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectuses or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the U.S.
Representatives notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)) or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectuses,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
U.S. Representatives with copies of any such documents a reasonable amount of
time prior to such proposed filing or use, as the case may be, and will not file
or use any such document to which the U.S. Representatives or counsel for the
U.S. Underwriters shall reasonably object in a timely manner.

<PAGE>
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the U.S. Representatives, counsel for the U.S. Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed to be
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the U.S.
Underwriters. If applicable, the copies of the Registration Statement and each
amendment thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
such number of copies of the U.S. Prospectus (as amended or supplemented) as
such U.S. Underwriter may reasonably request. If applicable, the U.S. Prospectus
and any amendments or supplements thereto furnished to the U.S. Underwriters
will be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T or Rule 430A.

(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement, the International Purchase Agreement and in
the Prospectuses. If at any time prior to the expiration of nine months after
the time of issuance of the Prospectuses a prospectus is required by the 1933
Act to be delivered in connection with sales of the Securities, and if at such
time any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the U.S. Underwriters or counsel for
the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of any such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the U.S.
Underwriters such number of copies of such amendment or supplement as the U.S.
Underwriters may reasonably request.

(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the U.S. Underwriters, to qualify the Securities
for offering and sale under the applicable

<PAGE>

securities laws of such states and other jurisdictions (domestic or foreign) as
the U.S. Representatives may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the effective
date of the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b) Registration
Statement.

(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds".

(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.

(j) Restriction on Sale of Securities. During a period of 90 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of Merrill Lynch, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof, (C) any shares of Common Stock issued
or options to purchase Common Stock granted pursuant to existing employee
benefit plans of the Company or (D) any shares of Common Stock issued pursuant
to any non-employee director stock plan or dividend reinvestment plan.

(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.

<PAGE>
SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the preparation, printing and delivery to the U.S. Underwriters of this
Agreement, any Agreement Among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the U.S. Underwriters, including any stock
or other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer of
the Securities between the U.S. Underwriters and the International Managers,
(iv) the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and of the Prospectuses
and any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any
supplement thereto, (viii) the filing fees incident to, and the reasonable fees
and disbursements of counsel to the Underwriters in connection with, the review
by the National Association of Securities Dealers, Inc. of the terms of the
offering and sale of the Securities and (ix) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange.

(b) Termination of Agreement. If this Agreement is terminated by the
U.S. Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the U.S. Underwriters.

SECTION 5. Conditions.

(a) Conditions of U.S. Underwriters' Obligations. The obligations of
the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof, to
the accuracy of the statements in certificates of any officer of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:

(i) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or and no proceedings therefor shall have been
initiated or threatened by the Commission, and any request on the part
of the Commission for

<PAGE>
additional information shall have been complied with to the reasonable
satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).

(ii) Opinions of Counsel for the Company. At Closing Time, the
U.S. Representatives shall have received (1) the favorable opinion,
dated as of Closing Time, of Dewey Ballantine, counsel for the Company,
in form and substance reasonably satisfactory to counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter
for each of the other U.S. Underwriters, and (2) the favorable opinion,
dated as of Closing Time, of Alan L. Langus, Esq., Chief Counsel for
the Company, in form and substance reasonably satisfactory to counsel
for the U.S. Underwriters, together with signed or reproduced copies of
such letter for each of the other U.S. Underwriters.

(iii) Opinion of Counsel for U.S. Underwriters. At Closing
Time, the U.S. Representatives shall have received the favorable
opinion, dated as of Closing Time, of Brown & Wood LLP, counsel for
the U.S. Underwriters, in form and substance reasonably satisfactory
to the U.S. Representatives, together with signed or reproduced copies
of such letter for each of the other U.S. Underwriters.

(iv) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectuses, any material adverse
change in the condition, financial or otherwise, or in the earnings,
operations or business of the Company and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of
business, and the U.S. Representatives shall have received a
certificate of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, dated
as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties of the
Company contained in Section 1 hereof are true and correct with the
same force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the best of their knowledge, are
pending or are contemplated by the Commission.

(v) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the U.S. Representatives shall have received from
Arthur Andersen LLP a letter dated such date, in form and substance
satisfactory to counsel for the U.S. Representatives, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial

<PAGE>
statements and certain financial information contained in the
Registration Statement and the Prospectuses.

(vi) Accountant's Bring-down Comfort Letter. At Closing Time,
the U.S. Representatives shall have received from Arthur Andersen LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished by them pursuant to Section
5(a)(v) hereof, except that the "specified date" referred to shall be a
date not more than three business days prior to Closing Time.

(vii) Approval of Listing. At Closing Time, the Securities
shall have been approved for listing on the New York Stock Exchange,
subject only to official notice of issuance.

(viii) No Objection. The NASD shall not have raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(ix) Lock-up Agreements. At the date of this Agreement, the
U.S. Representatives shall have received an agreement substantially in
the form of Exhibit A hereto signed by each of the persons and
entities listed on Schedule D hereto.

(x) Purchase of Initial International Securities.
Contemporaneously with the purchase by the U.S. Underwriters of the
Initial U.S. Securities under this Agreement, the International
Managers shall have purchased the Initial International Securities
under the International Purchase Agreement.

(xi) Conditions to Purchase of U.S. Option Securities. In the
event that the U.S. Underwriters exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the U.S. Option
Securities, the representations and warranties of the Company and
contained herein and the statements in any certificates furnished by
the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the U.S.
Representatives shall have received:

(A) Officers' Certificate. A certificate, dated
such Date of Delivery, of the President or a Vice President of
the Company and of the chief financial or chief accounting
officer of the Company confirming that the certificate
delivered at Closing Time pursuant to Section 5(a)(iv) hereof
is true and correct as of such Date of Delivery.

(B) Opinions of Counsel for the Company. The
favorable opinions of (1) Dewey Ballantine, counsel for the
Company, and (2) Alan L. Langus, Esq., Chief Counsel for the
Company, in form and substance reasonably satisfactory to
counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinions required by Section 5(a)(ii) hereof.

<PAGE>
(C) Opinion of Counsel for U.S. Underwriters. The
favorable opinion of Brown & Wood LLP, counsel for the U.S.
Underwriters, in form and substance reasonably satisfactory to
the U.S. Representatives, dated such Date of Delivery,
relating to the U.S. Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(a)(iii) hereof.

(D) Accountant's Bring-down Comfort Letter. A
letter from Arthur Andersen LLP, in form and substance
satisfactory to counsel for the U.S. Underwriters and dated
such Date of Delivery, substantially the same in form and
substance as the letter furnished to the U.S. Underwriters
pursuant to Section 5(a)(vi) hereof, except that the
"specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.

(xii) Additional Documents. At Closing Time and at each Date
of Delivery, counsel for the U.S. Underwriters shall have been
furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, contained herein; and all
proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the U.S. Representatives and
counsel for the U.S. Underwriters.

(b) Termination of Agreement. If any condition specified in subsection
(a) of this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase of
U.S. Option Securities on a Date of Delivery which is after the Closing Time,
the obligations of the several U.S. Underwriters to purchase the relevant U.S.
Option Securities, may be terminated by the U.S. Representatives by notice to
the Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 6 and 7
shall survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of U.S. Underwriters. The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act, as follows:

<PAGE>
including the Rule 430A Information, if applicable, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto), or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, referred to
under (i) above; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, referred to under (i) above,
to the extent that any such expense is not paid under (i) or (ii)
above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) including the Rule 430A
Information, if applicable, or any preliminary prospectus or the U.S. Prospectus
(or any amendment or supplement thereto); provided, further, however, that the
foregoing indemnity with respect to any untrue statement contained in or
omission from a preliminary prospectus shall not inure to the benefit of any
U.S. Underwriter (or any person controlling such U.S. Underwriter) from whom the
person asserting any such loss, liability, claim, damage or expense purchased
any of the Securities which are the subject thereof if such person was not sent
or given a copy of the U.S. Prospectus (or the U.S. Prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person and the untrue statement contained in or omission from
such preliminary prospectus was corrected in the U.S. Prospectus (or any
amendment or supplement thereto).

(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all

<PAGE>
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) including the Rule 430A
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).

(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch; and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to

<PAGE>

the date of such settlement for all such fees and expenses of counsel, other
than such fees and expenses of counsel which are being contested in good faith
by an indemnifying party.

SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.

The relative benefits received by Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be such that the U.S.
Underwriters shall be responsible for that portion of the aggregate amount of
such losses, liabilities, claims, damages and expenses represented by the
percentage that the total underwriting discount received by the U.S.
Underwriters, as set forth on the cover of the U.S. Prospectus, bears to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover and the Company shall be responsible for the balance.

The relative fault of the Company on the one hand and the U.S.
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the U.S. Underwriters on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

The Company and the U.S. Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the U.S. Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

<PAGE>

Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall not be required to contribute any amount in excess of the amount by which
the total price at which the U.S. Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names on Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the U.S. Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement, or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, operations or business of the Company and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the U.S. Representatives, impracticable
to market the Securities or to enforce contracts for the sale of the Securities,
or (iii) if trading in the Common Stock has been suspended or limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or limited, or minimum or maximum prices for trading
have

<PAGE>

been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the NASD or any other
governmental authority, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section 9, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
6 and 7 shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:

(a) if the number of Defaulted Securities does not exceed 10%
of the number of U.S. Securities to be purchased on such date, each of
the non-defaulting U.S. Underwriters shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting U.S. Underwriters, or

(b) if the number of Defaulted Securities exceeds 10% of the
number of U.S. Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the U.S. Underwriters to purchase and of the
Company to sell the Option Securities to be purchased and sold on such
Date of Delivery, shall terminate without liability on the part of any
non-defaulting U.S. Underwriter.

No action taken pursuant to this Section 10 shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
U.S. Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representatives or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectuses or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.

<PAGE>

SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, North Tower, World
Financial Center, New York, New York 10281, attention of Mark J. Schulte; and
notices to the Company shall be directed to it at 277 Park Avenue, New York, New
York 10172, attention of Alan L. Langus, Esq., Chief Counsel.

SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and shall
not affect the construction hereof.

<PAGE>

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the U.S. Underwriters and the Company in accordance with its terms.

Very truly yours,

CONTIFINANCIAL CORPORATION

By ____________________________
Name:
Title:

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO. INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By ______________________________________
Authorized Signatory

For themselves and as U.S. Representatives of the other
U.S. Underwriters named in Schedule A hereto.

<PAGE>
SCHEDULE A

Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Bear, Stearns & Co. Inc..................................

---------
Total.................................................... 2,240,000
=========

Sch A - 1

<PAGE>

SCHEDULE B

2,240,000 shares
CONTIFINANCIAL CORPORATION
Common Stock
(Par Value $.01 Per Share)

1. The initial public offering price per share of
the Securities, as referred to in Section 2, shall be $_____.

2. The purchase price per share for the U.S. Securities to be
paid by the several U.S. Underwriters shall be $_____, being an amount equal to
the initial public offering price set forth above less $_____ per share;
provided that the purchase price per share for any U.S. Option Securities
purchased upon the exercise of the over-allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S. Securities
but not payable on the U.S. Option Securities.

Sch B - 1

<PAGE>

SCHEDULE C

List of Subsidiaries

ContiMortgage Corporation
ContiWest Corporation
ContiTrade Services L.L.C.
ContiFinancial Services Corporation
ContiSecurities Asset Funding Corp.
ContiSecurities Asset Funding Corp. II
ContiSecurities Asset Funding L.L.C.
ContiSecurities Asset Funding II, L.L.C.
ContiSecurities Asset Funding Corp. III
ContiSecurities Asset Funding Corp. IV
ContiFunding Corporation
Royal Mortgage Partners, L.P. d/b/a Royal MortgageBanc
California Lending Group, Inc. d/b/a United Lending Group
Triad Financial Corporation
Resource One Consumer Discount Company, Inc.
ContiAuto Asset Funding Corp.

Sch C - 1

<PAGE>

SCHEDULE D

James E. Moore
Robert A. Major
Peter Abeles
Robert J. Babjak
A. John Banu
Daniel J. Egan
Glenn S. Goldman
Scott M. Mannes
Daniel J. Willett
Jerome M. Perelson
Michael J. Festo
Alan L. Langus
Susan E. O'Donovan
James J. Bigham
Michel Fribourg
Paul J. Fribourg
Donald L. Staheli
Lawrence G. Weppler
John W. Spiegel
John P. Tierney
Michael J. Zimmerman

Sch D - 1

<PAGE>

EXHIBIT A

[Form of Lock-up Letter]

______________________, 1997

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BEAR, STEARNS & CO. INC.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated

North Tower
World Financial Center
New York, New York 10281-1209

MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
as Lead Managers of the several Managers
c/o Merrill Lynch International

Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Re: Proposed Public Offering by ContiFinancial Corporation

Ladies and Gentlemen:

The undersigned, a stockholder and/or an officer and/or a
director and/or a director nominee of ContiFinancial Corporation, a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Bear, Stearns &
Co. Inc. propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase
Agreement") and Merrill Lynch International and Bear, Stearns International
Limited propose to enter into an International Purchase Agreement (the
"International Purchase Agreement" and with the U.S. Purchase Agreement, the
"Purchase Agreements") with the

Exh A-1

<PAGE>

Company providing for the public offering of shares (the "Securities") of the
Company's common stock, par value $.01 per share (the "Common Stock") which will
set forth, among other things, the initial public offering price of the
Securities. In recognition of the benefit that such an offering will confer upon
the undersigned as a stockholder and/or an officer and/or a director nominee of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter or manager to be named in the Purchase Agreements that, during a
period of 90 days from the date of the Purchase Agreements, the undersigned will
not, without the prior written consent of Merrill Lynch, directly or indirectly,
sell, offer to sell, grant any option for the sale of, or otherwise dispose of
or transfer, any shares of the Company's Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition.

Very truly yours,

Signature: __________________________

Print Name: _________________________

Exh A-2

<PAGE>

------------------------------------------------------------------------------

CONTIFINANCIAL CORPORATION

(a Delaware corporation)

560,000 Shares of Common Stock

INTERNATIONAL PURCHASE AGREEMENT

Dated: __________, 1997

------------------------------------------------------------------------------

<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTERNATIONAL PURCHASE AGREEMENT................................................................................ 1
SECTION 1. Representations and Warranties................................................................ 3
(a) Representations and Warranties by the Company...................................... 3
(i) Compliance with Registration Requirements............................ 3
(ii) Incorporated Documents............................................... 4
(iii) Independent Accountants.............................................. 5
(iv) Financial Statements................................................. 5
(v) No Material Adverse Change in Business............................... 5
(vi) Good Standing of the Company......................................... 5
(vii) Good Standing of Subsidiaries........................................ 5
(viii) Capitalization....................................................... 6
(ix) Description of Common Stock.......................................... 6
(x) Authorization of Agreement........................................... 6
(xi) Authorization and Description of Securities.......................... 6
(xii) Absence of Defaults and Conflicts.................................... 6
(xiii) Absence of Labor Dispute............................................. 7
(xiv) Absence of Proceedings............................................... 7
(xv) Accuracy of Exhibits................................................. 8
(xvi) Possession of Intellectual Property.................................. 8
(xvii) Absence of Further Requirements...................................... 8
(xviii) Possession of Licenses and Permits................................... 8
(xix) Title to Property.................................................... 9
(xx) Investment Company Act............................................... 9
(xxi) Environmental Laws................................................... 9
(xxii) Compliance with Laws................................................. 10
(xxiii) Registration Rights.................................................. 10
(xxiv) Options and Warrants................................................. 10
(xxv) Taxes................................................................ 10
(xxvi) Insurance............................................................ 10
(xxvii) Accounting Control................................................... 11
(xxviii) Restriction on Sale of Securities.................................... 11
(xxix) Accuracy of Information.............................................. 11
(b) Officer's Certificates............................................................. 11
SECTION 2. Sale and Delivery to International Managers; Closing.......................................... 11
(a) Initial Securities................................................................. 11
(b) Option Securities.................................................................. 11
(c) Payment............................................................................ 12
(d) Denominations; Registration........................................................ 13
SECTION 3. Covenants of the Company...................................................................... 13
(a) Compliance with Securities Regulations and Commission Requests..................... 13
(b) Filing of Amendments............................................................... 13
(c) Delivery of Registration Statements................................................ 13
(d) Delivery of Prospectuses........................................................... 14
(e) Continued Compliance with Securities Laws.......................................... 14

</TABLE>

<PAGE>

<TABLE>

<S> <C>
(f) Blue Sky Qualifications............................................................ 14
(g) Rule 158........................................................................... 15
(h) Use of Proceeds.................................................................... 15
(i) Listing............................................................................ 15
(j) Restriction on Sale of Securities.................................................. 15
(k) Reporting Requirements............................................................. 15
SECTION 4. Payment of Expenses........................................................................... 15
(a) Expenses........................................................................... 16
(b) Termination of Agreement........................................................... 16
SECTION 5. Conditions.................................................................................... 16
(a) Conditions of International Managers' Obligations.................................. 16
(i) Effectiveness of Registration Statement.............................. 16
(ii) Opinions of Counsel for the Company.................................. 17
(iii) Opinion of Counsel for International Managers........................ 17
(iv) Officers' Certificate................................................ 17
(v) Accountant's Comfort Letter.......................................... 17
(vi) Accountant's Bring-down Comfort Letter............................... 18
(vii) Approval of Listing.................................................. 18
(viii) No Objection......................................................... 18
(ix) Lock-up Agreements................................................... 18
(x) Purchase of Initial U.S. Securities.................................. 18
(xi) Conditions to Purchase of International Option
Securities........................................................... 18
(xii) Additional Documents................................................. 19
(b) Termination of Agreement........................................................... 19
SECTION 6. Indemnification............................................................................... 19
(a) Indemnification of International Managers.......................................... 19
(b) Indemnification of Company, Directors and Officers................................. 20
(c) Actions against Parties; Notification.............................................. 21
(d) Settlement without Consent if Failure to Reimburse................................. 21
SECTION 7. Contribution.................................................................................. 22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery................................ 23
SECTION 9. Termination of Agreement...................................................................... 23
(a) Termination; General............................................................... 23
(b) Liabilities........................................................................ 24
SECTION 10. Default by One or More of the International Managers.......................................... 24
SECTION 11. Notices....................................................................................... 25
SECTION 12. Parties....................................................................................... 25
SECTION 13. GOVERNING LAW AND TIME........................................................................ 25
SECTION 14. Effect of Headings............................................................................ 25

SCHEDULE A List of International Managers..........................................................Sch A - 1

SCHEDULE B Price per share of Common Stock.........................................................Sch B - 1

SCHEDULE C List of Subsidiaries....................................................................Sch C - 1

</TABLE>

<PAGE>

<TABLE>

<S> <C>
SCHEDULE D List of Persons Subject to Lock-up......................................................Sch D - 1

EXHIBIT A Form of Lock-up Letter....................................................................Exh A-1
</TABLE>
iii

<PAGE>

CONTIFINANCIAL CORPORATION

(a Delaware corporation)

INTERNATIONAL PURCHASE AGREEMENT

__________ __, 1997

MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Ladies and Gentlemen:

ContiFinancial Corporation, a Delaware corporation (the "Company")
confirms its agreement with Merrill Lynch International ("Merrill Lynch"), Bear,
Stearns International Limited and each of the other International Managers named
in Schedule A hereto (collectively, the "International Managers", which term
shall also include any underwriter substituted as provided in Section 10 hereof,
for whom Merrill Lynch and Bear, Stearns International Limited are acting as
representatives (in such capacity, the "Lead Managers"), with respect to (i) the
issue and sale by the Company and the purchase by the International Managers,
acting severally and not jointly, of the respective numbers of shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") set forth
in Schedule A hereto and (ii) the grant by the Company to the International
Managers, acting severally and not jointly, of the option described in Section
2(b) hereof to purchase all or any part of 84,000 additional shares of Common
Stock to cover over-allotments, if any. The aforesaid 560,000 shares of Common
Stock (the "Initial International Securities") to be purchased by the
International Managers pursuant to this Agreement and all or any part of the
84,000 shares of Common Stock subject to the option described in Section 2(b)
hereof (the "International Option Securities") are hereinafter called,
collectively, the "International Securities".

<PAGE>

It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of 2,240,000 shares of Common Stock
(the "Initial U.S. Securities") through arrangements with certain underwriters
in the United States and Canada (the "U.S. Underwriters") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Bear, Stearns & Co. Inc. are
acting as representatives and the grant by the Company to the U.S. Underwriters,
acting severally and not jointly, of an option to purchase all or any part of
the 336,000 additional shares of Common Stock, subject to the option described
in Section 2(b) of the U.S. Purchase Agreement, to cover over-allotments, if any
(the "U.S. Option Securities" and, together with the International Option
Securities, the "Option Securities"). The Initial U.S. Securities and the U.S.
Option Securities are hereinafter called the "U.S. Securities". It is understood
that the Company is not obligated to sell, and the International Managers are
not obligated to purchase, any Initial International Securities unless all of
the Initial U.S. Securities are contemporaneously purchased by the U.S.
Underwriters.

The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters", the Initial International Securities and
the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities", and the International Securities, and the U.S.
Securities are hereinafter collectively called the "Securities".

The Company understands that the International Managers propose to make
a public offering of the International Securities as soon as the Lead Managers
deem advisable after this Agreement has been executed and delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-21839) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the Rules and Regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. Two forms of prospectus are to be used in connection
with the offering and sale of the Securities: one relating to the International
Securities (the "Form of International Prospectus") and one relating to the U.S.
Securities (the "Form of U.S. Prospectus"). The Form of International Prospectus
is identical to the Form of U.S. Prospectus, except for the front cover and back
cover pages and the information under the caption "Underwriting". The
information included in any such prospectus that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information." Each Form

<PAGE>

of International Prospectus and Form of U.S. Prospectus used before such
registration statement became effective, and any prospectus relating to the
offering of the Securities that omitted the Rule 430A Information that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, the schedules thereto, if any, and
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the 430A
Information, is herein called the "Registration Statement." Any registration
statement filed by the Company pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final Form of International Prospectus and
the final Form of U.S. Prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
forms first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "International Prospectus" and
the "U.S. Prospectus," respectively, and collectively, the "Prospectuses." For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the International Prospectus, the U.S. Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each International Manager as of the date hereof and
as of the Closing Time referred to in Section 2(c) hereof, and agrees with each
International Manager, as follows:

(i) Compliance with Registration Requirements. The Company
meets the requirements for the use of Form S-3 under the 1933 Act. Each
of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and no

<PAGE>

proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any International
Option Securities are purchased, at the Date of Delivery), the
Registration Statement, the Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither of the Prospectuses nor any amendments or supplements thereto,
at the time the Prospectuses or amendments or supplements thereto were
issued and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or International Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
International Manager through the Lead Managers expressly for use in
the Registration Statement or the International Prospectus.

Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424(b) under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectuses delivered to the International Managers for use in
connection with the offering of the Securities was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectuses, when they became effective or at the time they
were or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations or the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"),
as applicable, and, when read together with the other information in
the Prospectuses, at the time the Registration Statement became
effective, at the time the Prospectuses were issued and at the Closing
Time (and, if any International Option Securities are purchased, at the
Date of Delivery), did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.

<PAGE>

(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each, a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a

<PAGE>

corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are the
subsidiaries listed on Schedule C hereto.

(ix) Description of Common Stock. The Common Stock conforms
to the statements relating thereto contained in the Prospectuses.

(x) Authorization of Agreement. This Agreement and the U.S.
Purchase Agreement have been duly authorized, executed and delivered by
the Company.

(xi) Authorization and Description of Securities. The
Securities to be purchased by the International Managers and the U.S.
Underwriters from the Company have been duly authorized for issuance
and sale to the International Managers pursuant to this Agreement and
the U.S. Underwriters pursuant to the U.S. Purchase Agreement,
respectively, and, when issued and delivered by the Company pursuant to
this Agreement and the U.S. Purchase Agreement, respectively, against
payment of the consideration set forth herein and the U.S. Purchase
Agreement, respectively, will be validly issued, fully paid and
non-assessable; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of
any securityholder of the Company.

(xii) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter or bylaws or
limited liability company agreement or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively,

<PAGE>

"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the U.S. Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
U.S. Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of proceeds from
the sale of the Securities as described in the Prospectuses under "Use
of Proceeds") and compliance by the Company with its obligations under
this Agreement and the U.S. Purchase Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary pursuant to, the Agreements and Instruments
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or bylaws or limited liability company agreement of the Company
or any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any subsidiary or any of their assets, properties or
operations (except for such violations of law, statute, rule
regulation, judgment, order writ or decree that would not result in a
Material Adverse Effect). As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness of the Company or any subsidiary (or any
person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary. As used herein, a
"subsidiary" means a subsidiary more than a majority of whose
outstanding securities representing the right, other than as affected
by events of default, to vote for the election of directors of such
subsidiary or to direct or cause the direction of the management and
policies of such subsidiary, is owned, directly or indirectly, by the
Company.

(xiv) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending with
respect to which the Company has received service of process, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, or which might,

<PAGE>

individually or in the aggregate, reasonably be expected to materially
and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated by this Agreement and the
U.S. Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal
or governmental proceedings (with respect to which the Company has
received service of process) to which the Company or any subsidiary is
a party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.

(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations in connection with the offering, issuance or sale of
the Securities under this Agreement and the U.S. Purchase Agreement or
the consummation of the transactions contemplated by this Agreement and
the U.S. Purchase Agreement, except such as have been already obtained
or as may be required under the 1933 Act or the 1933 Act Regulations or
the 1934 Act or the 1934 Act Regulations and foreign or state
securities laws.

(xviii) Possession of Licenses and Permits. The Company and
its subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them,
except where the failure to possess any such Governmental Licenses
would not, singly or in the aggregate, result in a Material Adverse
Effect; the Company and its subsidiaries are

<PAGE>

in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of any reasonably likely
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.

(xx) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").

(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials

<PAGE>

(collectively, "Environmental Laws"), (B) the Company and its
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) to the Company's knowledge, there are no
pending (with respect to which the Company has received service of
process) or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries and
(D) to the Company's knowledge, there are no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or
any Environmental Laws.

(xxiii) Registration Rights. Except as set forth in the
Registration Statement or the Prospectuses, there are no persons with
registration or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.

(xxiv) Options and Warrants. Except as disclosed in the
Registration Statement or the Prospectuses, there are no outstanding
options, warrants, or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any, shares of capital
stock of the Company or any of its Subsidiaries or any security
convertible into or exchangeable for capital stock of the Company or
any of its Subsidiaries.

(xxvi) Insurance. The Company and its Subsidiaries carry or
are entitled to the benefits of insurance in such amounts and covering
such risks as is, in the Company's opinion, reasonably adequate for its
purposes.

<PAGE>

(xxviii) Restriction on Sale of Securities. The Company has
obtained and delivered to the Lead Managers the agreements of the
persons and entities named in Schedule D annexed hereto to the effect
that each such person will not, for a period of 90 days from the date
hereof and except as otherwise provided therein, without the prior
written consent of Merrill Lynch directly or indirectly, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares
of Common Stock or any securities convertible into or exercisable for
Common Stock owned by such person or entity or with respect to which
such person has the power of disposition.

(xxix) Accuracy of Information. The information in the
International Prospectus regarding delinquencies and foreclosures, loan
losses, the value of the servicing portfolios and Excess Spread
Receivables (as such term is defined in the Registration Statement) is
accurate and complete in all material respects.

(b) Officer's Certificates. Any certificate signed by any officer of
the Company and delivered to the Lead Managers or counsel for the International
Managers in connection with the offering of the Securities shall be deemed a
representation and warranty by the Company to each International Manager as to
the matters covered thereby.

SECTION 2. Sale and Delivery to International Managers; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each International Manager, severally and
not jointly, and each International Manager, severally and not jointly, agrees
to purchase from the Company, at the price per share set forth in Schedule B,
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Manager, plus any additional number of Initial
International Securities which such International Manager may become obligated
to purchase pursuant to the provisions of Section 10 hereof.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
International Managers, severally and not jointly, to purchase up to an
additional 84,000 shares of Common Stock at the price per share set forth in
Schedule B. The

<PAGE>

option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial International Securities upon notice by the Lead
Managers to the Company setting forth the number of International Option
Securities as to which the several International Managers are then exercising
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Lead Managers, but shall not be later than seven full business
days after the exercise of said option, nor in any event prior to the Closing
Time, as hereinafter defined. If the option is exercised as to all or any
portion of the International Option Securities, each of the International
Managers, acting severally and not jointly, will purchase that proportion of the
total number of International Option Securities then being purchased which the
number of Initial International Securities set forth in Schedule A opposite the
name of such International Manager bears to the total number of Initial
International Securities, subject in each case to such adjustments as the Lead
Managers in their discretion shall make to eliminate any sales or purchases of
fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the Lead Managers and the Company, at 9:00 A.M.
(Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Lead Managers and the Company (such time and date of payment and delivery being
herein called "Closing Time"). In addition, in the event that any or all of the
International Option Securities are purchased by the International Managers,
payment of the purchase price for, and delivery of certificates for, such
International Option Securities shall be made at the above-mentioned offices, or
at such other place as shall be agreed upon by the Lead Managers and the
Company, on each Date of Delivery as specified in the notice from the Lead
Managers to the Company.

Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Lead Managers for the respective accounts of the International Managers of
certificates for the International Securities to be purchased by them. It is
understood that each International Manager has authorized the Lead Managers, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial International Securities and the International
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the International Managers, may (but
shall not be obligated to) make payment of the purchase price for the Initial
International Securities or the International Option Securities, if any, to be
purchased by any International Manager whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Manager from its obligations
hereunder.

<PAGE>

(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Managers in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants with each
International Manager as follows:

(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify the Lead Managers immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectuses or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the Lead Managers
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectuses, whether pursuant to the
1933 Act, the 1934 Act or otherwise, will furnish the Lead Managers with copies
of any such documents a reasonable amount of time prior to such proposed filing
or use, as the case may be, and will not file or use any such document to which
the Lead Managers or counsel for the International Managers shall reasonably
object in a timely manner.

(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Lead Managers, counsel for the International Managers,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed to be
incorporated by reference therein) and signed copies of all consents and
certificates of experts,

<PAGE>

and will also deliver to the Lead Mangers, without charge, a conformed copy of
the Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the International Managers. If applicable, the
copies of the Registration Statement and each amendment thereto furnished to the
International Managers will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each International Manager, without charge,
during the period when the International Prospectus is required to be delivered
under the 1933 Act or the 1934 Act, such number of copies of the International
Prospectus (as amended or supplemented) as such International Manager may
reasonably request. If applicable, the International Prospectus and any
amendments or supplements thereto furnished to the International Managers will
be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T
or Rule 430A.

(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement, the U.S. Purchase Agreement and in the
Prospectuses. If at any time prior to the expiration of nine months after the
time of issuance of the Prospectuses, a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Securities, and if at such time
any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the International Managers or counsel
for the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of any such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the
International Managers such number of copies of such amendment or supplement as
the International Managers may reasonably request.

(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the International Managers, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Lead Managers may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any

<PAGE>

general consent to service of process or to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so qualified or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b) Registration
Statement.

(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds".

(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.

(j) Restriction on Sale of Securities. During a period of 90 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof, (C) any shares of Common Stock issued
or options to purchase Common Stock granted pursuant to existing employee
benefit plans of the Company or (D) any shares of Common Stock issued pursuant
to any non-employee director stock plan or dividend reinvestment plan.

SECTION 4. Payment of Expenses.

<PAGE>

(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the International
Managers of this Agreement, any Agreement Among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the International
Managers in connection therewith and in connection with the preparation of the
Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to
the International Managers of copies of each preliminary prospectus and of the
Prospectuses and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the International Managers of copies of the Blue Sky
Survey and any supplement thereto, (viii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the International Managers in
connection with, the review by the National Association of Securities Dealers,
Inc. of the terms of the offering and sale of the Securities and (ix) the fees
and expenses incurred in connection with the listing of the Securities on the
New York Stock Exchange.

(b) Termination of Agreement. If this Agreement is terminated by the
Lead Manger(s) in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Mangers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Mangers.

SECTION 5. Conditions.

(a) Conditions of International Managers' Obligations. The obligations
of the several International Managers hereunder are subject to the accuracy of
the representations and warranties of the Company contained in Section 1 hereof,
to the accuracy of the statements in certificates of any officer of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:

<PAGE>

Information shall have been filed with the Commission in accordance
with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance
with the requirements of Rule 430A).

(ii) Opinions of Counsel for the Company. At Closing Time, the
Lead Managers shall have received (1) the favorable opinion, dated as
of Closing Time, of Dewey Ballantine, counsel for the Company, in form
and substance reasonably satisfactory to counsel for the International
Managers, together with signed or reproduced copies of such letter for
each of the other International Managers, and (2) the favorable
opinion, dated as of Closing Time, of Alan L. Langus, Esq., Chief
Counsel for the Company, in form and substance reasonably satisfactory
to counsel for the International Managers, together with signed or
reproduced copies of such letter for each of the other International
Managers.

(iii) Opinion of Counsel for International Managers. At
Closing Time, the Lead Managers shall have received the favorable
opinion, dated as of Closing Time, of Brown & Wood LLP, counsel for the
International Managers, in form and substance reasonably satisfactory
to the Lead Managers, together with signed or reproduced copies of such
letter for each of the other International Managers.

(iv) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectuses, any material adverse
change in the condition, financial or otherwise, or in the earnings,
operations or business of the Company and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of
business, and the Lead Managers shall have received a certificate of
the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of
Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties of the Company
contained in Section 1 hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time, (iii)
the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the best of their knowledge, are
pending or are contemplated by the Commission.

(v) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Lead Managers shall have received from Arthur
Andersen LLP a letter dated such date, in form and substance
satisfactory to counsel for the Lead Managers, together with signed or
reproduced copies of such letter for each of the other International
Managers, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect
to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.

<PAGE>

(vi) Accountant's Bring-down Comfort Letter. At Closing Time,
the Lead Managers shall have received from Arthur Andersen LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished by them pursuant to Section
5(a)(v) hereof, except that the "specified date" referred to shall be a
date not more than three business days prior to Closing Time.

(vii) Approval of Listing. At Closing Time, the Securities
shall have been approved for listing on the New York Stock Exchange,
subject only to official notice of issuance.

(viii) No Objection. The NASD shall not have raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(ix) Lock-up Agreements. At the date of this Agreement, the
Lead Managers shall have received an agreement substantially in the
form of Exhibit A hereto signed by each of the persons and entities
listed on Schedule D hereto.

(x) Purchase of Initial U.S. Securities. Contemporaneously
with the purchase by the International Managers of the Initial
International Securities under this Agreement, the U.S. Underwriters
shall have purchased the Initial U.S. Securities under the U.S.
Purchase Agreement.

(xi) Conditions to Purchase of International Option
Securities. In the event that the International Managers exercise their
option provided in Section 2(b) hereof to purchase all or any portion
of the International Option Securities, the representations and
warranties of the Company and contained herein and the statements in
any certificates furnished by the Company hereunder shall be true and
correct as of each Date of Delivery and, at the relevant Date of
Delivery, the Lead Managers shall have received:

(B) Opinions of Counsel for the Company. The
favorable opinions of (1) Dewey Ballantine, counsel for the
Company, and (2) Alan L. Langus, Esq., Chief Counsel for the
Company, in form and substance reasonably satisfactory to
counsel for the International Managers, dated such Date of
Delivery, relating to the International Option Securities to
be purchased on such Date of Delivery and otherwise to the
same effect as the opinions required by Section 5(a)(ii)
hereof.

(C) Opinion of Counsel for International
Managers. The favorable opinion of Brown & Wood LLP, counsel
for the International Managers, in form

<PAGE>

and substance reasonably satisfactory to the Lead Managers,
dated such Date of Delivery, relating to the International
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(a)(iii) hereof.

(D) Accountant's Bring-down Comfort Letter. A
letter from Arthur Andersen LLP, in form and substance
satisfactory to counsel for the International Managers and
dated such Date of Delivery, substantially the same in form
and substance as the letter furnished to the International
Managers pursuant to Section 5(a)(vi) hereof, except that the
"specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.

(xii) Additional Documents. At Closing Time and at each Date
of Delivery, counsel for the International Managers shall have been
furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, contained herein; and all
proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Lead Managers and counsel for
the International Managers.

(b) Termination of Agreement. If any condition specified in subsection
(a) of this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the Closing
Time, the obligations of the several International Managers to purchase the
relevant Option Securities, may be terminated by the Lead Managers by notice to
the Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 6 and 7
shall survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of International Managers. The Company agrees to
indemnify and hold harmless each International Manager and each person, if any,
who controls any International Manager within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, as follows:

(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) including the Rule
430A Information, if applicable, or the omission or alleged omission

<PAGE>

therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto) including the Rule 430A
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto); provided, further, however,
that the foregoing indemnity with respect to any untrue statement contained in
or omission from a preliminary prospectus shall not inure to the benefit of any
International Manager (or any person controlling such International Manager)
from whom the person asserting any such loss, liability, claim, damage or
expense purchased any of the Securities which are the subject thereof if such
person was not sent or given a copy of the International Prospectus (or the
International Prospectus as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person and the untrue
statement contained in or omission from such preliminary prospectus was
corrected in the International Prospectus (or the International Prospectus as
amended or supplemented).

(b) Indemnification of Company, Directors and Officers. Each
International Manager severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a)

<PAGE>

of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) including the Rule 430A Information, if
applicable, or any preliminary international prospectus or the International
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by any
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the International Prospectus (or any amendment or supplement thereto).

<PAGE>

the date of such settlement for all such fees and expenses of counsel, other
than such fees and expenses of counsel which are being contested in good faith
by an indemnifying party.

SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Managers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company on one hand and the
International Managers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be such that the
International Managers shall be responsible for that portion of the aggregate
amount of such losses, liabilities, claims, damages and expenses represented by
the percentage that the total underwriting discount received by the
International Managers, as set forth on the cover of the International
Prospectus, bears to the aggregate initial public offering price of the
International Securities as set forth on such cover and the Company shall be
responsible for the balance.

The relative fault of the Company on the one hand and the International
Managers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the International Managers on the
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

The Company and the International Managers agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the International Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

<PAGE>

Notwithstanding the provisions of this Section 7, no International
Manager shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such International Manager has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission.

For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager; and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Securities set forth
opposite their respective names on Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any International Manager or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the International Managers.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Lead Managers may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement, or since the
respective dates as of which information is given in the International
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, operations or business of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the Lead
Managers, impracticable to market the Securities or to enforce contracts for the
sale of the Securities, or (iii) if trading in the Common Stock has been
suspended or limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq

<PAGE>

National Market has been suspended or limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any
of said exchanges or by such system or by order of the Commission, the NASD or
any other governmental authority, or (v) if a banking moratorium has been
declared by either Federal or New York authorities.

SECTION 10. Default by One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time or a Date
of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Lead Managers
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting International Managers, or any other underwriters,
to purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Lead Managers shall not have completed such arrangements within such 24-hour
period, then:

(a) if the number of Defaulted Securities does not exceed 10%
of the number of International Securities to be purchased on such date,
each of the non-defaulting International Managers shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
International Managers, or

(b) if the number of Defaulted Securities exceeds 10% of the
number of International Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the International Managers to
purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery, shall terminate without
liability on the part of any non-defaulting International Manager.

No action taken pursuant to this Section 10 shall relieve any
defaulting International Manager from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Managers or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectuses or
in any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for an International Manager under this
Section 10.

<PAGE>

SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers at: Merrill Lynch
International, Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY England,
attention of Equity Capital Markets; and notices to the Company shall be
directed to it at 277 Park Avenue, New York, New York 10172, attention of Alan
L. Langus, Esq., Chief Counsel.

SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the International Managers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
International Managers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any International Manager shall be deemed to be a successor by reason merely of
such purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and shall
not affect the construction hereof.

<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the International Managers and the Company in accordance with its terms.

Very truly yours,

CONTIFINANCIAL CORPORATION

By
------------------------
Name:
Title:

CONFIRMED AND ACCEPTED, as of the date first above written:

MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL
LIMITED

By: MERRILL LYNCH INTERNATIONAL

By
-------------------------------------------------
Authorized Signatory

For themselves and as Lead Managers of the
other International Managers named in
Schedule A hereto.

<PAGE>

SCHEDULE A

<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
----------------------------- -------------
<S> <C>
Merrill Lynch International...................................................
Bear, Stearns International Limited...........................................

-------
Total......................................................................... 560,000
=======
</TABLE>

Sch A -1

<PAGE>
SCHEDULE B

560,000 shares
CONTIFINANCIAL CORPORATION
Common Stock
(Par Value $.01 Per Share)

1. The initial public offering price per share of the
Securities, as referred to in Section 2, shall be $_____.

2. The purchase price per share for the International
Securities to be paid by the several International Managers shall be $_____,
being an amount equal to the initial public offering price set forth above less
$_____ per share; provided that the purchase price per share for any
International Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities.

Sch B - 1

<PAGE>
SCHEDULE C

List of Subsidiaries

Sch C - 1

<PAGE>

SCHEDULE D

Sch D - 1

<PAGE>
EXHIBIT A

[Form of Lock-up Letter]

______________________, 1997

MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
as Lead Managers of the several Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Re: Proposed Public Offering by ContiFinancial Corporation

Ladies and Gentlemen:

Exh A-1

<PAGE>

the initial public offering price of the Securities. In recognition of the
benefit that such an offering will confer upon the undersigned as a stockholder
and/or an officer and/or a director nominee of the Company, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter or manager to be
named in the Purchase Agreements that, during a period of 90 days from the date
of the Purchase Agreements, the undersigned will not, without the prior written
consent of Merrill Lynch, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of or transfer, any shares of the
Company's Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition.

Very truly yours,

Signature:
------------------------

Print Name:
-----------------------

Exh A-2

<PAGE>
------------------------------------------------------------------------------

------------------------------------------------------------------------------

CONTIFINANCIAL CORPORATION

(a Delaware corporation)

REGISTRATION AGREEMENT

Dated: __________, 1997

------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

<S> <C>
REGISTRATION AGREEMENT.......................................................................................... 1

SECTION 1. Representations and Warranties.................................................... 3
(a) Representations and Warranties by the Company..................................... 3
(i) Compliance with Registration Requirements........................... 3
(ii) Incorporated Documents.............................................. 4
(iii) Independent Accountants............................................. 5
(iv) Financial Statements................................................ 5
(v) No Material Adverse Change in Business.............................. 5
(vi) Good Standing of the Company........................................ 5
(vii) Good Standing of Subsidiaries....................................... 5
(viii) Capitalization...................................................... 6
(ix) Description of Common Stock......................................... 6
(x) Authorization of Agreement.......................................... 6
(xi) Absence of Defaults and Conflicts................................... 6
(xii) Absence of Labor Dispute............................................ 7
(xiii) Absence of Proceedings.............................................. 7
(xiv) Accuracy of Exhibits................................................ 7
(xv) Possession of Intellectual Property................................. 7
(xvi) Absence of Further Requirements..................................... 8
(xvii) Possession of Licenses and Permits.................................. 8
(xviii) Title to Property................................................... 8
(xix) Investment Company Act.............................................. 9
(xx) Environmental Laws.................................................. 9
(xxi) Compliance with Laws................................................ 9
(xxii) Registration Rights................................................. 9
(xxiii) Options and Warrants................................................ 9
(xxiv) Taxes............................................................... 10
(xxv) Insurance........................................................... 10
(xxvi) Accounting Control.................................................. 10
(xxvii) Restriction on Sale of Securities................................... 10
(xxviii) Accuracy of Information............................................. 10
(b) Officer's Certificates............................................................ 11

SECTION 2. Covenants of the Company.......................................................... 11
(a) Compliance with Securities Regulations and Commission
Requests.......................................................................... 11
(b) Filing of Amendments.............................................................. 11
(c) Delivery of ContiFinancial Registration Statements................................ 11
(d) Delivery of ContiFinancial Prospectuses........................................... 12
(e) Continued Compliance with Securities Laws......................................... 12
(f) Blue Sky Qualifications........................................................... 12
(g) Rule 158.......................................................................... 13
(h) Restriction on Sale of Securities................................................. 13

<PAGE>

(i) Reporting Requirements............................................................ 13

SECTION 3. Payment of Expenses............................................................... 13
(a) Expenses.......................................................................... 13
(b) Allocation of Expenses............................................................ 14

SECTION 4. Indemnification................................................................... 14
(a) Indemnification of Underwriters and the Trust..................................... 14
(b) Indemnification of Company, Directors and Officers................................ 15
(c) Actions against Parties; Notification............................................. 15
(d) Settlement without Consent if Failure to Reimburse................................ 16

SECTION 5. Contribution...................................................................... 16

SECTION 6. Representations, Warranties and Agreements to Survive
Delivery.......................................................................... 18
SECTION 7. Termination....................................................................... 18

SECTION 8. Notices........................................................................... 18

SECTION 9. Parties........................................................................... 18

SECTION 10. GOVERNING LAW..................................................................... 18

SECTION 11. Effect of Headings................................................................ 19

SCHEDULE A List of Underwriters........................................................Sch A - 1

SCHEDULE B List of Subsidiaries....................................................... Sch B - 1

SCHEDULE C List of Persons Subject to Lock-up......................................... Sch C - 1
</TABLE>

<PAGE>

CONTIFINANCIAL CORPORATION

(a Delaware corporation)

REGISTRATION AGREEMENT

__________ __, 1997

CONTIFINANCIAL STRYPES TRUST
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

ContiFinancial Corporation, a Delaware corporation (the "Company"),
confirms its agreement with ContiFinancial STRYPES Trust, a Delaware business
trust (the "Trust"), and with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and each of the
other Underwriters named in Schedule A hereto (collectively, the "Underwriters",
which term shall also include any underwriter substituted as provided in Section
10 of the Purchase Agreement (as defined below)), for whom Merrill Lynch and
Bear, Stearns & Co. Inc. are acting as representatives (in such capacity, the
"Representatives"), in connection with the proposed issue and sale by the Trust
to the Underwriters, acting severally and not jointly, pursuant to a purchase
agreement, dated the

<PAGE>

date hereof (the "Purchase Agreement"), among the Trust, Continental Grain
Company, a Delaware corporation ("Continental Grain"), and the Underwriters, of
an aggregate of 2,800,000 the Trust's STRYPESSM (each, a "STRYPES"),
exchangeable for shares of common stock, par value $.01 per share (the
"ContiFinancial Common Stock"), of the Company upon conclusion of the term of
the Trust on May 15, 2000 (the "Exchange Date"), and, at the option of the
Underwriters, all or any part of [420,000] additional STRYPES to cover
over-allotments, if any. The aforesaid 2,800,000 STRYPES (the "Initial
Securities") to be purchased by the Underwriters and all or any part of the
[420,000] STRYPES subject to the option described in Section 2(b) of the
Purchase Agreement (the "Option Securities") are hereinafter called,
collectively, the "Securities." Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.

The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement and the Purchase Agreement have been executed and delivered. The
Company acknowledges that it has been advised that the execution and delivery of
this Agreement is a condition to the execution and delivery of the Purchase
Agreement by the Underwriters and the Trust, and the Company acknowledges that
it is required to enter into this Agreement by the terms of Section 2 of the
Common Stock Registration Rights Agreement (the "Common Stock Registration
Rights Agreement") between the Company and Continental Grain and that, in
consideration of the Company's obligations under Section 2 of the Common Stock
Registration Rights Agreement and the execution and delivery of the Purchase
Agreement by the Underwriters and the Trust, the Company is willing to make the
representations, warranties and covenants herein contained.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-21839) covering the
registration of the shares of ContiFinancial Common Stock deliverable upon
exchange of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses. Each
prospectus used before such registration statement became effective is herein
called a "ContiFinancial preliminary prospectus." Such registration statement,
including the exhibits thereto, the schedules thereto, if any, and the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, at the time it became effective, is herein called the "ContiFinancial
Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") is herein referred to as the "ContiFinancial Rule 462(b)
Registration Statement," and after such filing the term "ContiFinancial
Registration Statement" shall include the ContiFinancial Rule 462(b)
Registration Statement. The final prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, in the form first furnished to the Underwriters for use in connection with
the offering of the Securities is herein called the "ContiFinancial Prospectus."
For purposes of this Agreement, all references to the ContiFinancial
Registration Statement, any ContiFinancial preliminary prospectus, the
ContiFinancial Prospectus or any amendment or supplement to any of the
- --------
SM Service mark of Merrill Lynch & Co., Inc.

<PAGE>

foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
ContiFinancial Registration Statement, any ContiFinancial preliminary prospectus
or the ContiFinancial Prospectus (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information which is incorporated by reference in the ContiFinancial
Registration Statement, any ContiFinancial preliminary prospectus or the
ContiFinancial Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the ContiFinancial Registration
Statement, any ContiFinancial preliminary prospectus or the ContiFinancial
Prospectus shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is
incorporated by reference in the ContiFinancial Registration Statement, such
ContiFinancial preliminary prospectus or the ContiFinancial Prospectus, as the
case may be.

Prior to the closing under the Purchase Agreement, the Trust will enter
into a forward purchase contract (the "Forward Purchase Contract") with
Continental Grain pursuant to which Continental Grain will agree to sell and the
Trust will agree to purchase, immediately prior to the Exchange Date, the
Reference Property (as defined in the Forward Purchase Contract) required by the
Trust to exchange all of the Securities on the Exchange Date as described in the
Trust Prospectus, subject to Continental Grain's right[, to the extent permitted
by applicable law,] to satisfy its obligations thereunder through a cash payment
based on the value of such Reference Property.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter and to the Trust as of the date
hereof, as of the Closing Time referred to in Section 2(c) of the Purchase
Agreement, and agrees with each Underwriter and the Trust as follows:

(i) Compliance with Registration Requirements. The Company
meets the requirements for the use of Form S-3 under the 1933 Act. Each
of the ContiFinancial Registration Statement and any ContiFinancial
Rule 462(b) Registration Statement has become effective under the 1933
Act and no stop order suspending the effectiveness of the
ContiFinancial Registration Statement or any ContiFinancial Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.

At the respective times the ContiFinancial Registration
Statement, any ContiFinancial Rule 462(b) Registration Statement and
any post-effective amendments

<PAGE>

thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the ContiFinancial
Registration Statement, the ContiFinancial Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither the ContiFinancial Prospectus nor any amendments or
supplements thereto, at the time the ContiFinancial Prospectus or any
such amendment or supplement was issued and at the Closing Time (and,
if any Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or
omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the ContiFinancial Registration Statement or
ContiFinancial Prospectus made in reliance upon and in conformity with
(x) information furnished to the Company in writing by any Underwriter
through the Representatives expressly for use in the ContiFinancial
Registration Statement or ContiFinancial Prospectus and (y) information
furnished to the Company in writing by the Trust expressly for use in
the ContiFinancial Registration Statement or ContiFinancial Prospectus.

Each ContiFinancial preliminary prospectus and the
ContiFinancial Prospectus filed as part of the ContiFinancial
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied
when so filed in all material respects with the 1933 Act Regulations
and, if applicable, each ContiFinancial preliminary prospectus and the
ContiFinancial Prospectus delivered to the Underwriters for use in
connection with the offering of the Securities was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the ContiFinancial
Registration Statement and the ContiFinancial Prospectus, when they
became effective or at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations or the
1934 Act and the rules and regulations of the Commission thereunder
(the "1934 Act Regulations"), as applicable, and, when read together
with the other information in the ContiFinancial Prospectus, at the
time the ContiFinancial Registration Statement became effective, at the
time the ContiFinancial Prospectus was issued and at the Closing Time
(and if any Option Securities are purchased, at the Date of Delivery),
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.

<PAGE>

(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules of the Company
included in the ContiFinancial Registration Statement are independent
public accountants as required by the 1933 Act and the 1933 Act
Regulations.

(iv) Financial Statements. The financial statements of the
Company included in the ContiFinancial Registration Statement and the
ContiFinancial Prospectus, together with the related schedules and
notes, present fairly the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") in the United States applied on a
consistent basis throughout the periods involved except for changes in
GAAP during such periods. The supporting schedules, if any, included in
the ContiFinancial Registration Statement present fairly in accordance
with GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in the
ContiFinancial Prospectus present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the ContiFinancial Registration
Statement.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the ContiFinancial
Registration Statement and the ContiFinancial Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
in the condition, financial or otherwise, or in the earnings,
operations or business of the Company and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.

(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the ContiFinancial Prospectus and to enter
into and perform its obligations under this Agreement; and the Company
is duly qualified as a foreign corporation to transact business and is
in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.

(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each, a "Subsidiary"

<PAGE>

and, collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the ContiFinancial Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the ContiFinancial Registration Statement, all
of the issued and outstanding capital stock of each such Subsidiary has
been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are the subsidiaries
listed on Schedule B hereto.

(ix) Description of Common Stock. The ContiFinancial
Common Stock conforms to the statements relating thereto contained in
the ContiFinancial Prospectus.

(x) Authorization of Agreement. This Agreement has
been duly authorized, executed and delivered by the Company.

(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter or bylaws or
limited liability company agreement or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
herein and compliance by the Company with its obligations hereunder
have been duly authorized by all necessary corporate action and do not
and will not, whether with or without the giving of notice or passage
of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will

<PAGE>

such action result in any violation of the provisions of the charter or
bylaws or limited liability company agreement of the Company or any
subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
subsidiary or any of their assets, properties or operations (except for
such violations of law, statute, rule regulation, judgment, order writ
or decree that would not result in a Material Adverse Effect). As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness of
the Company or any subsidiary (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
As used herein, a "subsidiary" means a subsidiary more than a majority
of whose outstanding securities representing the right, other than as
affected by events of default, to vote for the election of directors of
such subsidiary or to direct or cause the direction of the management
and policies of such subsidiary, is owned, directly or indirectly, by
the Company.

(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any Subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xiii) Absence of Proceedings. There is no action, suit,
proceeding, or, to the knowledge of the Company, any inquiry or
investigation before or brought by any court or governmental agency or
body, domestic or foreign, now pending with respect to which the
Company has received service of process, or, to the knowledge of the
Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the ContiFinancial
Registration Statement (other than as disclosed therein), or which
might, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, or which might, individually or in
the aggregate, reasonably be expected to materially and adversely
affect the properties or assets thereof or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings (with respect to which the
Company has received service of process) to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the ContiFinancial
Registration Statement, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result
in a Material Adverse Effect.

(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the ContiFinancial
Registration Statement, the ContiFinancial Prospectus or the documents
incorporated by reference therein or to be filed as exhibits thereto
which have not been so described or filed as required.

<PAGE>

(xv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any reasonably likely unfavorable decision, ruling or
finding) or invalidity or inadequacy, singly or in the aggregate, would
result in a Material Adverse Effect.

(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, except such as has been already obtained or
as may be required under the 1933 Act or the 1933 Act Regulations or
the 1934 Act or the 1934 Act Regulations or state securities laws.

(xvii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess any such Governmental Licenses would not,
singly or in the aggregate, result in a Material Adverse Effect; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of any reasonably likely unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.

(xviii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the ContiFinancial Prospectus
or (b) do not, singly or in the aggregate, materially affect the value
of such property and do not interfere with the use made and proposed to
be made of such property by the Company or any of its

<PAGE>

subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries
holds properties described in the ContiFinancial Prospectus, are in
full force and effect, and neither the Company nor any subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.

(xix) Investment Company Act. The Company is not an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended.

(xx) Environmental Laws. Except as described in the
ContiFinancial Registration Statement and except as would not, singly
or in the aggregate, result in a Material Adverse Effect, (A) neither
the Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) to the Company's knowledge, there are no pending (with respect to
which the Company has received service of process) or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its subsidiaries and (D) to the Company's
knowledge, there are no events or circumstances that might reasonably
be expected to form the basis of an order for clean-up or remediation,
or an action, suit or proceeding by any private party or governmental
body or agency, against or affecting the Company or any of its
subsidiaries relating to Hazardous Materials or any Environmental Laws.

(xxi) Compliance with Laws. Except as set forth in the
ContiFinancial Registration Statement or the ContiFinancial Prospectus,
the Company and its Subsidiaries are in compliance in all material
respects with all applicable laws, statutes, ordinances, rules or
regulations, the enforcement of which, individually or in the
aggregate, would be reasonably expected to result in a Material Adverse
Effect.

<PAGE>

(xxii) Registration Rights. Except as set forth in the
ContiFinancial Registration Statement or the ContiFinancial Prospectus,
there are no persons with registration or other similar rights to have
any securities registered pursuant to the ContiFinancial Registration
Statement or otherwise registered by the Company under the 1933 Act.

(xxiii) Options and Warrants. Except as disclosed in the
ContiFinancial Registration Statement or the ContiFinancial Prospectus,
there are no outstanding options, warrants, or other rights calling for
the issuance of, and no commitments, plans or arrangements to issue,
any shares of capital stock of the Company or any of its Subsidiaries
or any security convertible into or exchangeable for capital stock of
the Company or any of its Subsidiaries.

(xxiv) Taxes. The Company and its Subsidiaries have filed all
federal, state, local and foreign tax returns that are required to be
filed or have duly requested extensions thereof and have paid all taxes
required to be paid by any of them and any related assessments, fines
or penalties, except for any such tax, assessment, fine or penalty that
is being contested in good faith and by appropriate proceedings; and
adequate charges, accruals and reserves have been provided for in the
financial statements referred to in Section 1 (a)(iv) above in respect
of all federal, state, local and foreign taxes for all periods as to
which the tax liability of the Company or any of its Subsidiaries has
not been finally determined or remains open to examination by
applicable taxing authorities.

(xxv) Insurance. The Company and its Subsidiaries carry or are
entitled to the benefits of insurance in such amounts and covering such
risks as is, in the Company's opinion, reasonably adequate for its
purposes.

(xxvi) Accounting Control. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general and specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of
financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

(xxvii) Restriction on Sale of Securities. The Company has
obtained and delivered to the Representatives the agreements of the
persons and entities named in Schedule C annexed hereto to the effect
that each such person will not, for a period of 90 days from the date
hereof and except as otherwise provided therein, without the prior
written consent of Merrill Lynch directly or indirectly, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares
of ContiFinancial Common Stock or any

<PAGE>

securities convertible into or exercisable for ContiFinancial Common
Stock owned by such person or entity or with respect to which such
person has the power of disposition.

(xxviii) Accuracy of Information. The information in the
ContiFinancial Prospectus regarding delinquencies and foreclosures,
loan losses, the value of the servicing portfolios and Excess Spread
Receivables (as such term is defined in the ContiFinancial Registration
Statement) is accurate and complete in all material respects.

(b) Officer's Certificates. Any certificate signed by any officer of
the Company and delivered to the Representatives or counsel for the Underwriters
or to the Trust or counsel for the Trust in connection with the offering of the
Securities shall be deemed a representation and warranty by the Company to each
Underwriter and to the Trust, as the case may be, as to the matters covered
thereby.

SECTION 2. Covenants of the Company. The Company covenants
with each Underwriter and with the Trust as follows:

(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 2(b), will notify the Representatives and the Trust
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the ContiFinancial Registration Statement shall become effective,
or any supplement to the ContiFinancial Prospectus or any amended ContiFinancial
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
ContiFinancial Registration Statement or any amendment or supplement to the
ContiFinancial Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
ContiFinancial Registration Statement or of any order preventing or suspending
the use of any ContiFinancial preliminary prospectus, or of the suspension of
the qualification of the shares of ContiFinancial Common Stock deliverable upon
exchange of the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the Representatives and
the Trust notice of its intention to file or prepare any amendment to the
ContiFinancial Registration Statement (including any filing under Rule 462(b))
or any amendment, supplement or revision to either the prospectus included in
the ContiFinancial Registration Statement at the time it became effective or to
the ContiFinancial Prospectus, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish the Representatives and the Trust with copies of any
such documents a reasonable amount of time prior to such proposed filing or use,
as the case may be,

<PAGE>

and will not file or use any such document to which the Representatives or
counsel for the Underwriters or the Trust or counsel for the Trust shall
reasonably object in a timely manner.

(c) Delivery of ContiFinancial Registration Statements. The Company has
furnished or will deliver to the Representatives, counsel for the Underwriters,
the Trust and counsel for the Trust, without charge, signed copies of the
ContiFinancial Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference therein)
and signed copies of all consents and certificates of experts. If applicable,
the copies of the ContiFinancial Registration Statement and each amendment
thereto furnished to the Underwriters and the Trust will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T or Rule 430A of the 1933
Act Regulations.

(d) Delivery of ContiFinancial Prospectuses. The Company has delivered
to each Underwriter, without charge, as many copies of each ContiFinancial
preliminary prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each Underwriter, without charge, during the
period when the ContiFinancial Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the ContiFinancial Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. If
applicable, the ContiFinancial Prospectus and any amendments or supplements
thereto furnished to the Underwriters and the Trust will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in the Purchase Agreement. If
at any time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters, counsel for the Trust or counsel for the Company, to amend the
ContiFinancial Registration Statement or amend or supplement the ContiFinancial
Prospectus in order that the ContiFinancial Prospectus will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of any such counsel, at any such time to
amend the ContiFinancial Registration Statement or amend or supplement the
ContiFinancial Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 2(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the ContiFinancial
Registration Statement or the ContiFinancial Prospectus comply with such
requirements, and the Company will furnish to the Underwriters and the Trust
such number of copies of such amendment or supplement as the Underwriters and
the Trust may reasonably request.

<PAGE>

(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the shares of ContiFinancial
Common Stock deliverable upon exchange of the Securities for offering and sale
under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect through the Exchange Date; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the shares of ContiFinancial Common Stock
deliverable at maturity of the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect through the Exchange Date.

(h) Restriction on Sale of Securities. During a period of 90 days from
the date of the ContiFinancial Prospectus, the Company will not, without the
prior written consent of Merrill Lynch, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any share of ContiFinancial Common Stock or
any securities convertible into or exercisable or exchangeable for
ContiFinancial Common Stock or file any registration statement under the 1933
Act with respect to any of the foregoing or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the ContiFinancial
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of ContiFinancial Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the ContiFinancial Common Stock deliverable upon exchange of the
Securities, (B) any shares of ContiFinancial Common Stock issued by the Company
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof, (C) any shares of ContiFinancial Common Stock
issued or options to purchase ContiFinancial Common Stock issued or options to
purchase ContiFinancial Common Stock granted pursuant to existing employee
benefit plans of the Company or (D) any shares of ContiFinancial Common Stock
issued pursuant to any non-employee director stock plan or dividend reinvestment
plan.

(i) Reporting Requirements. The Company, during the period when the
ContiFinancial Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the 1934 Act Regulations.

SECTION 3. Payment of Expenses.

<PAGE>

(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
printing and filing of the ContiFinancial Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters and the Trust of this Agreement, (iii) the fees and disbursements
of the Company's counsel, accountants and other advisors, (iv) the qualification
of the shares of ContiFinancial Common Stock deliverable upon exchange of the
Securities under securities laws in accordance with the provisions of Section
2(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (v) the printing
and delivery to the Underwriters of copies of each ContiFinancial preliminary
prospectus and of the ContiFinancial Prospectus and any amendments or
supplements thereto, (vi) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, and
(vii) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. of the terms of the offering and sale of
the shares of ContiFinancial Common Stock deliverable upon exchange of the
Securities.

(b) Allocation of Expenses. The provisions of this Section 3 shall not
affect any agreement that the Company and Continental Grain may make for the
sharing of such costs and expenses.

SECTION 4. Indemnification.

(a) Indemnification of Underwriters and the Trust. The Company agrees
to indemnify and hold harmless each Underwriter, the Trust and each person, if
any, who controls any Underwriter or the Trust within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, as follows:

(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
ContiFinancial Registration Statement (or any amendment thereto) or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any ContiFinancial
preliminary prospectus or the ContiFinancial Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;

<PAGE>

statement or omission, or any such alleged untrue statement or
omission, referred to under (i) above; provided that (subject to
Section 4(d) below) any such settlement is effected with the written
consent of the Company; and

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the
Underwriters or the Trust, as the case may be), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, referred to under (i) above, to the extent that any such
expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with (A) written information furnished to the Company by
any Underwriter through Merrill Lynch expressly for use in the ContiFinancial
Registration Statement (or any amendment thereto), or any ContiFinancial
preliminary prospectus or the ContiFinancial Prospectus (or any amendment or
supplement thereto) or (B) written information furnished to the Company by the
Trust expressly for use in the ContiFinancial Registration Statement (or any
amendment thereto), or any ContiFinancial preliminary prospectus or the
ContiFinancial Prospectus (or any amendment or supplement thereto); provided,
further, however, that the foregoing indemnity with respect to any untrue
statement contained in or omission from a ContiFinancial preliminary prospectus
shall not inure to the benefit of any Underwriter (or any person controlling
such Underwriter) from whom such person asserting any such loss, liability,
claim, damage or expense purchased any of the Securities which are the subject
thereof, if such person was not sent or given a copy of the ContiFinancial
Prospectus (or the ContiFinancial Prospectus as amended or supplemented) at or
prior to the written confirmation of the sale of such Securities to such person
and the untrue statement contained in or omission from the ContiFinancial
preliminary prospectus was corrected in the ContiFinancial Prospectus (or the
ContiFinancial Prospectus as amended or supplemented).

(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the ContiFinancial Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
ContiFinancial Registration Statement (or any amendment thereto), or any
ContiFinancial preliminary prospectus or the ContiFinancial Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Merrill Lynch
expressly for use in the ContiFinancial Registration Statement (or any amendment
thereto) or such ContiFinancial preliminary prospectus or the ContiFinancial
Prospectus (or any amendment or supplement thereto).

<PAGE>

(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 4(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch; and, in
the case of parties indemnified pursuant to Section 4(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 or Section
5 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement for all such fees and expenses of counsel, other than such fees and
expenses of counsel which are being contested in good faith by the indemnifying
party.

SECTION 5. Contribution. If the indemnification provided for in Section
4 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then the Company on the one hand and the
Underwriters and the Trust on the other hand shall contribute to the aggregate
amount of such losses, liabilities, claims, damages and expenses incurred by
such indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters and the Trust on the

<PAGE>

other hand from the offering of the Securities pursuant to the Purchase
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Underwriters and the Trust on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

The relative benefits received by the offering of the Securities
pursuant to the Purchase Agreement shall be deemed to be such that the
Underwriters and the Trust shall be responsible for that portion of the
aggregate amount of such losses, liabilities, claims, damages and expenses
represented by the percentage that the total underwriting discount received by
the Underwriters, as set forth on the cover of the Trust Prospectus, or, if Rule
434 is used, the corresponding location on the Trust Term Sheet, bears to the
aggregate initial public offering price of the Securities as set forth on such
cover and the Company shall be responsible for the balance.

The relative fault of the Company on the one hand and the Underwriters
and the Trust on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or Continental Grain on the one hand or by the
Underwriters or the Trust on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company, the Underwriters and the Trust agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 5. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 5 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

Notwithstanding the provisions of this Section 5, the Underwriters and
the Trust shall not be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by the
Underwriters and distributed to the public were offered to the public exceeds
the amount of any damages which the Underwriters and the Trust have otherwise
been required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.

<PAGE>

For purposes of this Section 5, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter;
each person, if any, who controls the Trust within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as the Trust; and each
director of the Company, each officer of the Company who signed the
ContiFinancial Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 5
are several in proportion to the number of Securities set forth opposite their
respective names on Schedule A hereto and not joint.

SECTION 6. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant to the Purchase Agreement, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or controlling person, or by or on behalf of the Trust or controlling persons or
by or on behalf of the Company, and shall survive delivery of the Securities to
the Underwriters pursuant to the Purchase Agreement.

SECTION 7. Termination. In the event that the Underwriters terminate
the Purchase Agreement as provided in Section 5, Section 9 or Section 10
thereof, this Agreement shall simultaneously terminate, except that the
provisions of Section 3, the indemnity agreements set forth in Section 4, the
contribution provisions set forth in Section 5, and the provisions of Section 6
shall remain in effect.

SECTION 8. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, North Tower, World Financial
Center, New York, New York 10281-1209, attention of Mark J. Schulte; notices to
the Trust shall be directed to it at c/o Puglisi & Associates, 850 Library
Avenue, Suite 204, Newark, Delaware 19715, attention of Donald J. Puglisi;
notices to the Company shall be directed to it at 277 Park Avenue, New York, New
York 10172, attention of Alan L. Langus, Esq., Chief Counsel.

SECTION 9. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Trust and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Trust and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 4 and 5
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Trust and the
Company and their respective successors, and said controlling

<PAGE>

persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.

SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

SECTION 11. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

<PAGE>

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters, the Trust and the Company in accordance with its terms.

Very truly yours,

CONTIFINANCIAL CORPORATION

By
-------------------------------
Name:
Title:

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO. INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By
- ----------------------------------------
Authorized Signatory

For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.

CONTIFINANCIAL STRYPES TRUST

By
- ----------------------------------------
Name:
Title:

<PAGE>

SCHEDULE A

Number of
Initial
Name of Underwriter Securities

<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................................
Bear, Stearns & Co. Inc....................................................................

---------
Total...................................................................................... 2,800,000
=========

</TABLE>

Sch A - 1

<PAGE>

SCHEDULE B

List of Subsidiaries

Sch B - 1

<PAGE>

SCHEDULE C

Sch C - 1

<PAGE>
April , 1997

ContiFinancial Corporation
277 Park Avenue
New York, New York 10172

Ladies and Gentlemen:

We refer to the Registration Statement on Form S-3, Registration No.
333-21839 (the "Registration Statement") filed by ContiFinancial Corporation, a
Delaware corporation (the "Company"), on February 14, 1997 with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), and the amendments to the Registration Statement filed by
the Company with the Commission on March 10, 1997 and March 28, 1997,
respectively, relating to the offering of 6,440,000 shares (including up to
840,000 shares issuable by the Company upon exercise of the underwriters'
over-allotment options) of the Company's common stock, par value $.01 per share
(the "Common Stock"), registered for the sale thereunder.

In connection with the furnishing of this opinion, we have reviewed the
Registration Statement (including all amendments thereto filed on or prior to
the date hereof), the form of the United States Purchase Agreement included as
Exhibit 1.1 to the Registration Statement (the "U.S. Purchase Agreement"), the
form of the International Purchase Agreement included as Exhibit 1.2 to the
Registration Statement (the "International Purchase Agreement"), originals or
copies certified or otherwise identified to our satisfaction, of the Company's
Restated Certificate of Incorporation and Amended and Restated Bylaws, each as
in effect on the date hereof, and records of certain of the Company's corporate
proceedings. We also have examined and relied upon representations as to factual
matters contained in certificates of officers of the Company, and have made such
other investigations of fact and law and have examined and relied upon the
originals, or copies certified or otherwise identified to our satisfaction, of
such documents, records, certificates or other instruments, and upon such
factual information otherwise supplied to us, as in our judgment are necessary
or appropriate to render the opinion expressed below. In addition, we have
assumed, without independent investigation, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity of original documents to all documents submitted to us as certified,
photostatic, reproduced or conformed copies, the authenticity of all such latter
documents and the legal capacity of all individuals who have executed any of the
documents.

Based upon the foregoing, it is our opinion that:

1. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware.

2. The Common Stock, when issued, delivered and paid for as contemplated in
the Registration Statement, the U.S. Purchase Agreement and the
International Purchase Agreement, will be duly authorized, validly
issued, and fully paid and nonassessable.

We are not members of any bar except that of the State of New York, and in
expressing the opinions set forth above, we are not passing upon the laws of any
jurisdiction other than laws of the State of New York, the Delaware General
Corporation Law and the federal laws of the United States.

We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our name under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required by the Act or the rules and regulations of the
Commission promulgated thereunder.

Very truly yours,