Page 19
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to
__________________________
Commission File Number: 1-8422
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(Exact name of registrant as specified in
its charter)
DELAWARE 13-2641992
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
155 N. Lake Avenue, Pasadena, California 91101
(Address of principal executive offices) (Zip Code)
(818) 304-8400
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding at June 22, 1994
Common Stock $.05 par value 91,184,063
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
May 31, February 28,
1994 1994
(Dollar amounts in thousands)
<S> <C> <C>
ASSETS
Cash $ 4,644 $ 4,034
Receivables for mortgage loans shipped - pledged as collateral
for notes payable 1,515,754 1,970,431
Mortgage loans held for sale - pledged as collateral for notes payable 1,431,847 1,743,830
Other receivables 332,789 349,770
Property, equipment and leasehold improvements, at cost - net of
accumulated depreciation 155,648 145,625
Capitalized servicing fees receivable 354,994 289,541
Purchased servicing rights 942,864 836,475
Other assets 316,623 245,815
Total assets $5,055,163 $5,585,521
Borrower and investor custodial accounts (segregated in special
accounts - excluded from corporate assets) $1,231,027 $1,366,643
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $3,491,961 $3,859,227
Drafts payable issued in connection with mortgage loan closings 211,910 449,814
Accounts payable and accrued liabilities 113,257 87,818
Deferred income taxes 331,011 308,525
Total liabilities 4,148,139 4,705,384
Commitments and contingencies - -
Shareholders' equity
Preferred stock - authorized, 1,316,000 shares of $.05 par value;
issued and outstanding, none - -
Common stock - authorized, 240,000,000 shares of $.05 par value;
issued and outstanding, 91,139,885 shares at May 31, 1994
and 91,063,751 shares at February 28, 1994 4,556 4,553
Additional paid-in capital 606,476 606,031
Retained earnings 295,992 269,553
Total shareholders' equity 907,024 880,137
Total liabilities and shareholders' equity $5,055,163 $5,585,521
Borrower and investor custodial accounts $1,231,027 $1,366,643
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended May 31,
1994 1993
(Dollar amounts in
thousands, except per
share data)
<S> <C> <C>
Revenues
Loan origination fees $ 73,736 $ 79,240
Gain on sale of loans, net of commitment fees 11,748 29,123
Loan production revenue 85,484 108,363
Interest earned 90,782 65,534
Interest charges (63,643) (51,728)
Net interest income 27,139 13,806
Loan servicing income 95,930 63,838
Less amortization, net of servicing hedge benefit or expense (42,916) (30,528)
Net loan administration income 53,014 33,310
Commissions, fees and other income 11,481 11,186
Total revenues 177,118 166,665
Expenses
Salaries and related expenses 60,132 47,567
Occupancy and other office expenses 26,005 21,301
Guarantee fees 19,058 11,880
Marketing expenses 6,757 4,670
Other operating expenses 8,951 9,085
Total expenses 120,903 94,503
Earnings before income taxes 56,215 72,162
Provision for income taxes 22,486 28,865
NET EARNINGS $ 33,729 $ 43,297
Earnings per share
Primary $0.37 $0.49
Fully diluted $0.37 $0.47
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended May 31
1994 1993
(Dollar amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 33,729 $ 43,297
Adjustments to reconcile net earnings to net cash
used by operating activities:
Amortization of purchased servicing rights 23,000 26,995
Amortization of capitalized servicing fees receivable - 30,433
Depreciation and other amortization 6,366 3,010
Deferred income taxes 22,486 28,865
Origination and purchase of loans held for sale (9,353,167) (11,500,973)
Principal repayments and sale of loans 10,119,827 10,010,672
Decrease (increase) in mortgage loans shipped and held for sale 766,660 (1,490,301)
Increase in other receivables and other assets (54,993) (33,420)
Increase in accounts payable and accrued liabilities 25,439 20,567
Net cash provided (used) by operating activities 822,687 (1,370,554)
Cash flows from investing activities:
Additions to purchased servicing rights (129,389) (130,264)
Additions to capitalized servicing fees receivable (65,453) (43,276)
Purchase of property, equipment and leasehold
improvements - net (15,223) (7,334)
Net cash used by investing activities (210,065) (180,874)
Cash flows from financing activities:
Net (decrease) increase in warehouse debt and other
short-term borrowings (706,695) 1,295,390
Issuance of long-term debt 101,706 288,000
Repayment of long-term debt (181) (25,712)
Issuance of common stock 448 2,806
Cash dividends paid (7,290) (5,949)
Net cash (used) provided by financing activities (612,012) 1,554,535
Net increase in cash 610 3,107
Cash at beginning of period 4,034 12,573
Cash at end of period $ 4,644 $ 15,680
Supplemental cash flow information:
Cash used to pay interest $61,231 $40,144
Cash (refunded from) used to pay income taxes ($ 804) $ 305
Noncash financing activities - conversion of preferred stock - $ 4,787
The accompanying notes are an integral part of these statements.
</TABLE>
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended May 31, 1994 are
not necessarily indicative of the results that may be expected for the fiscal
year ending February 28, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the annual
report on Form 10-K for the fiscal year ended February 28, 1994 of Countrywide
Credit Industries, Inc. (the "Company").
On March 21, 1994, the Company's Board of Directors declared a 3-for-2
stock split payable May 3, 1994 to shareholders of record on April 11, 1994.
All references in the accompanying consolidated financial statements to the
number of common shares and share amounts have been restated to reflect the
stock split.
NOTE B - NOTES PAYABLE
<TABLE>
Notes payable consisted of the following.
<CAPTION>
(Dollar amounts in thousands) May 31, February 28,
1994 1994
<S> <C> <C>
Commercial paper $1,645,732 $2,194,543
Medium-term notes, Series A, B and C, net of discounts 1,188,550 1,088,550
Reverse-repurchase agreements 455,359 312,129
Pre-sale funding facilities - 63,210
Subordinated notes 200,000 200,000
Other notes payable (2.40%-2.90%) 2,320 795
$3,491,961 $3,859,227
</TABLE>
Bank Mortgage Warehouse Credit Facility and Commercial Paper
As of May 31, 1994, Countrywide Funding Corporation ("CFC"), the Company's
mortgage banking subsidiary, had an unsecured credit arrangement (mortgage
warehouse credit facility) with forty-two commercial banks permitting CFC to
borrow an aggregate maximum amount of $2.93 billion, including commercial paper.
This is an increase from the maximum amount previously available, which as of
February 28, 1994 was $2.85 billion. As of May 31, 1994, CFC had no outstanding
direct borrowings under the mortgage warehouse credit facility, and commercial
paper borrowings amounted to $1.65 billion. The maximum amount that can be
borrowed under the mortgage warehouse credit facility may be increased to $3.0
billion in the event any lender or lenders agree with CFC to increase such
lender's maximum commitment and/or through the inclusion as a lender of an
additional financial institution or institutions. The facility contains various
financial covenants and restrictions, including the prohibition of paying
dividends, if at the date of payment or distribution an event of default or
potential default exists with respect to the credit agreement. Interest on bank
borrowings is based on the prime rate and/or the London Interbank Offered Rates
("LIBOR") for U.S. dollar deposits. The weighted average commercial paper rate
for the three months ended May 31, 1994, including the effect of the interest
rate swap agreements discussed below, was 3.79%. Under certain circumstances,
including the failure to maintain specified minimum credit ratings, borrowings
under the mortgage loan warehouse credit facility and commercial paper may
become secured by mortgage loans held for sale and receivables for mortgage
loans shipped. Under the provisions of the mortgage warehouse credit facility,
$977 million of the total aggregate maximum borrowing amount expires on November
14, 1994; the remaining amount available under the facility of $1.95 billion
expires on November 15, 1995.
Medium-Term Notes
<TABLE>
As of May 31, 1994, outstanding medium-term notes issued by the parent and
CFC under various shelf registrations filed with the Securities and Exchange
Commission were as follows.
<CAPTION>
(Dollar amounts in thousands)
Outstanding Interest Rate Maturity Date
Balance
Floating- Fixed-Rate Total From To From To
Rate
<S> <C> <C> <C> <C> <C> <S> <S>
Parent
Series A $ - $ 12,750 $ 12,750 10.60% 10.60% Dec 1994 Aug 1995
CFC
Series A 5,000 494,800 499,800 5.71% 8.79% Jun 1994 Mar 2002
Series B 31,000 469,000 500,000 4.10% 6.98% Aug 1994 Aug 2005
Series C 150,000 26,000 176,000 4.55% 7.04% Apr 1999 Mar 2004
Subtotal $186,000 $989,800 $1,175,800
Total $186,000 $1,002,550 $1,188,550
</TABLE>
At May 31, 1994, all of the outstanding fixed-rate notes of CFC had been
effectively converted by interest rate swap agreements to floating-rate notes.
The weighted average borrowing rate on CFC's medium-term note borrowings for the
three months ended May 31, 1994, including the effect of the interest rate swap
agreements, was 4.42%. In addition, as of May 31, 1994, $324.0 million was
available for future issuances under the Series C shelf registration.
Reverse-Repurchase Agreements
As of May 31, 1994, the Company had entered into short-term financing
arrangements to sell mortgage-backed securities and whole loans under agreements
to repurchase. The weighted average borrowing rate for the three months ended
May 31, 1994 was 3.82%. The reverse-repurchase agreements were collateralized by
either mortgage-backed securities or whole loans. All mortgage-backed securities
and whole loans underlying reverse-repurchase agreements are held in safekeeping
by broker-dealers, and all agreements are to repurchase the same or
substantially identical mortgage-backed securities or whole loans.
Pre-Sale Funding Facilities
As of May 31, 1994, CFC had a $1.5 billion revolving credit facility ("Early
Funding Agreement") with the Federal Home Loan Mortgage Corporation ("FHLMC").
The credit facility is secured by conforming mortgage loans which are in the
process of being pooled into FHLMC participation certificates. Interest rates
under the agreement are based on the prevailing rates for mortgage-backed
securities reverse-repurchase agreements. The weighted average borrowing rate
for the three months ended May 31, 1994 was 3.64%. Of the total credit
facility, $750 million is committed through November 18, 1994. This commitment
is subject to CFC's compliance with certain financial and operational covenants.
The balance of the credit facility is cancelable by either party upon the
maturity of all, if any, then existing obligations. As of May 31, 1994, CFC had
no outstanding borrowings under this facility.
As of May 31, 1994, CFC had a $1 billion revolving credit facility ("As Soon as
Pooled Agreement") with the Federal National Mortgage Association ("FNMA"). The
credit facility is secured by conforming mortgage loans which are in the process
of being pooled into FNMA mortgage-backed securities. Interest rates are based
on LIBOR and/or federal funds. The weighted average borrowing rate for the
three months ended May 31, 1994 was 3.72%. Of the total credit facility, $500
million is committed through July 20, 1995. This commitment is subject to CFC's
compliance with certain financial and operational covenants. The balance of the
credit facility is cancelable by either party upon the maturity of all, if any,
then existing obligations. As of May 31, 1994, the Company had no outstanding
borrowings under this facility.
Subordinated Notes
In October 1992, CFC issued $200 million of 8.25% subordinated notes (the
"Subordinated Notes") due July 15, 2002 under a registration statement filed in
September 1992. Interest on the Subordinated Notes is payable semi-annually on
each January 15 and July 15, beginning January 15, 1993. The Subordinated Notes
are not redeemable prior to maturity and are not subject to any sinking fund.
Other
As of May 31, 1994, CFC had interest rate swap agreements with certain
financial institutions having notional principal amounts totaling $2.61 billion.
The effect of these agreements is to enable CFC to convert a portion of its
fixed-rate cost borrowings to LIBOR-based floating-rate cost borrowings
(notional amount $1.12 billion), to convert a portion of its commercial paper
borrowings from one floating-rate index to another (notional amount $.49
billion) and to further manage the Company's exposure to interest rate risk
(notional amount $1.00 billion). Payments are due periodically through the
termination date of each agreement. The agreements expire between June 1994 and
August 2005.
NOTE C - AMORTIZATION AND SERVICING HEDGE
<TABLE>
The following tables present components of amortization expense and servicing
hedge expense (benefit), included in net loan administration income.
<CAPTION>
(Dollar amounts in thousands) Three Months Ended May 31,
1994 1993
<S> <C> <C>
Amortization of purchased servicing rights $23,000 $26,995
Amortization of capitalized servicing fees receivable - 30,433
23,000 57,428
Servicing hedge expense (benefit) 19,916 (26,900)
Amortization, net of servicing hedge benefit or expense $42,916 $30,528
</TABLE>
NOTE D - SUBSEQUENT EVENTS
On June 14, 1994, the Company declared a cash dividend of $0.08 per common
share payable July 19, 1994 to shareholders of record on June 27, 1994.
NOTE E - SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The following tables present summarized financial information for Countrywide
Funding Corporation.
(Dollar amounts in thousands) May 31, February 28,
1994 1994
Balance Sheets:
Mortgage loans shipped and held for sale $2,947,601 $3,714,261
Other assets 2,044,991 1,809,403
Total assets $4,992,592 $5,523,664
Short- and long-term debt $3,691,122 $4,296,291
Other liabilities 416,952 374,559
Equity 884,518 852,814
Total liabilities and equity $4,992,592 $5,523,664
(Dollar amounts in thousands) Three Months Ended May 31,
1994 1993
Statements of Earnings:
Revenues $167,973 $156,166
Expenses 115,133 88,491
Provision for income taxes 21,136 27,070
Net earnings $ 31,704 $ 40,605
RESULTS OF OPERATIONS
Quarter Ended May 31, 1994 Compared to Quarter Ended May 31, 1993
Revenues for the quarter ended May 31, 1994 increased 6% to $177.1 million
from $166.7 million for the quarter ended May 31, 1993. Net earnings decreased
22% to $33.7 million for the quarter ended May 31, 1994 from $43.3 million for
the quarter ended May 31, 1993. The increase in revenues for the quarter ended
May 31, 1994 was due to the favorable impact of a larger and more slowly
prepaying loan servicing portfolio, the positive effects of which were offset
somewhat by the negative impact of decreased loan production resulting from
increased mortgage interest rates. The decrease in net earnings was the result
of decreased loan production along with an increase in expenses.
The total volume of loans produced decreased 19% to $9.4 billion for the
quarter ended May 31, 1994 from $11.5 billion for the quarter ended May 31,
1993. Refinancings totaled $4.8 billion, or 52% of total fundings for the
quarter ended May 31, 1994, as compared to $8.7 billion or 76% of total fundings
for the quarter ended May 31, 1993. Adjustable-rate mortgage loan production
totaled $2.0 billion, or 21% of total fundings for the quarter ended May 31,
1994, as compared to $3.0 billion or 26% of total fundings for the quarter ended
May 31, 1993. Production in the Company's Retail Division increased to $2.0
billion for the quarter ended May 31, 1994 compared to $1.6 billion for the
quarter ended May 31, 1993. Production in the Company's Wholesale Division
decreased to $3.0 billion (which included approximately $1.8 billion of
originated loans and $1.2 billion of purchased loans) for the quarter ended May
31, 1994 compared to $5.0 billion (which included approximately $3.2 billion of
originated loans and $1.8 billion of purchased loans) for the quarter ended May
31, 1993. The Company's Correspondent Division purchased $3.5 billion in
mortgage loans for the quarter ended May 31, 1994 compared to $4.3 billion for
the quarter ended May 31, 1993. Production in the Company's Consumer Division
increased to $0.9 billion for the quarter ended May 31, 1994 compared to $0.5
billion for the quarter ended May 31, 1993. The factors which affect the
relative volume of production among the Company's four divisions include pricing
decisions and the relative competitiveness of such pricing, the level of real
estate and mortgage lending activity in each Division's markets, and the success
of each Division's sales and marketing efforts.
At May 31, 1994 and 1993, the Company's pipeline of loans in process was
$4.4 billion and $7.8 billion, respectively. Historically, approximately 41% to
75% of the pipeline of loans in process has funded. In addition, at May 31,
1994 and 1993, the Company had committed to make loans in the amount of $2.7
billion and $0.7 billion, respectively, subject to property identification and
borrower qualification. For the quarters ended May 31, 1994 and 1993, the
Company received 90,900 and 123,406 new loan applications, respectively, at an
average daily rate of $165 million and $272 million, respectively. The
following actions were taken during the quarter ended May 31, 1994 on the total
applications received during that quarter: 44,048 loans (48% of total
applications received) were funded and 13,240 applications (15% of total
applications received) were either rejected by the Company or withdrawn by the
applicant. The following actions were taken during the quarter ended May 31,
1993 on the total applications received during that quarter: 55,270 loans (45%
of total applications received) were funded and 15,011 applications (12% of
total applications received) were either rejected by the Company or withdrawn by
the applicant. The factors that affect the percentage of applications received
and funded during a given time period include the movement and direction of
interest rates, the average length of loan commitments issued, the
creditworthiness of applicants, the production divisions' loan processing
efficiency and loan pricing decisions.
Loan origination fees and gain on sale of loans decreased due to lower loan
production that resulted from an increase in the level of mortgage interest
rates. Gain on sale of loans also decreased as a result of increased
competition caused by lower demand for mortgage loans. In general, loan
origination fees and gain on sale of loans are affected by numerous factors
including loan pricing decisions, volatility, the general direction of interest
rates and the volume of loans produced.
Net interest income (interest earned net of interest charges) increased to
$27.1 million for the quarter ended May 31, 1994 from $13.8 million for the
quarter ended May 31, 1993. Consolidated net interest income is principally a
function of: (i) net interest income earned from the Company's mortgage loan
warehouse ($19.4 million and $17.9 million for the quarters ended May 31, 1994
and 1993, respectively); (ii) interest expense related to the Company's
investment in servicing rights ($6.4 million and $13.3 million for the quarters
ended May 31, 1994 and 1993, respectively); and (iii) interest income earned
from the escrow balances associated with the Company's servicing portfolio ($
14.1 million and $9.2 million for the quarters ended May 31, 1994 and 1993,
respectively). The Company earns interest on, and incurs interest expense to
carry, mortgage loans held in its warehouse. The increase in net interest
income from the mortgage loan warehouse was attributable to an increase from the
quarter ended May 31, 1993 to the quarter ended May 31, 1994 in the average
mortgage loan warehouse due to a longer warehousing period for mortgage loans.
The decrease in interest expense related to the investment in servicing rights
resulted primarily from a decrease in the payments of interest to certain
investors pursuant to customary servicing arrangements with regard to paid-off
loans in excess of the interest earned on these loans through their respective
payoff dates ("Interest Costs Incurred on Payoffs"). The increase in net
interest income earned from the escrow balances was related to larger escrow
account balances caused by a larger servicing portfolio and an increase in the
earnings rate from the quarter ended May 31, 1993 to the quarter ended May 31,
1994.
During the quarter ended May 31, 1994, loan administration income was
positively affected by the continued growth and decreased prepayment rate of the
loan servicing portfolio. At May 31, 1994, the Company serviced $93.6 billion
of loans (including $0.9 billion of loans subserviced for others) compared to
$64.0 billion (including $0.4 billion of loans subserviced for others) at May
31, 1993, a 46% increase. The growth in the Company's servicing portfolio
during the quarter ended May 31, 1994 was primarily the result of loan
production volume and the acquisition of bulk servicing rights, partially offset
by prepayments. The weighted average interest rate of the mortgage loans in the
Company's servicing portfolio at May 31, 1994 was 7.2% compared to 7.8% at May
31, 1993. It is the Company's strategy to build and retain its servicing
portfolio because of the returns the Company can earn from such investment and
because the Company believes that servicing income is countercyclical to loan
origination income. In periods of rising interest rates (as occurred in the
quarter ended May 31, 1994), prepayments tend to decline and income from the
servicing portfolio generally rises.
During the quarter ended May 31, 1994, the annualized prepayment rate of
the Company's servicing portfolio was 17%, as compared to 30% for the quarter
ended May 31, 1993. In general, the prepayment rate is affected by the relative
level of mortgage interest rates, activity in the home purchase market and the
relative level of home prices in a particular market. The decrease in the
prepayment rate was primarily attributable to decreased refinance activity
caused by increased mortgage interest rates in the quarter ended May 31, 1994
from the quarter ended May 31, 1993. The primary means used by the Company to
reduce the sensitivity of its earnings to changes in interest rates is through a
strong production capability and a growing servicing portfolio. To further
mitigate the effect on earnings of higher amortization (which is deducted from
loan servicing income) resulting from increased prepayment activity, the Company
purchases call options that increase in value when interest rates decline (the
"Servicing Hedge").
For the quarter ended May 31, 1994, total amortization amounted to $23.0
million, representing an annualized rate of 8% of average capitalized servicing
fees receivable and purchased servicing rights ("Servicing Assets"). During the
quarter ended May 31, 1994, the Company did not realize any Servicing Hedge
gains; in addition, amortization of option premiums related to the Servicing
Hedge amounted to $19.9 million. For the quarter ended May 31, 1993, total
amortization was $57.4 million, representing an annualized rate of 32% of the
average Servicing Assets. During the quarter ended May 31, 1993, the Company
recognized $26.9 million in net Servicing Hedge gains. The factors affecting the
rate of amortization recorded in an accounting period include the level of
prepayments during the period, the change in prepayment expectations and the
amount of Servicing Hedge gains or losses. The decline in the rate of
amortization from the quarter ended May 31, 1993 to the quarter ended May 31,
1994 resulted primarily from a decline in the current and projected future
prepayment rates caused by an increase in mortgage interest rates.
The following summarizes the notional amounts of servicing hedge
transactions.
Long Call Options
Long Call Options on on U.S. Treasury
(Dollar amounts in millions) MBS Futures
Balance, February 28, 1994 $ 2,000 $1,770
Additions (expirations) (1,500) 1,300
Balance, May 31, 1994 $ 500 $3,070
The long call options purchased by the Company protect the value of the
investment in servicing rights from the effects of increased prepayment activity
that generally results from declining interest rates. To the extent that
interest rates increase, as they did during the quarter ended May 31, 1994, the
value of the servicing rights increases while the value of the options declines.
The value (i.e., replacement cost) of the options can decline below the
remaining unamortized cost of such options, but the options cannot expose the
Company to loss beyond its initial outlay to acquire them. Although the
replacement cost of the call options tends to decline when interest rates rise,
the options continue to provide protection over their remaining term against a
decline in interest rates below the level implied at purchase by their exercise
price. Accordingly, the Company amortizes option premiums over the lives of the
respective options. Any unamortized premium remaining when an option gain is
realized (through exercise or sale) is deducted from such gain. At May 31,
1994, the call options on mortgage-backed securities, which expire through
September 1994, had an unamortized cost of approximately $5.5 million and a
replacement value of less than $1 million. At May 31, 1994, the call options on
U.S. treasury futures, which expire through March 1995, had an unamortized cost
of approximately $38.4 million and a replacement value of approximately $9.1
million. To the extent that interest rates remain at the higher levels to which
they rose during the quarter ended May 31, 1994, the Company should be able to
replace existing Servicing Hedge positions at a cost significantly below that
previously paid.
During the quarter ended May 31, 1994, the Company acquired bulk servicing
rights for loans with principal balances aggregating $3.5 billion at a price of
$42.9 million or 1.23% of the aggregate outstanding principal balances of the
servicing portfolios acquired. During the quarter ended May 31, 1993, the
Company acquired bulk servicing rights for loans with principal balances
aggregating $2.9 billion at a price of $43.4 million or 1.49% of the aggregate
outstanding principal balances of the servicing portfolios acquired.
<TABLE>
Salaries and related expenses are summarized below for the quarters ended
May 31, 1994 and 1993.
<CAPTION>
(Dollar amounts in thousands) Quarter Ended May 31, 1994
Production Loan Other
Activities Administration Activities Total
<S> <C> <C> <C> <C>
Base Salaries $33,656 $ 5,492 $ 1,334 $ 40,482
Incentive Bonus 10,693 110 683 11,486
Payroll Taxes and Benefits 6,541 958 665 8,164
Total Salaries and Related Expenses $50,890 $ 6,560 $ 2,682 $60,132
Average Number of Employees 3,389 804 204 4,397
</TABLE>
<TABLE>
<CAPTION>
(Dollar amounts in thousands) Quarter Ended May 31, 1993
Production Loan Other
Activities Administration Activities Total
<S> <C> <C> <C> <C>
Base Salaries $24,350 $ 4,209 $ 1,259 $ 29,818
Incentive Bonus 11,978 62 733 12,773
Payroll Taxes and Benefits 3,988 796 192 4,976
Total Salaries and Related Expenses $40,316 $ 5,067 $ 2,184 $47,567
Average Number of Employees 2,702 607 120 3,429
</TABLE>
The amount of expense attributable to salaries increased during the quarter
ended May 31, 1994 primarily due to the increased number of employees (resulting
from hirings that occurred subsequent to May 31, 1993 during periods of
increased loan production), a larger servicing portfolio and the Company's
strategy to expand its market share, particularly in the home purchase lending
market. Incentive bonuses earned during the quarter ended May 31, 1994
decreased primarily due to decreased loan production.
Occupancy and other office expenses for the quarter ended May 31, 1994
increased 22% to $26.0 million from $21.3 million for the quarter ended May 31,
1993. This increase was attributable primarily to the expansion of the Retail
and Wholesale Divisions' branch networks. As of May 31, 1994, there were 285
Retail Division branch offices (including 77 satellite offices and five regional
service centers) and 70 Wholesale Division branch offices (including 9 regional
support centers). As of May 31, 1993, there were 207 Retail Division branch
offices (including 75 satellite offices and eight regional service centers) and
60 Wholesale Division branch offices (including 9 regional support centers). In
addition, the increase in the Company's loan production that occurred subsequent
to May 31, 1993 and a larger servicing portfolio resulted in an increase in
occupancy and other office expenses related to the Company's central office.
Guarantee fees (fees paid to guarantee timely and full payment of principal
and interest on mortgage-backed securities and whole loans sold to permanent
investors and to transfer the recourse provisions of the loans in the servicing
portfolio) for the quarter ended May 31, 1994 increased 60% to $19.1 million
from $11.9 million for the quarter ended May 31, 1993. This increase resulted
primarily from an increase in the servicing portfolio.
Marketing expenses for the quarter ended May 31, 1994 increased 45% to $6.8
million from $4.7 million for the quarter ended May 31, 1993. The increase in
marketing expenses reflects the Company's strategy to expand its market share,
particularly in the home purchase lending market.
Profitability of Loan Production and Servicing Activities
During the quarter ended May 31, 1994, the Company's pre-tax income from
its loan production activities (which include loan originations and purchases,
warehousing and sales) was $20.9 million. For the quarter ended May 31, 1993,
the Company's comparable pre-tax income was $59.3 million. The decrease of
$38.4 million is primarily attributable to lower loan production. During the
quarter ended May 31, 1994, the Company's pre-tax income from its loan servicing
activities (which include administering the loans in the servicing portfolio,
selling homeowners and other insurance and acting as tax payment agent) was
$32.0 million as compared to $12.2 million during the quarter ended May 31,
1993. The increase is primarily due to an increase in the servicing portfolio.
INFLATION
Inflation affects the Company in the areas of loan production and
servicing. Interest rates normally increase during periods of high inflation
and decrease during periods of low inflation. Historically, as interest rates
decline, loan production, particularly from loan refinancings, increases.
However, during such periods, prepayment rates tend to accelerate (principally
on the portion of the portfolio having a note rate higher than the then-current
interest rates), thereby decreasing the average life of the Company's servicing
portfolio and adversely impacting its servicing-related earnings primarily due
to increased amortization of the Servicing Assets, a decreased rate of interest
earned from the escrow balances, and increased Interest Costs Incurred on
Payoffs. Conversely, as interest rates increase, loan production, particularly
from loan refinancings, decreases, although in an environment of gradual
interest rate increases, purchase activity may actually be stimulated by a more
vibrant economy or anticipation of increasing real estate values. In a higher
interest rate environment, servicing-related earnings are enhanced because
prepayment rates tend to slow down, thereby extending the average life of the
Company's servicing portfolio and reducing Interest Costs Incurred on Payoffs,
and because the rate of interest earned from the escrow balances tends to
increase. This is particularly noteworthy as the Company's servicing portfolio
grows.
SEASONALITY
The mortgage banking industry is generally subject to seasonal trends.
These trends reflect the general national pattern of sales and resales of homes,
although refinancings tend to be less seasonal and more closely related to
changes in interest rates. Sales and resales of homes typically peak during the
spring and summer seasons and decline to lower levels from mid-November through
February. The Company believes that during the period from March 1, 1994
through May 31, 1994, any favorable impact of the typical seasonal pattern was
offset by an increase in mortgage interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financing needs are the financing of loan funding
activities and the investment in servicing rights. To meet these needs, the
Company currently relies on sales of commercial paper supported by the mortgage
warehouse credit facility, medium-term note issuances, pre-sale funding
facilities, mortgage-backed securities and whole loan reverse-repurchase
agreements, subordinated notes and cash flow from operations. In addition, in
the past the Company has relied on bank borrowings collateralized by mortgage
loans held for sale, servicing-secured bank facilities, privately-placed
financings and public offerings of preferred and common stock.
Certain of the Company's and CFC's debt obligations contain various
provisions that may affect the ability of the Company and CFC to pay dividends
and remain in compliance with such obligations. These provisions include
requirements concerning net worth, current ratio, debt-to-adjusted-net-worth
ratio and other financial covenants. These provisions have not had, and are not
expected to have, an adverse impact on the ability of the Company and CFC to pay
dividends.
The Company continues to investigate and pursue alternative and
supplementary methods to finance its growing operations through the public and
private capital markets. These may include such methods as mortgage loan sale
transactions designed to expand the Company's financial capacity and reduce its
cost of capital and the securitization of servicing income cash flows.
At times, the Company must meet margin requirements to cover changes in the
market value of its commitments to sell mortgage-backed securities. To the
extent that aggregate commitment prices are less than the current market prices,
the Company must deposit cash or certain government securities or obtain letters
of credit. The Company's credit facility provides a means of obtaining such
letters of credit to meet these margin requirements.
In the course of the Company's mortgage banking operations, the Company
sells to investors the mortgage loans it originates and purchases but generally
retains the right to service the loans, thereby increasing the Company's
investment in loan servicing rights. The Company views the sale of loans on a
servicing-retained basis in part as an investment vehicle.
Cash Flows
Operating Activities During the quarter ended May 31, 1994, the decrease
of the Company's warehouse of mortgage loans provided cash of approximately $0.8
billion, which was principally used to reduce short-term debt as discussed below
under Financing Activities. The Company's operating activities used cash to
fund other asset and working capital increases of $30 million, and also
generated $86 million of positive cash flow, which was principally allocated to
the long-term investment in servicing as discussed below under Investing
Activities.
Investing Activities Net cash used by investing activities increased to
$210 million for the quarter ended May 31, 1994 from $181 million for the
quarter ended May 31, 1993. This increase was primarily the result of an
increase in additions to capitalized servicing fees receivable due to the
Company's decision to retain more excess servicing.
Financing Activities Net cash used by financing activities was $0.6
billion for the quarter ended May 31, 1994. In the quarter ended May 31, 1993,
net cash was provided by financing activities in the amount of $1.6 billion.
This change was primarily the result of repayments of short-term borrowings by
the Company during the quarter ended May 31, 1994.
PROSPECTIVE TRENDS
Applications and Pipeline of Loans in Process
During the quarter ended May 31, 1994, the Company received new loan
applications at an average daily rate of $165 million, and at May 31, 1994, the
Company's pipeline of loans in process was $4.4 billion. This compares to a
daily application rate during the quarter ended May 31, 1993 of $272 million and
a pipeline of loans in process at May 31, 1993 of $7.8 billion. The decline in
the pipeline of loans in process from May 31, 1993 to May 31, 1994 was primarily
due to an increase in mortgage interest rates. The size of the pipeline is
generally an indication of the level of future fundings, as historically 41% to
75% of the pipeline of loans in process has funded. In addition, the Company
has committed to make loans in the amount of $2.7 billion, subject to property
identification and borrower qualification ("Lock n' Shop Pipeline"). At May 31,
1993, the Lock n' Shop Pipeline was $0.7 billion. Future application levels and
loan fundings are dependent on numerous factors, including the level of demand
for mortgage credit, the direction of interest rates, seasonal factors and
general economic conditions. At June 30, 1994, the average daily amount of
applications received was $121 million, the pipeline of loans in process was
$4.0 billion and the Lock n' Shop Pipeline was $2.2 billion.
Market Factors
Since late 1993, mortgage interest rates have increased. An environment of
rising interest rates has resulted in lower production (particularly from
refinancings) and greater price competition, which may adversely impact earnings
from loan origination activities in the future. The Company has taken steps to
maintain its productivity and efficiency, particularly in the loan production
area, by reducing staff and embarking on a program to reduce production-related
and overhead costs. However, there has been a time lag between the reduction in
income caused by declining production and the reduction in expenses. Through
June 30, 1994, the net decline in the Company's production staff was
approximately 39% from approximately 2,700 at February 28, 1994. The Company
has reduced its total staffing levels from approximately 4,800 at February 28,
1994 to approximately 3,500 at June 30, 1994. However, with rising interest
rates, earnings from the Company's loan servicing portfolio should increase over
time as amortization of the Servicing Assets and Interest Costs Incurred on
Payoffs decrease and the rate of interest earned from the escrow balances
associated with the Company's servicing portfolio increases. The Company has
begun a campaign to further increase the size of its servicing portfolio,
thereby increasing its servicing revenue base, by acquiring servicing contracts
through bulk purchases. During the quarter ended May 31, 1994, the Company has
purchased such servicing contracts with principal balances amounting to $3.5
billion.
In addition to other mortgage bankers, some of whom have raised equity
capital in public markets during the past several years (including initial
public offerings by most of the mortgage bankers now publicly traded), the
Company's primary competitors are commercial banks and savings and loans and
mortgage banking subsidiaries of diversified companies. Particularly in
California, savings and loans are competing with the Company by offering
aggressively priced adjustable-rate mortgage products since interest rates have
increased. Generally, the Company has noted significant price competition among
mortgage lenders, which has resulted in downward pressure on gain on sale of
loans.
Some regions in which the Company operates have been experiencing slower
economic growth, and real estate financing activity in these regions has been
negatively impacted. As a result, home lending activity for single- (one-to-
four) family residences in these regions may also have experienced slower
growth. There can be no assurance that the Company's operations and results
will not be negatively impacted by adverse economic conditions such as those
discussed above. The Company's California mortgage loan production (measured by
principal balance) constituted 34% of its total production during the quarter
ended May 31, 1994, down from 51% for the quarter ended May 31, 1993. The
decline in the percentage of California production was due to the Company's
continued effort to expand its production capacity outside of California. Since
California's mortgage loan production constitutes a significant portion of the
Company's production during the quarter, there can be no assurance that the
Company's operations will not be adversely affected to the extent California
experiences a period of slower or negative economic growth resulting in
decreased residential real estate lending activity.
As of May 31, 1994, approximately 47% of the principal balance of mortgage
loans in the Company's servicing portfolio were secured by properties located in
California. Because the Company services substantially all conventional loans
on a non-recourse basis, foreclosure losses are generally the responsibility of
the investor or insurer and not the Company. Accordingly, any increase in
foreclosure activity should not result in significant foreclosure losses to the
Company. However, the Company's expenses may be increased somewhat as a result
of the additional staff efforts required to foreclose on a loan. Similarly,
government loans serviced by the Company (17% of the Company's servicing
portfolio at May 31, 1994) are insured or partially guaranteed against loss by
the Federal Housing Administration or the Veterans Administration. As such, the
limited unreimbursed costs incurred by the Company on government foreclosed
loans are not material to the Company's consolidated financial statements.
Servicing Hedge
As previously discussed, the Company realized no gains and recorded
amortization of Servicing Hedge option premiums amounting to $19.9 million
during the quarter ended May 31, 1994. At May 31, 1994, the Servicing Hedge
option premiums had an unamortized cost of approximately $44 million. The
options expire through March 1995. There is no assurance that the Company's
Servicing Hedge will generate gains in the future. To the extent that interest
rates remain at the higher levels to which they rose during the quarter ended
May 31, 1994, the Company should be able to replace existing Servicing Hedge
positions at a cost significantly below that previously paid.
Implementation of New Accounting Standards
Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan, was issued in May 1993. Implementation of
this standard, which is required for the Company's fiscal year beginning March
1, 1995, is not expected to have a material effect on the Company's financial
statements.
In June 1994, the Financial Accounting Standards Board ("FASB") issued a
Proposed Statement of Financial Accounting Standards, Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans. This proposed statement would, among other provisions, require
the recognition of originated mortgage servicing rights ("OMSRs"), as well as
purchased mortgage servicing rights ("PMSRs"), as assets. Presently, the cost
of OMSRs is included with the cost of the related loans and written off against
income when the loans are sold, but the cost of PMSRs is recorded as an asset.
All capitalized mortgage servicing rights would be evaluated for impairment on a
discounted, disaggregated basis. Under current accounting requirements, the
impairment evaluation may be made on either a discounted or an undiscounted
basis. The Company uses a disaggregated, undiscounted method. A final
statement is expected by the end of calendar year 1994. The effect on the
Company's financial position and results of operations will be evaluated when
the FASB finalizes its decisions.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 First Amendment to Mortgage Loan Warehousing Agreement: Facility A and
Mortgage Loan Warehousing Agreement: Facility B dated as of March 25, 1994 by
and among Countrywide Funding Corporation ("CFC") and various financial
institutions.
10.2 Countrywide Credit Industries, Inc. Supplemental Executive Retirement Plan
effective March 1, 1994.
10.3 Countrywide Credit Industries, Inc. Split-Dollar Life Insurance Agreement.
10.4 Countrywide Credit Industries, Inc. Split-Dollar Collateral Assignment.
10.5 1994 Amended and Extended Management Agreement, dated as of May 15, 1994,
between Countrywide Mortgage Investments, Inc. ("CMI") and Countrywide Asset
Management Corporation.
10.6 1994 Amended and Restated Loan Purchase and Administrative Services
Agreement, dated as of May 15, 1994, between CMI and CFC.
11.1 Statement Regarding Computation of Per Share Earnings.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during this
reporting period.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(Registrant)
DATE: July 15, 1994 /s/ Stanford L. Kurland
Senior Managing Director and
Chief Operating Officer
DATE: July 15, 1994 /s/ Stanford L. Kurland
Chief Financial Officer
209357[7083]941
FIRST AMENDMENT TO
MORTGAGE LOAN WAREHOUSING AGREEMENT: FACILITY A,
MORTGAGE LOAN WAREHOUSING AGREEMENT: FACILITY B
AND RELATED DOCUMENTS
THIS FIRST AMENDMENT TO MORTGAGE LOAN WAREHOUSING AGREEMENT: FACILITY
A, MORTGAGE LOAN WAREHOUSING AGREEMENT: FACILITY B AND RELATED DOCUMENTS (the
"Amendment") is made and dated as of the 25th day of March, 1994, by and among
the Lenders signatory hereto, THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association ("FNBC"), as credit agent for the Lenders (in such capacity,
the "Credit Agent"), FIRST CHICAGO NATIONAL PROCESSING CORPORATION, a Delaware
corporation, as collateral agent for the Lenders (in such capacity, the
"Collateral Agent"), ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH, BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK, THE
CHASE MANHATTAN BANK, N.A., CREDIT LYONNAIS NEW YORK BRANCH, FNBC and
NATIONSBANK OF TEXAS, N.A., as Managing Co-Agents for the Lenders (in such
capacity, the "Managing Co-Agents"), BANKERS TRUST COMPANY, CANADIAN IMPERIAL
BANK OF COMMERCE, CITICORP USA, INC. and THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY, as Co-Agents for the Lenders (in such capacity, the
"Co-Agents"), FNBC as Paying Agent under the Depositary Agreement (in such
capacity, the "Paying Agent"), FIRST CHICAGO TRUST COMPANY OF NEW YORK, as sub-
agent for Paying Agent (the "Sub-Agent"), and COUNTRYWIDE FUNDING CORPORATION, a
New York corporation (the "Company").
RECITALS
A. Pursuant to that certain Mortgage Loan Warehousing Agreement:
Facility A (the "Facility A Agreement") and that certain Mortgage Loan
Warehousing Agreement: Facility B (the "Facility B Agreement"), both dated as of
November 15, 1993 and among the Credit Agent, the Lenders, the Collateral Agent,
the Managing Co-Agents, the Co-Agents and the Company (collectively, the
"Agreements"), the Lenders have agreed to extend credit to the Company on the
terms and subject to the conditions set forth therein. All capitalized terms
not otherwise defined herein shall have the meanings given to them in the
Glossary to the Agreements.
B. In connection with the Agreements, the Company, the Credit Agent,
the Collateral Agent, the Paying Agent and the Sub-Agent entered into that
certain Depositary and Issuing Agreement dated as of November 15, 1993 (the
"Depositary Agreement"), which governs the authentication and issuance of CPNs.
C. The parties hereto desire to amend the Depositary Agreement in
order to remove the limit on the aggregate face amount of CPNs maturing on any
date, and to amend the Agreements in order to clarify the nature of the
participation interest in sub-participations by Lenders and to allow the Company
to include certain "Eligible Conversion Mortgage Loans" (as defined below) in
the Borrowing Base, all as more particularly described below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Amendment of Depositary Agreement. To reflect the agreement of
the parties hereto to remove the limit on the aggregate face amount of CPNs
maturing on any date, the text of clause (a) of Paragraph 4 of the Depositary
Agreement is hereby deleted and the phrase "INTENTIONALLY OMITTED" is hereby
inserted in its place.
2. Clarification of Participation Interest in Sub-Participations. To
reflect the agreement of the parties hereto to amend the nature of the
participation interest of a Participant, subparagraph 14(d)(4) of the Facility A
Agreement is hereby amended by deleting the phrase "Aggregate Maximum
Commitment" in the fifth line and inserting in its place the phrase "Maximum
Primary Loan Commitment." Likewise, subparagraph 11(d)(4) of the Facility B
Agreement is hereby amended by deleting the phrase "Aggregate Maximum
Commitment" in the fifth line and inserting in its place the phrase "Maximum
Primary Loan Commitment."
3. Eligible Conversion Mortgage Loan. To reflect the agreement of
the parties hereto to permit the Company to include "Eligible Conversion
Mortgage Loans" (as defined below) in the Borrowing Base:
(a) A new definition of the term "Eligible Conversion Mortgage
Loan" is hereby inserted in the Glossary in correct alphabetical order to read
in its entirety as follows:
"'Eligible Conversion Mortgage Loan' shall mean a Mortgage Loan with
respect to which each of the following statements shall be accurate and complete
(and the Company by including said Mortgage Loan in any computation of the
Collateral Value of the Borrowing Base shall be deemed to so represent and
warrant to the Credit Agent, the Collateral Agent and the Lenders at and as of
the date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan; and
(b) Said Mortgage Loan was originated as a mortgage loan bearing
interest at an adjustable rate that may be converted to a fixed rate at the
election of the Obligor thereunder and was subsequently sold to an Approved
Investor, said Mortgage Loan having been purchased by the Company as a Mortgage
Loan due to the election of such Obligor to so convert."
(b) Subparagraph (n) of the definition of the term "Eligible
Mortgage Loan" is hereby amended to read in its entirety as follows:
"(n) Unless said Mortgage Loan is an Eligible Conversion Mortgage
Loan, the date of the promissory note relating to said Mortgage Loan is no
earlier than ninety (90) days prior to the date said Mortgage Loan is first
included in the Borrowing Base; provided, however, that even if said Mortgage
Loan is not an Eligible Conversion Mortgage Loan and the date of the promissory
note relating to said Mortgage Loan is earlier than ninety (90) days prior to
the date said Mortgage Loan is first included in the Borrowing Base, said
Mortgage Loan may constitute an Eligible Mortgage Loan if, but only if, the Fair
Market Value of said Mortgage Loan, when added to the Fair Market Value of all
other Mortgage Loans which are not Eligible Conversion Mortgage Loans and with
such earlier dates included in the Borrowing Base, does not exceed
$75,000,000.00;"
(c) The definition of the term "Type" is hereby amended by adding the
phrase ", an Eligible Conversion Mortgage Loan" immediately after the phrase "an
Eligible Uncommitted Non-Conforming Mortgage Loan" on the fourth line thereof.
4. Effective Date. This Amendment shall be effective (with such
effectiveness being retroactive to the day and year first above written) on the
earliest date upon which the Credit Agent has received this Amendment, duly
executed by all parties hereto, and such corporate resolutions, incumbency
certificates and other documents as the Credit Agent shall request.
5. No Other Amendment. Except as expressly amended herein, the
Credit Documents shall remain in full force and effect as currently written.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
7. Reaffirmation. By signing below, the Parent acknowledges and
agrees (a) to the terms of this Amendment and (b) that each of the Guaranty and
the Subordination Agreement remain in full force and effect
8. Representations and Warranties. The Company and the Parent hereby
represent and warrant to the Credit Agent, the Lenders, the Collateral Agent,
the Managing Co-Agents and the Co-Agents as follows:
(a) Each of the Company and the Parent has the corporate power
and authority and the legal right to execute, deliver and perform this Amendment
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Amendment. This Amendment has been duly
executed and delivered on behalf of each of the Company and the Parent and
constitutes the legal, valid and binding obligation of such party enforceable
against such party in accordance with its terms.
(b) At and as of the date of execution hereof and at and as of
the effective date of this Amendment and both prior to and after giving effect
to this Amendment: (1) the representations and warranties of the Company and
the Parent contained in the Credit Documents are accurate and complete in all
respects, and (2) there has not occurred an Event of Default or Potential
Default.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE FUNDING CORPORATION,
a New York corporation
By _____________________________
Name ___________________________
Title __________________________
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association,
as Credit Agent
By __________________________________
Name ________________________________
Title _______________________________
FIRST CHICAGO NATIONAL PROCESSING CORPORATION, a Delaware corporation,
as Collateral Agent
By __________________________________
Name ________________________________
Title _______________________________
ABN AMRO BANK N.V.,
LOS ANGELES INTERNATIONAL BRANCH,
as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Managing Co-Agent
and a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE BANK OF NEW YORK, as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE CHASE MANHATTAN BANK, N.A.,
as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
CREDIT LYONNAIS SAN FRANCISCO BRANCH,
as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
NATIONSBANK OF TEXAS, N.A.,
as a Managing Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANKERS TRUST COMPANY, as a Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
CANADIAN IMPERIAL BANK OF COMMERCE,
as a Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
CITICORP USA, INC., as a Co-Agent and a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, as a Co-Agent and
a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK OF MONTREAL, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK ONE, TEXAS, N.A., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANQUE NATIONALE DE PARIS,
LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
BANQUE PARIBAS, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
COMMERZBANK AKTIENGESELLSCHAFT GRAND CAYMAN BRANCH, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
DG BANK, DEUTSCHE GENOSSENSCHAFTSBANK, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
DRESDNER BANK AG, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
FIRST INTERSTATE BANK OF CALIFORNIA,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
KREDIETBANK, N.V., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
NATIONAL WESTMINSTER BANK USA,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
PNC BANK, NATIONAL ASSOCIATION, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE SAKURA BANK, LTD., LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE SANWA BANK, LIMITED, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
SHAWMUT BANK, N.A., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
SOCIETE GENERALE, NEW YORK BRANCH,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
UNION BANK OF SWITZERLAND, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH/CAYMAN ISLANDS BRANCH,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
LLOYDS BANK, PLC, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK HAPOALIM B.M., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE DAI-ICHI KANGYO BANK, LTD.,
SAN FRANCISCO AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
DEUTSCHE BANK AG, NEW YORK AND CAYMAN ISLAND BRANCHES, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK OF HAWAII, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE SUMITOMO BANK, LIMITED, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
UNITED STATE NATIONAL BANK OF OREGON, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE YASUDA TRUST & BANKING CO., LTD., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK BRUSSELS LAMBERT, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
CREDIT SUISSE, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE FIRST NATIONAL BANK OF CHICAGO, as Paying Agent
By __________________________________
Name ________________________________
Title _______________________________
FIRST CHICAGO TRUST COMPANY OF NEW YORK, as sub-agent for Paying Agent
By __________________________________
Name ________________________________
Title _______________________________
ACKNOWLEDGED and AGREED as of the date
first written above:
COUNTRYWIDE CREDIT INDUSTRIES, INC., a
Delaware corporation
By _______________________________
Name _____________________________
Title ____________________________
Countrywide Credit Industries, Inc.
Supplemental Executive Retirement Plan
Plan Document
CountrywidePlanDocB.mal 04/12/1994
TABLE OF CONTENTS
Page
Purpose 1
Article 1 Definitions 1
Article 2 Selection, Eligibility, Enrollment and Vesting 5
2.1 Selection by Committee 5
2.2 Enrollment Requirements 5
2.3 Eligibility; Commencement of Participation 5
2.4 Vesting 5
Article 3 Benefits 6
3.1 Normal Benefit 6
3.2 Special Benefit 6
3.3 Withholding and Payroll Taxes 7
3.4 Withdrawal Election 7
Article 4 Beneficiary 7
4.1 Beneficiary 7
4.2 Beneficiary Designation; Change; Spousal Consent 7
4.3 Acknowledgment 8
4.4 No Beneficiary Designation 8
4.5 Doubt as to Beneficiary 8
4.6 Discharge of Obligations 8
Article 5 Termination, Amendment or Modification of the Plan 8
5.1 Termination 8
5.2 Amendment 9
5.3 Effect of Payment 9
Article 6 Other Benefits and Agreements 9
6.1 Coordination with Other Benefits 9
Article 7 Administration 10
7.1 Committee Duties 10
7.2 Agents 10
7.3 Binding Effect of Decisions 10
7.4 Indemnity of Committee 10
7.5 Employer Information 10
Article 8 Claims Procedures 11
8.1 Presentation of Claim 11
8.2 Notification of Decision 11
8.3 Review of a Denied Claim 12
8.4 Decision on Review 12
8.5 Legal Action 12
ARTICLE 9 Trust 13
9.1 Establishment of Trust 13
9.2 Interrelationship of the Plan and the Trust 13
Article 10 Miscellaneous 13
10.1 Unsecured General Creditor 13
10.2 Employer's Liability 13
10.3 Nonassignability 13
10.4 Not a Contract of Employment 14
10.5 Furnishing Information 14
10.6 Terms 14
10.7 Captions 14
10.8 Governing Law 14
10.9 Validity 14
10.10 Notice 15
10.11 Successors 15
10.12 Spouse's Interest 15
10.13 Incompetent 15
10.14 Distribution in the Event of Taxation 16
COUNTRYWIDE CREDIT INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective March 1, 1994
Purpose
The purpose of this plan is to provide specified benefits to a select
group of management and highly compensated employees who contribute materially
to the continued growth, development and future business success of Countrywide
Credit Industries, Inc., a Delaware corporation, and its subsidiaries. This
Plan shall be unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended from time to time.
1 Definitions
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
.1 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 4 below, that are entitled to
receive benefits under this Plan upon the death of a Participant.
.2 "Beneficiary Designation Form" shall mean the form established from time to
time by the Committee that a Participant completes, signs and returns to the
Committee to designate one or more Beneficiaries.
.3 "Benefit Amount" shall mean an annual benefit that is equal in amount to:
(i) 70% of the average of the Participant's five highest years of salary
(or such shorter period that the Participant is employed by an Employer),
determined by averaging the Participant's five highest calendar years of Salary
during the ten calendar year period ending with the calendar year in which the
Participant terminates his or her service with all Employers (or such shorter
period that the Participant is employed by an Employer); less
(ii) An annual amount, determined as of the Participant's Retirement date,
that is the actuarial equivalent (based on the assumptions used in the Company's
qualified defined benefit plan) of the total company contributions made to the
Deferred Compensation Plan established by the Employers on behalf of the
Participant, plus the earnings thereon, calculated as an annual benefit in the
form of a term certain for 15 years; less
(iii) An amount equal to the Participant's annual qualified pension plan
benefits, determined as of the Participant's 65th birthday or, if later, his or
her Retirement or, if earlier his or her early Retirement.
.4 "Board" shall mean Compensation Committee of the Board of Directors of the
Company.
.5 "Change in Control" shall mean the first to occur of any of the following
events:
(a) Any "person" (as that term is used in Section 13 and 14(d)(2) of the
Securities Exchange Act of 1934 ("Exchange Act")) is or becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act), directly or
indirectly, of 50% or more of the Company's capital stock entitled to vote in
the election of directors;
(b) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of the Company cease for any
reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new director was
approved by a vote of at least three-quarters of the directors still in office
who were directors at the beginning of the period;
(c) Any consolidation or merger of the Company, other than a merger of the
Company in which the holders of the common stock of the Company immediately
prior to the merger hold more than 50% of the common stock of the surviving
corporation immediately after the merger;
(d) The shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(e) Substantially all of the assets of the Company are sold or otherwise
transferred to parties that are not within a "controlled group of corporations"
(as defined in Section 1563 of the Code) in which the Company is a member.
.6 "Claimant" shall have the meaning set forth in Section 8.1 below.
.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
.8 "Committee" shall mean the administrative committee appointed to manage and
administer the Plan in accordance with the provisions of Article 7 below.
.9 "Company" shall mean Countrywide Credit Industries, Inc., a Delaware
corporation.
.10 "Salary" shall mean the annual compensation, excluding bonuses,
commissions, overtime, incentive payments, non-monetary awards, directors fees
and other fees, paid to a Participant for employment services rendered to any
Employer, before reduction for compensation deferred pursuant to all qualified,
non-qualified and Code Section 125 plans of any Employee.
1.11 "Deferred Compensation Plan" shall mean the Countrywide Credit Industries,
Inc., Deferred Compensation Plan effective August 1, 1993.
1.12 "Disability" shall mean a period of disability during which a Participant
qualifies for benefits under the Participant's Employer's long-term disability
plan, or, if a Participant does not participate in such a plan, a period of
disability during which the Participant would have qualified for benefits under
such a plan, as determined in the sole discretion of the Committee, had the
Participant been a participant in such a plan.
1.13 "Employer" shall mean the Company and/or any of its subsidiaries that have
been selected by the Board to participate in the Plan.
1.14 "Qualified Plan" shall mean the Company's Pension Plan, as amended,
effective March 1, 1994.
1.15 "Normal Benefit" shall mean the benefit described in Section 3.1 below.
1.16 "Participant" shall mean any employee of an Employer (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan, (iii) who
signs a Plan Agreement and Beneficiary Designation Form, (iv) whose signed Plan
Agreement and Beneficiary Designation Form are accepted by the Committee, and
(v) whose Plan Agreement has not terminated.
1.17 "Plan" shall mean the Company's Supplemental Executive Retirement Plan,
which shall be evidenced by this instrument and by each Plan Agreement, all as
may be amended from time to time.
1.18 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant shall provide for
the entire benefit to which such Participant is entitled to under the Plan, and
the Plan Agreement bearing the latest date shall govern such entitlement. Such
Agreement is hereby incorporated by reference and, with respect to the
Participant who is a party thereto, shall form a part of this Plan.
1.19 "Plan Year" shall, for the first Plan Year, begin on March 1, 1994, and end
on February 28, 1995. For each Plan Year thereafter, the Plan Year shall begin
on March 1 of each year and continue through February 28 of the next year.
1.20 "Retirement," "Retires" or "Retired" shall mean severance from employment
with all Employers for any reason other than a leave of absence, death,
Termination of Employment or a Disability on or after the attainment of age
sixty-five (65).
1.21 "Special Benefit" shall mean the benefit described in Section 3.2 below.
1.22 "Termination of Employment" shall mean the ceasing of employment with all
Employers, voluntarily or involuntarily, for any reason other than Retirement,
Disability or death.
1.23 "Trust" shall mean the trust established pursuant to that certain Trust
Agreement, dated as of September 1, 1993, between the Company and the Trustee
named therein, as amended from time to time.
1.24 "Years of Plan Participation" shall mean the total number of full years a
Participant has been a Participant in the Plan. For purposes of a Participant's
first Plan Year of participation only, any partial Plan Year of participation
shall be treated as a full year.
2 Selection, Eligibility, Enrollment and
Vesting
.1 Selection by Committee. Participation in the Plan shall be limited to a
select group of management and highly compensated employees of the Employers.
From that group, the Committee shall select, in its sole discretion, employees
of the Employers to participate in the Plan.
.2 Enrollment Requirements. As a condition to participation, each selected
employee shall complete, sign and return to the Committee a Plan Agreement and a
Beneficiary Designation Form. In addition, the Committee, in its sole
discretion, shall establish from time to time such other enrollment requirements
as it determines in its sole discretion are necessary.
.3 Eligibility; Commencement of Participation. Provided an employee selected
to participate in the Plan has met all enrollment requirements set forth in this
Plan and required by the Committee, that employee shall commence participation
in the Plan on the date specified by the Committee. If a selected employee
fails to meet all such requirements prior to that date, that employee shall not
be eligible to participate in the Plan until the completion of those
requirements.
.4 Vesting. A Participant shall vest 100% in his or her benefits under this
Plan upon attaining, while employed by an Employer, age 65 or at least age 55
(but less than 65) with at least 5 Years of Plan Participation. Notwithstanding
the foregoing, a Participant shall become 100% vested in his or her benefits
under this Plan, upon the earliest to occur of, while employed by an Employer,
the onset of a Disability, a Change in Control, or his or her death. If a
Participant has a Termination of Employment prior to becoming 100% vested as
described in this Section 2.4, he or she shall forfeit his or her entire benefit
hereunder and no person shall have any claim or right to any benefit or payment
under this Plan.
4
Benefits
.1 Normal Benefit.
(a) Eligibility. Except as provided in Section 3.2 below, upon a
Participant's Retirement or Disability, the Participant shall become entitled to
receive the Normal Benefit.
(b) Form and Amount. The "Normal Benefit" shall be paid in 15 annual
payments, with the first payment commencing within 30 days following the
Participant's Retirement Date or onset of the Disability and with each annual
payment thereafter being paid on the first day of the month following the
anniversary of the Participant's Retirement Date or Disability onset, as the
case may be. The amount of each annual payment shall be equal to the Benefit
Amount, as that amount is calculated for the Participant. If a Participant dies
after payments have commenced, his or her beneficiary will continue to receive
the SERP benefit for the balance of the 15 year period.
.2 Special Benefit.
(a) Eligibility. If a Participant dies, or a Change in Control occurs,
prior to his or her Retirement or Disability, the Participant or his or her
Beneficiary, as the case may be, shall be paid the Special Benefit in lieu of
the Normal Benefit.
(b) Benefit and Payment. The "Special Benefit" shall be paid in a lump
sum cash payment within 60 days following the date that the Committee receives
notice of the Participant's death, or within 60 days following a Change in
Control. The amount of this benefit shall be the present value of the Normal
Benefit that the Participant would have received had the Participant lived and
terminated his or her employment with all Employers on the date of his or her
death or the Change in Control and payments commenced on that date. Such
benefit shall be computed using a rate equal to the Pension Benefit Guarantee
Corporation immediate annuity interest rate ("PBGC Rate"), at the time of
retirement for a benefit of 15 years certain based on 100% of the 1983 Group
Annuity Mortality Table.
.3 Withholding and Payroll Taxes. The Employers shall withhold from any and
all of the Participant's benefits distributed under this Article 3 and, if
necessary, the Participant's wages, all federal, state and local income,
employment and other taxes required to be withheld by the Employer in connection
with the benefits hereunder, in amounts to be determined in the sole discretion
of the Employer.
3.4 Withdrawal Election. A Participant or his or her Beneficiary, as the case
may be, may elect, at any time after he or she commences to receive benefits
payments under this Plan, to receive those payments in a lump sum, based on the
Actuarial Equivalent of his or her remaining vested SERP benefits less a 10%
penalty (as described below). No election to partially accelerate benefits
shall be allowed. The Participant shall make this election by giving the Plan
Administrator advance written notice of the election in a form determined from
time to time by the Plan Administrator. The penalty shall be equal to 10% of
the lump sum actuarial equivalent of the Participant's remaining vested SERP
benefit, determined using a rate equal to the Pension Benefit Guarantee
Corporation immediate annuity interest rate ("PBGC Rate"), at the time of
retirement for a benefit of 15 years certain based on 100% of the 1983 Group
Annuity Mortality Table. The Participant shall be paid the reduced Benefit
Amount within 60 days of his or her election. Once such is paid, the
Participant's participation in the Plan shall terminate and the Participant
shall not be eligible to participate in the Plan in the future.
6
Beneficiary
.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent) to receive
any benefits payable under the Plan to a Beneficiary upon the death of a
Participant. The Beneficiary designated under this Plan may be the same as or
different from the Beneficiary designation under any other plan of the Company
in which the Participant participates.
.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall
designate his or her Beneficiary or Beneficiaries by completing and signing the
Beneficiary Designation Form and returning it to the Committee or its designated
agent. A Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the Beneficiary
Designation Form and the Committee's rules and procedures, as in effect from
time to time. If the Participant names someone other than his or her spouse as
a Beneficiary, a spousal consent, if required by the Committee, must be signed
by that Participant's spouse on a form designated by the Committee and returned
to the Committee. Upon the acceptance by the Committee of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be
canceled. The Committee shall be entitled to rely on the last Beneficiary
Designation Form filed by the Participant and accepted by the Committee prior to
his or her death.
.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by the
Committee or its designated agent.
.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 4.1, 4.2 and 4.3 above or, if all designated
Beneficiaries predecease the Participant or die prior to the complete
distribution of the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be his or her surviving spouse. If the
Participant has no surviving spouse, the benefits remaining under the Plan to be
paid to a Beneficiary shall be payable to the executor or personal
representative of the Participant's estate.
.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, before a Change in Control, to cause the Trustee to withhold such
payments until this matter is resolved to the Committee's satisfaction.
.6 Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the Committee
from all further obligations under this Plan with respect to a Participant, and
that Participant's Plan Agreement shall terminate upon such full payment of
benefits.
7 Termination, Amendment or Modification of the
Plan
.1 Termination. Any Employer reserves the right to terminate the Plan at any
time with respect to the Participants employed by that Employer. Upon the
termination of the Plan, all Plan Agreements shall terminate and a Participant
shall be paid a Special Benefit under Section 3.2 as if the Participant had died
as of the date of the termination of the Plan. Prior to a Change in Control,
the Company shall have the right, at its sole discretion, and notwithstanding
any elections made by the Participant, to pay such benefits in a lump sum or in
monthly installments (with reasonable interest determined by the Committee) for
up to 5 years. Upon a Change in Control, the Company shall be required to pay
such benefits in a lump sum. The termination of the Plan shall not adversely
affect any Participant or Beneficiary who has become entitled to the payment of
any benefits under the Plan as of the date of termination; provided however,
that the Company shall have the right to accelerate installment payments.
.2 Amendment. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to the Participants employed by that Employer,
provided, however, that no amendment or modification shall be effective to
decrease or restrict a Participant's benefit under this Plan at the time of the
amendment or modification, which benefits shall be calculated as if the
Participant had Retired as of the date the amendment or modification is made or
becomes effective, whichever is later and payment commenced on that date. The
amendment or modification of the Plan shall not affect any Participant or
Beneficiary who has become entitled to the payment of benefits under the Plan as
of the date the amendment or modification is made or becomes effective,
whichever is later; provided, however, that the Company shall have the right to
accelerate installment payments.
.3 Effect of Payment. The full payment of the applicable benefit under
Article 3 of the Plan shall completely discharge all obligations to a
Participant under this Plan and the Participant's Plan Agreement shall
terminate.
8 Other Benefits and Agreements
.1 Coordination with Other Benefits. The benefits provided for a Participant
and Participant's Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant's Employer. The Plan shall supplement and shall
not supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.
9 Administration
.1 Committee Duties. This Plan shall be administered by a Committee which
shall consist of not fewer than three (3) persons appointed by the Board of the
Company. Committee members shall serve at the pleasure of the Board. Members
of the Committee may be Participants under this Plan. The Committee shall have
the discretion and authority to make, amend, interpret and enforce all
appropriate rules and regulations for the administration of this Plan and decide
or resolve any and all questions including interpretations of this Plan, as may
arise in connection with the Plan.
.2 Agents. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as it
sees fit and may, from time to time, consult with counsel who may be counsel to
any Employer.
.3 Binding Effect of Decisions. The decision or action of the Committee with
respect to any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.
.4 Indemnity of Committee. All Employers shall indemnify and hold harmless
the members of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Plan, except in the case of willful misconduct by the Committee or any
of its members.
.5 Employer Information. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee on all
matters relating to the compensation of its Participants, the date and circum
stances of the Retirement, Disability, death or Termination of Employment of its
Participants, and such other pertinent information as the Committee may
reasonably require.
10 Claims Procedures
.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a determination
with respect to the amounts distributable to such Claimant from the Plan. If
such a claim relates to the contents of a notice received by the Claimant, the
claim must be made within 60 days after such notice was received by the
Claimant. All other claims must be made within 180 days of the date on which
the event that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.
.2 Notification of Decision. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice must set forth
in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any part of it;
(ii) the specific reference(s) to pertinent provisions of the Plan upon
which such denial was based;
(iii) a description of any additional material or information necessary
for the Claimant to perfect the claim, and an explanation of why such material
or information is necessary; and
(iv) an explanation of the claim review procedure set forth in Section 8.3
below.
.3 Review of a Denied Claim. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, a Claimant (or the
Claimant's duly authorized representative) may file with the Committee a written
request for a review of the denial of the claim. Thereafter, but not later than
30 days after the review procedure began, the Claimant (or the Claimant's duly
authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
.4 Decision on Review. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request for
review of the denial, unless a hearing is held or other special circumstances
require additional time, in which case the Committee's decision must be rendered
within 120 days after such date. Such decision must be written in a manner
calculated to be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based; and
(c) such other matters as the Committee deems relevant.
.5 Legal Action. A Claimant's compliance with the foregoing provisions of
this Article 8 is a mandatory prerequisite to a Claimant's right to commence any
legal action with respect to any claim for benefits under this Plan.
11 Trust
.1 Establishment of Trust. The Company may establish one or more grantor
Trusts and shall at least annually transfer over to the Trust such assets as the
Committee determines, in its sole discretion, are necessary to provide for the
Company's future liabilities created under this Plan, provided the assets of the
Trust shall be considered part of the general assets of the Company subject to
the claims of its general creditors.
.2 Interrelationship of the Plan and the Trust. The provisions of the Plan
and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall govern
the rights of the Participant and the creditors of the Company to the assets
transferred to the Trust. The Company shall at all times remain liable to carry
out its obligations under the Plan. The Company's obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust.
12 Miscellaneous
.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of an Employer. With respect to the Plan, any
Plan Agreement and the Trust, any and all of an Employer's assets shall be, and
shall remain, the general, unpledged unrestricted assets of the Employer. An
Employer's obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.
.2 Employer's Liability. An Employer's liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer and a Participant. An Employer shall have no obligation to
a Participant under the Plan except as expressly provided in the Plan.
.3 Nonassignability. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt, the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be unassignable and non-
transferable, except that the foregoing shall not apply to any family support
obligations set forth in a court order. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a Participant
or any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
.4 Not a Contract of Employment. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between any Employer and
the Participant. Such employment is hereby acknowledged to be an "at will"
employment relationship that can be terminated at any time for any reason, with
or without cause, unless expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service of any Employer or to interfere with the right of any
Employer to discipline or discharge the Participant at any time.
.5 Furnishing Information. A Participant will cooperate with any Employer by
furnishing any and all information requested by any Employer and take such other
actions as may be requested in order to facilitate the administration of the
Plan and the payments of benefits hereunder, including but not limited to taking
such physical examinations as any Employer may deem necessary.
.6 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would so
apply; and wherever any words are used herein in the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.
.7 Captions. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
.8 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of California.
.9 Validity. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Plan shall be construed and enforced as if such illegal
and invalid provision had never been inserted herein.
.10 Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below:
Countrywide Credit Industries, Inc.
Administrative Committee
Supplemental Executive Retirement Plan
155 North Lake Avenue, 9th Floor
Pasadena, California 91109
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and hand-
delivered, or sent by mail, to the last known address of the Participant.
.11 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns and the
Participant, the Participant's Beneficiaries, and their permitted successors and
assigns.
.12 Spouse's Interest. The interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass to the
Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall such interest pass
under the laws of intestate succession.
.13 Incompetent. If a benefit under this Plan is to be paid to a minor, a
person declared incompetent or to a person incapable of handling the disposition
of that person's property, the Committee may direct payment of such benefit to
the guardian, legal representative or person having the care and custody of such
minor, incompetent or incapable person. The Committee may require proof of
minority, incompetency, incapacity or guardianship, as it may deem appropriate
prior to distribution of the benefit. Any payment of a benefit shall be a
payment for the account of the Participant and the Participant's Beneficiary, as
the case may be, and shall be a complete discharge of any liability under the
Plan for such payment amount.
.14
.14 Distribution in the Event of Taxation. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the Committee for a
distribution of assets sufficient to meet the Participant's tax liability
(including additions to tax, penalties and interest). Upon the grant of such a
petition, which grant shall not be unreasonably withheld, a Participant's
Employer shall distribute to the Participant immediately available funds in an
amount equal to that Participant's federal, state and local tax liability
associated with such taxation (which amount shall not exceed a Participant's
accrued benefit under the Plan), which liability shall be measured by using that
Participant's then current highest federal, state and local marginal tax rate,
plus the rates or amounts for the applicable additions to tax, penalties and
interest. If the petition is granted, the tax liability distribution shall be
made within 90 days of the date when the Participant's petition is granted.
Such a distribution shall affect and reduce the benefits to be paid under
Article 3.
IN WITNESS WHEREOF, the Company has signed this Plan document as
of _______________, 19__.
Countrywide Credit Industries, Inc.,
a Delaware corporation
By: _______________________________
Its: ____________________________
Countrywide Credit Industries, Inc.
Split-Dollar Life Insurance Plan
Split-Dollar Life Insurance Agreement
countrywideSplitDollar.doc.mal 04/14/94
THIS AGREEMENT, is made as of the _____ day of _______________, 19___, by
and between Countrywide Credit Industries, Inc. (the "Employer")
and________________ ___________________________ the ("Employee").
RECITALS:
A. The Employer is a corporation duly organized and validly existing
under the laws of the state of its incorporation.
B. The Employee is a valued and trusted employee of the Employer.
C. In consideration of the faithful performance of services by the
Employee for the Employer, the Employer wishes to benefit the Employee by
entering into a split-dollar life insurance agreement in accordance with the
terms and conditions of this Agreement.
D. The split-dollar arrangement provided for in this Agreement, which the
parties intend to satisfy the requirements of Revenue Ruling 64-328, 1964-2 C.B.
11, relates to a life insurance Policy Number ____________ to be issued by
Aetna Life Insurance Company, and a life insurance Policy Number ____________ to
be issued by Manulife Financial Insurance Company, or one of their subsidiaries
(the "Insurers") on the life of the Employee to be owned by the Employee subject
to a collateral assignment in favor of the Employer.
E. This Agreement, the policies with the insurers and the collateral
assignment agreements shall all form part of the Countrywide Credit Industries,
Inc. Split Dollar Life Insurance (the "CCI Plan"), a welfare benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), although an Employee shall be governed only by this Agreement and any
collateral assignment agreement and other instruments to which he or she is a
party.
NOW, THEREFORE, the parties mutually agree as follows:
1. Acquisition of Policy. The parties shall cooperate in applying for and
obtaining the Policy. The Policy shall be issued to the Employee as the sole
and exclusive owner of the Policy, subject to a collateral assignment in favor
of the Employer as hereinafter provided.
2. Payment of Premiums. The Employer shall pay all of the premiums due on the
Policy.
A. The Employee shall pay directly or reimburse the Employer for that
portion of the annual gross premium due on the Policy, up to but not exceeding
the entire amount thereof, equal to the value of the economic benefit (including
the economic benefit attributable to the use of policy dividends) provided to
the Employee in accordance with the principles set forth in Revenue Ruling 64-
328, 1964-2 C.B. 11 and Revenue Ruling 66-110, 1966-1 C.B. 12. The Employer
shall pay the balance of the premium, if any.
3. Liability of Employee.
A. Liability. In consideration of the Employer's premium payments under
the split-dollar arrangement, the liability of the Employee shall at all times
equal the amount determined in accordance with the following provisions (the
"Liability"). The Employer shall be entitled to recover the Liability in
accordance with the terms and conditions of this Agreement.
B. Termination of Agreement. Upon the occurrence of a Termination Event
(as defined below) other than the death of the Employee, the Liability, at such
time, shall be an amount equal to the lesser of (i) Aggregate Premiums Paid, as
hereinafter defined, or (ii) the Cash Surrender Value, as hereinafter defined.
The excess, if any, shall go to the Employee. However, until such time, the
Liability or any funds or assets securing the Liability shall be assets of the
Employer subject to the claims of its general creditors.
C. Death of the Employee. Upon the death of the Employee, the Liability
shall be an amount equal to any and all death proceeds in excess of the amount
of death proceeds paid to the beneficiary named in the Policy by the Employee.
D. Definitions. For purposes of this Agreement:
(i) The Cash Surrender Value of the Policy at any time equals at such time the
guaranteed cash value set forth in the Policy; plus any additional cash value
credited to the Policy; less any amounts withdrawn from the Policy by the
Employer by means of the surrender or partial surrender of the Policy; less any
policy loans to the Employer and accrued interest thereon at such time.
(ii) The Aggregate Premiums Paid at any time equal at such time the cumulative
premiums paid by the Employer under the Policy; less any amounts withdrawn from
the Policy by the Employer by means of the surrender or partial surrender of the
Policy; less any policy loans to the Employer and accrued interest thereon at
such time; less any amounts received by the Employer from the Employee for the
economic benefit under the split-dollar arrangement.
4. Collateral Assignment.
A. Employer's Rights. As security for the Liability, the Employee
shall execute, on a form acceptable to the parties and the Insurer, a collateral
assignment of the Policy to the Employer (the "Collateral Assignment") which
instrument shall be expressly incorporated herein and form a part of this
Agreement, which gives the Employer the following rights:
(i) The sole right to collect from the Insurer the net proceeds of the Policy
when they become payable by reason of death or maturity;
(ii) The sole right to surrender the Policy or any portion of the Policy and
receive its share of the surrender value thereof at any time provided by the
terms of the Policy and at such other times as the Insurer may allow; provided,
however, the Employer hereby agrees not to exercise such right except following
a Termination Event;
(iii) The right to obtain one or more loans or advances on the Policy, either
from the Insurer or, at any time, from other persons, and to pledge or assign
the Policy as security for such loans or advances; provided, however, that such
loans shall not in the aggregate exceed Aggregate Premiums Paid without the
written consent of the Employee;
(iv) The sole right to exercise all nonforfeiture rights permitted by the terms
of the Policy or allowed by the Insurer and to receive all benefits and
advantages derived therefrom.
B. Employee's Rights. Except for the rights granted to the Employer in
the Collateral Assignment, the Employee shall have all the rights of the owner
under the Policy and the Employee shall be entitled to exercise all such rights,
options, and privileges without the consent of the Employer.
C. Conflict. As between the parties hereto, in the event of any conflict
between the terms of the Collateral Assignment and this Agreement, the terms of
this Agreement shall prevail.
5. Death of the Employee.
A. Employer's Recovery. The Employer shall be entitled to recover out of
the proceeds of the Policy an amount equal to the Liability of the Employee to
the Employer as determined under Article 3.C above.
B. Beneficiary's Recovery. The beneficiary designated by the Employee
under the Policy shall be paid out of the proceeds of the Policy an amount equal
to ___ times the Employee's annual salary as of the policy anniversary date
(March 1) immediately prior to the Employee's death. Annual salary, for
purposes of this Agreement, is base salary before any salary deferral reductions
for any qualified or non-qualified deferred compensation, qualified reduction or
cafeteria plan.
C. Collection of Death Proceeds. Promptly following the Employee's death,
the parties shall take all necessary steps to collect the proceeds of the Policy
by submitting the proper claim forms to the Insurer. The Employer shall notify
the Insurer, by affidavit, of the amount of Liability of the Employee to the
Employer and the amount of proceeds payable to the beneficiary designated by the
Employee under the Policy. Such amounts shall be paid by the Insurer to the
Employer and the beneficiary and such payments shall be a full discharge of the
Insurer binding on all parties claiming any interest under the Policy.
6. Termination of Agreement.
A. Termination Event. Subject to fulfillment of the obligations arising
upon termination hereinafter set forth, this Agreement shall terminate on the
first to occur of the following events (each referred to as a "Termination
Event"):
(i) The death of the Employee.
(ii) Termination of the Employee's employment with the Employer for any reason
other than death, including retirement, excluding disability retirement, with or
without cause.
(iii) Attainment of age 65 by an Employee who is disabled under Article 9 of
this Agreement.
(iv) Delivery of written notice of termination of the Agreement by the Employer
to the Employee or vice versa.
B. Disposition of Policy. Within fifteen (15) days of a Termination Event
other than death of the Employee, the Employer, may at its sole discretion,
withdraw from the Policy, by any means available to the Employer under the terms
of the Policy as the Employer in its sole discretion deems advisable, an amount
equal to the lesser of Aggregate Premiums Paid as defined in Article 3, or the
total Cash Surrender Value as defined in Article 3, and thereafter release the
Collateral Assignment and otherwise take all steps necessary to transfer its
interest in this split-dollar arrangement to the Employee, without
consideration. A Policy so transferred shall belong to the Employee who may
continue it (subject to any premium or other requirements of the insurer) or
surrender it and recover any remaining cash value.
C. Cooperation. The Employer shall cooperate in effecting any full or
partial policy surrender, policy loan, or surrender of paid-up additions
requested by the Employee related to the Employee's exercise of any option
provided under the Collateral Assignment and this Agreement provided that the
Employer's Interest is paid to the Employer in connection with such a
transaction.
7. Provisions Regarding the Insurers.
A. Bound By Policy. The Insurers shall be bound only by the provisions of
the Policy and any endorsement thereto.
B. Discharge. Any payment made or actions taken by the Insurer in
accordance with the provisions of the Policy and any endorsement thereto shall
fully discharge the Insurer from all claims, suits, and demands of all persons
whatsoever.
C. Insurers Not a Party. The Insurers shall not be deemed a party to, or
have notice of, this Agreement or the provisions hereof and shall have no
obligations to see to the performance of the obligations of the parties
hereunder.
8. Special Provisions.
In compliance with the requirements of the Employee Retirement Income Security
Act of 1974, as amended, the parties hereby confirm:
A. Named Fiduciary. The Employer is the named fiduciary of the CCI Plan.
B. Funding. The funding policy of the CCI Plan is that the Employer will pay
that portion of the premiums under the Policy required under Article 2 above.
C. ERISA Claim Procedure. The following claims procedure shall be
utilized:
(i) The claimant shall file a claim for benefits by notifying the Employer in
writing. If the claim is wholly or partially denied, the Employer shall provide
a written notice within ninety (90) days specifying the reasons for the denial,
the provisions of this Agreement on which the denial is based, and additional
material or information, if any, necessary for the claimant to receive benefits.
Such written notice shall also indicate the steps to be taken by the claimant if
review of the denial is desired.
(ii) If the claim is denied and review is desired, the claimant shall notify the
Employer in writing within sixty (60) days after receipt of the written notice
of a denial of a claim. In requesting a review, the claimant may review plan
documents and submit written issues and comments the claimant feels are
appropriate. The Employer shall then review the claim and provide a written
decision within sixty (60) days of receipt of request for a review. This
decision shall state the specific reasons for the decision and shall include
references to specific provisions of this Agreement, if any, upon which the
decision is based.
(iii) In no event shall the Employee's liability under this Agreement exceed the
amount of proceeds from the Policy.
9. Disability
If the Employee becomes disabled in accordance with any Employer-sponsored
disability or disability retirement program, the Agreement shall continue until
terminated in accordance with Article 6A.
10. Amendment.
This Agreement may be altered, amended, or modified, including the addition of
any extra policy provisions, but only by a written instrument signed by the
parties hereto.
11. Assignment.
A party may assign such party's interest and obligations under this Agreement at
any time subject to the terms and conditions of this Agreement.
12. Governing Law.
This Agreement shall be governed by the laws of the State of Connecticut.
13. Entire Agreement.
This Agreement sets forth the entire agreement of the parties with respect to
the subject matter hereof. Any and all prior agreements or understandings with
respect to such matters are hereby superseded.
14. Counterparts
This Agreement may be executed in one or, more counterparts each of which is
legally binding and enforceable.
IN WITNESS WHEREOF, the parties have signed and sealed this Agreement as of
the day and year first written above.
WITNESS:
____________________________________ ____________________________________
(Witness) (Employee)
ATTEST:
____________________________________ By___________________________________
(Witness) Countrywide Credit Industries, Inc.
Countrywide Credit Industries, Inc.
Life Insurance Plan
Split-Dollar Collateral Assignment
cntwd Split Dollar Collateral Assign A. doc. mal 04/14/94
____________________________________ __________________________________
Policy Number Insured
Both copies of this Assignment should be forwarded to the Home Office. One copy
will be retained by the Company (hereafter called the Insurer). The Insurer
shall be defined as the company that issued the policy, Aetna Life
Insurance Company.
The undersigned owner/applicant of the policy to be issued pursuant to
application Part I number _____________ and dated __________________ for
insurance on the life of the insured named above authorizes the Insurer to
insert the policy number in this Assignment after said policy is issued.
___________________________________
Owner/Assignor
ASSIGNOR___________________________________________________________________
ASSIGNEE: Countrywide Credit Industries, Inc.
155 North Lake Avenue
Suite 900
Pasadena, California 91101
RECITALS:
A. The assignor desires to assign the Assignee certain interests in the
policy as security for certain liabilities of the Assignor to the Assignee in
connection with a split-dollar arrangement regarding the policy in accordance
with Revenue Ruling 64-328, 1964-2 C.B. 11.
B. The Assignee, by accepting this Agreement, agrees to the terms and
conditions hereof.
C. Assignor and Assignee acknowledge that this Assignment Agreement shall
be part of and incorporated into that certain Split Dollar Life Insurance
Agreement between Assignor and Assignee dated _____________ entered into under
the Countrywide Credit Industries, Inc. Split Dollar Insurance Plan.
ASSIGNMENT:
A. FOR VALUE RECEIVED, the Assignor hereby assigns, transfers, and sets
over to the Assignee, and the Assignee's successors or assigns, certain rights
in and to the Policy hereinafter set forth, subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy.
B. It is expressly agreed that the following specific rights are included
in this Assignment and pass by virtue hereof:
(1) The sole right to collect from the Insurer the net proceeds of the
Policy when they become payable by reason of death or maturity.
(2) The sole right to surrender the Policy or any portion of the Policy
and receive the surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow; provided,
however, the Employer hereby agrees not to exercise such right except following
a Termination Event;
(3) The sole right to obtain one or more loans or advances on the Policy,
either from the Insurer or, at any time, from other persons, and to pledge
or assign the Policy as security for such loans or advances; provided,
however, that such loans shall not in the aggregate exceed Aggregate Premiums
Paid without the written consent of the Employee;
(4) The sole right to exercise all nonforfeiture rights permitted by the
terms of the Policy or allowed by the Insurer and to receive all benefits and
advantages derived therefrom.
C. It is expressly agreed that all other rights in the Policy, including
but not limited to the following specific rights, are reserved and excluded from
this Assignment and do not pass by virtue hereof:
(1) The right to designate and change the beneficiary; and,
(2) The right to elect any optional mode of settlement permitted by the
Policy or allowed by the Insurer; but the reservation of these rights shall
in no way impair the right of the Assignee to surrender the Policy or
exercise any other right in the Policy.
D. This Assignment is made as collateral security for any liability (the
"Liability") of the Assignor to the Assignee under the split-dollar arrangement
between them relating to the Policy, as more fully described below.
(1) Upon surrender of the Policy the liability shall be an amount equal to
the lesser of Aggregate Premiums Paid by the Assignee at such time or the Cash
Surrender Value of the Policy.
(2) Upon the death of the Insured, the Liability shall be an amount equal
to any and all death proceeds in excess of the amount of death proceeds
paid to the beneficiary named in the Policy, as specified in paragraph E
below.
E. The beneficiary designated and named in the Policy by the Assignor
shall be paid an amount of death proceeds equal to times the Assignor's
annual salary as of each policy anniversary date (March 1). Annual salary, for
purposes of this Agreement, is base salary before any salary deferral reduction
for any qualified or non-qualified deferred compensation, qualified reduction or
cafeteria plan. For the purpose of establishing the annual Salary provided
herein, the Insurer shall rely on the written statement of the Assignee.
F. The Aggregate Premiums Paid at any time equal at such time the
cumulative premiums paid by the Assignee under the Policy, less any amounts
withdrawn from the Policy by the Assignee by means of the surrender or partial
surrender of the Policy; less any Policy loans to the Assignee and accrued
interest thereon at such time; less any amounts received by the Assignor from
the Assignee for the economic benefit under the split-dollar arrangement.
G. The Cash Surrender Value of the Policy at any time equals at such time
the guaranteed cash value set forth in the Policy; plus any additional cash
value credited to the Policy; less any amounts withdrawn from the Policy by the
Assignee by means of the surrender or partial surrender of the Policy; less any
policy loans to the Assignee and accrued interest thereon at such time.
H. The Assignee covenants and agrees with the Assignor that any balance of
sums received hereunder from the Insurer after payment of the then existing
liabilities, matured, or unmatured, shall be paid by the Assignee to the persons
entitled thereto under the terms of the Policy; provided, however, if before
settlement of the claim by the Insurer, the Insurer shall receive from the
Assignee a written demand for less than the entire net proceeds, then such
amount shall be paid to the Assignee and the excess, if any, shall be paid
directly by the Insurer to the beneficiary named in the Policy by the Assignor.
I. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of all or any death proceeds to the
Assignee in reliance upon an affidavit of any officer of the Assignee as to the
Assignee's share of the proceeds shall be a full discharge of the Insurer and
shall be binding on all parties claiming any interest under this Policy.
J. The Assignee will forward to the Insurer upon request and without
unreasonable delay, the Policy for endorsement of any designation or change of
beneficiary or any election of an optional mode of settlement by the Assignor.
K. All provisions of this Assignment shall be binding on the executors,
administrators, successors or assigns of the Assignor and Assignee.
L. This Assignment may be executed in one or more counterparts each of
which is legally binding and enforceable.
Signed at__________________________________
on______________________________
(City and State) (Date)
SIGN ORIGINAL AND DUPLICATE
_____________________________________ ___________________________________
Witness Signature Signature of Owner of Policy (Assignor)
ACKNOWLEDGEMENT:
Acknowledged by:____________________________________________ Date_____________
Aetna Life Insurance Company
14
1994 AMENDED AND EXTENDED MANAGEMENT AGREEMENT
THIS AGREEMENT, initially made as of September 3, 1985 and amended and
extended from time to time thereafter, is amended and extended as of May 15,
1994 by and between COUNTRYWIDE MORTGAGE INVESTMENTS, INC., a Delaware
corporation which has elected to qualify as a real estate investment trust (the
"Company"), and COUNTRYWIDE ASSET MANAGEMENT CORPORATION, a Delaware
corporation, and its permitted successors and assigns under this agreement (the
"Manager").
WITNESSETH
WHEREAS, the Company has elected to qualify for the tax benefits
accorded by Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, the Company, directly or through Subsidiaries, in the conduct
of its business primarily operates a mortgage loan conduit, engages in warehouse
lending and invests in mortgage loans and mortgage-related securities meeting
the investment criteria established from time to time by its Board of Directors;
and
WHEREAS, the Company desires to retain the Manager to manage the
operations and investments of the Company and its Subsidiaries and to perform
administrative services for the Company and its Subsidiaries, each in the manner
and on the terms set forth in this Agreement; and
WHEREAS, the Company and the Manager wish to amend and extend their
agreement originally entered into as of September 3, 1985 for a one year period
through May 14, 1995;
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the Company and the Manager agree as follows:
Section 1. Definitions. Whenever used in this Agreement, the
following terms, unless the context otherwise requires, shall have the following
meanings:
(a) "Affiliate" of another person shall mean any person directly or
indirectly owning, controlling or holding with power to vote, more than 5% of
the outstanding voting securities of such other person; any person 5% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by such other person; any person directly or
indirectly controlling, controlled by or under common control with, such other
person; and any officer, director, partner or employee of such other person.
The term "person" includes a natural person, corporation, partnership, trust,
company or other entity.
(b) "Agency Securities" shall mean (i) fully modified pass-through
mortgage-backed certificates guaranteed as to timely payment of principal and
interest by the Governmental National Mortgage Association, (ii) mortgage
participation certificates guaranteed as to payment of interest and principal by
the Federal Home Loan Mortgage Corporation and (iii) mortgage pass-through
certificates guaranteed as to payment of interest and principal by the Federal
National Mortgage Association.
(c) "Agreement" shall mean this 1994 Amended and Extended Management
Agreement.
(d) "Average Invested Assets" for any period shall mean the average
of the aggregate book value of the assets of the mortgage conduit operations of
the Company and its Subsidiaries invested, directly or indirectly, in loans
secured by real estate (including without limitation whole mortgage loans,
retained undivided interests in mortgage loans and Agency Securities, but not
including any whole mortgage loans, retained undivided interests in mortgage
loans, or Agency Securities pledged to secure the issuance of collateralized
mortgage obligations or other mortgage collateralized debt or sold in the form
of mortgage backed securities in transactions entered into by the Company or a
Subsidiary), computed by taking the average of such values at the end of each
calendar month during such period.
(e) "Average Net Worth" for any period shall mean the arithmetic
average of the Net Worth of the Company at the beginning of such period and at
the end of each calendar month during such period.
(f) "Board of Directors" shall mean the Board of Directors of the
Company.
(g) "CCI" shall mean Countrywide Credit Industries, Inc., a Delaware
corporation.
(h) "CFC" shall mean Countrywide Funding Corporation, a Subsidiary of
CCI, and a New York corporation.
(i) "CMC" shall mean Countrywide Mortgage Conduit, Inc. a Delaware
corporation.
(j) "Commitment" shall mean any document containing the terms
pursuant to which the Company or any Subsidiary agrees to purchase on a forward
basis any specified mortgage loans, including purchases from Affiliates of the
Manager.
(k) "Consolidated Average Invested Assets" for any period shall mean
the Average Invested Assets for the Company and its consolidated subsidiaries
taken as a whole, computed by taking the average of such values at the end of
each calendar month during such period.
(l) "Governing Instruments" shall mean the articles or certificate of
incorporation, trust agreement and bylaws of the Company or any Subsidiary, as
applicable.
(m) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.
(n) "Loan Purchase Agreement" shall mean the 1993 Amended and
Extended Loan Purchase and Administrative Services Agreement, dated as of May
15, 1993, as thereafter amended or supplemented, between the Company and CFC.
(o) "Mortgage Backed Securities" shall mean the collateralized
mortgage obligations, mortgage collateralized debt, mortgage pass-through
securities including real estate mortgage investment conduits or other mortgage
related securities issued by the Company or a Subsidiary of the Company.
(p) "Net Income" for any period shall mean total revenues applicable
to such period, less the expenses applicable to such period determined in
accordance with generally accepted accounting principles.
(q) "Net Worth" at any time shall mean the sum of the gross proceeds
from any offerings of equity securities by the Company (before deducting any
underwriting discounts and commissions and other expenses and costs relating to
the offering), plus or minus any retained earnings or losses of the Company,
computed in accordance with generally accepted accounting principals.
(r) "Return on Equity" for a period shall be calculated by dividing
the Company's Net Income for such period by the Company's Average Net Worth for
such period.
(s) "Servicing Agreement" shall mean an agreement between the Company
or any Subsidiary and each seller or servicer of mortgage loans purchased by the
Company, including CFC, which agreement governs the sale and/or servicing of
such mortgage loans.
(t) "Shareholders" shall mean the owners of the shares of the
Company.
(u) "Subsidiary" shall mean any corporation, whether now existing or
in the future established, of which the Company, directly or indirectly, owns
more than 50% of the outstanding voting securities of any class or classes, any
business trust, partnership or similar non-corporate form in which the Company,
directly or indirectly, owns more than 50% of the beneficial interests and CMC.
(v) "Ten Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 10 years).
(w) "Ten Year U.S. Treasury Rate" for a quarterly period shall mean
the arithmetic average of the weekly per annum Ten Year Average Yields published
by the Federal Reserve Board during such quarter. In the event that the Federal
Reserve Board does not publish a weekly per annum Ten Year Average Yield during
any week in a quarter, then the Ten Year U.S. Treasury Rate for such week shall
be the weekly per annum Ten Year Average Yields published by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company for
such week. In the event that the Company determines in good faith that for any
reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
quarter as provided above, then the Ten Year U.S. Treasury Rate for such quarter
shall be the arithmetic average of the per annum average yields to maturity
based upon the daily closing bids during such quarter for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities (other
than securities which can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax) with a final maturity date not less
than eight nor more than twelve years from the date of each such quotation, as
chosen and quoted for each business day (or less frequently if daily quotations
shall not be generally available) in each such quarterly period in New York City
to the Company by at least three recognized dealers in U.S. Government
securities selected by the Company.
(x) "Unaffiliated Directors" shall mean those members of the Board of
Directors of the Company who are not Affiliates of the Manager.
Section 2. General Duties of the Manager. Subject to the
supervision of the Board of Directors and in accordance with the Governing
Instruments, the Manager shall provide services to the Company and CMC, and to
the extent directed by the Board of Directors, shall provide similar services to
any other Subsidiary of the Company, as follows:
(a) conduct the day-to-day mortgage loan conduit, warehouse lending
and other operations of the Company and CMC as approved by the Board of
Directors, including without limitation, the purchase, accumulation, financing
and securitization of mortgage loans, the establishment and financing of
warehouse lending facilities, the management of assets and investments and the
administration thereof; and
(b) provide such reports and analysis to the Board of Directors
regarding the operating strategies and results of the Company and its
Subsidiaries as the Board may reasonably request.
The Manager shall perform its duties and shall take actions on behalf
of the Company and its Subsidiaries consistent with (i) the operating policies
and criteria established from time to time by the Board of Directors or any
authorized officer with respect thereto, and (ii) the obligations of the Company
and its Subsidiaries under the various agreements to which each is a party. So
long as the Manager is serving as the Manager under this Agreement, it shall be
and remain a Subsidiary of and wholly owned, directly or indirectly, by CCI.
Section 3. Additional Activities of Manager. Except as provided
in the Letter Agreement between CCI and the Company attached hereto as Exhibit
A, nothing herein shall prevent the Manager or its Affiliates from engaging in
other businesses or from rendering services of any kind to any other person or
entity, including investment in or advisory service to others investing in any
type of real estate investment, including investments which meet the principal
investment objectives of the Company or any Subsidiary of the Company.
Directors, officers, employees and agents of the Manager or Affiliates of the
Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any Subsidiary of the Company, to the extent
permitted by its Governing Instruments, as from time to time amended, or by any
resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments. When executing documents or otherwise acting in such capacities
for the Company or any Subsidiary of the Company, such persons shall use their
respective titles in the Company or such Subsidiary.
Section 4. Purchases and Sales of Investments and Loans from the
Manager and its Affiliates. The Manager agrees that sales of investments to and
purchases of investments from the Manager and its Affiliates, including without
limitation purchases and sales of mortgage loans, Agency Securities and
Commitments, shall only be made as stated in an agreement therefor setting forth
in general the operating policies and guidelines within which such sales or
purchases may be made, which agreement has been approved by the Board of
Directors, including a majority of the Unaffiliated Directors. Notwithstanding
the terms of any other agreements between the manager or its Affiliates and the
Company, the Manager further agrees that all such sales and purchases will be
made upon terms no less favorable to the Company than are generally available to
other third parties. The Manager shall purchase or exercise the Company's
option to purchase mortgage loans from CFC in accordance with the Company's
rights and obligations under the Loan Purchase Agreement or any other applicable
agreement between the Company and CFC which is approved by the Board of
Directors, including a majority of the Unaffiliated Directors.
Section 5. Repurchase Obligation.
(a) The Manager agrees that if the Company purchases any mortgage
loan, Agency Security or other investment which does not meet the investment
and/or purchase criteria and policies of the Company and/or CMC as applicable at
the time of purchase, the Manager will repurchase or will cause the repurchase
of such mortgage loan, Agency Security or other investment from the Company for
an amount not less than the unpaid principal balance of the mortgage loan,
Agency Security or other investment as of the date of repurchase, less any
amounts received by the Company representing prepaid interest not accrued as of
the date of repurchase, plus any amounts representing accrued and unpaid
interest to the date of repurchase and any amounts incurred by the Company,
including, but not limited to reasonable fees and out-of-pocket expenses of
counsel, in enforcing the obligation of the Manager to repurchase or cause the
repurchase of such mortgage loan. In lieu of repurchasing or causing the
repurchase of any mortgage loan, Agency Security or other investment, the
Manager may, in its discretion, substitute or cause the substitution,
respectively, of a mortgage loan, Agency Security or other investment having an
unpaid principal amount and yield at least equivalent to and a maturity not
later than the defective mortgage loan, Agency Security or other investment and
otherwise meeting the investment and/or purchase criteria and policies of the
Company and/or CMC as applicable and the terms of the agreement, if any,
pursuant to which the mortgage loan, Agency Security or other investment has
been securitized.
(b) The Manager shall be subrogated to any and all rights of the
Company or any Subsidiary, and the Company agrees to assign to the Manager or
direct its Subsidiary to assign to the Manager its rights, under any Servicing
Agreement with any third party with respect to any mortgage loan repurchased or
substituted for, by or on behalf of the Manager under Subsection (a).
Section 6. Bank Accounts. The Manager may establish and maintain
one or more bank accounts in the name of the Company or any Subsidiary, at the
direction of the Board of Directors, and may collect and deposit into any such
account or accounts, and disburse from any such account or accounts, any money
on behalf of the Company or any Subsidiary, under such terms and conditions as
the Board of Directors may approve; and the Manager shall from time to time
render appropriate accountings of such collections and payment to the Board of
Directors and, when requested, to the auditors of the Company or any Subsidiary.
Section 7. Records; Confidentiality. The Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for inspection
by the Company or any Subsidiary at any time during normal business hours. The
Manager agrees to keep confidential any and all information it obtains from time
to time in connection with the services it renders under this Agreement and
shall not disclose any portion thereof to non-affiliated third parties except
with the prior written consent of the Company.
Section 8. Obligations of Manager.
(a) The Manager shall use its best efforts to provide that each
mortgage loan conforms to the purchase criteria of the Company or CMC as
applicable and shall require each seller or transferor of mortgage loans to the
Company or CMC in connection with such purchase or transfer to make all
applicable representations and warranties contained in the Servicing Agreement
for such loans. The Manager shall take such other action as the Manager deems
necessary or appropriate with regard to the protection of the Company's or CMC's
investments.
(b) Anything else in this Agreement to the contrary notwithstanding,
the Manager shall refrain from any action which in its sole judgment made in
good faith would adversely affect the status of the Company, or any Subsidiary
which elects to so qualify, as a real estate investment trust as defined and
limited in Section 856 through 860 of the Internal Revenue Code or which in its
sole judgment made in good faith would violate any law, rule or regulation of
any governmental body or agency having jurisdiction over the Company or any
Subsidiary or which would otherwise not be permitted by the Company's or its
Subsidiary's Governing Instruments except if such action shall be ordered by the
Board of Directors, in which event the Manager shall promptly notify the Board
of Directors of the Manager's judgment that such action would adversely affect
such status or violate any such law, rule or regulation or the Governing
Instruments and shall refrain from taking such action pending further
clarification or instructions from the Board of Directors. If the Board of
Directors thereafter instructs the Manager, despite the Manager's notification
as provided herein, to take any such action and the Manager so acts upon the
instructions given, the Manager shall not be responsible for any loss of the
Company's or Subsidiary's status as a real estate investment trust or violation
of any law, rule or regulation or the Governing Instruments caused thereby.
Section 9. Fidelity Bond. The Manager shall maintain a fidelity
bond with a responsible surety company in an amount approved by the Board of
Directors covering all officers and employees of the Manager handling funds of
the Company or any Subsidiary and any documents or papers, which bond shall
protect the Company or any Subsidiary against all losses of any such property
from acts of such officers and employees through theft, embezzlement, fraud,
negligent acts, errors and omissions or otherwise. The premium for said bond
shall be paid by the Manager.
Section 10. Compensation.
(a) Manager will receive a base management fee equal to the Average
Invested Assets Multiplied by 1/8 of 1%."
(b) The Manager shall be paid for services rendered with respect to
warehouse lending activities a management fee in an amount equal to 3/8 of 1% of
the average daily balance of the amounts outstanding under warehouse lines of
credit extended by the Company or its Subsidiaries to originators of mortgage
loans.
(c) If the Company's annualized Return on Equity during any fiscal
quarter (computed by multiplying the Return on Equity for such fiscal quarter by
four) is in excess of the Ten Year U.S. Treasury Rate, plus 2% after taking into
account any recovery of the Manager's fees under Subsection (d), the Company
will pay the Manager as incentive compensation for such quarter an amount equal
to 25% of the amount by which the annualized Return on Equity of the Company for
such fiscal quarter exceeds the Ten Year U.S. Treasury Rate plus 2%, but in no
event shall any payment of incentive compensation under this Subsection reduce
the Company's annualized Return on Equity for such quarter to less than the Ten
Year U.S. Treasury Rate plus 2%. For purposes of the calculation contained in
this Subsection (b), all Net Income of the Company and any Subsidiaries shall be
deemed to have been distributed on the last day of each quarter. The incentive
compensation shall be paid to the Manager within 60 days after the end of each
fiscal quarter on an interim basis, subject to adjustment under Subsection (d).
(d) The Manager shall compute the compensation payable under
Subsections (a), (b) and (c) within 45 days after the end of each fiscal
quarter. A copy of the computations made by the Manager to calculate its
compensation shall thereafter by promptly delivered to the Company and, upon
such delivery, payment of the interim compensation earned under Subsections (a),
(b) and (c) shown therein shall be due and payable within 60 days after the end
of such fiscal quarter. The aggregate amount of the Manager's compensation for
each fiscal year shall be adjusted within 120 days after the end of such fiscal
year so as to provide compensation for such year in the annual amounts stated in
Subsections (a), (b) and (c) and any excess owed to, or shortfall owed by, the
Manager with respect to such compensation, collectively, shall be promptly
remitted by, or paid to, the Company.
(e) Notwithstanding the definition of Average Invested Assets, in the
event the Company implements a strategy of investing directly or indirectly in
loans secured by real estate which are not intended to be securitized, the base
management fee in Subsection (a) shall be paid with respect to these assets.
The Manager acknowledges that it has waived 25% of all fees payable to the
Manager pursuant to Section 10(c) of this Agreement, if any, for the calendar
year 1994
Section 11. Operating Expenses. The Manager shall be reimbursed by
the Company for its operating expenses on a monthly basis. Any allocation of
general administrative costs and overhead by the Manager to the Company shall be
supported by documentation establishing that each other applicable affiliate of
the Manager is also charged a pro rata share of such expenses. Promptly
following the end of each month for which reimbursement is due, the Manager
shall submit an itemized accounting of its expenses to the Company, and the
Company shall pay within 30 days of the receipt of the accounting. The Board of
Directors shall have the authority to approve the incurrence of any expenses by
the Manager for the account of the Company, either prior to or after such
expenses have been incurred. The Manager shall be required to request and
receive the approval of the Board of Directors with respect to the compensation
and expense reimbursement provided to the executive officers of the Company.
Section 12. Limits of Manager Responsibility. The Manager assumes
no responsibility under this Agreement other than to render the services called
for hereunder in good faith and shall not be responsible for any action of the
Board of Directors in following or declining to follow any advice or
recommendations of the Manager, including as set forth in Subsection 9(b) above.
The Manager, its directors, officers, shareholders and employees will not be
liable to the Company, any Subsidiary, the Unaffiliated Directors of the Company
or the Company's or any Subsidiary's shareholders for any acts performed by the
Manager, its directors, officers, shareholders or employees in accordance with
this Agreement, except by reason of acts constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties. The Company
or any Subsidiaries, as applicable, shall reimburse, indemnify and hold harmless
the Manager, its shareholders, directors, officers or employees for and from any
and all expenses, losses, damages, liabilities, demands, charges and claims of
any nature whatsoever in respect of or arising from any acts or omissions of the
Manager, its shareholders, directors, officers and employees made in good faith
in the performance of the Manager's duties under this Agreement and not
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of duties.
Section 13. No Joint Venture. The Company and the Manager are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
Section 14. Term; Termination. This agreement shall continue in
force through May 14, 1995, and thereafter it may be extended only with the
consent of the Manager and by the affirmative vote of a majority of the
Unaffiliated Directors.
Each extension shall be executed in writing by all parties hereto
before the expiration of this Agreement or of any extension thereof. Each such
extension shall be effective for a period in no case exceeding twelve months.
Notwithstanding any other provision to the contrary, this Agreement,
or any extension hereof, may be terminated by any party, upon sixty (60) days'
written notice, by majority vote of the Unaffiliated Directors or by majority
vote of the Shareholders, in the case of termination by the Company, or, in the
case of termination by the Manager, by majority vote of the directors of the
Manager.
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 17.
Section 15. Assignment; Subcontract.
(a) This Agreement may not be assigned, in whole or in part, by the
Manager, unless such assignment is to a corporation, association, trust or other
organization which shall acquire the property and carry on the business of the
Manager, if at the time of such assignment a majority of the voting stock of
such assignee organization shall be owned, directly or indirectly, by CCI or any
of its Affiliates or unless such assignment is consented to in writing by the
Company with the consent of a majority of the Unaffiliated Directors. Such a
permitted assignment shall bind the assignee hereunder in the same manner as the
Manager is bound under this Agreement and, to further evidence its obligations,
under this Agreement, the assignee shall execute and deliver to the Company a
counterpart of this Agreement. This Agreement shall not be assignable by the
Company without the consent of the Manager, except in the case of assignment by
the Company to a real estate investment trust or other organization which is a
successor (by merger, consolidation, or otherwise purchase of assets) to the
Company, in which case such successor organization shall be bound hereunder and
by the terms of said assignment in the same manner as the Company is bound
hereunder.
(b) Notwithstanding the foregoing, the Company and the Manager agree
that the Manager may enter into a subcontract with CFC or any of its Affiliates
pursuant to which CFC or such Affiliate will provide such of the management
services required under this Agreement as the Manager deems necessary, and the
Company hereby consents to the entering into and performance of such
subcontract; provided, however, that no such arrangement between the Manager and
CFC or any of its Affiliates shall relieve the Manager of any of its duties or
obligations under this Agreement and, provided further, that if any subcontract
results in operating expenses to be paid by the Company to the Manager, such
expenses shall be in the amount actually incurred by the Manager.
Section 16. Termination by Company for Cause. At the option solely
of the Company, this Agreement shall be and become terminated upon thirty days'
written notice of termination from the Board of Directors to the Manager if any
of the following events shall occur:
(a) If the Manager shall violate any provision of this Agreement and,
after notice of such violation, shall not cure such default within 30 days; or
(b) There is entered an order for relief or similar decree or order
with respect to the Manager by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or the Manager (i) ceases or admits in writing its inability
to pay debts as they become due and payable, or makes a general assignment for
the benefit of, or enters into any composition or arrangement with, creditors;
(ii) applies for, or consents (by admission of material allegations of a
petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of the Manager
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against the Manager and
continue undismissed for 30 days; (iii) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorizes such
application or consent, or proceedings to such end are instituted against the
Manager without such authorization, application or consent and remain
undismissed for 30 days or result in adjudication of bankruptcy or insolvency;
or (iv) permits or suffers all or any substantial part of its properties or
assets to be sequestered or attached by court order and the order remains
undismissed for 30 days.
(c) The Manager agrees that if any of the events specified in
paragraph (b) of this Section 16 shall occur, it will give prompt written notice
thereof to the Board of Directors after the happening of such event.
Section 17. Action Upon Termination. From and after the effective
date of termination of this Agreement, pursuant to Sections 14, 15, or 16
hereof, the Manager shall not be entitled to compensation for further services
hereunder, but shall be paid all compensation accruing to the date of
termination, subject to adjustment on an annualized basis in accordance with
Section 10(d). The Manager shall forthwith upon such termination:
(a) Pay over to the Company or any Subsidiary, as applicable, all
money collected and held for the account of the Company or any Subsidiary
pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Board of Directors with respect to the Company or any Subsidiary; and
(c) Deliver to the Board of Directors all property and documents of
the Company or any Subsidiary then in the custody of the Manager.
Section 18. Release of Money or Other Property Upon Written
Request. The Manager agrees that any money or other property of the Company or
any Subsidiary held by the Manager under this Agreement shall be held for the
Company or such Subsidiary in a custodial capacity, and the Manager's records
shall be appropriately marked to reflect clearly the ownership of such money or
other property by the Company or such Subsidiary. Upon the receipt by the
Manager of a written request signed by a duly authorized officer of the Company
requesting the Manager to release to the Company or any Subsidiary any money or
other property then held by the Manager for the account of the Company or any
Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time,
but in no event later than 60 days following such request. The Manager shall
not be liable to the Company, any Subsidiary, the Unaffiliated Directors, or the
Company's Shareholders for any acts thereafter performed or omissions thereafter
to act by the Company or any Subsidiary of the Company in connection with the
money or other property released to the Company or any Subsidiary in accordance
with this Section. The Company and any Subsidiary receiving released money or
other property hereby agree to indemnify the Manager, its directors, officers,
shareholders and employees against any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, which arise
in connection with the Manager's release of such money or other property to the
Company or such Subsidiary in accordance with the terms of this Section unless
the Manager's release of such money constitutes bad faith, willful misconduct,
gross negligence or reckless disregard of duties. This provision shall be in
addition to any right of the Manager to indemnification under Section 12.
Section 19. Representations and Warranties.
(a) The Company hereby represents and warrants to the Manager as
follows:
(i) Corporate Existence. The Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Company and its Subsidiaries,
taken as a whole. The Company does not do business under any fictitious
business name.
(ii) Corporate Power; Authorization; Enforceable Obligations.
The Company has the corporate power, authority and legal right to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action authorize this Agreement on the terms
and conditions hereof and its execution, delivery and performance of this
Agreement and all obligations required hereunder. Except such as have been
obtained, no consent of any other person including, without limitation,
stockholders and creditors of the Company, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required by the Company in
connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement and all obligations required hereunder.
This Agreement has been, and each instrument or document required hereunder will
be, executed and delivered by a duly authorized officer of the Company, and this
Agreement constitutes, and each instrument or document required hereunder when
executed and delivered hereunder will constitute, the legally valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
(iii) No Legal Bar to This Agreement. The execution, delivery
and performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Company, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Company, or the certificate
of incorporation or by-laws of, or any securities issued by the Company or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Company
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
(b) The Manager hereby represents and warrants to the Company as
follows:
(i) Corporate Existence. The Manager is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Manager and its Subsidiaries,
taken as a whole. The Manager does not do business under any fictitious
business name.
(ii) Corporate Power; Authorization; Enforceable Obligations.
The Manager has the corporate power, authority and legal right to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and its execution, delivery and performance of this
Agreement and all obligations required hereunder. Except such as have been
obtained, no consent of any other person including, without limitation,
stockholders and creditors of the Manager, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required by the Manager in
connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement and all obligations required hereunder.
This Agreement has been, and each instrument or document required hereunder will
be, executed and delivered by a duly authorized officer of the Manager, and this
Agreement constitutes, and each instrument or document required hereunder when
executed and delivered hereunder will constitute, the legally valid and binding
obligation of the Manager enforceable against the Manager in accordance with its
terms.
(iii) No Legal Bar to This Agreement. The execution, delivery
and performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Manager, or the certificate
of incorporation or by-laws of, or any securities issued by the Manager or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
Section 20. Notices. Any notice, report, or other communication
required or permitted to be given hereunder shall be in writing unless some
other method of giving such notice, report, or other communication is accepted
by the party to whom it is given, and shall be given by being delivered at the
following addresses of the parties hereto:
The Company: Countrywide Mortgage Investments, Inc.
35 North Lake Avenue
P.O. Box 7211
Pasadena, California 91109-7311
Attention: General Counsel
The Manager: Countrywide Asset Management Corporation
155 North Lake Avenue
P.O. Box 7137
Pasadena, California 91109-7137
Attention: General Counsel
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 20.
Section 21. Name Change Upon Termination of Management Agreement. The
Company agrees that, if at any time the Manager or any Affiliate of CCI
shall cease to serve generally as manager of the Company or any Subsidiary, upon
receipt of a written request from the Manager, the Company and such Subsidiary
will cause their Governing Instruments to be amended so as to change their names
to a name that does not include "Countrywide" or any approximation thereof;
provided, however, that such requirement shall not apply to any trust in which
the Company or any of its Subsidiaries has sold a majority of the beneficial
interest, and which has issued Mortgage Backed Securities that remain
outstanding in whole or in part.
Section 22. Amendments. This Agreement shall not be amended,
changed, modified, terminated or discharged in whole or in part except by an
instrument in writing signed by all parties hereto, or their respective
successors or assigns, or otherwise as provided herein.
Section 23. Successors and Assigns. This Agreement shall bind any
successors or assigns of the parties hereto as herein provided.
Section 24. Governing Law. This Agreement shall be governed,
construed and interpreted in accordance with the laws of the State of
California.
Section 25. Headlines and Cross References. The section headings
hereof have been inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement. Any
reference in this Agreement to a "Section" or "subsection" shall be construed,
respectively, as referring to a section of this Agreement or a subsection of a
section of this Agreement in which the reference appears.
Section 26. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
Section 27. Entire Agreement. This instrument contains the entire
agreement between the parties as to the rights granted and the obligations
assumed in this instrument.
Section 28. Waiver. Any forbearance by a party to this Agreement in
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not be a waiver of or preclude the exercise of that or any
other right or remedy.
Section 29. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, any of which shall constitute an original
as against any party whose signature appears on it, and all of which shall
together constitute a single instrument. This Agreement shall become binding
when one or more counterparts, individually or taken together, bear the
signatures of both parties.
Section 30. Guaranty of Manager's Obligations. The Manager agrees that
in order to insure the performance of its duties under this Agreement, it will
be necessary for CFC to guarantee the full performance of the Manager, and this
Agreement is conditioned upon the execution and delivery to the Company of a
Guaranty Agreement in the form attached to this Agreement as Exhibit B. Such
Guaranty Agreement shall remain in effect through the term of this Agreement,
including any renewals or extensions; provided, however, that the Guaranty
Agreement may be terminated by the Guarantor as provided therein at such time as
the Manager and the Guarantor are no longer Affiliates.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
By: __________________________________ Michael W. Perry
Executive Vice President
COUNTRYWIDE ASSET MANAGEMENT CORPORATION
By: __________________________________ Stanford L. Kurland President
S:\GJE\CMIMGMT.DOC
EXHIBIT A
August 29, 1985
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
P.O. Box 7137
Pasadena, California 91109-7137
Gentlemen:
In order to induce Countrywide Mortgage Investments, Inc. (the "Company") to
enter into a Management Agreement with Countywide Asset Management Corporation
(the "Manager"), the Manager's parent corporation, Countrywide Credit
Industries, Inc. ("CCI") agrees that so long as the Manager or any affiliated
company of CCI is serving as the Manager of the Company pursuant to a management
agreement neither CCI nor any of its affiliated companies will either sponsor
another real estate investment trust or elect, or cause the election by any such
affiliate, to be taxed as a real estate investment trust without the prior
approval of a majority of the members of the Board of Directors of the Company
who are not affiliated with CCI or any of its affiliates.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(SEAL) By: /s/Angelo R. Mozilo
Title: Executive
Vice President
ATTEST:
By: /s/Wayne Turkheimer
Title: Secretary
8
7
1994 AMENDED AND EXTENDED
LOAN PURCHASE AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made as of May 15, 1994, by and between Countrywide
Mortgage Investments, Inc., a Delaware corporation (the "Company"), and
Countrywide Funding Corporation, a New York corporation ("CFC").
WITNESSETH:
WHEREAS, the Company has elected to qualify for the tax benefits
accorded by Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, the Company, directly or through Subsidiaries, in the conduct
of its business primarily operates a mortgage loan conduit, engages in warehouse
lending and invests in mortgage loans and mortgage-related securities meeting
the investment criteria established from time to time by the Board of Directors;
and
WHEREAS, the Company may desire to purchase mortgage loans originated
or purchased by CFC and may want CFC to cause the issuance of Agency Securities
supported by pools of such mortgage loans on its behalf; and
WHEREAS, the Company may desire to appoint CFC to service mortgage
loans originated by others and purchased by the Company through its mortgage
loan conduit operations; and
WHEREAS, the Company and CFC desire to amend and extend the Loan
Purchase and Administrative Services Agreement originally entered into as of
September 3, 1985, for a one-year period through May 14, 1995, upon the terms
and subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
Section 1. Definitions. Whenever used in this Agreement, the
following terms, unless the context otherwise requires, shall have the following
meanings:
(a) "Affiliate" shall have the meaning attributed to such term in the
Management Agreement.
(b) "Agency Securities" shall mean GNMA Certificates, FHLMC
Certificates and/or FNMA Certificates.
(c) "Agreement" shall mean this 1994 Amended and Extended Loan
Purchase and Administrative Services Agreement.
(d) "Board of Directors" shall mean the Board of Directors of the
Company.
(e) "Conforming Loan" shall mean an FHA Loan, a VA Loan or a
conventional mortgage loan eligible for sale to FNMA or FHLMC.
(f) "FHA Loan" shall mean any mortgage loan insured by the Federal
Housing Administration under the National Housing Act.
(g) "FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a
corporation organized and existing under the laws of the United States, or any
successor thereto.
(h) "FHLMC Certificate" shall mean a mortgage participation
certificate, guaranteed as to payment of interest and principal by FHLMC and
backed by a pool of conventional mortgage loans.
(i) "FNMA" shall mean the Federal National Mortgage Association, a
corporation organized and existing under the laws of the United States, or any
successor thereto.
(j) "FNMA Certificate" shall mean a guaranteed mortgage pass-through
certificate, guaranteed as to timely payment of interest and principal by FNMA
and backed by a pool of FHA Loans, VA Loans, and/or conventional mortgage loans.
(k) "GNMA" shall mean the Government National Mortgage Association, a
wholly owned corporate instrumentality of the United States within the
Department of Housing and Urban Development, or any successor thereto.
(l) "GNMA Certificate" shall mean a fully modified pass-through
mortgage-backed certificate guaranteed as to timely payment of interest and
principal by GNMA and backed by a pool of FHA Loans or VA Loans.
(m) "Jumbo Loan" shall mean any mortgage loan which is not a
Conforming Loan.
(n) "Management Agreement" shall mean that certain agreement dated as
of May 15, 1994 between the Company and the Manager governing the management of
the Company's investments and day-to-day operations.
(o) "Manager" shall mean Countrywide Asset Management Corporation, or
any successor thereto, under a Management Agreement with the Company.
(p) "Mortgage Backed Securities" shall have the meaning attributed to
such term in the Management Agreement.
(q) "Subsidiary" shall have the meaning attributed to such term in
the Management Agreement.
(r) "Unaffiliated Directors" shall mean those members of the Board of
Directors who are not Affiliates of the Manager.
(s) "VA Loan" shall mean any mortgage loan guaranteed by the Veterans
Administration under the Servicemen's Readjustment Act of 1944, as amended, or
Chapter 37 of Title 38, United States Code.
Section 2. Purchase of Mortgage Loans and Agency Securities from
CFC by the Company. (a) CFC may sell to the Company mortgage loans, Agency
Securities and other mortgage-related assets meeting the Company's investment
criteria. CFC agrees that all such sales shall be made in accordance with the
normal and customary industry practices with respect to the sale of mortgage
loans, Agency Securities and other mortgage-related assets. CFC agrees that all
mortgage loans or other investments sold by it to the Company will meet the
investment criteria of the Company in effect at the time of sales.
(b) CFC agrees that, any sale of mortgage loans, Agency Securities
and other mortgage-related assets from CFC to the Company will be made at prices
no less favorable to the Company than are available to CFC from other
purchasers.
(c) The Company agrees that prior to the delivery of each mortgage
loan purchased, it shall have no interest in such mortgage loan. CFC shall bear
all expenses and costs associated with the mortgage loans prior to delivery,
including the costs associated with mortgage loans that are not sold. Upon the
delivery of such mortgage loan, the Company shall be the sole beneficial owner
of such mortgage loan although legal title to the mortgage and the mortgage note
will be held by CFC if so directed by the Company to permit the issuance of
Agency Securities under Section 3.
(d) Notwithstanding the fact that the Company is the beneficial owner
of the mortgage loans it purchases, the Company and CFC agree that from and
after the date first written above, the Conforming Loans sold to the Company
under this Agreement shall be sold "servicing retained" and the servicing rights
therefor shall remain with CFC or the other holder thereof. Notwithstanding the
foregoing, neither CFC nor such holder may assign its servicing rights to such
Conforming Loans without the consent of the Company prior to the issuance of
Agency Securities backed by such Conforming Loans. The Company agrees that it
will not unreasonably withhold its consent to such an assignment of servicing
rights. CFC's rights to assign the servicing rights to Conforming Loans that
have been pooled and exchanged for Agency Securities shall be subject to
Subsection 3(c).
(e) CFC hereby represents and warrants that at the time of sale of
mortgage loans to the Company such mortgage loans will meet the representations
and warranties required to be made by sellers of mortgage loans to the Company
or any Subsidiary pursuant to the Seller/Servicer Guide incorporated by
reference into the Seller/Servicer Contract executed by CFC.
(f) CFC shall act as an independent contractor and not as an agent of
the Company for purposes of originating and purchasing mortgage loans and
selling to the Company mortgage loans and Agency Securities and other
investments.
Section 3. Pooling of Mortgage Loans; Issuance of Agency
Securities; Payments of Certain Amounts to Company. (a) If directed by the
Company, CFC on behalf of the Company will pool any FHA Loans and VA Loans
purchased by the Company in accordance with the requirements of FNMA and will
use its best efforts to have GNMA Certificates issued backed by such FHA Loans
and VA Loans. In connection therewith, CFC will (i) apply to GNMA for a
commitment to guarantee mortgage-backed securities by the issuance of such GNMA
Certificates; (ii) once such a commitment has been issued by GNMA, deliver the
pool of mortgage loans to a custodian (selected by CFC and acceptable to the
Company, subject to GNMA requirements) to be held for the benefit of the holder
of the Certificates; and (iii) once the custodian verifies to GNMA that it has
custody of the pool, enter into or cause to be created an appropriate GNMA
guaranty pursuant to which CFC will issue a GNMA Certificate owned by and
registered in the name of or deposited into a depository institution for the
account of the Company. After the issuance of such GNMA Certificates, CFC will
retain all responsibilities and duties to GNMA, including the payment of all
GNMA guaranty fees, with respect to such FHA Loans, VA Loans and GNMA
Certificates and will service such FHA Loans and VA Loans after the issuance of
the GNMA Certificates in accordance with GNMA requirements.
(b) If directed by the Company, CFC on behalf of the Company will
pool any conventional mortgage loans and/or FHA Loans and VA Loans purchased by
the Company in accordance with the requirements of FNMA and/or the requirements
of FHLMC and will use its best efforts to have FNMA Certificates and/or FHLMC
Certificates issued backed by such conventional mortgage loans, FHA Loans and VA
Loans, but only if CFC in its sole discretion determines that such conventional
mortgage loans, FHA Loans and VA Loans meet all FNMA or FHLMC underwriting and
other requirements for such issuance. In connection therewith, CFC will (i)
apply to FNMA or FHLMC for a commitment to issue FNMA Certificates or FHLMC
Certificates and (ii) once such commitment has been approved, CFC will contract
with FNMA or FHLMC to pool such conventional mortgage loans, FHA Loans and VA
Loans and cause to be issued FNMA Certificates or FHLMC Certificates backed by
such loans, which FNMA Certificates or FHLMC Certificates will be owned by and
will be registered in the name of or deposited into a depository institution for
the account of the Company. After the issuance of such FNMA Certificates and
FHLMC Certificates, CFC will retain all responsibilities and duties to FNMA and
FHLMC, including the payment of all FNMA or FHLMC guaranty fees, with respect to
such conventional mortgage loans, FHA Loans, VA Loans, FNMA Certificates and
FHLMC Certificates and will service such conventional mortgage loans, FHA Loans
and VA Loans after the issuance of the FNMA or FHLMC Certificates which they
back, in accordance with FNMA and FHLMC requirements.
(c) If Agency Securities are issued to the Company pursuant to this
Section, CFC agrees that for such time as it is servicing the mortgage loans
underlying each Agency Security on behalf of the Company, in addition to all
duties and obligations imposed on CFC by the servicing agreement which
incorporates the appropriate GNMA, FNMA or FHLMC requirements, CFC shall remit
to the Company at the same time it remits each periodic installment of principal
and interest on the Agency Security, the amount, if any, representing the
difference between (i) the schedules installment of principal and interest on
the mortgage loans underlying the Agency Security, less the applicable GNMA,
FNMA or FHLMC guaranty fee and CFC's servicing fee as agreed to between the
Company and CFC, and (ii) the scheduled installment of principal and interest on
the Agency Security. The obligation of CFC to remit such amounts to the Company
shall arise upon receipt from the mortgagor by CFC of the scheduled installment
of principal and interest on the underlying mortgage loan. CFC agrees that in
the event it assigns its right to service the mortgage loans underlying Agency
Securities, either the successor servicer of such mortgage loans will continue
to remit the amounts referred to above to the Company or CFC will remit to the
Company an amount representing the present value of the anticipated amounts
which would otherwise be received by the Company over the life of the mortgage
loans under this Subsection.
Section 4. Obligation to Assume Servicing. In the event the
Company or any Subsidiary acquires rights to service mortgage loans or
terminates the servicing rights of any entity which has sold mortgage loans to
the Company or any Subsidiary on a servicing retained basis, the Company and CFC
agree to negotiate a servicing agreement pursuant to which CFC will assume the
servicing function.
Section 5. Additional Activities of CFC. Nothing herein shall
prevent CFC or its Affiliates from engaging in other businesses or from
rendering services of any kind to any other person or entity, including the
performance of monitoring, administering or servicing activities for others
investing in any type of real estate investment.
Section 6. Bank Accounts. Fidelity Bond. (a) CFC may establish
and maintain in connection with the services performed hereunder one or more
bank accounts in the name of the Company, at the direction of the Company, and
may collect and deposit into any such account or accounts, and disburse from any
such account or accounts, moneys on behalf of the Company, under such terms and
conditions as the Company may approve; and CFC shall from time to time render
appropriate accountings of such collections and payments to the Company and,
when requested, to the auditors of the Company.
(b) CFC shall maintain a fidelity bond with a responsible surety
company in an amount approved by the Board of Directors covering all officers
and employees of CFC handling funds of the Company and any documents or papers,
which bond shall protect the Company against all losses of any such property
from acts of such officers and employees through theft, embezzlement, fraud,
negligent acts, errors and omissions or otherwise, the premium for said bond to
be paid by CFC.
Section 7. Records; Confidentiality. CFC shall maintain
appropriate books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for inspection
and copying by the Company at any time during normal business hours. CFC agrees
to keep confidential any and all information it obtains from time to time in
connection with the services it renders hereunder and shall not disclose any
portion thereof to nonaffiliated third parties except with the prior written
consent of the Company.
Section 8. Term; Termination. (a) This Agreement shall continue
in force through May 14, 1995, and thereafter it may be extended only with the
consent of CFC and by the affirmative vote of a majority of the Unaffiliated
Directors. Each extension shall be executed in writing by both parties hereto
before the expiration of this Agreement or of any extension thereof.
(b) CFC may terminate this Agreement upon 30 days' written notice if
at any time any of the Affiliates of Countrywide Credit Industries, Inc. are no
longer servicing as Manager.
(c) Notwithstanding any other provision herein to the contrary, this
Agreement, or any extension hereof, may be terminated by the Company with cause,
upon 30 days' written notice, or by either party without cause, upon 60 days'
written notice, by majority vote of the Unaffiliated Directors or by vote of the
holders of a majority of the outstanding shares of common stock of the Company,
in the case of termination by the Company, or in the case of termination by CFC,
by majority vote of the Directors of CFC.
Section 9. Assignment. This Agreement shall not be assignable in
whole or in part by CFC, unless such assignment is to a corporation,
association, trust or other organization which shall acquire the property and
carry on the business of CFC, if at the time of such assignment a majority of
the voting stock of such assignee organization shall be owned, directly or
indirectly, by Countrywide Credit Industries, Inc. or unless such assignment is
consented to in writing by the Company with the consent of a majority of the
Unaffiliated Directors. Such an assignment shall bind the assignee hereunder in
the same manner as CFC is bound hereunder, and, to further evidence its
obligations hereunder, the assignee shall execute and deliver to the Company a
counterpart of this Agreement. This Agreement shall not be assignable by the
Company without the consent of CFC, except in the case of an assignment by the
Company to a corporation or other organization which is a successor (by merger,
consolidation or purchase of assets) to the Company, in which case such
successor organization shall be bound hereunder by the terms of said assignment
in the same manner as the Company is bound hereunder.
Section 10. Termination by Company for Cause. At the option solely
of the Company, this Agreement may be and become terminated upon receipt of
thirty days' written notice of termination from the Board of Directors to CFC is
any of the following events shall occur:
(a) If CFC shall violate any provisions of this Agreement and, after
notice of such violation, shall not cure such default within 30 days; or
(b) There is entered an order for relief or similar decree or order
with respect to CFC by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or CFC (i) ceases or admits in writing its inability to pay
its debts as they become due and payable, or makes a general assignment for the
benefit of, or enters into any composition or arrangement with, creditors; (ii)
applies for, or consents (by admission of material allegations of a petition or
otherwise) to the appointment of a receiver, trustee, assignee, custodian,
liquidator or sequestrator (or other similar official) of CFC or of any
substantial part of its properties or assets, or authorizes such an application
or consent, or proceedings seeking such appointment are commenced without such
authorization, consent or application against CFC and continue undismissed for
30 days; (iii) authorizes or files a voluntary petition in bankruptcy, or
applies for or consents (by admission of material allegations of a petition or
otherwise) to the application of any bankruptcy, reorganization, arrangement,
readjustment of debt, insolvency, dissolution, liquidation or other similar law
of any jurisdiction, or authorizes such application or consent, or proceedings
to such end are instituted against CFC without such authorization, application
or consent and remain undismissed for 30 days or result in adjudication of
bankruptcy or insolvency; or (iv) permits or suffers all or any substantial part
of its properties or assets to be sequestered or attached by court order and the
order remains undismissed for 30 days.
(c) CFC agrees that if any of the events specified in paragraph (b)
of this Section 10 shall occur, it will give prompt written notice thereof to
the Board of Directors after the happening of such event.
Section 11. Action Upon Termination. From and after the effective
date of termination of this Agreement, pursuant to Sections 8, 9 or 10 hereof,
CFC shall not be entitled to compensation for further services hereunder, but
shall be paid all compensation accruing to the date of termination. CFC shall
forthwith upon such termination:
(a) Pay over to the Company any money collected and held for the
account of the Company pursuant to this Agreement or otherwise, after deducting
any accrued compensation to which it is then entitled;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing any payments collected by it and a statement of any money held
by it, covering the period following the date of the last accounting furnished
to the Board of Directors; and
(c) Deliver to the Board of Directors all property and documents of
the Company then in the custody of CFC, except to the extent that to do so would
conflict with the terms of its servicing agreement with the Company.
Section 12. Release of Money or other Property Upon Written
Request. CFC agrees that any money or other property of the Company held by CFC
under this Agreement shall be held for the Company in a custodial capacity, and
CFC's records shall be appropriately marked to clearly reflect the ownership of
such money or other property of the Company. CFC shall release its custody of
any money or other property only in accordance with written instructions from
the Company.
Section 13. Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, unless some
other method of giving such notice , report or other communication is accepted
by the party to whom it is given, and shall be given by being delivered at the
following addresses of the parties hereto:
The Company: Countrywide Mortgage Investments, Inc.
35 North Lake Avenue
Pasadena, California 91101-1857
Attention: General Counsel
CFC: Countrywide Funding Corporation
155 North Lake Avenue
Post Office 7137
Pasadena, California 91109-7137
Attention: General Counsel
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 13.
Section 14. No Joint Venture. The Company and CFC are not partners
or joint venturers with each other and nothing herein shall be construed to make
them such partners or joint venturers or impose any liability as such on either
of them.
Section 15. Amendments. This Agreement shall not be amended,
changed, modified, terminated or discharged in whole or in part, and the
performance of any obligation hereunder may not be waived, except by an
instrument in writing signed by both parties hereto, or their respective
successors or permitted assigns, or otherwise as provided herein.
Section 16. Successors and Assigns. This Agreement shall bind any
successors or permitted assigns of the parties hereto as herein provided.
Section 17. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
Section 18. Entire Agreement. This instrument contains the entire
agreement between the parties as to the rights granted and the obligations
assumed in this instrument.
Section 19. Waiver. Any forbearance by a party to this Agreement
in exercising any right or remedy under this Agreement or otherwise afforded by
applicable laws shall not be a waiver of or preclude the exercise of that or any
other right or remedy.
Section 20. Governing Law. This Agreement shall be governed by,
construed under and interpreted in accordance with the laws of the State of
California.
Section 21. Supplemental Servicing. From and after the date of
this Agreement the Supplemental Servicing Agreement dated as of May 15, 1987, by
and among the Company, CFC and the Manager shall be of no further force and
effect.
Section 22. Headings and Cross-References. The section headings
hereof have been inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement. Any
reference in this Agreement to a "Section" or "Subsection" shall be construed,
respectively, as referring to a section of this Agreement or a subsection of a
section of this Agreement in which the reference appears.
Section 23. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, any of which shall constitute an original
as against any party whose signature appears on it, and all of which shall
together constitute a single instrument. This Agreement shall become binding
when one or more counterparts, individually or taken together, bear the
signatures of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and year
first above written.
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
By: _____________________________
Michael W. Perry
Title: Executive Vice President
COUNTRYWIDE FUNDING CORPORATION
By: _____________________________
Kevin W. Bartlett
Title: Managing Director
The undersigned, as Manager, consents to the foregoing terms and
provisions of this Agreement and agrees to be bound by them in performing its
duties as Manager of the Company.
COUNTRYWIDE ASSET MANAGEMENT
CORPORATION
By: _____________________________
Stanford L. Kurland
Title: President
Exhibit 11.1
COUNTRYWIDE CREDIT INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months
Ended May 31,
1993 1994
(Dollar amounts in
thousands,
except per share
data)
Primary
Net earnings $33,729 $43,297
Preferred stock dividend requirement - 564
Net earnings applicable to common stock $33,729 $42,733
Average shares outstanding 91,121 84,656
Net effect of dilutive stock options --
based on the treasury stock method
using average market price 1,060 2,164
Total average shares 92,181 86,820
Per share amount $0.37 $0.49
Fully diluted
Net earnings applicable to common stock $33,729 $43,297
Average shares outstanding 91,121 84,656
Assumed conversion of conv. preferred shares - 6,167
Net effect of dilutive stock options --
based on the treasury stock method using
the closing market price, if higher than
average market price. 1,224 2,164
Total average shares 92,345 92,987
Per share amount $0.37 $0.47
