<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1997
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 1-8972
INMC MORTGAGE HOLDINGS, INC.
(formerly CWM Mortgage Holdings, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE 95-3983415
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
155 NORTH LAKE AVENUE, PASADENA, CALIFORNIA 91101-1857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (800) 669-2300
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
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 close of the period covered by this report.
Common stock outstanding as of June 30, 1997: 54,107,452 shares
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Loans:
Mortgage loans held for investment, net $1,582,562 $1,210,891
Manufactured housing loans held for investment, net 26,636 25,822
Mortgage loans held for sale - prime 691,443 404,346
Mortgage loans held for sale - subprime 156,445 177,913
Manufactured housing loans held for sale 146,029 74,949
Construction loans receivable, net 685,510 460,546
Revolving warehouse lines of credit, net 268,141 251,032
Mortgage securities 400,177 231,780
Collateral for CMOs 268,127 289,054
Investment in and advances to IndyMac 161,607 169,730
Cash and cash equivalents 20,797 12,450
Other assets 69,190 47,546
---------- ----------
Total assets $4,476,664 $3,356,059
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Repurchase agreements and other credit facilities $3,570,506 $2,531,509
Collateralized mortgage obligations 243,750 264,080
Senior unsecured notes 59,820 59,759
Accounts payable and accrued liabilities 29,411 22,287
---------- ----------
Total liabilities 3,903,487 2,877,635
Shareholders' equity
Common stock - authorized, 100,000,000 shares of
$.01 par value; issued and outstanding, 54,107,452 shares
at June 30, 1997 and 50,200,146 at December 31, 1996 541 502
Additional paid-in capital 570,809 490,695
Net unrealized gain (loss) on available-for-sale mortgage securities
Held by INMC (2,421) (7,166)
Held by IndyMac 222 (8,427)
Cumulative earnings 263,136 219,135
Cumulative distributions to shareholders (259,110) (216,315)
---------- ----------
Total shareholders' equity 573,177 478,424
---------- ----------
Total liabilities and shareholders' equity $4,476,664 $3,356,059
========== ==========
</TABLE>
2
<PAGE>
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Interest income
Mortgage loans held for investment $28,288 $22,627 $ 55,221 $ 49,709
Manufactured housing loans held for investment 663 - 1,296 -
Mortgage loans held for sale 16,240 14,098 31,412 28,073
Manufactured housing loans held for sale 3,208 150 5,468 150
Construction loans 17,506 5,939 32,218 10,422
Revolving warehouse lines of credit 4,395 3,831 8,424 7,650
Mortgage securities 5,516 2,330 8,838 4,797
Collateral for CMOs 5,195 6,034 10,596 11,367
Advances to IndyMac 2,530 2,133 5,240 3,906
Other 340 58 385 142
------- ------- -------- --------
Total interest income 83,881 57,200 159,098 116,216
Interest expense
Repurchase agreements and other credit facilities 49,654 30,634 91,219 64,202
CMOs 4,898 5,917 10,103 11,526
Senior unsecured notes 1,379 1,347 2,757 2,694
------- ------- -------- --------
Total interest expense 55,931 37,898 104,079 78,422
------- ------- -------- --------
Net interest income 27,950 19,302 55,019 37,794
Provision for loan losses 3,900 2,646 7,800 5,049
------- ------- -------- --------
Net interest income after provision for loan losses 24,050 16,656 47,219 32,745
Equity in earnings of IndyMac 2,735 3,646 6,994 7,191
Unrealized gains on securities 1,413 (133) 1,119 (321)
Other 1,461 1,046 3,066 1,441
------- ------- -------- --------
Net revenues 29,659 21,215 58,398 41,056
EXPENSES
Salaries 2,869 1,851 5,858 3,494
General and administrative 2,036 920 4,132 1,692
Management fees to affiliate 2,098 2,075 4,407 4,143
------- ------- -------- --------
Total expenses 7,003 4,846 14,397 9,329
NET EARNINGS $22,656 $16,369 $ 44,001 $ 31,727
======= ======= ======== ========
EARNINGS PER SHARE $0.43 $0.37 $0.85 $0.72
Weighted average shares outstanding 53,296,345 44,649,927 51,674,810 43,877,750
</TABLE>
3
<PAGE>
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $44,001 $31,727
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Amortization and depreciation 12,952 11,629
Provision for loan losses 7,800 5,049
Equity in earnings of IndyMac (6,994) (7,191)
Unrealized gain on trading securities (1,697) -
Purchases of mortgage loans held for sale (1,865,673) (2,112,762)
Sale of and payments from mortgage loans held for sale 1,537,190 1,928,652
Net purchases of manufactured housing loans held for sale (71,286) (15,648)
Net purchases of trading securities (37,982) -
(Increases)/decreases in other assets (13,862) 3,030
(Increases)/decreases in other liabilities 6,894 (938)
----------- -------------
Net cash used in operating activities (388,657) (156,452)
Cash flows from investing activities:
Purchases of mortgage loans held for investment (520,602) -
Payments from mortgage loans held for investment 195,927 170,787
Net increase in construction loans receivable (225,939) (91,225)
Purchases of mortgage securities (153,316) -
Sales and payments of mortgage securities 18,877 -
Net (increase) decrease in revolving warehouse lines of credit (17,409) 15,560
Net purchases of manufactured housing loans held for investment (814) -
Advances (to)/from IndyMac 23,764 (17,274)
Net payments from collateral for CMOs 20,913 29,411
----------- -----------
Net cash (used in) provided by investing activities (658,599) 107,259
Cash flows from financing activities:
Net increase (decrease) in repurchase agreements and other credit facilities 1,038,997 (89,942)
Net proceeds from issuance of common stock 80,152 44,489
Cash dividends paid (42,797) (31,008)
Proceeds from issuance of collateralized mortgage obligations - 146,931
Principal payments on collateralized mortgage obligations (20,749) (27,057)
----------- -------------
Net cash provided by financing activities 1,055,603 43,413
Net increase/(decrease) in cash and cash equivalents 8,347 (5,780)
Cash and cash equivalents at beginning of period 12,450 8,049
----------- -------------
Cash and cash equivalents at end of period $20,797 $2,269
=========== =============
Supplemental cash flow information:
Cash paid for interest $102,122 $77,089
=========== =============
</TABLE>
Supplemental disclosure of non-cash activity:
$154.6 million of mortgage loans held for investment were transferred to
collateral for CMOs in 1996 in association with the issuance of a CMO.
<PAGE>
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
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. INMC Mortgage Holdings, Inc. has elected to be treated as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. The consolidated financial statements include the accounts of INMC
Mortgage Holdings, Inc. and its qualified REIT subsidiaries ("INMC"). The
mortgage loan conduit operations are primarily conducted through IndyMac Inc.
("IndyMac"), a taxable corporation, which is not consolidated with INMC for
financial reporting or income tax purposes. INMC owns all of the preferred stock
and a 99% economic interest in IndyMac. INMC's investment in IndyMac is
accounted for under a method similar to the equity method. As used herein, the
"Company" includes INMC and IndyMac and their respective subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation of INMC. Certain reclassifications have been made to the financial
statements for prior periods to conform to the June 30, 1997 financial statement
presentation.
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 six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in INMC's annual report on Form 10-K for the year
ended December 31, 1996.
NOTE B - ALLOWANCE FOR CREDIT LOSSES
During the six months ended June 30, 1997, INMC added $7.8 million to its
allowance for credit losses. The allowance for credit losses totaled $21.4
million at June 30, 1997, and primarily includes reserves for mortgage loans
held for investment, construction loans, warehouse lines of credit and CMOs in
the amounts of $16.4 million, $3.2 million, $1.5 million and $300,000,
respectively. INMC recorded chargeoffs of $3.4 million and $2.1 million during
the six months ended June 30, 1997 and 1996, respectively.
NOTE C - MORTGAGE SECURITIES
Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities. Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities. Contractual maturities on the mortgage securities range
from 10 to 30 years.
5
<PAGE>
NOTE C - MORTGAGE SECURITIES - CONTINUED
Following is the estimated fair value of INMC's mortgage securities as of June
30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
---- ----- ------ -----
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1997
Securitized Master Servicing Fees $ 23,612 $ - $ - $ 23,612
Other Mortgage Securities 44,787 - - 44,787
-------- ------ -------- --------
Total Trading 68,399 - - 68,399
Securitized Master Servicing Fees 80,465 2,198 (6,333) 76,330
Other Mortgage Securities 253,733 2,197 (482) 255,448
-------- ------ -------- --------
Total Available for Sale 334,198 4,395 (6,815) 331,778
-------- ------ -------- --------
Total $402,597 $4,395 $ (6,815) $400,177
======== ====== ======== ========
December 31, 1996
Securitized Master Servicing Fees $ 25,570 $ - $ - $ 25,570
Other Mortgage Securities 7,439 - - 7,439
-------- ------ -------- --------
Total Trading 33,009 - - 33,009
Securitized Master Servicing Fees 87,457 1,159 (10,486) 78,130
Other Mortgage Securities 118,480 2,209 (48) 120,641
-------- ------ -------- --------
Total Available for Sale 205,937 3,368 (10,534) 198,771
-------- ------ -------- --------
Total $238,946 $3,368 $(10,534) $231,780
======== ====== ======== ========
</TABLE>
As of June 30, 1997, all of INMC's mortgage securities were pledged to secure
repurchase borrowings intended to finance the holding of such securities.
NOTE D - INVESTMENT IN INDYMAC (Unaudited)
- ------------------------------------------
Summarized financial information for IndyMac follows:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans held for sale, net $224,310 $ 86,962
Mortgage securities 550,800 541,672
Master servicing fees receivable 44,009 44,239
Other assets 46,204 38,232
-------- --------
Total assets $865,323 $711,105
======== ========
Repurchase agreements and other credit facilities $649,738 $496,052
Due to INMC 105,510 130,153
Accounts payable and accrued liabilities 53,411 44,243
Shareholders' equity 56,664 40,657
-------- --------
Total liabilities and shareholders' equity $865,323 $711,105
======== ========
</TABLE>
6
<PAGE>
NOTE D - INVESTMENT IN INDYMAC (Unaudited) - continued
- ------------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Six months, ended
June 30, June 30,
-----------------------------------------------------------------
(Dollars in thousands) 1997 1996 1997 1996
-----------------------------------------------------------------
(as adjusted) (as adjusted)
<S> <C> <C> <C> <C>
Interest income
Loans held for sale $ 3,740 $ 829 $ 5,269 $ 2,307
Mortgage securities 10,321 10,390 20,526 19,613
Master servicing fees receivable, net 2,835 438 4,823 1,184
-----------------------------------------------------------------
Total interest income 16,896 11,657 30,618 23,104
Interest expense 12,335 10,112 23,061 18,854
-----------------------------------------------------------------
Net interest income 4,561 1,545 7,557 4,250
Gain on sale of loans and securities 11,575 10,920 28,086 19,801
Other 763 477 1,095 725
-----------------------------------------------------------------
Net revenues 16,899 12,942 36,738 24,776
Salaries 7,663 4,703 14,770 8,583
General and administrative expense 4,511 1,901 8,698 3,587
Management fees to affiliate - 467 757 910
-----------------------------------------------------------------
Total expenses 12,174 7,071 24,225 13,080
Earnings before income tax provision 4,725 5,871 12,513 11,696
Income tax provision 1,962 2,499 5,242 5,044
-----------------------------------------------------------------
Net earnings $ 2,763 $ 3,372 $ 7,271 $ 6,652
=================================================================
</TABLE>
Allowance for Credit Losses. IndyMac's allowance for credit losses related to
loans held for sale totaled $1.3 million at June 30, 1997. IndyMac recorded
chargeoffs of $754,000 and $18,000 during the six months ended June 30, 1997 and
1996, respectively.
Mortgage Securities. Mortgage securities consist of subordinated securities,
principal-only and interest-only securities. Interest-only securities are
comprised primarily of securitized excess master servicing fees retained in
connection with the securitization of mortgage loans held for sale. IndyMac
restated its 1996 financial statements to classify and account for certain
subordinated securities, principal-only and interest-only securities retained in
connection with IndyMac's securitization activities as trading, in accordance
with SFAS No. 115.
7
<PAGE>
NOTE D - INVESTMENT IN INDYMAC (Unaudited) - continued
- ------------------------------------------------------
Contractual maturities on the mortgage securities range from 10 to 30 years.
Following is the estimated fair value of IndyMac's mortgage securities as of
June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1997
Securitized Master Servicing Fees $223,898 $ - $ - $223,898
Other Mortgage Securities 276,150 - - 276,150
-------- --------- ----------- --------
Total Trading 500,048 - - 500,048
Other Mortgage Securities Available for Sale 50,233 1,418 (1,031) 50,620
-------- --------- ----------- --------
Total $550,281 $ 1,418 $ (1,031) $550,668
======== ========= =========== ========
December 31,1996
Securitized Master Servicing Fees $209,190 $ - $ - $209,190
Other Mortgage Securities $199,676 - - 199,676
-------- --------- ----------- --------
Total Trading 408,866 - - 408,866
Other Mortgage Securities Available for Sale 147,482 2,815 (17,491) 132,806
-------- --------- ----------- --------
Total $556,348 $2,815 $ (17,491) $541,672
======== ========= =========== ========
</TABLE>
During the quarter ended June 30, 1997, IndyMac sold mortgage securities
classified as available-for-sale with an amortized cost of $5.0 million (based
upon specific identification) for proceeds of $6.0 million, resulting in gross
realized gains of $1.0 million. There were no realized losses during the quarter
ended June 30, 1997. For the six months ended June 30, 1997, IndyMac sold
mortgage securities classified as available-for-sale with an amortized cost of
$25.4 million (based upon specific identification) for proceeds of $29.6
million, resulting in gross realized gains of $4.2 million. There were no
realized losses during the six months ended June 30, 1997. For the six month
period ended June 30, 1996, IndyMac sold mortgage securities available-for-sale
with an amortized cost of $22.4 million for proceeds of $26.6 million, resulting
in a gross realized gain of $4.2 million. There were no realized losses during
the six months ended June 30, 1996. The estimated fair value as of June 30,
1997 in the above table reflects decreases in market interest rates during the
first six months of 1997.
As of June 30, 1997, all of IndyMac's mortgage securities were pledged to secure
repurchase borrowings intended to finance the holding of such securities.
8
<PAGE>
NOTE E - SUBSEQUENT EVENTS
On July 1, 1997, INMC and Countrywide Credit Industries, Inc. ("CCR") completed
a transaction whereby INMC acquired all of the outstanding stock of its manager,
Countrywide Asset Management Corporation ("CAMC"), from CCR in exchange for
3,440,860 new shares of common stock of INMC. The transaction was approved in
January, 1997 by a Special Committee consisting of the independent Directors of
INMC, by the full Board of Directors of INMC, and by the full Board of Directors
of CCR. The transaction was then approved by INMC's shareholders at their Annual
Meeting held on June 24, 1997. Following consummation of the transaction, CAMC
was merged into INMC, and INMC became a self-managed REIT.
INMC will account for its merger with CAMC for book purposes as the settlement
of its management contract, which will result in a non-recurring charge for INMC
of approximately $75 million and a reported loss during the third quarter of
1997. For tax purposes, the transaction represents a tax-free exchange of shares
with CCR, and will not have a material effect on INMC's taxable income.
Accordingly, INMC's dividends will not be affected by the charge since it will
be taken for book purposes only, not for tax purposes.
At its 1997 Annual Meeting, INMC also obtained the approval of its shareholders
to change its name to "INMC Mortgage Holdings, Inc." from it's former name of
"CWM Mortgage Holdings, Inc." This change was effective on July 1, 1997 and
included the changing of INMC's NYSE trading symbol from "CWM" to "NDE."
On July 15, 1997, the Board of Directors declared a cash dividend of $0.43 per
share to be paid on, September 2, 1997 to shareholders of record on July 28,
1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
INMC Mortgage Holdings, Inc. was incorporated in the state of Maryland in July
1985 and reincorporated in the state of Delaware in March 1987. References to
"INMC" mean either the parent company alone or the parent company and the
entities consolidated for financial reporting purposes, while references to the
"Company" mean the parent company, its consolidated subsidiaries and IndyMac and
its consolidated subsidiaries, which are not consolidated with INMC for
financial reporting or tax purposes.
In its mortgage loan conduit business, the Company acts as an intermediary
between the originators of mortgage loans and permanent investors in mortgage-
backed securities ("MBS") secured by or representing an ownership interest in
such mortgage loans. The Company purchases "jumbo" and other "nonconforming"
mortgage loans from mortgage originators, including subprime mortgage loans
(i.e., "A- through D paper" mortgages). The Company and its sellers negotiate
whether such sellers will retain, or the Company will purchase the rights to
service the mortgage loans delivered by such sellers to the Company. All loans
purchased by INMC, for which a Real Estate Mortgage Investment Conduit ("REMIC")
transaction or whole loan sale is contemplated, are committed for sale to
IndyMac at the same price at which the loans were acquired by INMC pursuant to a
Master Forward Commitment and Services Agreement. At present, IndyMac does not
purchase any loans from entities other than INMC. Additionally, IndyMac's
conduit operations include the purchase or origination, securitization and sale
of consumer and mortgage loans secured by manufactured housing and home
improvements.
The Company's principal sources of income from its conduit operations are gains
recognized on the sale or securitization of mortgage and consumer loans, the net
spread between interest earned on mortgage and consumer loans and the interest
costs associated with the borrowings used to finance such loans pending their
sale or securitization, and master servicing fee income.
In addition to its conduit operations, the Company earns fee income and net
interest income through its construction and warehouse lending programs and its
investment portfolio of mortgage and manufactured housing loans and mortgage
securities. The construction lending operation consists of two distinct
divisions: (i) the Builder Division, which provides subdivision construction,
builder custom home, model home, land acquisition and development and certain
condominium loan financing on a nationwide basis to builders, and (ii) the
Consumer Division, which provides construction-to-permanent, home improvement
and residential lot financing to individual borrowers who wish to construct or
remodel their principal or secondary residences. The Company's warehouse
lending operation provides financing to small-to-medium-size mortgage
originators for the origination and sale of mortgage loans.
FINANCIAL CONDITION
CONDUIT OPERATIONS: During the first six months of 1997, INMC purchased $2.4
billion of non-conforming mortgage loans, including $78 million of subprime
mortgage loans. In addition, the Company purchased $89 million of manufactured
housing loans. These loans were financed on an interim basis using equity and
short-term financing in the form of repurchase agreements and other credit
facilities. In general, the Company, through IndyMac, sells the loans in the
form of REMIC securities or whole loan sales or, alternatively, through INMC,
invests in the loans on a long-term basis using financing provided by CMOs or
repurchase agreements and other credit facilities. During the first six months
of 1997, IndyMac sold $1.4 billion of its prime mortgage loans through the
issuance of five series of multiple-class MBS in the form of REMIC securities
and two whole loan sales. There were no subprime or manufactured housing loan
securitizations or loan sales during the first six months of 1997. At June 30,
1997, the Company had committed to purchase $787 million of mortgage loans from
various mortgage originators. The IndyMac master servicing portfolio at June 30,
1997 had an aggregate outstanding principal balance of $11.5 billion with a
weighted average coupon of 8.53%.
10
<PAGE>
MORTGAGE LOANS HELD FOR INVESTMENT: INMC's $1.6 billion portfolio of mortgage
loans held for investment at June 30, 1997 consisted of $1.2 billion of
adjustable-rate products which contractually reprice in monthly, semi-annual or
annual periods, $310 million of mortgage loans which have a fixed rate for a
period of three to ten years and subsequently convert to adjustable-rate
mortgage loans that reprice annually, and $112 million of fixed-rate mortgage
loans. The weighted average coupon of mortgage loans held for investment by
INMC at June 30, 1997 was 8.34%. INMC finances mortgage loans held for
investment with repurchase agreements and other credit facilities which reprice
at intervals ranging from overnight to two months as of June 30, 1997. INMC also
utilizes interest rate swap agreements to manage interest rate exposure on its
portfolio of mortgage loans held for investment. The allowance for losses
related to mortgage loans held for investment totaled $16.4 million at June 30,
1997. Chargeoffs related to mortgage loans held for investment totaled $3.4
million for the six months ended June 30, 1997.
CONSTRUCTION LENDING OPERATIONS: At June 30, 1997, INMC's Builder Division had
commitments to fund construction loans of $965 million with outstanding
principal balances of $489 million. The Consumer Division had commitments to
fund construction-to-permanent and home improvement loans of $325 million at
June 30, 1997 with outstanding principal balances of $197 million. The
allowance for losses related to construction loans totaled $3.2 million at June
30, 1997. Chargeoffs totaled $70,000 related to construction loans during the
six months ended June 30, 1997. The Company had outstanding borrowings under
various revolving credit facilities totaling $422 million at June 30, 1997
associated with the financing of construction loans.
WAREHOUSE LENDING OPERATIONS: At June 30, 1997, INMC had extended commitments
to make warehouse and related loans in an aggregate amount of $770 million, of
which $268 million was outstanding, net of reserves. The allowance for loan
losses related to warehouse lines of credit totaled $1.5 million at June 30,
1997. There were no chargeoffs against such allowance during the six months
ended June 30, 1997. Repurchase agreements associated with INMC's financing of
these warehouse lines of credit totaled $229 million at June 30, 1997.
CMO PORTFOLIO: As of June 30, 1997, the CMO Portfolio was comprised of 9 series
of CMOs. Collateral for CMOs decreased to $268 million at June 30, 1997 from
$289 million at December 31, 1996. This decrease of $21 million is primarily the
result of repayments (including prepayments and premium and discount
amortization) of $19.7 million, a decrease in guaranteed investment contracts
("GICs") held by trustees of $1.2 million and a decrease in accrued interest
receivable of $100,000. The fair value of the collateral for CMOs totaled $262
million and $282 million at June 30, 1997 and December 31, 1996, respectively.
INMC's CMOs outstanding decreased to $244 million at June 30, 1997 from $264
million at December 31, 1996. This decrease of $20 million resulted from
principal payments and discount amortization on CMOs of $19.7 million and a
decrease in accrued interest payable on CMOs of $300,000.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
NET EARNINGS: INMC's net earnings were $22.7 million or $.43 per share, based on
53,296,345 weighted average shares outstanding for the quarter ended June 30,
1997, compared to $16.4 million or $0.37 per share, based on 44,649,927 weighted
average shares outstanding for the quarter ended June 30, 1996.
The increase of $6.3 million in second quarter earnings resulted primarily from
an increase in net interest income of $8.7 million and an increase of $1.5
million in unrealized gain on securities, offset by an increase of $1.0 million,
$1.1 million and $1.3 million in salaries, general and administrative expenses,
and provision for loan losses, respectively, and a decrease of $900,000 from
equity in earnings of IndyMac.
11
<PAGE>
INTEREST INCOME: Total interest income was $83.9 million for the quarter ended
June 30, 1997 and $57.2 million for the quarter ended June 30, 1996. The
increase in interest income of $26.7 million is primarily due to increases in
interest earnings on construction loans, mortgage loans held for investment,
manufactured housing loans, mortgage loans held for sale, and mortgage
securities of $11.6 million, $5.7 million, $3.9 million, $2.1 million, and $3.2
million, respectively.
Interest income on mortgage loans held for investment, consisting primarily of
adjustable rate mortgages, totaled $28.3 million and $22.6 million, resulting
in effective yields of 7.47% and 7.95%, for the quarters ended June 30, 1997 and
1996, respectively. The average outstanding balance of such loans increased to
$1.5 billion for the second quarter of 1997 from $1.1 billion during the second
quarter of 1996.
Interest income earned on mortgage loans held for sale totaled $16.2 million and
$14.2 million, resulting in effective yields of 8.71% and 8.91%, for the
quarters ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $747.8 million for the quarter ended June 30,
1997 from $642.7 million for the quarter ended June 30, 1996.
Interest income on manufactured housing loans totaled $3.9 million and $150,000
with interest earned at effective yields of 10.34% and 9.90%, for the quarters
ended June 30, 1997 and 1996, respectively. The average outstanding balance of
such loans increased to $150.2 million during the second quarter of 1997 from
$6.1 million during the second quarter of 1996.
Interest income on construction loans totaled $17.5 million and $5.9 million
with interest earned at effective yields of 10.97% and 12.71%, for the quarters
ended June 30, 1997 and 1996, respectively. The average outstanding balance of
such loans increased to $640.1 million during the second quarter of 1997 from
$188.0 million during the second quarter of 1996.
Interest income on collateral for CMOs was $5.2 million and $6.0 million for the
quarters ended June 30, 1997 and 1996, respectively. This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $272.9 million for the quarter ended June
30, 1997 compared to $319.7 million for the quarter ended June 30, 1996, offset
by an increase in the effective yield earned on the collateral for CMOs to 7.64%
in the second quarter of 1997 from 7.59% in the second quarter of 1996.
Interest income on collateral for CMOs includes the impact of amortization of
premiums paid in connection with acquiring the loan portfolio, the delay in the
receipt of prepayments and the temporary investment of cash payments in lower
yielding short-term holdings (GICs) until such amounts are used to make payments
on CMOs.
Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities. Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities. Net income related to mortgage securities totaled $5.5
million during the second quarter of 1997 as compared to $2.3 million for the
second quarter of 1996.
12
<PAGE>
Interest income earned on revolving warehouse lines of credit totaled $4.4
million and $3.8 million, at effective yields of 9.03% and 8.74%, for the
quarters ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $195.2 million during the second quarter of
1997 from $176.4 million during the second quarter of 1996.
INTEREST EXPENSE: For the quarters ended June 30, 1997 and 1996, total interest
expense was $55.9 million and $37.9 million, respectively. This increase in
interest expense of $18.0 million was primarily due to an increase in interest
expense on repurchase agreements and other credit facilities of $19.0 million,
offset by a decline in interest expense related to CMOs of $1.0 million.
Interest expense on repurchase agreements and other credit facilities used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled $49.7
million for the quarter ended June 30, 1997, compared to $30.7 million for the
quarter ended June 30, 1996. This increase was principally the result of an
increase in the aggregate average balance of indebtedness outstanding for the
period to $3.1 billion for the quarter ended June 30, 1997 compared to $2.0
billion for the quarter ended June 30, 1996 and an increase in the weighted
average effective rate applicable to such indebtedness to 6.46% for the quarter
ended June 30, 1997 from 6.17% for the quarter ended June 30, 1996.
Interest expense on senior unsecured notes totaled $1.4 million and $1.3
million, resulting in effective rates of 9.25% and 9.22% for the second quarter
of 1997 and 1996, respectively.
Interest expense on CMOs was $4.9 million and $5.9 million for the quarters
ended June 30, 1997 and 1996, respectively. This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding to $249.8
million for the quarter ended June 30, 1997 from $293.0 million for the quarter
ended June 30, 1996, combined with a decrease in the effective rate on the CMOs
to 7.86% in the second quarter of 1997 from 8.12% in the second quarter of 1996.
EQUITY IN EARNINGS OF INDYMAC: The 1997 second quarter earnings of $2.8
million for IndyMac, in which INMC has a 99% economic interest, resulted
principally from net interest income of $4.6 million and gain on sale of
mortgage loans and securities of $11.6 million, offset by salaries, general and
administrative expenses of $12.2 million, and income taxes of $2.0 million.
During the second quarter of 1996, IndyMac's earnings totaled $3.4 million
which resulted principally from net interest income of $1.5 million and gain on
sale of mortgage loans and securities of $10.9 million, offset by salaries,
general and administrative expenses of $6.6 million, management fees of $467,000
and income taxes of $2.5 million. IndyMac's interest income related to mortgage
securities totaled $10.3 million during the second quarter of 1997 compared to
$10.4 million during the second quarter of 1996.
SALARIES, GENERAL AND ADMINISTRATIVE EXPENSE: The increase of $2.1 million in
salaries, general and administrative expenses for the three months ended June
30, 1997 compared to the three months ended June 30, 1996 is primarily the
result of the increased personnel and expenses deemed necessary to support the
growth in the operations of INMC and its qualified REIT subsidiaries.
MANAGEMENT FEES: Management fees paid by INMC to CAMC were $2.1 million for both
the three months ended June 30, 1997 and 1996.
13
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET EARNINGS: INMC's net earnings were $44 million or $0.85 per share, based on
51,674,810 weighted average shares outstanding for the six months ended June 30,
1997, compared to $31.7 million or $0.72 per share, based on 43,877,750 weighted
average shares outstanding for the six month ended June 30, 1996.
The increase of $12.3 million in 1997 earnings resulted primarily from an
increase in net interest income of $17.2 million and an increase of $1.4 million
in unrealized gain on securities, offset by an increase of $2.4 million, $2.4
million, and $2.8 million in salaries, general and administrative expenses, and
the provision for loan losses, respectively.
INTEREST INCOME: Total interest income was $159.1 million for the six months
ended June 30, 1997 and $116.2 million for the six months ended June 30, 1996.
The increase in interest income of $42.9 million is primarily due to increases
in interest earnings on construction loans, mortgage loans, manufactured housing
loans, and mortgage securities, of $21.8 million, $8.9 million, $6.8 million,
and $4.0 million, respectively.
Interest income on mortgage loans held for investment, consisting primarily of
adjustable rate mortgages, totaled $55.2 million and $49.7 million, resulting
in effective yields of 7.97% and 8.23%, for the six months ended June 30, 1997
and 1996, respectively. The average outstanding balance of such loans increased
to $1.4 billion for the first six months of 1997 from $1.2 billion for the first
six months of 1996.
Interest income earned on mortgage loans held for sale totaled $31.4 million and
$28.2 million, resulting in effective yields of 8.70% and 8.80%, for the six
months ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $728 million for the six months ended June
30, 1997 from $645 million for the six months ended June 30, 1996.
Interest income on manufactured housing loans totaled $6.8 million and $150,000
with interest earned at effective yields of 10.23% and 9.86%, for the six months
ended June 30, 1997 and 1996, respectively. The average outstanding balance of
such loans increased to $133.3 million for the first six months of 1997 from
$3.1 million for the first six months of 1996.
Interest income on construction loans totaled $32.2 million and $10.4 million,
with interest earned at effective yields of 11.73% and 12.65%, for the six
months ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $554 million from $166 million for the six
months ended June 30, 1997 and 1996, respectively.
Interest income on collateral for CMOs was $10.6 million and $11.4 million for
the six months ended June 30, 1997 and 1996, respectively. This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $277 million for the six months ended June
30, 1997 compared to $304 million for the six months ended June 30, 1996, offset
by an increase in the effective yield earned on the collateral for CMOs to 7.70%
in the six months of 1997 from 7.52% in the six months of 1996. Interest
income on collateral for CMOs includes the impact of amortization of premiums
paid in connection with acquiring the loan portfolio, the delay in the receipt
of prepayments and the temporary investment of cash payments in lower yielding
short-term holdings (GICs) until such amounts are used to make payments on CMOs.
14
<PAGE>
Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities. Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities. Net income related to mortgage securities totaled $8.8
million during the first six months of 1997 as compared to $4.8 million for the
first six months of 1996.
Interest income earned on revolving warehouse lines of credit totaled $8.4
million and $7.7 million, at effective yields of 9.09% and 8.72%, for the six
months ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $187 million for the six months ended June
30, 1997 from $176 million for the six months ended June 30, 1996.
INTEREST EXPENSE: For the six months ended June 30, 1997 and 1996, total
interest expense was $104.1 million and $78.4 million, respectively. This
increase in interest expense of $25.7 million was primarily due to an increase
in interest expense on repurchase agreements and other credit facilities of
$27.0 million, offset by a decline in interest expense related to CMOs of $1.4
million.
Interest expense on repurchase agreements and other credit facilities used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled $91.2
million for the six months ended June 30, 1997, compared to $64.2 million for
the six months ended June 30, 1996. This increase was principally the result of
an increase in the aggregate average balance of indebtedness outstanding for the
period to $3.0 billion for the six months ended June 30, 1997 compared to $2.1
billion for the six months ended June 30, 1996 and a decrease in the weighted
average effective rate applicable to such indebtedness to 6.09% for the six
months ended June 30, 1997 from 6.28% for the six months ended June 30, 1996.
Interest expense on senior unsecured notes totaled $2.8 million and $2.7
million, resulting in effective rates of 9.30% and 9.22% for the six months
ended June 30, 1997 and 1996, respectively.
Interest expense on CMOs was $10.1 million and $11.5 million for the six months
ended June 30, 1997 and 1996, respectively. This decrease was primarily
attributable to an decrease in average aggregate CMOs outstanding to $255
million for the six months ended June 30, 1997 from $278 million for the six
months ended June 30, 1996, combined with a decrease in the effective rate on
the CMOs to 8.00% in the six months ended 1997 from 8.33% in the six months
ended of 1996.
EQUITY IN EARNINGS OF INDYMAC: The six months earnings of $7.3 million for
IndyMac, in which INMC has a 99% economic interest, resulted principally from
net interest income of $7.6 million and gain on sale of mortgage loans and
securities of $28.1 million, offset by salaries, general and administrative
expenses of $23.5 million: and income taxes of $5.2 million. Additionally,
equity in earnings of IndyMac, in INMC's consolidated statement of earnings, was
adjusted during the first quarter by $205,000 to reflect the cumulative effect
on IndyMac's earnings through December 31, 1996 of IndyMac's restatement of its
financial statements, reflecting the reclassification of its portfolio of
mortgage securities retained in connection with the securitization of loans from
both available for sale and held to maturity to trading securities. Because the
effect of this adjustment was not material to INMC's earnings, INMC did not
restate its earnings at December 31, 1996 in it's 1996 Form 10-K/A.
15
<PAGE>
During the first six months of 1996, IndyMac's earnings totaled $6.7 million
which resulted principally from net interest income of $4.3 million and gain on
sale of mortgage loans and securities of $19.8 million, offset by salaries,
general and administrative expenses of $12.2 million, management fees of $1.0
million and income taxes of $5.0 million. IndyMac's interest income related to
mortgage securities totaled $20.5 million for the first six months of 1997
compared to $19.6 million for the first six months of 1996.
SALARIES, GENERAL AND ADMINISTRATIVE EXPENSE: The increase of $4.8 million in
salaries, general and administrative expenses for the six months ended June 30,
1997 compared to the six months ended June 30, 1996 is primarily the result of
the increased personnel and expenses deemed necessary to support the growth in
the operations of INMC and its qualified REIT subsidiaries.
MANAGEMENT FEES: For the six months ended June 30, 1997, management fees paid
by INMC to CAMC were $4.4 million compared to $4.1 million for the six months
ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses proceeds from the issuance of CMOs, repurchase agreements, bank
debt, other borrowings and common stock to meet its liquidity requirements. In
addition, in connection with its mortgage conduit operations, IndyMac issues
REMIC securities from time to time to help meet such requirements.
The Company has established a revolving financing facility with Merrill Lynch,
Pierce, Fenner & Smith Inc. and certain of its affiliates, in an aggregate
principal amount of $1 billion. The facility is committed for a period of at
least two years from its date of execution and currently permits the Company to
finance its mortgage conduit, mortgage portfolio, warehouse lending, consumer
construction lending and manufactured housing lending assets and operations.
This facility carries a floating rate of interest based on LIBOR, plus an
applicable margin, which varies by the type of asset financed.
The Company has entered into a repurchase facility with Nomura Asset Capital
Corporation in an aggregate principal amount of $300 million. This financing
facility is currently under renegotiation to renew and carries a floating rate
of interest based on LIBOR, plus an applicable margin, which varies by the type
of asset financed.
The Company has entered into a repurchase facility with Paine Webber Real Estate
Securities, Inc. in an aggregate principal amount of $500 million. Such
repurchase facility is committed for a one-year period from the date of
execution and currently permits the Company to finance its mortgage conduit,
warehouse lending and mortgage portfolio assets and operations. Such repurchase
facility carries a floating rate of interest based on LIBOR, plus an applicable
margin, which varies by the type of asset financed.
In May 1995, the Company entered into a credit facility with a syndicate of
commercial banks led by First Union National Bank. This facility primarily
finances mortgage loans, builder construction loans, and master servicing
assets. In September 1996, the Company amended this credit facility to expand
the number of lenders and the available committed borrowings from $300 million
to $405 million and to increase financing available for builder construction
loans. In July 1997, the Company again amended this credit facility to increase
the available committed borrowings from $405 million to $500 million. The
interest rates under this credit facility are based, at the Company's election,
on LIBOR or the federal funds rate, plus an applicable margin, which varies by
the type of asset financed.
During the fourth quarter of 1995, the Company raised $59.6 million in
connection with the private placement of senior notes with certain institutional
lenders. These senior notes are unsecured, and the proceeds are utilized by the
Company in connection with its working capital needs. The effective rate of
16
<PAGE>
interest on such senior notes is fixed at 9.22% for a period of seven years from
the date of issuance. The senior notes were rated "BBB-" by Duff & Phelps Credit
Rating Co. at the time of issuance and, in December 1996, were rated "BBB-" by
Fitch Investors Service, L.P.
The Company has from time to time raised additional capital through secondary
public offerings. Since the inception of its new business plan in 1993, the
Company has raised a total of $205 million in connection with such secondary
offerings. The Company also raises new equity capital primarily through the
optional cash payment feature of its Dividend Reinvestment Plan. During the
second quarter of 1997 the Company raised $29.7 million and a total of $79
million for the first six months of 1997 through such Dividend Reinvestment
Plan. During 1996 and 1995, the Company raised $133 million and $25 million,
respectively, through such Dividend Reinvestment Plan.
During the first quarter of 1996, the Company issued one series of CMOs in an
aggregate principal amount of $146 million, secured by collateral consisting of
mortgage loans with an aggregate principal balance of $155 million.
The REIT provisions of the Internal Revenue Code restrict INMC's ability to
retain earnings and thereby replenish the capital committed to its mortgage
portfolio, conduit, commercial lending and other operations by requiring INMC to
distribute to its shareholders substantially all of its taxable income from
operations. Certain of the Company's material businesses, including its mortgage
conduit and commercial lending operations, are known to require significant and
continuing commitments of capital resources.
The Company's liquidity and its ability to raise working capital has generally
improved during recent periods, and management believes that the Company's cash
flow from operations and the Company's existing debt and equity financing
arrangements are sufficient to meet the Company's current short-term liquidity
requirements. To the extent the Company possesses working capital in excess of
its current liquidity requirements, such working capital is as a general matter
utilized to repay borrowings under those tranches of the Company's lines of
credit which carry higher rates of interest, which borrowings would typically
remain available for reborrowing by the Company pursuant to the terms and
conditions of the applicable credit facility.
The Company's ability to meet its long-term liquidity requirements is subject to
the renewal of its repurchase and credit facilities and/or obtaining other
sources of financing, including issuing additional debt or equity from time to
time. Any decision by the Company's lenders and/or investors to make additional
funds available to the Company in the future will depend upon a number of
factors, such as the Company's compliance with the terms of its existing credit
arrangements, the Company's financial performance, industry and market trends in
the Company's various businesses, the general availability of and rates
applicable to financing and investments, such lenders' and/ or investors' own
resources and policies concerning loans and investments, and the relative
attractiveness of alternative investment or lending opportunities.
CASH FLOWS
Operating Activities - Net cash used in operating activities totaled $389
million for the six months ended June 30, 1997 in comparison to $156 million for
the six months ended June 30, 1996. The primary operating activity for which
cash was used during the six months ended June 30, 1997 was the acquisition of
mortgage loans and manufactured housing loans held for sale.
Investing Activities - Net cash used in investing activities totaled $659
million for the six months ended June 30, 1997 compared to a net cash provided
by investing activities of $107 million for the six months ended June 30, 1996.
The primary investing activity for which cash was used during the six months
ended June 30, 1997 was the funding of construction loans receivable and
acquisition of mortgage loans held for investment.
Financing Activities - Net cash provided by financing activities amounted to
$1.1 billion for the six months ended June 30, 1997 compared to $43 million for
the six months ended June 30, 1996. The
17
<PAGE>
increase in cash provided by financing activities was primarily the result of
new borrowings under repurchase agreements and other credit facilities and
proceeds of common stock issuances pursuant to the Dividend Reinvestment and
Stock Purchase Plan during the six months ended June 30, 1997.
EFFECT OF INTEREST RATE CHANGES
Due to the characteristics of certain financial assets and liabilities of the
Company, and the nature of the Company's business activities, the Company's
financial position and results of operations may be affected by changes in
market interest rates. With respect to its financial assets and liabilities,
the Company has devised and implemented a general asset/liability investment
management strategy which seeks, on an economic basis, to mitigate significant
fluctuations in the financial position and results of operations of the Company
caused by changes in market interest rates. This strategy attempts, among other
things, to balance investments in various types of financial instruments whose
values are expected to move inversely to each other in response to movements in
market interest rates. However, there can be no assurance that this strategy
(including assumptions concerning the correlation thought to exist between
different types of instruments) or its implementation will be successful in
any particular interest rate environment.
Financial assets of the Company that tend to increase in value as interest rates
increase, and decline in value as interest rates decrease, include securitized
excess master servicing fees and master servicing fees receivable. These
financial assets carry an implicit yield that is based upon estimates of future
cash flows on an underlying pool of mortgage loans. As interest rates increase,
the prepayments on the underlying pool of mortgage loans tends to slow,
resulting in higher residual cash flows than would otherwise have been obtained,
and therefore results in higher implicit yields. As of June 30, 1997, INMC and
IndyMac on a combined basis held $324 million of securitized excess master
servicing fees and master servicing fees receivable. Of the $324 million
aggregate amount, $248 million of such assets are classified as trading
securities in accordance with the requirements of SFAS 115 since they were
acquired in connection with the securitization of loans held for sale by
IndyMac.
Financial instruments of the Company that tend to decrease in value as interest
rates increase, and increase in value as interest rates decline, include fixed
rate subordinated securities, principal-only securities and inverse-floater
securities. Similar to the securitized master servicing fees, the principal-
only and inverse floater securities carry an implicit yield based upon estimates
of future cash flows on an underlying pool of mortgage loans. However, the
principal-only and inverse-floater securities generally sell at a discount,
similar to a "zero-coupon" bond, in order to yield an estimated return. If
interest rates increase and prepayments slow in comparison to assumed prepayment
rates, the repayment rate of the principal-only and inverse-floater security
would tend to lengthen and thus reduce the implicit yield on the security.
Conversely, if interest rates decrease, the rate of prepayment on the underlying
pool of loans would tend to increase, resulting in a more rapid rate of
repayment on the principal-only security and inverse floater security and
therefore a higher implicit yield. To a lesser extent, any mortgage securities
held by the Company and supported by adjustable rate mortgage loans may decline
in value as interest rates increase, if the timing or absolute level of interest
rate adjustments on the underlying loans do not correspond to any increases in
market interest rates. As of June 30, 1997, INMC and IndyMac on a combined
basis held $627 million of fixed and adjustable rate subordinated securities,
principal-only and inverse floater securities. Of the $627 million aggregate
amount, $321 million of such securities are classified as trading securities.
18
<PAGE>
In addition to the inherent risks in seeking to manage fluctuations in the value
of certain assets due to interest rate changes, there may be timing differences
in the recognition of the offsetting effects of gains and losses which are
attributable to specific instruments depending upon whether a security is
classified as trading or available for sale. The unrealized holding gains and
losses on trading securities are recognized in earnings of the period for the
reporting entity. By comparison, the unrealized holding gains and losses of
securities available for sale are excluded from earnings of the reporting entity
and included as a separate component of shareholders' equity. Therefore, to the
extent that the Company is required under GAAP to classify certain securities as
trading, such identification and the resulting accounting could cause
additional volatility in the Company's future reported earnings in periods where
interest rates fluctuate.
The Company is also subject to certain business and credit risks in connection
with interest rate changes. Increases in interest rates may discourage potential
mortgagors from borrowing or refinancing mortgage or manufactured housing loans,
thus decreasing the volume of loans available to be purchased through the
Company's mortgage conduit operations, or financed through the Company's
construction and warehouse lending operations. Additionally, with respect to
adjustable rate loans, the rate of delinquency may increase in periods of
increasing interest rates as borrowers face higher mortgage payments.
The Company's liquidity position and net interest income could also be adversely
impacted by significant interest rate fluctuations. Each of the Company's
collateralized borrowing facilities described above in Liquidity and Capital
Resources permit the lender thereunder to require the Company to repay amounts
outstanding and/or pledge additional assets in the event that the value of the
pledged collateral declines due to changes in market interest rates. In the
event of such a decrease in collateral values, it could be necessary for the
Company to provide additional funds and/or pledge additional assets to maintain
financing for its holdings that have not been financed to maturity through the
issuance of CMOs or other debt securities. In addition, increases in short-term
borrowing rates relative to rates earned on asset holdings that have not been
financed to maturity through the issuance of CMOs or other debt securities may
also adversely affect the Company's "spread income" on such assets and thus
reduce the Company's earnings.
19
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the annual meeting of INMC's stockholders held on June 24, 1997, the
stockholders voted to re-elect INMC's directors. The votes cast in this regard
were as follows: David S. Loeb - 48,882,441 for and 1,111,191 withheld; Angelo
R. Mozilo - 48,911,663 for and 1,081,969 withheld; Lyle E. Gramley - 48,906,085
for and 1,087,547 withheld; Thomas J. Kearns - 48,910,046 for and 1,083,586
withheld; and Frederick J. Napolitano - 48,906,684 for and 1,086,948 withheld.
In addition, the stockholders voted to approve the merger of CAMC with and into
INMC. The votes cast on this proposal were as follows: 33,862,359 in favor;
364,366 against; 373,369 abstaining; and 15,393,538 representing broker non-
votes. INMC's stockholders voted to approve amendments to INMC's Bylaws to
delete references to the management of INMC by an outside management company and
certain related provisions. The votes cast on this proposal were as follows:
33,732,470 in favor; 418,001 against; 449,623 abstaining; and 15,393,538
representing broker non-votes. INMC's stockholders voted to approve an amendment
to the Certificate of Incorporation changing INMC's name from "CWM Mortgage
Holdings, Inc." to "INMC Mortgage Holdings, Inc." The votes cast on this
proposal were as follows: 48,888,176 in favor; 625,389 against; 480,067
abstaining; and 0 representing broker non-votes. INMC's stockholders voted to
approve an amendment to the INMC 1996 Stock Incentive Plan to increase the
annual per person limit for benefits payable under the plan. The votes cast on
this proposal were as follows: 42,835,148 in favor; 6,119,432 against; 797,739
abstaining; and 241,313 representing broker non-votes. INMC's stockholders voted
to approve the annual cash bonus provisions of the Employment Agreement of
Michael W. Perry. The votes cast on this proposal were as follows: 46,694,818 in
favor; 2,123,141 against; 997,360 abstaining; and 178,313 representing broker
non-votes. Finally, INMC's stockholders voted to ratify the selection of Grant
Thornton LLP as INMC's independent certified public accountants for the fiscal
year ending December 31, 1997. The votes cast on this proposal were as follows:
49,478,216 in favor; 175,744 against; 339,672 abstaining; and 0 representing
broker non-votes.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
2.1* Agreement and Plan of Merger dated as of January 29, 1997
among INMC Mortgage Holdings, Inc., formerly known as CWM
Mortgage Holdings, Inc. (the "Company"), Countrywide Asset
Management Corporation ("CAMC"), and Countrywide Credit
Industries, Inc. ("CCR") (incorporated by reference to
Appendix A to the Company's Definitive Proxy Statement filed
with the SEC on May 21, 1997).
2.2* Registration Rights Agreement dated as of July 1, 1997 among
the Company and CCR (incorporated by reference to Exhibit A to
the Company's Definitive Proxy Statement filed with the SEC on
May 21, 1997).
3.1 Certificate of Incorporation of the Company, as amended.
3.2 Bylaws of the Company, as amended.
4.1 1996 Stock Incentive Plan adopted May 29, 1996, as amended
June 24, 1997.
10.1 Employment Agreement dated January 1, 1997 between CAMC and
Richard H. Wohl.
27 Financial Data Schedule
* Incorporated by reference.
(b) Reports on Form 8-K.
--------------------
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Pasadena, State of California, on August 14, 1997.
INMC MORTGAGE HOLDINGS, INC.
By: /s/ Michael W. Perry
-------------------
Michael W. Perry
President and Chief Operating Officer
By: /s/ James P. Gross
-----------------
James P. Gross
Senior Vice President and Chief Financial Officer
22
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
ARTICLE I
NAME
----
The name of the Corporation is: Countrywide Mortgage Investments, Inc.
(the "Corporation").
ARTICLE II
REGISTERED AGENT
----------------
The address of the registered office of the Corporation in the State of
Delaware is: Corporation Trust Center, 1209 Orange Street, New Castle County,
Wilmington, Delaware 19801. The name of the Corporation's registered agent at
such registered office is The Corporation Trust Company.
<PAGE>
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Thirty Million (30,000,000),
consisting of Thirty Million (30,000,000) shares of Common Stock having a par
value of $0.01 per share.
Section 2. All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of this Certificate of
Incorporation and the Bylaws of the Company.
Section 3. Each share of Common Stock shall entitle the owner
thereof to vote at the rate of one (1) vote for each share of Common Stock
held.
2
<PAGE>
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS
AND STOCKHOLDERS
----------------
Section 1. The number of Directors shall be determined by or in the
manner provided in the Bylaws of the Corporation, as they may be amended from
time to time. The names and mailing addresses of the persons who shall serve as
directors until the first annual meeting of stockholders or until their
successors are duly elected and qualified are:
David S. Loeb
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91109
Angelo R. Mozilo
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91109
Frederick J. Napolitano
Pembroke Enterprises, Inc.
281 Independence Boulevard
Suite 626
Virginia Beach, Virginia 23462
Harley W. Snyder
Harley Snyder Company
407 East Lincoln Way
Valparaiso, Indiana 46383
Jack Carlson
9901 Bluegrass Road
Potomac, Maryland 20854
3
<PAGE>
Robert J. Donato
PaineWebber Incorporated
700 South Flower Street
Los Angeles, California 90017
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation.
Section 2. The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such limitations as may be set forth
in this Certificate of Incorporation or in the Bylaws of the Corporation or in
the Delaware General Corporation Law.
Section 3. No holder of shares of capital stock of the Corporation
shall, as such holder, have any right to purchase or subscribe for any shares of
the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
this Certificate of Incorporation, or out of any shares of the capital stock of
the Corporation hereafter authorized or acquired by it after the issue thereof,
or otherwise) other than such right, if any, as the Board of Directors, in its
discretion, may determine.
4
<PAGE>
Section 4. A Director of this Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of the
Directors's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after the date hereof to permit the further elimination or limitation of the
personal liability of directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this Section 4 of Article V by the stockholders of the Corporation shall not
adversely affect any right or protection of a Director of the Corporation in
respect of any act or omission occurring prior to the time of such repeal or
modification.
Section 5. The Corporation shall indemnify and shall advance expenses
to each Director, officer, employee and agent of this Corporation to the fullest
extent permitted by the Delaware General Corporation Law as now or hereafter in
5
<PAGE>
force. The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, and the Board of Directors
is expressly authorized to adopt bylaws and/or enter into agreements whereby
the Corporation agrees to indemnify and advance expenses to its Directors,
officers, employees and agents.
Section 6. The Board of Directors of the Corporation may make, alter
or repeal from time to time any of the Bylaws of the Corporation except any
particular Bylaw which is specified in the Bylaws as not subject to alteration
or repeal by the Board of Directors.
Section 7. The Board of Directors may authorize, subject to such
approval of stockholders and other conditions, if any, as may be required by any
applicable statute, bylaw, rule or regulation, the execution and performance by
the Corporation of one or more agreements with any person, corporation,
association, company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control of the Board of
Directors, any such other person, corporation, association, company, trust,
partnership (limited or general), or other organization shall
6
<PAGE>
render or make available to the Corporation managerial, investment, advisory
and/or related services, office space and other services and facilities
(including the management or supervision of the investments of the Corporation)
upon such terms and conditions as may be provided in such agreement or
agreements (including the compensation payable thereunder by the Corporation).
Section 8. The Board of Directors may authorize any agreement of the
character described in Section 7 of this Article V or other contract or
transaction with any one or more Directors or officers or between the
Corporation and any other corporation, partnership (limited or general),
association, trust, company or other organization in which one or more of the
Corporation's Directors or officers are directors or officers, or similar
parties, or otherwise have a financial interest, and no such agreement, contract
or transaction shall be void or voidable solely by reason of the existence of
any such relationship or solely because the Director or officer so interested is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the agreement, contract or transaction, or solely
because such Director's votes are counted for such purpose if: (i) the material
facts as to the Director's or officer's relationship or interest and as to the
agreement or transaction are disclosed or are known to the
7
<PAGE>
Board of Directors or such committee and the Board of Directors or committee in
good faith authorizes, approves or ratifies the agreement, contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or
(ii) the material facts as to such Director's or Officer's relationship or
interest and as to the agreement or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the agreement, contract or
transaction is authorized, approved or ratified in good faith by a majority of
votes cast by the stockholders entitled to vote other than the votes of shares
owned of record or beneficially by the interested Director or officer; or (iii)
the agreement, contract or transaction is fair to the Corporation as of the time
it is authorized, approved or ratified by the Board of Directors, a committee
thereof or the stockholders. Any Director of the Corporation who is also a
director, officer, stockholder or member of such other entity may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
or of a committee which authorizes any such agreement, contract or transaction.
If such a Director votes at a meeting to approve or disapprove a transaction as
described in this Section, such vote shall not affect the validity of such a
transaction provided the provisions of this Section are otherwise satisfied.
8
<PAGE>
Section 9. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual meeting
or at a special meeting of stockholders of the Corporation. No action may be
taken by the written consent of the stockholders. Action need not be by written
ballot unless the chairman of the meeting shall so direct.
Section 10. The enumeration and definition of particular powers of
the Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the Certificate of Incorporation of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit the powers conferred upon the Board of Directors under the
General Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE VI
RESTRICTION ON ACQUISITION AND TRANSFER OF SHARES
-------------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in protecting the status of the Corporation as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended (the "Code"), the
9
<PAGE>
Board of Directors may require to be filed with the Corporation as a condition
to permitting any proposed transfer, and/or the registration of any transfer, of
shares of the Corporation a statement or affidavit from any proposed transferee
setting forth the number of shares already owned after application of the
attribution rules (the "Attribution Rules") of Section 544 of the Code by the
transferee and any related person(s) specified in the form prescribed by the
Board of Directors for that purpose. All contracts for the sale or other
transfer of shares of the Corporation shall be subject to this provision.
Section 2. As a condition to the transfer and/or registration of
transfer of any shares of capital stock of the Corporation which would result in
any stockholder owning, directly or indirectly, shares in excess of 9% of the
outstanding shares of capital stock of the Corporation, the transferee of such
shares shall file with the Corporation an affidavit setting forth the number of
shares of capital stock of the Corporation owned directly and indirectly by the
person filing the affidavit. For purposes of this Section, shares of capital
stock not owned directly shall be deemed to be owned indirectly by a person if
that person or a group of which he is a member would be the beneficial owner of
such shares for purposes of Rule 13d-3, or any successor rule thereto,
promulgated by the Securities and Exchange Commission under
10
<PAGE>
the Securities Exchange Act of 1934 (the "Exchange Act"), and/or would be
considered to own such shares by reason of the Attribution Rules. The affidavit
to be filed with the Corporation shall set forth all information required to be
reported in returns filed by stockholders under Regulation 1.857-9 issued by the
Internal Revenue Service, or similar provisions of any successor regulation, and
in reports to be filed under Section 13(d) of the Exchange Act. The affidavit,
or an amendment thereto, must be filed with the Corporation within 10 days after
demand therefor and in any event at least 15 days prior to any transfer,
registration of transfer or transaction which, if consummated, would cause the
filing person to hold shares in excess of 9% of the outstanding shares of
capital stock of the Corporation. No transfer nor any registration of any
purported transfer in violation of the notice provisions of this Section shall
be valid or be given effect. Notwithstanding the foregoing, compliance with the
requirements of this Section 2 shall not validate any purported transfer which
would result in any stockholder owning, directly or indirectly, shares in excess
of the "Limit" as defined in Section 4 of this Article VI.
Section 3. Any acquisition of shares of capital stock of the
Corporation that would result in any stockholder owning, directly or indirectly,
shares in excess of the "Limit" as defined in Section 4 of this Article VI shall
be
11
<PAGE>
void ab initio to the fullest extent permitted under applicable law and the
intended transferee of "Excess Shares," as defined in Section 4 of this Article
VI, shall be deemed never to have had an interest therein. If the foregoing
provision is determined to be void, voidable or invalid by virtue of any legal
decision, statute, rule or regulation, then the transferee of such shares shall
be deemed to have acted as agent on behalf of the Corporation in acquiring such
shares and to hold such shares on behalf of the Corporation.
Section 4. Notwithstanding any other provision hereof to the
contrary, and subject to the provisions of Section 5 of this Article VI, no
person, or persons acting as a group, shall at any time directly or indirectly
acquire ownership in the aggregate of more than 9.8% of the outstanding shares
of capital stock of the Corporation (the "Limit"). Shares which would, but for
this Section 4, be owned by a person or a group of persons in excess of the
Limit at any time shall be deemed "Excess Shares." For the purposes of
determining and dealing with Excess Shares, the term "ownership" shall be
defined to include shares of capital stock constructively owned by a person
under the Attribution Rules and shall also include shares of capital stock
beneficially owned by a person for purposes of Rule 13d-3, or any successor rule
thereto, promulgated by the Securities and Exchange Commission under the
Exchange Act and the term
12
<PAGE>
"group" shall have the same meaning as that term has for purposes of Section
13(d)(3) of such Act. All shares of the Corporation which any person has the
right to acquire upon exercise of outstanding rights, options and warrants, and
upon conversion of any securities convertible into shares, if any, shall be
considered outstanding for purpose of the Limit if such inclusion will cause
such person to own more than the Limit. Unless otherwise required by applicable
law, the Corporation shall refuse to transfer or register the transfer of, and
shall instruct the transfer agent of the Corporation to refuse to transfer or
register the transfer of, shares to the extent that, as a result of such
transfer or registration of transfer, any person would hold Excess Shares.
Section 5. The Limit set forth in Sections 3 and 4 of this Article VI
and the filing requirements of Section 2 of this Article VI shall not apply to
the acquisition of shares of the Corporation by the Corporation, by an
underwriter in connection with a public offering of shares of the Corporation,
or in any transaction involving the issuance of shares by the Corporation, in
which the Board of Directors determines that the underwriter or other person or
party initially acquiring such shares will timely distribute such shares to or
among others such that, following such distribution, none of such shares will be
Excess Shares. The Board of Directors in its discretion may exempt from the
Limit
13
<PAGE>
under Sections 3 and 4 of this Article VI and from the filing requirements of
Section 2 of this Article VI ownership or transfers of certain designated shares
while owned by or transferred to any subsidiary of this Corporation or to any
other person in connection with a reorganization, recapitalization, merger,
liquidation or similar transaction approved by the Board of Directors, provided
that such person has given the Board of Directors evidence and assurances
acceptable to the Board of Directors that the qualification of the Corporation
as a "real estate investment trust" under the Code would not be jeopardized
thereby.
Section 6. Notwithstanding Sections 3 and 4 of this Article VI, if at
any time more than 9.8% of the shares of capital stock of the Corporation has
become concentrated in the hands of a "beneficial owner" (as such term is
defined for purposes of Rule 13d-3, or any successor rule thereto promulgated by
the Securities and Exchange Commission, under the Exchange Act), such beneficial
owner and each of his "affiliates" (as such term is defined on December 1, 1986
in Rule 12b-2 under the Exchange Act) owning any shares of capital stock of the
Corporation shall be deemed to have offered to sell to the Corporation or its
designee, on a date fixed by the Corporation, as specified in the Corporation's
notice of its or its designee's acceptance of such offer of sale, such a number
of shares of capital stock sufficient, in
14
<PAGE>
the opinion of the Board of Directors, to maintain or bring the direct or
indirect ownership of shares of capital stock of the Corporation of such
beneficial owner to no more than the Limit. The price at which the Corporation
or its designee may purchase the outstanding shares of capital stock of the
Corporation pursuant to the preceding sentence of this Section (the "Purchase
Price") shall be equal to the closing sales price for the shares, if then listed
on a national securities exchange, or the average of the closing sales prices
for the shares if then listed on more than one national securities exchange, or
if the shares are not then listed on a national securities exchange, the latest
bid quotation for the shares if then traded over-the-counter, on the last
business day immediately preceding the day on which the Corporation's notice of
its acceptance of the beneficial owner's and/or his affiliates' offer of sale is
sent, or, if no such closing sales prices or quotations are available, then the
Purchase Price shall be equal to the net asset value of such stock (determined
on the basis of the fair market value of the assets of the Corporation) as
determined by the Board of Directors in accordance with the provisions of
applicable law. The Purchase Price of any shares acquired by the Corporation or
its designee shall be paid, at the option of the Corporation, in cash or in the
form of an unsecured, subordinated promissory note of the Corporation or its
designee bearing interest and having a term to maturity (to be
15
<PAGE>
not less than five nor more than twenty years) as shall be determined by the
Board of Directors. Payment of the Purchase Price shall be made at such time and
in such manner as may be determined by the Board of Directors and specified in
the notice of acceptance sent to the beneficial owner and/or his affiliates.
From and after the date fixed for purchase by the Board of Directors and the
tender by the Corporation of the Purchase Price therefor, each as specified in
the Corporation's notice of its acceptance of the offer of sale, the holder of
any shares to be so purchased shall cease to be entitled to any rights as a
holder of such shares, excepting only the right to payment of the Purchase Price
fixed as aforesaid.
Section 7. Nothing contained in this Article VI or in any other
provision hereof shall limit the authority of the Board of Directors to take
such other action as it deems necessary or advisable to protect the Corporation
and the interests of its stockholders by preservation of the Corporation's
status as a "real estate investment trust" under the Code.
Section 8. For purposes of this Article VI only, the term "person"
shall include individuals, corporations, limited partnerships, general
partnerships, joint stock companies or associations, joint ventures,
associations,
16
<PAGE>
consortia, companies, trusts, banks, trust companies, land trusts, common law
trusts, business trusts and other entities, and governments and agencies and
political subdivisions thereof; provided, however, that such term shall not
include this Corporation or any of its subsidiaries.
Section 9. If any provision of this Article VI or any application of
any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the determination of such
court.
ARTICLE VII
AMENDMENTS
----------
The Corporation reserves the right to adopt, repeal, rescind, alter,
restate or amend in any respect any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
17
<PAGE>
ARTICLE VIII
INCORPORATOR
------------
The name of the incorporator is Andrea J. Melville. The
Incorporator's mailing address is 400 South Hope Street, Los Angeles, California
90071-2899.
IN WITNESS WHEREOF, the undersigned incorporator of Countrywide
Mortgage Investments, Inc. hereby executes the foregoing Certificate of
Incorporation and acknowledges the same to be her act and further acknowledges
that, to the best of her knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated this 19th day of January, 1987.
------ -------
/s/ Andrea Melville
- -------------------
18
<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of Feb. 26, 1987, is entered into
between Countrywide Mortgage Investments, Inc., a Maryland corporation ("CMI
Maryland"), and Countrywide Mortgage Investments, Inc., a Delaware corporation
("CMI Delaware"). CMI Maryland and CMI Delaware are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, CMI Maryland is a corporation duly organized and existing under
the laws of the State of Maryland;
WHEREAS, CMI Delaware is a corporation duly organized and existing under
the laws of the State of Delaware;
WHEREAS, on the date of this Agreement, CMI Maryland has authority to issue
10,000,000 shares of capital stock, consisting of 10,000,000 shares of Common
Stock, par value $.01 per share ("Maryland Common Stock"), of which 7,875,000
shares are issued and outstanding or reserved for issuance;
WHEREAS, on the date of this Agreement, CMI Delaware has authority to issue
30,000,000 shares of capital stock, consisting of 30,000,000 shares of Common
Stock, par value $.01 per share ("Delaware Common Stock"), of which 100 shares
are issued and outstanding and owned by CMI Maryland;
WHEREAS, the respective Boards of Directors of CMI Maryland and CMI
Delaware have determined that it is advisable and in the best interests of each
of such corporations that CMI Maryland merge with and into CMI Delaware upon
the terms and subject to the conditions set forth in this Agreement for the
purpose of effecting the change of the state of incorporation of CMI Maryland
from Maryland to Delaware;
WHEREAS, the respective Boards of Directors of CMI Maryland and CMI
Delaware have, by resolutions duly adopted, approved this Agreement;
WHEREAS, CMI Maryland has approved this Agreement as the sole stockholder
of CMI Delaware; and
WHEREAS, the Board of Directors of CMI Maryland has directed that this
Agreement be submitted to a vote of its shareholders.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, CMI Maryland and CMI Delaware hereby agree as follows:
1. Merger. CMI Maryland shall be merged with and into CMI Delaware (the
"Merger"), and CMI Delaware shall be the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation"). The Merger shall
become effective upon the date and at the time of filing of appropriate
articles of merger, providing for the Merger, with the Maryland State
Department of Assessments and Taxation or an appropriate certificate of
merger, providing for the Merger, with the Secretary of State of the State of
Delaware, whichever later occurs (the "Effective Time").
2. Governing Documents. The Certificate of Incorporation of CMI Delaware,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation without change or amendment
until thereafter amended in accordance with the provisions thereof and
applicable laws, and the Bylaws of CMI Delaware, as in effect immediately
prior to the
<PAGE>
Effective Time, shall be the Bylaws of the Surviving Corporation without
change or amendment until thereafter amended in accordance with the provisions
thereof, of the Certificate of Incorporation of the Surviving Corporation and
applicable laws.
3. Succession. At the Effective Time, the separate corporate existence of
CMI Maryland shall cease, and CMI Delaware shall posses all the rights,
privileges, powers and franchises, of a public and private nature and be
subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to each of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action belonging to each of the Constituent Corporations, shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
respective Constituent Corporations, and the title to any real estate vested
by deed or otherwise, in either of such Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of CMI Maryland shall be preserved
unimpaired. To the extent permitted by law, any claim existing or action or
proceeding pending by or against either of the Constituent Corporations may be
prosecuted as if the Merger had not taken place. All debts, liabilities and
duties of the respective Constituent Corporations shall thenceforth attach to
the Surviving Corporation and may be enforced against it to the same extent as
if such debts, liabilities and duties had been incurred or contracted by it.
All corporate acts, plans, policies, agreements, arrangements, approvals and
authorizations of CMI Maryland, its shareholders, Board of Directors and
committees thereof, officers and agents which were valid and effective
immediately prior to the Effective Time, shall be taken for all purposes as
the acts, plans, policies, agreements, arrangements, approvals and
authorizations of the Surviving Corporation and shall be as effective and
binding thereon as the same were with respect to CMI Maryland. The employees
and agents of CMI Maryland shall become the employees and agents of the
Surviving Corporation and continue to be entitled to the same rights and
benefits which they enjoyed as employees and agents of CMI Maryland. The
requirements of any plans or agreements of CMI Maryland involving the issuance
or purchase by CMI Maryland of certain shares of its capital stock shall be
satisfied by the issuance or purchase of a like number of shares of the
Surviving Corporation.
4. Directors and Officers. The Directors and Officers of CMI Maryland on
the Effective Time shall be and become Directors and Officers, holding the
same titles and positions, of the Surviving Corporation on the Effective Time,
and after the Effective Time shall serve in accordance with the Bylaws of the
Surviving Corporation.
5. Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of CMI Maryland such deeds and other instruments, and
there shall be taken or caused to be taken by it all such further and other
action, as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of CMI Maryland, and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name and on
behalf of CMI Maryland or otherwise, to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
<PAGE>
(a) each share of Maryland Common Stock outstanding immediately prior to
the Effective Time shall be changed and converted into and shall be one
fully paid and nonassessable share of Delaware Common Stock; and
(b) the 100 shares of Delaware Common Stock presently issued and
outstanding in the name of CMI Maryland shall be cancelled and retired and
resume the status of authorized and unissued shares of Delaware Common
Stock, and no shares of Delaware Common Stock or other securities of CMI
Delaware shall be issued in respect thereof.
7. Condition to Merger. The Merger shall have received the requisite
approval of the holders of Maryland Common Stock pursuant to the General
Corporation Law of the State of Maryland.
8. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which, immediately prior to the Effective Time,
represented shares of Maryland Common Stock shall, respectively, be deemed for
all purposes to evidence ownership of, and to represent, shares of Delaware
Common Stock into which the shares of Maryland Common Stock, formerly
represented by such certificates, have been convened as herein provided. The
registered owner on the books and records of the Surviving Corporation or its
transfer agents of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted
for to the Surviving Corporation or its transfer agents, have and be entitled
to exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Delaware Common Stock
evidenced by such outstanding certificate as above provided.
9. Options. Each option to purchase shares of Maryland Common Stock
granted under the 1985 Stock Option Plan (the "Plan") of CMI Maryland which is
outstanding immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become an option to purchase the same number of shares of Delaware
Common Stock at the same option price per share, and upon the same terms and
subject to the same conditions as set forth in the Plan, as in effect at the
Effective Time. The same number of shares of Delaware Common Stock shall be
reserved for purposes of said Plan as is equal to the number of shares of
Maryland Common Stock so reserved as of the Effective Time. As of the
Effective Time, CMI Delaware hereby assumes the Plan and all obligations of
CMI Maryland under the Plan, including the outstanding options or awards or
portions thereof granted pursuant to the Plan, and the shares subject to such
Plan shall thereafter be the shares of Delaware Common Stock reserved for
issuance thereunder.
10. Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented by written agreement of the parties hereto at any
time prior to the Effective Time with respect to any of the terms contained
herein; provided, however, that no such amendment, modification or supplement
not adopted and approved by the shareholders of CMI Maryland and CMI Delaware
shall affect the rights of either or both of such shareholders in a manner
which is materially adverse to either or both of them.
11. Abandonment. At any time prior to the Effective Time, this Agreement
may be terminated and the Merger may be abandoned by the Board of Directors of
CMI Maryland, notwithstanding approval of this Agreement by the stockholder of
CMI Delaware or by the shareholders of CMI Maryland, or both, if, in the
opinion of the Board of Directors of CMI Maryland, circumstances arise which,
in the opinion of such Board of Directors, make the Merger for any reason
inadvisable.
12. Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in two or more counterparts, each of which
shall be deemed to be an original and the same agreement.
<PAGE>
IN WITNESS WHEREOF, CMI Maryland and CMI Delaware have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
COUNTRYWIDE MORTGAGE
INVESTMENTS, INC.,
a Maryland corporation
By: \s\ Angelo R. Mozilo
--------------------------
Angelo R. Mozilo,
President
ATTEST:
By: \s\ Thomas H. Boone
-----------------------
Thomas H. Boone,
Secretary
COUNTRYWIDE MORTGAGE
INVESTMENTS, INC.,
a Delaware corporation
By: \s\ Angelo R. Mozilo
--------------------------
Angelo R. Mozilo,
President
ATTEST:
By: \s\ Thomas H. Boone
------------------------
Thomas H. Boone,
Secretary
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Angelo R. Mozilo and Thomas H. Boone certify that:
1. They are the President and the Secretary, respectively, of Countrywide
Mortgage Investments, Inc., a Delaware corporation.
2. The Agreement of Merger in the form attached was duly approved by the
Board of Directors and the sole stockholder of this corporation.
3. There is only one class of shares of capital stock of this corporation
outstanding, Common Stock, $.01 par value. The number of shares of Common Stock
outstanding is 100.
4. The shareholder approval was by the holder of 100% of the outstanding
shares of this corporation. The approval of a majority of the outstanding
shares of Common Stock is required to approve the Agreement of Merger.
Date: Feb. 26, 1987
\s\ Angelo R. Mozilo
-----------------------------
Angelo R. Mozilo, President
ATTEST: \s\ Thomas H. Boone
-----------------------------
Thomas H. Boone, Secretary
(Delaware)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On February 26, 1987 before me, the undersigned, a Notary Public in and for
said State, personally appeared ANGELO R. MOZILO personally known to me or
proved to me on the basis of satisfactory evidence to be the person who executed
the within instrument as the President, and THOMAS H. BOONE personally known to
me or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the Secretary, of COUNTRYWIDE MORTGAGE
INVESTMENT, INC., a Delaware corporation, one of the corporations that executed
the within instrument and acknowledged to me that COUNTRYWIDE MORTGAGE
INVESTMENTS, INC. executed the within instrument pursuant to its by-laws or a
resolution of its board of directors.
WITNESS my hand and official seal.
Signature \s\ Ayda Zenian
----------------------
<PAGE>
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
2. The registered office of the corporation within the State of Delaware is
hereby changed to 32 Loockerman Square, Suite L-100, City of Dover 19901,
County of Kent.
3. The registered agent of the corporation within the State of Delaware is
hereby changed to The Prentice-Hall Corporation System, Inc., the business
office of which is identical with the registered office of the corporation as
hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by
resolution of its Board of Directors.
Signed on February 16, 1993.
\s\ Sandor E. Samuels
---------------------
SANDOR E. SAMUELS Sr. Vice-President
Attest:
\s\ Gwen J. Eells
- -----------------
GWEN J. EELLS Asst. Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide Mortgage
Investments, Inc., (the "Corporation") resolutions were duly adopted setting
forth a proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling for the
proposal to be presented to the shareholders of the Corporation at a Special
Meeting of the Shareholders. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising Article IV, Section 1 thereof so that, as amended,
Article IV, Section 1 shall read as follows:
"CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000),
consisting of Sixty Million (60,000,000) shares of Common Stock having a
par value of $0.01 per share."
2. That thereafter, the Special Meeting of the Stockholders, held on
December 9, 1993, of said corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statue
were voted in favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Angelo R. Mozilo, its President, and Sandor E.
Samuels, its Secretary, this 11th day of December, 1993.
BY: /s/ Angelo R. Mozilo
--------------------
Angelo R. Mozilo
President
ATTEST:
/s/ Sandor E. Samuels
- ---------------------
Sandor E. Samuels
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide Mortgage
Investments, Inc., (the "Corporation") resolutions were duly adopted setting
forth proposed amendments of the Certificate of Incorporation of said
Corporation, declaring said amendments to be advisable and calling for the
proposal to be presented to the stockholders of the Corporation at the Annual
Meeting of the Stockholders. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising ARTICLE I so that, as amended, ARTICLE I shall read as
follows:
ARTICLE I
"NAME"
------
The name of the Corporation is: CWM Mortgage Holdings, Inc. (the
"Corporation").
RESOLVED FURTHER, That the Certificate of Incorporation of the Corporation
be further amended by adding a new ARTICLE VII to read as follows and by
renumbering the existing ARTICLES VII and VIII as ARTICLES VIII and IX,
respectively:
ARTICLE VII
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
----------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more real estate mortgage investment conduits ("REMICs") or one or
more taxable mortgage pools in which the Corporation has acquired or
plans to acquire an interest) or
<PAGE>
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Board of Directors may
require to be filed with the Corporation a statement or affidavit from
any holder or proposed transferee of capital stock of the Corporation
stating whether the holder or proposed transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign
government, any international organization, or any agency or
instrumentality of the foregoing, or any other organization that
is exempt from federal income taxation (including taxation under
the unrelated business taxable income provisions of the Code) (a
"Disqualified Organization") or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in
which a Disqualified Organization holds or is permitted to hold a
direct or indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital
stock of the Corporation shall be subject to this provision.
Furthermore, the Board of Directors shall have the right, but shall
not be required, to refuse to transfer any shares of capital stock of
the Corporation purportedly transferred, if either
(a) a statement or affidavit requested pursuant to this Section
1 has not been received, or
(b) the proposed transferee is a Disqualified Organization or
Pass-Through Entity.
Section 2. Any acquisition of shares of capital stock of the
Corporation that could or would
(a) result in the direct or indirect imposition of a penalty tax
on the Corporation (including the imposition of an entity-level tax on
one or more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the Corporation has acquired or plans
to acquire an interest shall be void ab initio to the fullest extent
permitted under applicable law and the intended transferee of the
subject shares shall be deemed never to have had an interest therein.
2
<PAGE>
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the
transferee of those shares shall be deemed, at the option of the
Corporation, to have acted as agent on behalf of the Corporation in
acquiring those shares and to hold those shares on behalf of the
Corporation.
Section 3. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Corporation may redeem
shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Section 6 of Article VI.
Section 4. Nothing contained in this Article or in any other
provision hereof shall limit the authority of the Board of Directors to
take any and all other action as it in its sole discretion deems necessary
or advisable to protect the Corporation or the interests of its
stockholders by avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest.
Section 5. If any provision of this Article or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with
the determination of that court.
2. That thereafter, the Annual Meeting of the Stockholders of the
Corporation was duly called and held on May 17, 1994, upon notice in accordance
with Section 222
3
<PAGE>
of the General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendments.
3. That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Sterling Blair Albernathy, its Senior Vice
President, and Richard H. Wohl, its Secretary, this 20th day of May, 1994.
BY: /s/ Sterling Blair Abernathy
----------------------------
Sterling Blair Abernathy
Senior Vice President
ATTEST:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
4
<PAGE>
of the General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendments.
3. That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Sterling Blair Albernathy, its Senior Vice
President, and Richard H. Wohl, its Secretary, this 20th day of May, 1994.
BY: /s/ Sterling Blair Abernathy
----------------------------
Sterling Blair Abernathy
Senior Vice President
ATTEST:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
4
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Michael W. Perry, its Executive Vice President, and Richard H. Wohl,
its Secretary, this 18th day of May, 1995.
/s/ Michael W. Perry
--------------------
Michael W. Perry
Executive Vice President
ATTEST:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
-2-
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
INDEPENDENT LENDING CORPORATION
INTO CWM MORTGAGE HOLDINGS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
CWM Mortgage Holdings, Inc. a Delaware corporation (the "Company"), does
hereby certify:
FIRST: That the Company is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Company owns all of the outstanding shares of the capital
stock of Independent Lending Corporation, a Delaware corporation.
THIRD: That the Company, by the following resolutions of its Board of
Directors, duly adopted on the 20th day of January, 1997, determined to merge
into itself Independent Lending Corporation:
"WHEREAS, The Board of Directors has been presented with a proposal by
the Company to merge Independent Lending Corporation, a wholly owned subsidiary,
with and into the Company (the "ILC Merger");
WHEREAS, Section 253 of the Delaware General Corporation Law
authorizes the merger of a wholly owned subsidiary with and into its parent
corporation; and
WHEREAS, It is the determination of the Board of Directors that the
ILC Merger would be in the best interests of the Company;
NOW, THEREFORE, BE IT RESOLVED, That the merger of Independent Lending
Corporation with and into the Company is hereby approved;
RESOLVED FURTHER, That the officers of the Company be, and each of
them hereby is, authorized, empowered and directed to execute such documents and
to take or cause to be taken any and all such other actions as he or they may
deem necessary, appropriate or advisable in order to carry out the intent and
purposes of the foregoing resolution; and
RESOLVED FURTHER, That any actions heretofore taken by any officer of
the Company in connection with the ILC Merger be, and they hereby are, ratified,
confirmed and approved."
<PAGE>
IN WITNESS WHEREOF, CWM Mortgage Holdings, Inc. has caused its corporate
seal to be affixed and this certificate to be signed by Michael W. Perry, its
authorized officer, this 31st day of January, 1997.
CWM MORTGAGE HOLDINGS, INC.
\s\ Michael W. Perry
--------------------
Michael W. Perry
President and Chief Operating Officer
2
<PAGE>
CERTIFICATE OF MERGER OF
COUNTRYWIDE ASSET MANAGEMENT CORPORATION
INTO CWM MORTGAGE HOLDINGS, INC.
Pursuant to Section 251 of the
General Corporation Law of the State of Delaware
The undersigned hereby certifies as follows:
FIRST: The names of the constituent corporations are CWM Mortgage
Holdings, Inc. ("CWM") and Countrywide Asset Management Corporation ("CAMC").
Each constituent corporation is incorporated under the laws of the State of
Delaware.
SECOND: An Agreement and Plan of Merger (the "Merger Agreement") dated as
of January 29, 1997 by and among CWM, CAMC, and Countrywide Credit Industries,
Inc. has been approved, adopted, certified, executed and acknowledged by each of
the constituent corporations in accordance with Section 251 of the General
Corporation Law of the State of Delaware.
THIRD: The name of the corporation surviving the merger is CWM Mortgage
Holdings, Inc. The Certificate of Incorporation of CWM as in effect at the
Effective Time shall be the Certificate of Incorporation of the corporation
surviving the Merger (the "Surviving Corporation").
FOURTH: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at 155 North Lake
Avenue, Pasadena, California 91101, and a copy of the Merger Agreement will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of either constituent corporations.
IN WITNESS WHEREOF, CWM has caused this Certificate of Merger to be
executed in its corporate name by its President and Chief Operating Officer and
attested by its Secretary this 1st day of July, 1997.
CWM MORTGAGE HOLDINGS, INC.
/s/ Michael W. Perry
--------------------
Michael W. Perry
President and Chief Operating Officer
Attest:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
CWM MORTGAGE HOLDINGS, INC.
CWM Mortgage Holdings, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Company"), hereby certifies as follows:
1. That at a meeting of the Board of Directors of the Company resolutions
were duly adopted setting forth a proposed amendment of the Certificate of
Incorporation of the Company, declaring said amendment to be advisable and
calling for the proposal to be presented to the shareholders of the Company at
the Annual Meeting of the Shareholders. The resolution setting forth the
proposed amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, That subject to the requisite approval
of the shareholders of the Company at the Annual Meeting of Shareholders,
Article I of the Company's Certificate of Incorporation be amended to read
in full as follows:
"ARTICLE I
NAME
----
The name of the Corporation is: INMC Mortgage Holdings, Inc. (the
"Corporation")."
2. That thereafter, the Annual Meeting of the Shareholders of the Company
was duly called and held on June 24, 1997, upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware, at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Michael W. Perry, its President, and Richard H. Wohl, its Secretary, this 1st
day of July, 1997.
\s\ Michael W. Perry
--------------------
Michael W. Perry
President
ATTEST:
\s\ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
<PAGE>
EXHIBIT 3.2
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
A DELAWARE CORPORATION
______________________
BYLAWS
______________________
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located at the principal place of business in
that state of the entity acting as the corporation's registered agent in the
State of Delaware.
SECTION 2. Principal Executive Office. The principal executive office of
the Corporation shall be in the City of Pasadena, State of California.
SECTION 3. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. Meetings of stockholders shall be held on
such date, at such time and at such place within the United States as shall be
determined from time to time by the Board of Directors and stated in the notice
of meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders of the
Corporation shall be held on such date, at such time and at such place as shall
be designated annually by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof, at which meeting the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
SECTION 3. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders, unless otherwise provided by law
or by the Certificate of Incorporation, may be called by a majority of the Board
of Directors, a majority of the Unaffiliated Directors (as defined in Article
III, Section 3), the President or the Chairman of the Board of Directors. The
date, time and place of a special meeting shall be determined by the Board of
Directors or the officer calling the meeting and shall be stated in the written
notice of the meeting, which notice shall state the purpose or purposes for
which the meeting is called. Business of the Corporation transacted at any
special meeting of stockholders by whomever called shall be limited to the
purposes stated in the written notice thereof.
SECTION 4. Notice of Meetings; Waiver of Notice; Adjournment. Not less than
ten nor more than sixty days before the date of every stockholders' meeting, the
Secretary shall give to each stockholder of record entitled to vote at such
meeting, and to each stockholder not entitled to vote who is entitled by statute
to notice, written or printed notice stating the date, time and place of the
meeting and the purpose or purposes for which the meeting is called, either by
mail or by presenting it personally to the stockholder or by leaving it at his
residence or usual place of business. If mailed with postage thereon prepaid,
such notice shall be deemed to be given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors after the adjournment shall fix a
new record date for an adjourned meeting or the adjournment is
<PAGE>
for more than thirty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
SECTION 5. Quorum. At any meeting of stockholders the presence in person or
by proxy of stockholders entitled to cast a majority of the shares of stock
entitled to vote at the meeting shall constitute a quorum, unless otherwise
provided by any statute or by the Certificate of Incorporation. In the absence
of a quorum no business may be transacted, except that the holders of a majority
of the shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, except as required by Section 4 above, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally noticed.
SECTION 6. Voting. The affirmative vote of a majority of the shares of
common stock which are present in person or represented by proxy and entitled to
vote on the matter at a meeting of stockholders, duly called and at which a
quorum is present, shall be sufficient to constitute the act of the stockholders
as to any matter which properly comes before the meeting, unless more than a
majority of the votes shall be required by statute or by the Certificate of
Incorporation. If a vote shall be taken on any question other than the election
of directors (which shall be by written ballot), then unless required by statute
or these bylaws, or determined by the chairman of the meeting to be advisable,
any such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholders voting, or by his proxy, and shall state the number
of shares voted.
Unless a statute or the Certificate of Incorporation provides otherwise, each
holder of record of outstanding shares of stock of the Corporation having voting
power shall be entitled to one vote for every share of such stock on each matter
submitted to a vote at a meeting of stockholders. A stockholder may vote only
the shares owned by him as shown an the record of stockholders of the
Corporation as of the record date determined pursuant to Section 7 below or
pursuant to applicable law and may cast his shares in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney-in-
fact, but no proxy shall be valid after three years from its date, unless
otherwise provided in the proxy. At all meetings of stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
SECTION 7. Fixing of Record Date. The Board of Directors may fix, in
advance, a record date not more than sixty not less than ten days before the
date then fixed for the action requiring determination by the stockholders. All
persons who were holders of record of shares at such time, and no others, shall
be entitled to vote at such meeting and any adjournment thereof.
SECTION 8. Organization and Order of Business. At each meeting of the
stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any
person appointed by the chairman of the meeting, shall act as secretary of the
meeting and keep the minutes thereof. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and
2
<PAGE>
shall execute a certificate of any fact found by them. No director or candidate
for the office of director shall act as inspector of an election of directors.
Inspectors need not be stockholders.
ARTICLE III
Board of Directors
SECTION 1. Number of Directors. The number of directors of the Corporation
shall be six. By vote of a majority of the entire Board of Directors, the
number of directors fixed by these Bylaws may be increased or decreased by
resolution from time to time, but may not exceed nine nor be less than three.
The tenure of office of a director shall not be affected by any decrease in the
number of directors so made by the Board.
SECTION 2. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors, which may
exercise all of the powers of the Corporation, except such as are by law or by
the Certificate of Incorporation or by these Bylaws conferred upon or reserved
to the stockholders.
SECTION 3. Affiliations of Board Members. A majority of the members of the
Board of Directors shall at all times be persons who are not Affiliates of an
individual or corporate management company to whom the Board has delegated
management duties as permitted in Section 18 of this Article and Article V,
Section 7 of the Certificate of Incorporation (a "Management Company") (such
directors being referred to as "Unaffiliated Directors").
As used in these Bylaws, the term "Affiliate" of another person means any
person directly or indirectly owning, controlling, or holding with power to
vote, five percent (5%) or more of the outstanding voting securities of such
other person or of any person directly or indirectly controlling, controlled by
or under common control with such other person; any person five percent (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.
SECTION 4. Election and Term. Until the first annual meeting of
stockholders or until successors are duly elected and qualified, the Board shall
consist of the persons named as such in the Certificate of Incorporation. At
the first annual meeting of stockholders and at each annual meeting thereafter,
the stockholders shall elect directors, who need not be stockholders in the
Corporation, to hold office until the next annual meeting and until their
successors are elect and qualified or until their earlier resignation or
removal. Directors are eligible for re-election, and a director may resign at
any time by giving written notice to the Corporation.
SECTION 5. Vacancies. Any vacancy occurring in the Board of Directors for
any cause other than by reason of increase in the number of directors may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum. Any vacancy occurring by reason
of an increase in the number of directors may be filled by action of a majority
of the entire Board of Directors. The vacancy for any reason of any director
who is not an Affiliate of a Management Company shall be filled by a majority
vote of the remaining members of the Board of Directors, including a majority
vote of the remaining Unaffiliated Directors. A director elected by the Board
of Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders and until his or her successor is elected and
qualifies.
SECTION 6. Removal of Directors. Any director may be removed either with or
without cause, as provided by the General Corporation Law of the State of
Delaware.
SECTION 7. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held in or out of the State of Delaware at such place as the
Board of Directors may from time to time determine or as shall be specified in
the notice of such meeting.
SECTION 8. Annual Meeting. The first meeting of each newly elected Board of
Directors shall be held as soon as practicable after the annual meeting of the
stockholders at which the directors were elected. The meeting
3
<PAGE>
may be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors. or as shall
be specified in a written waiver signed by all of the directors, except that no
notice shall be necessary if such meeting is held immediately after the
adjournment, and at the site, of the annual meeting of stockholders.
SECTION 9. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 10. Special Meetings. Special meetings of the Board of Directors
may be called by two or more directors of the Corporation or by the Chairman of
the Board of Directors or the President.
SECTION 11. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Such notice shall state the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or
established nationwide courier service, delivery cost prepaid, addressed to each
director at his or her post-office address as it appears on the records of the
Corporation, at least four days before the day on which such meeting is to be
held. If mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the director at his or her address as it appears
in the records of the Secretary. Special meetings of the Board of Directors may
be held at any time without notice if all directors are present or if those
directors not present waive notice of the meeting in writing either before or
after the date of the meeting.
SECTION 12. Quorum and Voting. At all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by statute, the Certificate of Incorporation or these Bylaws. If a
quorum shall not be present at any meeting of directors, the directors present
at the meeting may by a majority vote adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
Notwithstanding the first paragraph of this Section 12, any action pertaining
to a transaction involving the Corporation in which any Management Company, any
director or officer of the Corporation or any Affiliate of any of the foregoing
persons has an interest shall be approved in specific as to any isolated
transactions or in general as to any series of similar transactions by a
majority of the members of the Board of Directors who are not Affiliates of such
interested party, even if the non-interested directors constitute less than a
quorum. In approving any such transaction or series of transactions the non-
interested directors must determine that
(a) the transaction as contemplated is fair as to the Corporation and its
stockholders at the time it is authorized, approved or ratified;
(b) if an acquisition of property other than mortgage loans is involved,
the total consideration is not in excess of the appraised value of such
property being acquired; and
(c) if the transaction involves compensation to any Management Company or
its Affiliates for services rendered in a capacity other than that
contemplated by the management arrangements, to the knowledge of the
directors such compensation is not greater than the customary charges for
comparable services generally available from other competent unaffiliated
persons.
SECTION 13. Organization. The Chairman of the Board shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside thereat. The Secretary (or, in his absence
or inability to act, any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
4
<PAGE>
SECTION 14. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting of the Board of Directors or any
committee thereof by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
SECTION 15. Consent in Lieu of Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
SECTION 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors in such manner and in such
amounts as may be fixed from time to time by the Board of Directors, and
expenses of attendance at each regular or special meeting of the Board of
Directors, or of any committee thereof.
SECTION 17. Investment Policies and Restrictions. The investment policies
of the Corporation and the restrictions thereon shall be established from time
to time by the Board of Directors, including a majority of the Unaffiliated
Directors; provided, however, that the investment policies of the Corporation
and the limitations thereon shall be at all times in compliance with the
restrictions applicable to real estate investment trusts pursuant to the
Internal Revenue Code of 1986, as it may be amended from time to time. The
Unaffiliated Directors shall review the investment policies of the Corporation
at least annually to determine that the policies then being followed by the
Corporation are in the best interests of its stockholders. Each such
determination and the basis therefor shall be set forth in the minutes of the
Board of Directors.
SECTION 18. Management Arrangements. The Board may delegate the duty of
management of the assets and the administration of the Corporation's day-to-day
operations to a Management Company pursuant to a written contract or contracts,
or any renewal thereof, which have obtained the requisite approvals of the Board
of Directors, including a majority of the Unaffiliated Directors, or the
stockholders of the Corporation, as provided in the Certificate of
Incorporation.
The Board of Directors shall evaluate the performance of the Management
Company before entering into or renewing any management arrangement. The
minutes of meetings with respect to such evaluation shall reflect the criteria
used by the Board of Directors in making such evaluation. Upon any termination
of the initial management arrangements reflected in the Registration Statement,
the Board of Directors shall determine that any successor Management Company
possess sufficient qualifications (a) to perform the management function for the
Corporation and (b) to justify the compensation provided for in its contract
with the Corporation. Each contract for the services of a Management Company
entered into by the Board of Directors shall have a term of no more than one
year, but may be renewed annually at or prior to the expiration of the contract.
Each contract shall be terminable by a majority of the Unaffiliated Directors,
or the Management Company on sixty (60) days' written notice without cause.
The Unaffiliated Directors shall determine at least annually that the
compensation which the Corporation contracts to pay the Management Company is
reasonable in relation to the nature and quality of services performed and shall
also supervise performance of the Management Company and the compensation paid
to it by the Corporation to determine that the provisions of such contract are
being carried out. Each such determination shall be based upon the following
factors and all other factors the Unaffiliated Directors may deem relevant and
the findings of the Unaffiliated Directors on each of such factors shall be
recorded in the minutes of the Board of Directors:
(a) The size of the management fee in relation to the size, compensation
and profitability of the investment portfolio of the Corporation;
(b) The success of the Management Company in generating opportunities that
meet the investment objectives of the Corporation;
5
<PAGE>
(c) The rates charged to other corporations similar to the Corporation and
to other investors by advisers performing similar services;
(d) Additional revenues realized by the Management Company and its
Affiliates through their relationship with the Corporation, including loan
administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Corporation or by others with
whom the Corporation does business;
(e) The quality and extent of service and advice furnished to the
Corporation;
(f) The performance of the investment portfolio of the Corporation,
including income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations; and
(g) The quality of the investment portfolio or the Corporation in
relationship to the investments generated by the Management Company for its
own account.
SECTION 19. Total Expenses. The Unaffiliated Directors shall determine,
from time to time but at least annually, that the total fees and expenses of the
Corporation are reasonable in light of all relevant factors. Within sixty days
after the end of any fiscal quarter of the Corporation for which "Total
Operating Expenses" (for the twelve months then ended) exceed two percent (2%)
of "Average Invested Assets" or twenty-five percent (25%) of the "Net Income",
whichever is greater, there shall be sent to the stockholders of the Corporation
a written disclosure of such fact, together with an explanation of the factors
the Unaffiliated Directors considered in arriving at the conclusion that such
higher operating expenses were justified. The Corporation shall also publish to
the stockholders quarterly (i) the ratio of the cost of raising capital during
the quarter to the capital raised and (ii) the aggregate amount of advisory fees
and the aggregate amount of other fees paid to any Management Company and all
Affiliates of such Management Company by the Corporation and including fees or
charges paid to such Management Company and all of its Affiliates by third
parties doing business with the Corporation.
As used herein, the following terms shall have the following meanings:
(a) "Total Operating Expenses" for any period shall mean the aggregate
expenses of every character which constitute ordinary operating expenses,
including additional expenses paid directly or indirectly by the Corporation
to a Management Company, its Affiliates or third parties based upon their
relationship with the Corporation, including loan administration, servicing,
and all other expenses paid by the Corporation, exclusive of expenses related
to raising capital, for interest, taxes and direct property acquisition,
disposition, operation, maintenance and management costs.
(b) "Average Invested Assets" for any period shall mean the average of the
aggregate book value of the assets of the Corporation, determined on a
consolidated basis, invested, directly or indirectly, in loans secured by
real estate, before deduction of reserves for depreciation and similar non-
cash reserves, computed taking the average of such values at the end of each
calendar month during such period.
(c) "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.
ARTICLE IV
Committees of Directors
SECTION 1. Executive and Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Board, appoint from among its members an
Executive Committee, an Audit Committee or other committees each composed of two
or more directors. At least a majority of the members of any such committee
shall be composed of directors who are Unaffiliated Directors. Any such
committee shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
6
<PAGE>
and may authorize the seal of the Corporation to be affixed to all papers which
may require it except that no such committee shall have such power or authority
with respect to amending the Bylaws or Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to shareholders the sale,
lease or exchange of all or substantially all of the Corporation's property or
assets or the dissolution or the revocation of a dissolution of the Corporation,
and, unless the resolution or the Bylaws or Certificate of Incorporation
specifically so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger.
SECTION 2. Minutes and Reports. The committees shall keep minutes of their
proceedings and shall report the same to the Board of Directors when requested
to do so, and any action taken by the committees shall be subject to revision
and alteration by the Board of Directors, provided that no rights of third
persons shall be affected by any such revision or alteration.
SECTION 3. Notice. Notice of committee meetings shall be given in the same
manner as notice for special meetings of the Board, and a waiver thereof in
writing, signed by the directors entitled to such notice and filed with the
records of the meeting, whether before or after the holding thereof, or actual
attendance at the committee meeting in person shall be deemed equivalent to the
giving of such notice to such director.
SECTION 4. Quorum, Voting and General. One-third, but not less than two, of
the members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business. The
act of a majority of the committee members present at such meeting shall be an
act of the committee. The Board may designate a chairman of any committee and
such chairman or any two members of any committee may fix the time and place of
its meetings unless the Board shall otherwise provide. In the event of the
absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time to
change the membership of any committee, to fill all vacancies, to designate
alternate members, to replace any absent or disqualified member or to dissolve
any such committee.
ARTICLE V
Officers and Agents
SECTION 1. Number and Qualification. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have as officers one or more Assistant Secretaries and one
or more Assistant Treasurers. Two or more offices may be held by the same
person but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law, the Certificate
of Incorporation or these Bylaws to be executed, acknowledged or verified by two
or more officers. Such officers shall be elected by the Board of Directors at
its first meeting after each annual meeting of stockholders and shall serve at
the pleasure of the Board of Directors until resignation, removal,
disqualification or until their successors are chosen and qualified. The Board
of Directors may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
SECTION 2. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
SECTION 3. Removal and Vacancies. Any officer or agent may be removed by
the Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby. If the office of any officer becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors for the
unexpired portion of the term of the office which shall be vacant.
7
<PAGE>
SECTION 4. The Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation. He shall direct, coordinate and
control the Corporation's business and activities and its operating expenses and
capital expenditures, and shall have general authority to exercise all the
powers necessary for the chief executive officer of the Corporation, all in
accordance with basic policies established by and subject to the control of the
Board of Directors. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers. He shall have general authority to execute bonds, deeds and
contracts in the name and on behalf of the Corporation. As provided in Section
8 of Article II, he shall act as chairman at all meetings of the stockholders at
which he is present, and, as provided in Section 13 of Article III, he shall
preside at all meetings of the Board of Directors at which he is present. In
the absence of the Chairman of the Board, his duties shall be performed and his
authority may be exercised by the President, and, in the absence of the Chairman
of the Board and the President, such duties shall be performed and such
authority may be exercised by the Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, or in the absence of such Vice President, by such
officer as may have been designated by the most senior officer of the
Corporation who has made any such designation, with the right reserved to the
Board of Directors to make the designation or supersede any designation so made.
SECTION 5. The President. The President shall be the chief operating
officer of the Corporation. He shall implement the general directives, plans
and policies formulated by the Chairman of the Board pursuant to the Bylaws, in
general shall have authority to exercise all powers delegated to him by the
Chairman of the Board and shall establish operating and administrative plans and
policies and direct and coordinate the Corporation's organizational components,
within the scope of the authority delegated to him by the Board of Directors or
the Chairman of the Board. He shall have general authority to execute bonds,
deeds and contracts in the name and on behalf of the Corporation and
responsibility for the employment or appointment and discharge of such
employees, agents and officers, except such as shall be appointed by the Board,
as may be required to carry on the operation of the business. As provided in
Section 4 of this Article V, in the absence of the Chairman of the Board, the
President shall perform all the duties and exercise the authority of the
Chairman of the Board. In the absence of the President, his duties shall be
performed and his authority may be exercised by the Vice Presidents in order of
their rank as fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, and, in the absence of the
President and such Vice President, by such officer as may have been designated
by the most senior officer of the Corporation who has made any such designation,
with the right reserved to the Board of Directors to make the designation or
supersede any designation so made.
SECTION 6. Vice Presidents. The Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and shall record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board or the President, under whose
supervision he shall act. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by his
signature.
SECTION 8. Assistant Secretaries. Each Assistant Secretary shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Secretary, the duties of the
Secretary shall be performed by such Assistant Secretary, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 9. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as
8
<PAGE>
may be designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and the Board of
Directors at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Treasurer, the duties of the
Treasurer shall be performed by such Assistant Treasurer, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Certificates of Stock
SECTION 1. Form and Number. Each stockholder shall be entitled upon request
to a certificate or certificates in such form as shall be approved by the Board
which shall represent and certify the number and kind and class of shares owned
by him in the Corporation; provided, however, that certificates for fractional
shares shall not be issued. Each certificate shall be signed by the Chairman of
the Board or the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal. The signatures may be either manual
or facsimile signatures and the seal may be either facsimile or any other form
of seal. In case any officer who has signed any certificate ceases to be an
officer of the Corporation before the certificate is issued, the certificate may
nevertheless be issued by the Corporation with the same effect as if the officer
had not ceased to be such officer as of the date of its issue. Each stock
certificate shall include on its face the name of the Corporation, the name of
the stockholder and the class of stock and number of shares represented by the
certificate. A stock certificate may not be issued by the Corporation until the
stock represented by it is fully paid by the stockholder.
SECTION 2. Legends. Every stock certificate representing shares of stock
which are restricted as to transferability by the Corporation shall contain a
full statement of the restriction or state that the Corporation will furnish
information about the restriction to the stockholder on request and without
charge.
SECTION 3. Transfers of Shares. No transfers of shares of stock of the
Corporation shall be made if (i) void ab initio pursuant to Article VI of the
Corporation's Certificate of Incorporation, or (ii) the Board of Directors,
pursuant to such Article VI, shall have refused to transfer such shares.
Permitted transfers of shares of stock of the Corporation shall be made on the
stock records of the Corporation only upon the instruction of the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates, if issued, for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Upon Surrender to the Corporation or the
transfer agent of the Corporation of the certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, as to any transfers not prohibited by such Article VI of the
Certificate of Incorporation or by action of the Board of Directors thereunder,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 4. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of
9
<PAGE>
certificates for shares of stock of the Corporation. It may appoint, or
authorize any officer or officers to appoint, one or more transfer agents or one
or more transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any of
them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
stolen, lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such stolen, lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and to give the Corporation a bond,
with sufficient surety, to indemnify it against any loss or claim which may
arise by reason of the issuance of a new certificate.
ARTICLE VII
Dividends
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in the Corporation's own shares,
subject to the provisions of any statute and of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
The Board may fix, in advance, a date not more than sixty days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of stock or other securities, as the record date
for the determination of the stockholders entitled to receive any such dividend,
distribution, allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to receive such
dividend, distribution, allotment, rights or interests.
ARTICLE VIII
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended, (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators.
10
<PAGE>
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
SECTION 2. Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 3. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be the same as the calendar year and
shall end on December 31 of each year.
ARTICLE X
Depositories and Custodians
SECTION 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
SECTION 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine.
ARTICLE XI
Execution of Instruments
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors by resolution shall from time to
time designate.
ARTICLE XII
Independent Public Accountants
A firm of independent public accountants shall sign or certify the annual
financial statements of the Corporation and shall be selected annually by the
Board of Directors.
ARTICLE XIII
11
<PAGE>
Stock Ledger, List of Shareholders, Books and Records
SECTION 1. Stock Ledger. The Corporation shall maintain at its principal
executive office, or at the office of its transfer agent or registrar, an
original stock ledger containing the names and addresses of all stockholders and
the number of shares held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
SECTION 2. Stockholder List. The Secretary or other officer in charge of
the stock ledger of the Corporation shall prepare and make, at least ten (10)
days prior to a meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares of stock of the Corporation
registered in the name of each stockholder. Such list shall be open to
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list also shall be
produced and kept at the place and time of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 3. Inspection of Books and Records. There shall be kept at the
principal executive office of the Corporation correct and complete books and
records of account of all the business and transactions of the Corporation.
In accordance with the General Corporation Laws of Delaware, any stockholder
of the Corporation or his agent may inspect and copy during usual business hours
the Corporation's stock ledger, an existing list of stockholders and other books
and records.
ARTICLE XIV
Amendments
The Board of Directors shall have the power, at any regular meeting or at any
special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws, except that the Board of Directors shall not alter, modify or repeal
any of the following provisions of the Bylaws
(a) Article III, Section 3;
(b) The third sentence of Article III, Section 5;
(c) The second paragraph of Article III, Section 12;
(d) Article III, Section 17-19;
(e) The second sentence of Article IV, Section 1; and
(f) This Article XIV.
The stockholders shall have the power, at any annual meeting or at any
special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws.
12
<PAGE>
AMENDMENT TO BYLAWS OF
----------------------
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
--------------------------------------
The following resolution was duly adopted by the Board of Directors of
the Company, by unanimous written consent without a meeting, effective as of
July 22, 1993:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Company be
hereby amended as follows:
Article VI of the Bylaws is hereby amended by deleting the first
sentence of Section 3 of said Article and adding in its place a new sentence to
read in full as set forth below:
"No transfers of shares of stock of the Company shall be made if (i)
void ab initio pursuant to Article VI of the Company's Certificate of
Incorporation, (ii) the Board of Directors, pursuant to such Article VI, shall
have refused to transfer such shares, or (iii) prohibited pursuant to Article XV
of the Bylaws."
The Bylaws of the company are hereby further amended by adding a new
Article XV to read in full as set forth below:
"ARTICLE XV
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
Section 1. Affidavits of Stockholders and Transferees. Whenever it is
deemed by the Board of Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more real estate
mortgage investment conduits ("REMICs") or one or more taxable mortgage
pools in which the Company has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest, the Board of Directors may require to be filed with
the Company a statement or affidavit from any holder or proposed transferee
of capital stock of the Company stating whether the holder or proposed
transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign government,
any international organization, or any agency or instrumentality of
the foregoing, or any other organization that is exempt from federal
income taxation (including taxation under
1
<PAGE>
the unrelated business taxable income provisions of the Code) (a
"Disqualified Organization") or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in which a
Disqualified Organization holds or is permitted to hold a direct or
indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital stock of the
Company shall be subject to this provision. Furthermore, the Board of
Directors shall have the right, but shall not be required, to refuse to
transfer any shares of capital stock of the Company purportedly transferred, if
either
(a) a statement or affidavit requested pursuant to this Section 1 has
not been received, or
(b) the proposed transferee is a Disqualified Organization or Pass-
Through Entity.
Section 2. Void Transfers. Any acquisition of shares of capital stock of
the Company that could or would
(a) result in the direct or indirect imposition of a penalty tax on
the Company (including the imposition of an entity-level tax on one or more
REMICs or one or more taxable mortgage pools in which the Company has
acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the company has acquired or plans to
acquire an interest
shall be void ab initio to the fullest extent permitted under applicable law
and the intended transferee of the subject shares shall be deemed never to have
had an interest therein.
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of those shares shall be deemed, at the option of the Company, to have acted as
agent on behalf of the Company in acquiring those shares and to hold those
shares on behalf of the Company.
Section 3. Redemption of Shares. Whenever it is deemed by the Board of
Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or
one or more taxable mortgage pools in which the Company has acquired or
plans to acquire an interest) or
2
<PAGE>
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest,
the Company may redeem shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Article VI, Section 6 of the Certificate of
Incorporation of the Company regarding the repurchase of Excess Shares (as
defined therein).
Section 4. Application of Article. Nothing contained in this Article or in
any other provision hereof shall limit the authority of the Board of Directors
to take any and all other action as it in its sole discretion deems necessary or
advisable to protect the Company or the interests of its stockholders by
avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or
one or more taxable mortgage pools in which the Company has acquired or
plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest.
Section 5. Severability. If any provision of this Article or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with the
determination of that court."
3
<PAGE>
AMENDMENT TO BYLAWS OF
-----------------------
CWM MORTGAGE HOLDINGS, INC.
---------------------------
The following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly called and held on May 17, 1995:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Corporation be
amended by adding to ARTICLE II a new Section 10 to read as follows:
"SECTION 10. Nominations for Directors. Nominations for the election
of members of the Board of Directors at the annual meeting of stockholders
may be made by the Board of Directors or by any holder of any outstanding
class of voting stock of the Corporation entitled to vote for the election
of directors. Nominations for the election of members of the Board of
Directors shall be stated in writing and filed with the Secretary of the
corporation on or before thirty days prior to the date of the annual
meeting of stockholders, and such nominations so stated, proposed and filed
with the Secretary shall be considered at the annual meeting."
<PAGE>
AMENDMENT TO THE BYLAWS OF
--------------------------
CWM MORTGAGE HOLDINGS, INC.
---------------------------
(Adopted by the Board of Directors on January 20, 1997
and Approved by the Shareholders on June 24, 1997)
Article II, Section 3 of the Bylaws of the Company is hereby amended to delete
the clause, "a majority of the Unaffiliated Directors (as defined in Article
III, Section 3),"
Article III, Section 3 of the Bylaws of the Company is hereby amended to delete
the first sentence thereof, which reads:
"A majority of the members of the Board of Directors shall at all times be
persons who are not Affiliates of an individual or corporate management company
to whom the Board has delegated management duties as permitted in Section 18 of
this Article and Article V, Section 7 of the Certificate of Incorporation (a
'Management Company') (such directors being referred to as 'Unaffiliated
Directors')."
Article III, Section 5 of the Bylaws of the Company is hereby amended to delete
the third sentence thereof, which reads:
"The vacancy for any reason of any director who is not an Affiliate of a
Management Company shall be filled by a majority vote of the remaining members
of the Board of Directors, including a majority vote of the remaining
Unaffiliated Directors."
and replace such sentence with the following new sentence to read in full as set
forth below:
"The vacancy for any reason of any director shall be filled by a majority vote
of the remaining members of the Board of Directors."
Article III, Section 12 of the Bylaws of the Company is hereby amended to make
the following changes to the second paragraph:
(i) delete the clause, "Notwithstanding the first paragraph of this
Section 12, any action pertaining to a transaction involving the Corporation in
which any Management Company, any director or officer of the Corporation or any
Affiliate of any of the foregoing persons has an interest" and replace such
clause with the following new clause, "Notwithstanding the first paragraph of
this Section 12, any action pertaining to a transaction involving the
Corporation in which any director or officer of the Corporation or any Affiliate
of any of the foregoing persons has an interest";
(ii) add the word "and" after the semicolon in subsection (a);
(iii) remove the word "and" from after the semicolon in section (b); and
1
<PAGE>
(iv) delete subsection (c), which reads: "(c) if the transaction involves
compensation to any Management Company or its affiliates for services rendered
in a capacity other than that contemplated by the management arrangements, to
the knowledge of the directors such compensation is not greater than the
customary charges for comparable services generally available from other
competent unaffiliated persons."
Article III, Section 17 of the Bylaws of the Company is hereby amended:
(i) to delete the clause, ", including a majority of the Unaffiliated
Directors"; and
(ii) to delete the following sentences, "The Unaffiliated Directors shall
review the investment policies of the Corporation at least annually to determine
that the policies then being followed by the Corporation are in the best
interests of its stockholders. Each such determination and the basis therefor
shall be set forth in the minutes of the Board of Directors."
Article III, Section 18 of the Bylaws of the Company is hereby deleted in its
entirety and replaced with the following statement: "Section 18. [RESERVED]".
Article III, Section 19 of the Bylaws of the Company is hereby deleted in its
entirety and replaced with the following statement: "Section 19. [RESERVED]".
Article IV, Section 1 of the Bylaws of the Company is hereby amended to delete
the second sentence, which reads:
"At least a majority of the members of any such committee shall be composed of
directors who are Unaffiliated Directors."
Article XIV of the Bylaws of the Company is hereby amended:
(i) to delete subsection (b);
(ii) to re-letter subsection (c) as subsection (b);
(iii) to replace subsection (d) with the following, "(c) Article III,
Section 17; and";
(iv) to delete subsection (e); and
(v) to re-letter subsection (f) as subsection (d).
2
<PAGE>
EXHIBIT 4.1
CWM MORTGAGE HOLDINGS, INC.
1996 STOCK INCENTIVE PLAN
1. Purpose of Plan. The purpose of this 1996 Stock Incentive Plan
---------------
("Plan") of CWM Mortgage Holdings, Inc., a Delaware corporation (the "Company")
---- -------
is to enable the Company and any subsidiaries to attract, retain and motivate
their employees, consultants, agents, officers and directors by providing
incentives related to equity interests in and the financial performance of the
Company.
2. Persons Eligible Under Plan. Any person, including any director
---------------------------
of the Company, who is an officer or employee of the Company or any subsidiary
or an individual who performs services for the Company or any subsidiary of a
nature similar to those performed by officers or employees, such as consultants
and agents (any of the foregoing, "Employee") shall be eligible to be considered
--------
for the grant of an Award (as defined in Section 5 below) or Awards under
Section 5 of this Plan. No member of the Board of Directors of the Company (the
"Board") who is not an officer or employee of the Company or any subsidiary (a
"Non-Officer Director") shall be eligible to receive any Awards under this Plan,
--------------------
except for nonqualified stock options granted automatically under the provisions
of Section 10 ("Director Options").
----------------
3. Stock Subject to Plan.
---------------------
(a) ISO Limit. The maximum number of Common Shares, $0.01 par
---------
value per share, of the Company (the "Common Shares") that may be issued
-------------
pursuant to options qualified as incentive stock options ("Incentive Stock
---------------
Options") under Section 422 of the Internal Revenue Code of 1986, as
-------
amended (the "Code") granted under this Plan is 4,000,000, and provided
----
further, that the aggregate fair market value of Common Shares with respect
to which Incentive Stock Options are exercisable for the first time by any
individual during any calendar year shall not exceed the limit, if any, set
forth in Section 422(d) of the Code or any successor provision thereto.
For purposes of this subsection (a), the fair market value of any Common
Shares shall be determined as of the time the Incentive Stock Option with
respect to the Common Shares is granted.
1
<PAGE>
(b) Aggregate/Individual Share Limit.
--------------------------------
(1) The maximum number of Common Shares that may be issued pursuant to
all Awards (including Incentive Stock Options) granted under this
Plan, other than Common Shares that are issued pursuant to Awards and
subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards ("Reacquired Common Shares"), is 4,000,000,
------------------------
subject to adjustment as provided in or pursuant to Sections 6 or 10
hereof (such maximum number, as so adjusted, shall be referred to as
the "Share Limit").
-----------
(2) Notwithstanding anything contained herein to the contrary, the
aggregate number of Common Shares subject to options and stock
appreciation rights granted during any calendar year to any individual
shall be limited to 250,000.
(c) Share Reservation. No Award may be granted under this Plan
-----------------
unless, on the date of grant, the sum of (i) the maximum number of Common
Shares issuable at any time pursuant to such Award, plus (ii) the number of
Common Shares that have previously been issued pursuant to Awards granted
under this Plan, other than Reacquired Common Shares available for reissue,
plus (iii) the maximum number of Common Shares that may be issued at any
time after such date of grant pursuant to Awards that are outstanding on
such date, does not exceed the Share Limit. Common Shares distributed
under the Plan may be treasury shares, authorized but unissued shares or
shares purchased in the open market for this purpose.
(d) Provisions for Certain Cash Awards. Unless otherwise
----------------------------------
permitted under Rule 16b-3 under Section 16 ("Rule 16b-3") of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for
purposes of determining the maximum number of Awards payable solely in cash
under the Plan that would constitute derivative securities but for the
exclusion in Rule 16a-l(c)(3)(i) under the Exchange Act ("Cash Only
---------
Awards"), the number of Common Shares referenced for purposes of
------
determining the value or price of the Cash Only Award shall be deducted
from the Share Limit as if the Awards were payable in Common Shares.
(e) Reissue of Awards and Common Shares. Cash Only Awards and
-----------------------------------
other Awards payable in cash or Common Shares that are forfeited or for any
reason are not so paid under this Plan, as well as Common Shares subject to
Awards that expire or for any reason are terminated and are not
2
<PAGE>
issued or constitute Reacquired Common Shares, shall again be available for
subsequent Awards under the Plan. Except as limited by Rule 16b-3, if an
Award is or may be settled only in cash and satisfies the requirements for
exemption under Rule 16b-3 or for exclusion from the definition of
derivative security under Rule 16a-1(c)(3)(ii), such Award need not be
counted against any of the limits under this Section 3.
(f) Fractional Shares/Minimum Issue. Fractional share interests
-------------------------------
shall be disregarded, but may be accumulated. No fewer than 100 Common
Shares may be purchased on exercise of any option granted under this Plan
("Option") at one time unless the number purchased is the total number at
------
the time available for purchase under the Option.
(g) Privileges of Stock Ownership. Except as otherwise expressly
-----------------------------
authorized by this Plan, a Participant shall not be entitled to any
privilege of stock ownership as to any Common Shares subject to an Option
granted under this Plan prior to the satisfaction of all conditions to the
valid exercise of the Option.
4. Administration of Plan.
----------------------
(a) The Committee. Except for the provisions of Section 10
-------------
(which to the maximum extent feasible shall be self-effectuating), this
Plan shall be administered by a committee of the Board (the "Committee")
---------
consisting of two or more directors, each of whom is a "disinterested
-------------
person", as such term is defined in Rule 16b-3.
------
(b) Powers of the Committee. Subject to the express provisions
-----------------------
of this Plan, the Committee shall be authorized and empowered to do all
things necessary or desirable in connection with the administration of this
Plan including, without limitation, the following:
(i) adopt, amend and rescind rules and regulations relating
to this Plan;
(ii) determine which persons meet the requirements of Section
2 hereof for eligibility under this Plan and to which of such eligible
persons, if any, Awards will be granted hereunder;
(iii) grant Awards to eligible persons and determine the terms
and conditions thereof, including, but not limited to, the number of
Common Shares
3
<PAGE>
issuable pursuant thereto, the time not more than five (5) years after
the date of an Award at which time the Award shall expire or (if not
vested) terminate, and the conditions upon which Awards become
exercisable or vest or shall expire or terminate, and the
consideration, if any, to be paid upon receipt, exercise or vesting of
Awards;
(iv) determine whether, and the extent to which, adjustments
are required pursuant to Section 6 hereof:
(v) interpret and construe this Plan and the terms and
conditions of any Award granted under Section 5, whether before or
after the date set forth in Section 7; and
(vi) determine the circumstances under which, consistent with
the provisions of Section 7, any outstanding Award under Section 5 may
be amended;
which authority (except as to clause (ii) and (iii) above) shall remain in
effect so long as any Award remains outstanding under this Plan.
(c) Specific Committee Responsibility and Discretion Regarding
----------------------------------------------------------
Awards. Subject to the express provisions of this Plan, the Committee, in
------
its sole and absolute discretion, shall determine all of the terms and
conditions of each Award granted under Section 5 of this Plan, which terms
and conditions may include, subject to such limitations as the Committee
may from time to time impose, among other things, provisions that:
(i) permit the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the
purchase price of the Common Shares or other property issuable
pursuant to such Award, or such recipient's tax withholding obligation
upon such issuance or in respect of such Award or Shares, in whole or
in part, by any one or more of the following:
(A) the delivery of previously owned shares of capital
stock of the Company (including shares acquired as or pursuant to
Awards) or other property,
4
<PAGE>
(B) a reduction in the amount of Common Shares or other
property otherwise issuable pursuant to such Award, or
(C) the delivery of a promissory note, under any
applicable financing plan or on such other terms and conditions,
as in either case authorized by the Committee, consistent with
applicable law;
(ii) accelerate the receipt of benefits pursuant to such
Award upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, the
dissolution or liquidation of the Company, a sale of substantially all
of the property and assets of the Company or an event of the type
described in Section 6 hereof, or in other circumstances or upon the
occurrence of other events as deemed appropriate by the Committee;
(iii) qualify such Award as an Incentive Stock Option;
(iv) extend the exercisability or term of any or all such
outstanding Awards, change the price of any or all such outstanding
Awards or otherwise change previously imposed terms and conditions, in
the specified events described in clause (ii) above or in other
circumstances or upon the occurrence of other events as deemed
appropriate by the Committee, in each case subject to Section 7;
(v) authorize the conversion, succession or substitution of
outstanding Awards under Section 5 upon the occurrence of an event of
the type described in Section 6, or in other circumstances or upon the
occurrence of other events as deemed appropriate by the Committee;
and/or
(vi) provide for automatic grants of Awards or successive
Awards.
(d) Binding Determinations. Any action taken by, or inaction of,
----------------------
the Company, the Board or the Committee relating or pursuant to this Plan
shall be within the absolute discretion of that entity or body and shall be
conclusive and binding upon all persons. No member of the Board or officer
of the Company shall be liable for any such
5
<PAGE>
action or inaction of the entity or body, of another person or, except in
circumstances involving bad faith, of himself or herself.
(e) Reliance on Experts. In making any determination or in
-------------------
taking or not taking any action under this Plan, the Board and the
Committee may obtain and may rely upon the advice of experts, including
professional advisors to the Company. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made
or omitted in good faith.
(f) Delegation. The Committee may delegate ministerial, non-
----------
discretionary functions to individuals who are officers or employees of the
Company.
5. Awards.
------
(a) Types of Awards. The Committee, on behalf of the Company, is
---------------
authorized under this Plan to enter into any type of arrangement with an
Employee that is not inconsistent with the provisions of this Plan and that
by its terms, involves or might involve the issuance of (i) Common Shares,
(ii) an option, warrant, convertible security, stock appreciation right or
similar right with an exercise or conversion privilege at a fixed or
variable price related to the Common Shares or other equity securities of
the Company and/or the passage of time, the occurrence of one or more
events, or the satisfaction of performance criteria or other conditions, or
any combination of these variables, or any similar security contemplated by
clause (b) below, or (iii) any similar security with a value derived from
the value of the Common Shares or other equity securities of the Company,
all of which may or may not involve the payment of cash consideration,
subject to subsection (e) below. The authorization of any such arrangement
(including any benefits described in Section 5(e)) is referred to herein as
the grant of an "Award". The date of grant may be at or after (but not
-----
before) the date the Committee authorizes the Award. The Committee may
authorize an officer or officers (other than the particular recipient) to
execute any or all agreements memorializing any grant of an Award by the
Committee under this Plan. All Awards shall be evidenced by a writing
("Award Agreement") executed on behalf of the Company and, if required by
-----------------
the Committee, by the recipient of the Award.
(b) Form of Awards. Awards are not restricted to any specified
--------------
form or structure and may include, without limitation, sales or bonuses of
stock, restricted stock,
6
<PAGE>
performance restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an Award may consist of one such security or benefit, or two or more
of them in any combination or alternative.
(c) Restricted Stock Awards. If expressly provided by the
-----------------------
Committee, and without limiting subsection (b) above, Awards of restricted
Common Shares ("Restricted Stock") may be made to the holder of any Option,
based upon dividends or distributions that would have been received had the
Common Shares covered by the Option been issued and outstanding on the
applicable dividend record date. The terms and conditions of any such
Awards of Restricted Stock shall be specified by the applicable Award
Agreement.
(d) Time and Method of Exercise. Awards may be exercised in
---------------------------
whole or in part at such time or times as shall be determined by the
Committee and set forth in the applicable Award Agreement. Awards shall be
exercised in accordance with procedures established by the Committee.
(e) Price; Consideration; Option Pricing Limit. Common Shares
------------------------------------------
may be issued pursuant to an Award for any lawful consideration as
determined by the Committee, including, without limitation, cash, Common
Shares (valued at then Fair Market Value), or services rendered by the
recipient of such Award; provided that no Common Shares shall be issued for
-------- ----
less than the minimum lawful consideration and no Option shall be granted
with an exercise price that is less than the Fair Market Value of the
underlying Common Shares on the date of grant.
(f) Effect of Termination of Employment or Death; Change in
-------------------------------------------------------
Subsidiary Status. Each Option and all other rights thereunder, to the
------------------
extent not exercised (whether or not presently exercisable), shall
terminate and become null and void at such time as the holder of such
Option ceases to be employed by either the Company or any subsidiary,
except that
(i) if the holder terminates for a reason other than by death,
permanent and total disability (as defined in clause (ii) below) or
for cause (as determined by the Committee in its sole discretion), the
holder may at any time within a period of three months after such
termination exercise such Option to
7
<PAGE>
the extent such Option was exercisable at the date of such
termination;
(ii) if the holder terminates by reason of permanent and total
disability (within the meaning of Section 22(e)(3) of the Code), or if
the holder becomes permanently and totally disabled within three
months after termination described in clause (i), the holder may at
any time within a period of twelve (12) months after such termination
exercise such Option to the extent such Option was exercisable on such
date;
(iii) if the holder dies while in the employ of the Company or
any subsidiary, or within three months after a termination described
in clauses (i) or (ii), then such Option may be exercised within a
period of twelve (12) months after the holder's termination from
employment, to the extent such Award was exercisable on such date;
provided, however, that in no event may any such Option be exercised by any
holder after its expiration date.
If the holder of an Option is employed by an entity which ceases
to be a subsidiary, such event shall be deemed for purposes of this
subsection (f) to be a termination of the holder's employment described in
clause (i) above. Absence from work caused by military service or
authorized sick leave shall not be considered a termination of employment
for purposes of this subsection (f).
(g) Cash Awards; Loans. The Committee shall have the express
------------------
authority to create, add or include a cash payment or benefit under this
Plan, whether in lieu of, in addition to or as an Award or as a component
of another type of Award, and to make or authorize loans to finance, or to
otherwise accommodate the financing of, the acquisition or exercise of an
Award.
(h) Transfer Restrictions. Unless otherwise permitted under Rule
---------------------
16b-3(a)(2), any Award that constitutes a derivative security (as defined
in Rule 16a-1(c) under the Exchange Act) and that is granted to or held by
a person subject to Section 16 of the Exchange Act (a "Section 16 Person")
-----------------
shall not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order.
(i) Tax Withholding. Upon the issuance of Common Shares, the
---------------
payment of cash or any other taxable event in
8
<PAGE>
respect of an Award under this Plan, such number of shares or amount of
cash or other consideration, as the case may be, otherwise issuable or
payable may be reduced by the amount necessary to satisfy the minimum
applicable tax withholding requirements imposed on the Company or any
subsidiary in respect of such Award or event, all to the extent and in such
manner as the Committee may determine. The participant shall have no
discretion as to whether such shares or amount will or will not be withheld
by the Company; and, if the withholding offset is not mandatory and
automatic, the payment of any such Award shall be subject to the delivery
(or provision for delivery) to the Company of the full amount due for such
withholding in cash equivalent.
6. Adjustments and Acceleration.
----------------------------
(a) Adjustments. If (i) the outstanding securities of the class
-----------
then subject to this Plan (the "outstanding shares") (A) are increased,
------------------
decreased, exchanged or converted as a result of a stock split (including a
split in the form of a stock dividend), reverse stock split,
recapitalization, or similar event or (B) are exchanged for or converted
into cash, property or a different number or kind of securities (or if
cash, property or securities are distributed in respect of the outstanding
shares), as a result of a reorganization, merger, consolidation, exchange,
recapitalization, restructuring, or reclassification, or (ii) substantially
all of the property and assets of the Company are sold as an entirety, or
(iii) the Company is liquidated and dissolved, then, the Committee (or, in
the case of Director Options, the Board) shall, in such manner and to such
extent (if any) as is equitable and appropriate, make proportionate
adjustments in (x) the number and type of shares or other securities or
cash or other property that may be acquired pursuant to Options and other
Awards previously granted under this Plan (and, where applicable, the
exercise price thereof so as to maintain the same aggregate exercise
price), and (y) the maximum number and type of shares or other securities,
cash, or property that may be issued or delivered pursuant to Options
(including Incentive Stock Options and Director Options) and other Awards
thereafter granted under this Plan, and (z) such other terms as necessarily
are affected by such event. In the case of an extraordinary distribution,
merger, reorganization, consolidation, combination, sale of assets,
exchange, or spin off, the Committee (or the Board, in the case of Director
Options) may make provisions for a substitution or exchange of any or all
outstanding Options or other Awards or rights (or for the securities, cash
or property deliverable upon exercise of such outstanding
9
<PAGE>
Options or other Awards or rights), based upon the distribution or
consideration payable to holders of the Common Shares of the Company upon
or in respect of such event; provided, however, that (i) such adjustment
and the acting body's actions in respect thereof are based on objective
criteria and (in the case of holders subject to Section 16(a) of the
Exchange Act) satisfy applicable criteria in respect of anti-dilutive or
similar adjustments, substitutions or exchanges, as the case may be, under
Rule 16b-3, and, as to Director Options, the provisions of Rule 16b-
3(c)(2)(ii), and (ii) such adjustment is approved by shareholders or is
otherwise consistent with the effect of such event on shareholders, and
(iii) the accuracy of such adjustments is confirmed by the Company's
independent auditors.
(b) Acceleration.
------------
(i) A "Change in Control" for purposes of this Plan shall
-----------------
mean (u) approval by the shareholders of the Company of the
dissolution or liquidation of the Company; (v) approval by the
shareholders of the Company of an agreement of merger or
consolidation, or other reorganization, with or into one or more
entities that are not subsidiaries or affiliates, as a result of which
less than 25% of the outstanding voting securities of the surviving or
resulting entity immediately after the reorganization are, or will be,
owned by shareholders of the Company immediately before such
reorganization (assuming for purposes of such determination that there
is no change in the record ownership of the Company's securities from
the record date for such approval until such reorganization); (x)
approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets to a person
or entity which is not a subsidiary or other affiliate; (y) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 25% of the combined voting power of the
Company's then outstanding securities entitled to then vote generally
in the election of directors of the Company; or (z) during any period
not longer than two consecutive years, individuals who at the
beginning of such period constituted the Board cease to constitute at
least a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new Board member was
approved by a vote of at
10
<PAGE>
least a majority of the Board members then still in office who were
Board members at the beginning of such period (including for these
purposes, new members whose election or nomination was so approved,
but, in the case of successors to such new members, without
duplication).
(ii) Prior to a Change in Control, the Committee may
determine in respect of Awards held by Employees that upon or in
anticipation of the occurrence of the Change in Control benefits under
Awards shall be accelerated only for a limited period of time, not
less than a period of time reasonably necessary to realize the
benefits of such acceleration nor more than one year after the Change
in Control. Unless such a determination is made, then (subject to the
last sentence of this clause) upon the occurrence of a Change in
Control (x) each Option and stock appreciation right shall become
immediately exercisable, (y) Performance Restricted Stock shall
immediately vest free of restrictions, and (z) each Performance Share
Award shall become payable to the Participant; provided, however, that
in no event shall any Award be accelerated as to any Section 16 Person
to a date less than six months after the date of such Award. The
Committee may override the limitations on acceleration in this Section
6(b)(ii) by express provision in the Award Agreement or otherwise, and
may accord any holder of an Award a right to refuse any acceleration,
whether pursuant to the Award Agreement or otherwise, in such
circumstances as the Committee may approve. Any acceleration of
Awards shall comply with any applicable regulatory requirements,
including without limitation Section 422 of the Code.
(iii) Any Awards that are (or but for a holder's rejection
of acceleration would have been) accelerated under this Section 6 and
that are not exercised or vested prior to a dissolution of the Company
or a reorganization event described in Section 6(a) that the Company
does not survive shall terminate, provided that if provision has been
made, consistent with the terms hereof, for the substitution, exchange
or other settlement of Awards, such Awards shall be substituted,
exchanged or otherwise settled in accordance with such provision.
(iv) Any Awards that are (or but for the holder's rejection
of the acceleration would have been) accelerated that are not
exercised or vested prior to
11
<PAGE>
an abandonment or termination of a transaction subject to shareholder
approval that triggered the Change in Control (as evidenced by public
announcement, Board resolution, execution of documents terminating the
transaction, or other action or document objectively confirming such
abandonment or termination), shall be restored to their prior status
(except for the effects of the passage of time) as if no Change in
Control had occurred.
7. Amendment and Termination of Plan. (a) No Award shall be granted
under this Plan after March 31, 2006. Although Common Shares may be issued after
March 31, 2006 pursuant to Awards granted prior to such date, no Common Shares
otherwise shall be issued under this Plan after such date. Notwithstanding the
foregoing, any Award granted prior to such date may vest or be amended after
such date in any manner that would have been permitted prior to such date,
except that (except as provided herein) no such amendment shall increase the
number of shares subject to or comprising such Award, or extend the final
expiration date of the Award or reduce (below the Fair Market Value on the date
of the amendment) the exercise price of or under such Award.
(b) The Board may, without shareholder approval, at any time and from time
to time, suspend, discontinue or amend this Plan in any respect whatsoever,
except that no such amendment shall impair any rights under any Award
theretofore made under the Plan without the consent of the holder of such Award.
Furthermore, and except as and to the extent otherwise permitted by the
provisions hereof, no such amendment shall, without shareholder approval:
(1) materially increase the benefits accruing to grantees under the
Plan;
(2) increase the maximum number of Common Shares which may be made
subject to Awards to an individual as Options or stock appreciation rights
in any year;
(3) materially increase, beyond the amounts set forth in Section 3,
the number of Common Shares in respect of which Awards may be issued under
the Plan;
(4) materially modify the designation in Section 2 of the class of
persons eligible to receive awards under the Plan;
(5) provide for the grant of Options or Stock Appreciation Rights
having an exercise price or appreciation
12
<PAGE>
base per Common Share less than 100% of the Fair Market Value of a Common
Share on the date of such grant; or
(6) extend the term of the Plan beyond the period set forth herein.
8. Effective Date of Plan: Shareholder Approval. This Plan
--------------------------------------------
shall be effective as of April 1, 1996, the date upon which it was approved by
the Board; provided, however, that no Common Shares may be issued under this
Plan until it has been approved by the affirmative votes of the holders of a
majority of the Common Shares of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with applicable law.
9. Legal Issues.
------------
(a) Compliance and Choice of Law: Severability. This Plan, the
------------------------------------------
granting and vesting of Awards under this Plan and the issuance and
delivery of Common Shares and/or the payment of money under this Plan or
under Awards granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of Delaware. If any
provision shall be held by a court of competent jurisdiction to be invalid
and unenforceable, the remaining provisions of this Plan (subject to
Section 9(b)) shall continue in effect.
(b) Plan Construction. It is the intent of the Company that this
-----------------
Plan and Awards hereunder satisfy and be interpreted in a manner that in
the case of recipients who are or may become Section 16 Persons satisfies
the applicable requirements of Rule 16b-3 so that such persons will be
entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act and will not be subjected to avoidable
liability thereunder. If any provision of this Plan or of any Award would
otherwise frustrate or conflict with the intent expressed above, that
provision to the extent possible shall be interpreted and deemed amended so
as to avoid such conflict, but to the
13
<PAGE>
extent of any remaining irreconcilable conflict with such intent as to such
persons in the circumstances, such provision shall be deemed inoperative.
(c) REIT Qualification. Notwithstanding anything contained
------------------
herein to the contrary, no participant may receive any Common Shares upon
the grant, exercise or vesting of an option or right or other Award to the
extent it will cause such person to beneficially or constructively own
equity shares in excess of the 9.8% of the equity shares of the Company.
In the event that a participant would be otherwise entitled to claim or
seek to exercise any right which upon delivery of Common Shares would cause
such participant to beneficially or constructively own equity shares in
excess of the ownership limit, the Company shall have the right,
notwithstanding any option or right previously granted to the participant,
to deliver a check or cash to the participant in lieu thereof.
(d) Non-Exclusivity of Plan. Nothing in this Plan shall limit or
-----------------------
be deemed to limit the authority of the Board or the Committee to grant
awards or authorize any other compensation, with or without reference to
the Common Shares, under any other plan or authority.
10. Non-Officer Director Options
----------------------------
(a) Participation. Awards relating to the Common Shares
-------------
authorized under this Plan shall be made under this Section 10 only to Non-
Officer Directors.
(b) Certain Definitions. The following definitions shall apply
-------------------
to this Section 10:
"Business Day" shall mean any day, other than Saturday, Sunday or
------------
any statutory holiday in the state of California.
"Director Option" shall mean an Option granted to a Non-Officer
---------------
Director pursuant to this Section 10.
"Disability" shall mean a "permanent and total disability" within
----------
the meaning of Section 22(e)(3) of the Code.
"Fair Market Value" on a specified date shall mean (i) if the
-----------------
Common Shares are listed or admitted to trade on a national securities
exchange, the average of the high and low reported sales prices of the
Common Shares on the Composite Tape on such date, as published in the
Western
14
<PAGE>
Edition of The Wall Street Journal, on the principal national securities
exchange on which the Common Shares are so listed or admitted to trade, or,
if there is no trading of the Shares on such date, then the average of the
high and low reported sales prices of the Common Shares as quoted on such
Composite Tape on the next preceding date on which there was trading in
such Shares; (ii) if the Common Shares are not listed or admitted to trade
on a national securities exchange, the average of the high and low reported
prices for the Common Shares on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System (or a similar organization, if the NASD is
no longer reporting such information); (iii) if the Common Shares are not
listed or admitted to trade on a national securities exchange and are not
reported on the National Market Reporting System, the arithmetic mean
between the bid and asked prices for the Shares on such date, as furnished
by the NASD or a similar organization; or (iv) if the Common Shares are not
listed or admitted to trade on a national securities exchange nor reported
on the National Market Reporting System and if bid and asked prices for the
stock are not furnished by the NASD or a similar organization, the value as
established by the Board at such time for purposes of this Plan.
"Retirement" shall mean retirement or resignation as a director
----------
after at least five (5) years service as a director.
(c) Annual Awards. On the first Business Day in June in each
-------------
calendar year during the term of the Plan, commencing in June 1996, there
shall be granted automatically (without any action by the Committee or the
Board) a nonqualified stock option (the grant date of which shall be such
date in June) to each Non-Officer Director then in office to purchase the
number of Common Shares equal to 30,000 multiplied by a fraction, the
numerator of which is the earnings per Common Share (on a fully diluted
basis) of the Company for the fiscal year of the Company ended immediately
before the date of grant of the Non-Officer Director option (as reported in
the audited Financial Statements included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission ("SEC"), but in
no event less than zero) (the "EPS Numerator Amount") and the denominator
--------------------
of which is (i) in 1996, $1.15; and (ii) in each year after 1996, the
greater of (x) $1.32 compounded at a rate of 15% per year (i.e., in 1998,
$1.52; in 1999, $1.75; and in 2000, $2.01), or (y) the EPS Numerator Amount
for the fiscal year of the Company ended immediately before the fiscal year
used in determining the
15
<PAGE>
EPS Numerator Amount. The number 30,000 and the specific dollar amounts
herein are subject to adjustment in those events set forth in clause (i)
below.
(d) Maximum and Minimum Number of Shares. Notwithstanding
------------------------------------
anything to the contrary contained herein, a Non-Officer Director shall not
receive Options for less than 20,000 nor more than 50,000 Common Shares
pursuant to this Section 10 in any year.
(e) Purchase Price. The exercise price for Shares under each
--------------
Non-Officer Director option shall be equal to 100% of the Fair Market Value
of a Common Share on the date the Director Option is granted. The exercise
price of any option granted under this Section 10 shall be paid in full at
the time of each purchase in cash equivalent or in Common Shares valued at
their Fair Market Value on the date of exercise of such option, or partly
in such shares and partly in cash, provided that any such Common Shares
-------- ----
used in payment shall have been owned by the Non-Officer Director at least
six months prior to the date of exercise.
(f) Option Period and Exercisability. Each Director Option
--------------------------------
granted under this Section 10 shall become fully exercisable, in whole or
in part, on the first anniversary of the grant date. Each option granted
under this Section 10 and all rights or obligations thereunder shall expire
on the earlier of the fifth anniversary of the date of grant or the
liquidation or dissolution of the Company and shall be subject to earlier
termination as provided below.
(g) Termination of Directorship. If a Non-Officer Director's
---------------------------
services as a member of the Board of Directors terminate by reason of
death, Disability or Retirement, an option granted pursuant to this Section
10 then held by such Non-Officer Director shall immediately become and
shall remain exercisable for one year after the date of such termination or
until the expiration of the stated term of such option, whichever first
occurs. If a Non-Officer Director's services as a member of the Board
terminate for any other reason (other than Cause), any option granted
pursuant to this Section 10 which is not then exercisable shall terminate
and any such option which is then exercisable may be exercised for three
months after the date of such termination or until the expiration of the
stated term, whichever first occurs. If Non-Officer Director is terminated
for Cause, all Director Options granted to such Non-Officer Director shall
be forfeited and shall no longer be exercisable, effective on the date of
16
<PAGE>
such termination for Cause. For purposes of this Section 10, "Cause" shall
mean, with respect to any Non-Officer Director, termination on account of
any act of (i) fraud or intentional misrepresentation, (ii) embezzlement,
misappropriation or conversion of assets or opportunities of the Company or
any affiliate, or (iii) conviction of a felony.
(h) Adjustments. The provisions of this Section 10 and Director
-----------
Options granted hereunder shall be subject to Section 6. If there shall
occur any event described in Section 6(a), then in addition to the matters
contemplated thereby, the Board shall, in such manner and to such extent
(if any) as is appropriate and equitable, proportionately adjust the dollar
amounts set forth elsewhere in this Section 10.
(i) Loans. Subject to the requirements of applicable law, the
-----
Board may authorize loans to Non-Officer Directors to finance the exercise
of Awards; provided, however, that no loan shall be made to any Non-Officer
Director to finance the exercise of an Award made under this Section 10
unless (i) such loan is made pursuant to a full recourse promissory note,
and (ii) such loan, if secured by Common Shares (whether issuable under the
Award in question or otherwise), is made in compliance with Regulation G of
the Federal Reserve Board.
(j) Acceleration Upon a Change in Control. Upon the occurrence
-------------------------------------
of a Change in Control referred to in Section 6(b), each Director Option
granted under this Section 10 shall become immediately exercisable in full
subject to the terms thereof (other than with respect to the Committee's
discretion). To the extent that any Director Option granted under this
Section 10 is not exercised prior to (i) a dissolution of the Company or
(ii) a merger or other corporate event that the Company does not survive,
and no provision is (or consistent with the provisions of Sections 9 or 10
can be) made for the assumption, conversion, substitution or exchange of
the option, the Director Option shall terminate upon the occurrence of such
event.
(k) Limitation on Amendments and Changes. Without limiting the
------------------------------------
generality of Section 7, unless otherwise permitted under Rule 16b-3, the
provisions of this Section 10 shall not be amended more than once every six
months other than to comport with changes in the Code, the Employee
Retirement Income Security Act ("ERISA") or the rules thereunder.
-----
17
<PAGE>
(l) Other Provisions. The provisions of Sections 3(f)-(g), 5(h)
----------------
and 7 through 9 are incorporated herein by this reference. It is the
intent of the Company that this Section 10 constitute a formula plan within
the meaning of Rule 16b-3(c)(2)(ii) and that this Section 10 be construed
in a manner consistent with such intent. Unless the context otherwise
requires and to the extent required for purposes of Rule 16b-3, the
provisions of this Section 10 shall be construed as a separate plan.
18
<PAGE>
AMENDMENT TO
CWM MORTGAGE HOLDINGS, INC.
1996 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on January 20, 1997
and Approved by the Shareholders on June 24, 1997)
Section 3(b)(2) of the CWM Mortgage Holdings, Inc. 1996 Stock Incentive
Plan is replaced in its entirety with the following:
"(2) Notwithstanding anything contained herein to the contrary, the
aggregate number of Common Shares subject to options and stock appreciation
rights granted during the calendar year to any individual shall be limited
to 500,000."
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") has been executed as of January 1,
1997 by and between Countrywide Asset Management Corporation ("Employer") and
Richard Wohl ("Officer").
WITNESSETH:
WHEREAS, Employer desires to obtain the benefit of continued services of Officer
and Officer desires to continue to render services to Employer and its
affiliates.
WHEREAS, Employer and Officer desire to set forth the terms and conditions of
Officer's employment with Employer and its affiliates under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. TERM. Employer agrees to employ Officer and Officer agrees to serve Employer
and its affiliates, in accordance with the terms hereof, for a term beginning
on the date first written above and ending on December 31, 2000, unless
earlier terminated in accordance with the provisions hereof.
2. POSITION, DUTIES AND RESPONSIBILITIES. Employer and Officer hereby agree
that, subject to the provisions of this Agreement, Employer will employ
Officer and Officer will serve Employer as Executive Vice President, General
Counsel and Secretary of Employer and CWM Mortgage Holdings, Inc.
("Holdings") and as a Director of Independent National Mortgage Corporation
and any similarly structured entity or subsidiary (collectively, "Indy Mac").
Employer agrees that Officer's duties hereunder shall be the usual and
customary duties of such office and such further duties as shall not be
inconsistent with the provisions of applicable law. Officer shall have such
executive power and authority as shall reasonably be required to enable him
to discharge his duties in the offices which he may hold. All compensation
paid to Officer by Employer or any of its affiliates shall be aggregated in
determining whether Officer has received the benefits provided for herein,
but without prejudice to the allocation of costs among the entities to which
Officer renders services hereunder.
3. SCOPE OF THIS AGREEMENT AND OUTSIDE AFFILIATIONS. During the term of this
Agreement, Officer shall devote his full business time and energy, except as
expressly provided below, to the business, affairs and interests of Employer
and its affiliates, and matters related thereto, and shall use his best
efforts and abilities to promote their respective interests. Officer agrees
that he will diligently endeavor to promote the business, affairs and
interests of Employer and
<PAGE>
its affiliates and perform the services contemplated hereby, in accordance
with the policies established by the Board, which policies shall be
consistent with this Agreement. Officer agrees to serve without additional
remuneration as an officer of Holdings or of one or more (direct or indirect)
subsidiaries or affiliates of Employer or Holdings as the Board may from time
to time request, subject to appropriate authorization by the affiliate or
subsidiary involved and any limitation under applicable law. Officer's
failure to discharge an order or perform a function because Officer
reasonably and in good faith believes such would violate a law or regulation
or be dishonest shall not be deemed a breach by him of his obligations or
duties pursuant to any of the provisions of this Agreement, including without
limitation pursuant to Section 5(c) hereof.
During the course of Officer's employment as a full-time officer hereunder,
Officer shall not, without the consent of the Board, compete, directly or
indirectly, with Employer in the business then conducted by Employer or any
of its affiliates.
Officer may make and manage personal business investments of his choice and
serve in any capacity with any civic, educational or charitable organization,
or any governmental entity or trade association, without seeking or obtaining
approval by the Board, provided such activities and services do not
materially interfere or conflict with the performance of his duties
hereunder.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. Employer shall pay to Officer a base salary in respect of the
fiscal year of Employer (a "Fiscal Year") ending December 31, 1997 at the
annual rate of $225,000 (the "Annual Rate"). In respect of the Fiscal
Years ending in 1998, 1999, and 2000, the Compensation Committee of the
Board (the "Compensation Committee) may, based upon the recommendation of
Michael W. Perry and the performance of Officer and Employer, increase the
Annual Rate. While any such increase shall be at the discretion of the
Compensation Committee, it is anticipated that, for any Fiscal Year, an
earnings per share increase of 15% would result in an increase in the
Annual Rate of 10%, but could exceed such percentage if warranted.
b. INCENTIVE COMPENSATION. Employer shall pay to Officer for each of the
Fiscal Years ending during the term of this Agreement an incentive
compensation award in an aggregate amount determined by adding the sum of
(x) the Discretionary Incentive Award, as determined pursuant to the
Discretionary Incentive Award Plan attached hereto as Appendix A, and (y)
a Profitability Incentive Award, as determined pursuant to the Annual
Incentive Plan and Incentive Matrix attached hereto as Appendix B. The
terms of the Discretionary Incentive Award shall be determined at the
beginning of each Fiscal Year during the term of this Agreement, as
mutually agreed upon by Employer and Officer in good faith, with at least
one-half of the Discretionary Incentive Award being determined with
reference to Officer's general performance in the areas of legal affairs,
2
<PAGE>
compliance and contract administration, and up to one-half of the
Discretionary Incentive Award being determined with reference to specific
goals and/or objectives to be accomplished (with reasonable percentage
benchmarks for partial accomplishment). In determining the maximum amount
of the Discretionary Incentive Award for any Fiscal Year, such maximum
amount (x) shall be increased by a percentage equal to the percentage of
any increase in Holding's reported earnings per share for the applicable
Fiscal Year over such earnings for the preceding Fiscal Year, or (y) shall
be decreased by a percentage equal to the percentage of any decrease in
Holding's reported earnings per share for the applicable Fiscal Year over
such earnings for the preceding Fiscal Year (provided that, for the
purpose of the 1997 Fiscal Year, the maximum amount of the Discretionary
Incentive Award shall be $150,000, regardless of the percentage increase
or decrease in Holding's reported earnings per share for the 1997 Fiscal
Year over such earnings for the preceding Fiscal Year). The Profitability
Incentive Award shall be determined by calculating the amount due to be
paid, pursuant to the Annual Incentive Plan and Incentive Matrix which is
attached hereto as Appendix B. The aggregate incentive compensation award
payable to Officer for any Fiscal Year shall be paid no later than thirty
(30) days after completion of the applicable audited financial statements
for such Fiscal Year. In the event of a material one-time charge against
earnings by Holdings associated with Holdings' buyout of Employer as
manager of Holdings, the earnings of Holdings shall not be decreased for
such charge in the calculation of EPS in connection with the determination
of Officer's base and incentive compensation hereunder. For the purpose of
any allocation of Officer's incentive compensation pursuant to Section 2
above, it is understood that the calculation of earnings of Holdings
includes Holdings' equity interest in the earnings of Indy Mac.
c. STOCK OPTIONS. As soon as practicable after the date first written above,
Holdings shall grant to Officer a stock option in respect of 40,000 shares
of Holdings' common stock, such option to become exercisable as to 13,333
shares, 13,333 shares and 13,334 shares on each of the first three (3)
anniversaries of the date of grant. Beginning with the 1998 Fiscal Year
and in respect of each of the following Fiscal Years during the term of
this Agreement, Holdings may also grant to Officer stock options for such
number of shares of Holdings' common stock as the Compensation Committee
in its sole discretion determines, taking into account Officer's and
Holdings' performance and the competitive practices then prevailing
regarding the granting of stock options. Subject to the foregoing, it is
anticipated that the number of shares in respect of each annual stock
option grant shall be between 25,000 and 75,000, with the annual grant
targeted at 50,000 shares for the 1998 Fiscal Year, and increasing
thereafter assuming "good performance," as determined by Employer's
President and Chief Operating Officer and consistent performance of
Holdings in meeting earnings per share goals as set by the President and
Chief Operating Officer and Holdings' Board of Directors. The stock
options described in this Section 4(c) in respect of a Fiscal Year shall
be granted at the same time as Holdings grants stock options to its other
senior executives in respect of such Fiscal Year.
3
<PAGE>
All stock options granted in accordance with this Section 4(c): (i) shall
be granted pursuant to Holdings' current stock option plan, or such other
stock option plan or plans as may be or come into effect during the term
of this Agreement, (ii) shall have a per share exercise price equal to the
fair market value (as defined in the current Plan or such other plan or
plans) of the common stock at the time of grant, (iii) shall become
exercisable in three equal installments on each of the first three
anniversaries of the date of grant, (iv) shall become immediately and
fully exercisable in the event of a Change of Control (as defined in
Appendix C) or in the event that Officer's employment is terminated due to
death or Disability, or by Employer other than for Cause (as defined in
Section 5(c)), or in the event that this Agreement terminates according to
its terms (as provided in Section 5(g)), and (v) shall be subject to such
other reasonable and consistent terms and conditions as may be determined
by the Compensation Committee and set forth in the agreement evidencing
the award.
d. ADDITIONAL BENEFITS. Officer shall also be entitled to all rights and
benefits for which he is otherwise eligible under any bonus plan, stock
purchase plan, participation or extra compensation plan, executive
compensation plan, pension plan, profit-sharing plan, life and medical
insurance policy, or other plans or benefits, which Employer or its
subsidiaries may provide for him, or provided he is eligible to
participate therein, for senior officers generally or for employees
generally, during the term of this Agreement (collectively, "Additional
Benefits"). This Agreement shall not affect the provision of any other
compensation, retirement or other benefit program or plan of Employer. If
Officer's employment is terminated hereunder, pursuant to Section 5(a),
5(b), or 5(d), Employer shall continue for the period specified in Section
5(a), 5(b), or 5(d) hereof, to provide benefits substantially equivalent
to Additional Benefits (other than qualified pension or profit sharing
plan benefits and option, equity or stock appreciation or other incentive
plan benefits as distinguished from health, disability and welfare type
benefits) on behalf of Officer and his dependents and beneficiaries which
were being provided to them immediately prior to Officer's Termination
Date, but only to the extent that Officer is not entitled to comparable
benefits from other employment.
e. DEFERRAL OF AMOUNTS PAYABLE HEREUNDER. In the event Officer should desire
to defer receipt of any cash payments to which he would otherwise be
entitled hereunder, he may present such a written request to the
Compensation Committee which, in its sole discretion, may enter into a
separate deferred compensation agreement with Officer.
5. TERMINATION. The compensation and benefits provided for herein and the
employment of Officer by Employer shall be terminated only as provided for
below in this Section 5:
a. DISABILITY. In the event that Officer shall fail, because of illness,
injury or similar incapacity ("Disability"), to render for four (4)
consecutive calendar months, or for shorter periods aggregating eighty
(80) or more business days in any twelve (12) month period, services
contemplated by this Agreement, Officer's full-time employment
4
<PAGE>
hereunder may be terminated, by written Notice of Termination from
Employer to Officer; and thereafter, Employer shall continue, from the
Termination Date until Officer's death or December 31, 2000, whichever
first occurs (the "Disability Payment Period"), (i) to pay compensation to
Officer, in the same manner as in effect immediately prior to the
Termination Date, in an amount equal to (1) fifty percent (50%) of the
then existing base salary payable immediately prior to the termination,
minus (2) the amount of any cash payments due to him under the terms of
Employer's disability insurance or other disability benefit plans or
Employer's tax-qualified Defined Benefit Pension Plan, and any
compensation he may receive pursuant to any other employment, and (ii) to
provide during the Disability Payment period the benefits specified in the
last sentence of Section 4(d) hereof.
The determination of Disability shall be made only after 30 days notice to
Officer and only if Officer has not returned to performance of his duties
during such 30-day period. In order to determine Disability, both Employer
and Officer shall have the right to provide medical evidence to support
their respective positions, with the ultimate decision regarding
Disability to be made by a majority of Employer's disinterested directors.
b. DEATH. In the event that Officer shall die during the term of this
Agreement, Employer shall pay Officer's base salary for a period of twelve
(12) months following the date of Officer's death and in the manner
otherwise payable hereunder, to such person or persons as Officer shall
have directed in writing or, in the absence of a designation, to his
estate (the "Beneficiary"). Employer shall also (1) pay to such
Beneficiary (x) an amount equal to the incentive compensation that would
have been payable to Officer pursuant to Section 4(b) in respect of the
Fiscal Year in which the Officer's death occurs multiplied by a fraction,
the numerator of which is the number of days in such Fiscal Year through
the date of Officer's death and the denominator of which is 365 and (y)
any unpaid incentive compensation payable to Officer pursuant to Section
4(b) in respect of the Fiscal Year immediately preceding the Fiscal Year
in which his death occurs and (2) provide during the twelve-month period
following the date of Officer's death the benefits specified in the last
sentence of Section 4(d) hereof. If Officer's death occurs while he is
receiving payments for Disability under Section 5(a) above, such payments
shall cease and the Beneficiary shall be entitled to the payments and
benefits under this Subsection 5(b), which shall continue for a period of
twelve months thereafter at the full rate of base salary in effect
immediately prior to the Disability. This Agreement in all other respects
will terminate upon the death of Officer; provided, however, that (i) the
termination of the Agreement shall not affect Officer's entitlement to all
other benefits in which he has become vested or which are otherwise
payable in respect of periods ending prior to its termination, and (ii) to
the extent not otherwise vested, all outstanding stock options granted to
Officer pursuant to Section 4(c) will vest upon his death.
c. CAUSE. Employer may terminate Officer's employment under this Agreement
for "Cause." A termination for Cause is a termination by reason of (i) a
material breach of
5
<PAGE>
this Agreement by Officer (other than as a result of incapacity due to
physical or mental illness) which is committed in bad faith or without
reasonable belief that such breach is in the best interests of Employer
and which is not remedied within a reasonable period of time after receipt
of written notice from Employer specifying such breach, or (ii) Officer's
conviction by a court of competent jurisdiction of a felony, or (iii)
entry of an order duly issued by any federal or state regulatory agency
having jurisdiction in the matter removing Officer from office of Employer
or its affiliates or permanently prohibiting him from participation in the
conduct of the affairs of Employer of any of its affiliates. If Officer
shall be convicted of a felony or shall be removed from office and/or
temporarily prohibited from participating in the conduct of Employer's or
any of its affiliates' affairs by any federal or state regulatory
authority having jurisdiction in the matter, Employer's obligations under
Sections 4(a), 4(b) and 4(c) hereof shall be automatically suspended;
provided, however, that if the charges resulting in such removal or
prohibition are finally dismissed or if a final judgment on the merits of
such charges is issued in favor of Officer, or if the conviction is
overturned on appeal, then Officer shall be reinstated in full with back
pay for the removal period plus accrued interest at the rate then payable
on judgments. During the period that Employer's obligations under Sections
4(a), 4(b) and 4(c) hereof are suspended, Officer shall continue to be
entitled to receive Additional Benefits under Section 4(d) until the
conviction of the felony or removal from office has become final and non-
appealable. When the conviction of the felony or removal from office has
become final and non-appealable, all of Employer's obligations hereunder
shall terminate; provided, however, that the termination of Officer's
employment pursuant to this Section 5(c) shall not affect Officer's
entitlement to all benefits in which he has become vested or which are
otherwise payable in respect of periods ending prior to his termination of
employment. Anything herein to the contrary notwithstanding, termination
for Cause shall not include termination by reason of Officer's job
performance or a job performance rating given to Officer for his job
performance or the financial performance of Holdings or any affiliated
company.
d. SEVERANCE.
(i) Except as provided in Section 5(d)(ii) below, if during the term of
this Agreement, Officer's employment shall be terminated by Employer
other than for Cause, then Employer shall (1) pay Officer in a single
payment as soon as practicable after the Termination Date, but in no
event later than thirty (30) days thereafter, (A) an amount in cash
equal to one year of Officer's base salary at the Annual Rate at the
Termination Date and (B) an amount equal to the incentive compensation
paid or payable to Officer pursuant to Section 4(b) in respect of the
Fiscal Year immediately preceding the Fiscal Year in which Officer's
Termination Date occurs (the "Bonus Rate"); provided, however, that in
the event the first anniversary of the Termination Date occurs on a
date prior to the end of a Fiscal Year, Employer shall also pay
Officer an amount equal to the product of (x) the Bonus Rate and (y) a
fraction, the numerator of which is (I) the number of days elapsed
since the end of the
6
<PAGE>
immediately preceding Fiscal Year through the end of the Severance
Period and (II) the denominator of which is 365, and (2) until the
first anniversary of the Termination Date, provide the benefits
specified in the last sentence of Section 4(d) hereof. Employer shall
also pay in a single payment as soon as practicable after the
Termination Date, but in no event later than thirty (30) days
thereafter, any unpaid incentive compensation payable to Officer
pursuant to Section 4(b) in respect of the Fiscal Year immediately
preceding the Fiscal Year in which Officer's Termination Date occurs.
(ii) If within two (2) years after a "Change in Control" (as defined in
Appendix C to this Agreement) and during the term of this Agreement,
Officer's employment shall be terminated by Employer other than for
Cause or by Officer for Good Reason, then (A) Employer shall pay
Officer in a single payment as soon as practicable after the
Termination Date, but in no event later than thirty (30) days
thereafter, (x) as severance pay and in lieu of any further salary and
incentive compensation for periods subsequent to the Termination Date,
an amount in cash equal to two times the sum of (1) Officer's base
salary at the Annual Rate at the Termination Date and (2) the
incentive compensation paid or payable to Officer pursuant to Section
4(b) in respect of the Fiscal Year immediately preceding the Fiscal
Year in which Officer's Termination Date occurs and (y) any unpaid
incentive compensation payable to Officer pursuant to Section 4(b) in
respect of the Fiscal Year immediately preceding the Fiscal Year in
which Officer's Termination Date occurs, and (B) Employer shall
continue to provide for two years from the Termination Date the
benefits specified in the last sentence of Section 4(d) hereof.
(iii) For purposes of this Agreement, "Good Reason" shall be deemed to occur
if Employer (x) breaches this Agreement in any material respect or (y)
takes any other action which results in the diminution in Officer's
status, title, position, authority and responsibilities other than an
insubstantial action not taken in bad faith and which is remedied by
Employer promptly after receipt of notice by Officer.
(iv) Notwithstanding anything in this Agreement to the contrary, in the
event it shall be determined that any payment or distribution by
Employer or any other person or entity to or for the benefit of
Officer (within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"), whether paid or payable
or distributed or distributable pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, his
employment with Employer or a change in ownership or effective control
of Employer or a substantial portion of its assets (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), the Payments shall be reduced (but not below zero)
to the extent necessary so that no Excise Tax would be imposed. If the
application of the preceding sentence should require a reduction in
Payments or other "parachute payment" (within the meaning of Section
280G of the Code), unless
7
<PAGE>
Officer shall have designated otherwise, such reduction shall be
implemented, first, by reducing any non-cash benefits (other than
stock options) to the extent necessary, second, by reducing any cash
benefits to the extent necessary and, third, by reducing any stock
options to the extent necessary. In each case, the reductions shall be
made starting with the payment or benefit to be made on the latest
date following the Termination Date and reducing payments or benefits
in reverse chronological order therefrom. All determinations
concerning the application of this paragraph shall be made by a
nationally recognized firm of independent accountants, selected by
Officer and satisfactory to Employer, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such
accountants shall be borne by Employer.
e. RESIGNATION. Except as provided in Section 5(d)(ii) hereof, if during the
term of this Agreement, Officer shall resign voluntarily, all of his
rights to payment or benefits hereunder shall immediately terminate;
provided, however, that the termination of Officer's employment pursuant
to this Section 5(e) shall not affect Officer's entitlement to all
benefits in which he has become vested or which are otherwise payable in
respect of periods ending prior to his termination of employment.
f. NOTICE OF TERMINATION. Any purported termination by Employer or by Officer
shall be communicated by a written Notice of Termination to the other
party hereto which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail
the facts and circumstances, if any, claimed to provide a basis for
termination of Officer's employment under the provision so indicated. For
purposes of this Agreement, no such purported termination shall be
effective without such Notice of Termination. The "Termination Date" shall
mean the date specified in the Notice of Termination, which shall be no
less than 30 or more than 60 days from the date of the Notice of
Termination. Notwithstanding any other provision of this Agreement, in the
event of any termination of Officer's employment hereunder for any reason,
Employer shall pay Officer his full base salary through the Termination
Date, plus any Additional Benefits which have been earned or become
payable, but which have not yet been paid as of such Termination Date.
g. NON-RENEWAL OF AGREEMENT. In the event that this Agreement terminates
according to its terms on December 31, 2000, and is not renewed on terms
mutually acceptable to Employer and Officer, such termination of Officer's
employment pursuant to this Section 5(g) shall not affect Officer's
entitlement to all benefits in which he has become vested or which are
otherwise payable with respect to periods ending on or prior to his
termination of employment, provided that, to the extent not otherwise
vested, all outstanding stock options granted to Officer pursuant to
Section 4(c) shall thereupon vest.
6. REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Agreement,
Employer shall reimburse Officer promptly for all business expenditures to
the extent that such expenditures
8
<PAGE>
meet the requirements of the Code for deductibility by Employer for federal
income tax purposes or are otherwise in compliance with the rules and
policies of Employer and are substantiated by Officer as required by the
Internal Revenue Service and rules and policies of Employer.
7. INDEMNITY. To the extent permitted by applicable law, the Certificate of
Incorporation and the By-Laws of Employer or Holdings, as applicable (as from
time to time in effect) and any indemnity agreements entered into from time
to time between Employer and Officer, Employer shall indemnify Officer and
hold him harmless for any acts or decisions made by him in good faith while
performing services for Employer, and shall use reasonable efforts to obtain
coverage for him under liability insurance policies now in force or hereafter
obtained during the term of this Agreement covering the other officers or
directors of Employer.
8. MISCELLANEOUS.
a. SUCCESSION. This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns, but without the prior
written consent of Officer, this Agreement may not be assigned other than
in connection with a merger or sale of substantially all the assets of
Employer or similar transaction. Notwithstanding the foregoing, Employer
may assign, whether by assignment agreement, merger, operation of law or
otherwise, this Agreement to Holdings or Indy Mac, or to any successor of
either of them, subject to such assignee's express assumption of all
obligations of Employer hereunder, and Officer hereby consents to any such
assignment. The failure of any successor to or assignee of Employer's
business and/or assets in such transaction to expressly assume all
obligations of Employer hereunder shall be deemed a material breach of
this Agreement by Employer. The obligations and duties of Officer hereby
shall be personal and not assignable.
b. NOTICES. Any notices provided for in this Agreement shall be sent to
Employer at its corporate headquarters, Attention: President/Chief
Operating Officer, or to such other address as Employer may from time to
time in writing designate, and to Officer at such address as he may from
time to time in writing designate (or his business address of record in
the absence of such designation). All notices shall be deemed to have been
given two (2) business days after they have been deposited as certified
mail, return receipt requested, postage paid and properly addressed to the
designated address of the party to receive the notices.
c. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said
subject matter. No modifications or amendments of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
9
<PAGE>
d. WAIVER. The waiver of the breach of any term or of any condition of this
Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
e. CALIFORNIA LAW. This Agreement shall be construed and interpreted in
accordance with the laws of California.
f. ATTORNEYS' FEES IN ACTION ON CONTRACT. If any litigation shall occur
between the Officer and Employer, which litigation arises out of or as a
result of this Agreement or the acts of the parties hereto pursuant to
this Agreement, or which seeks an interpretation of this Agreement, the
prevailing party in such litigation, in addition to any other judgment or
award, shall be entitled to receive such sums as the court hearing the
matter shall find to be reasonable as and for the attorneys' fees of the
prevailing party.
g. CONFIDENTIALITY. Officer agrees that he will not divulge or otherwise
disclose, directly or indirectly, any trade secret or other confidential
information concerning the business or policies of Employer or any of its
subsidiaries which he may have learned as a result of his employment
during the term of this Agreement or prior thereto as an employee, officer
or director of or consultant to Employer or any of its subsidiaries,
except to the extent such use or disclosure is (i) necessary or
appropriate to the performance of this Agreement and in furtherance of
Employer's best interests, (ii) required by applicable law or in response
to a lawful inquiry from a governmental or regulatory authority, (iii)
lawfully obtainable from other sources, or (iv) authorized by Employer.
The provisions of this subsection shall survive the expiration, suspension
or termination, for any reason, of this Agreement.
h. REMEDIES OF EMPLOYER. Officer acknowledges that the services he is
obligated to render under the provisions of this Agreement are of a
special, unique, unusual, extraordinary and intellectual character, which
gives this Agreement peculiar value to Employer. The loss of these
services cannot be reasonably or adequately compensated in damages in an
action at law and it would be difficult (if not impossible) to replace
these services. By reason thereof, Officer agrees and consents that if he
violates any of the material provisions of this Agreement, Employer, in
addition to any other rights and remedies available under this Agreement
or under applicable law, shall be entitled during the remainder of the
term to seek injunctive relief, from a tribunal of competent jurisdiction,
restraining Officer from committing or continuing any violation of this
Agreement.
i. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect, and if any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances.
10
<PAGE>
j. NO OBLIGATION TO MITIGATE. Officer shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Section 5(a)(i)(2)
hereof, no payment hereunder shall be offset or reduced by the amount of
any compensation or benefits provided to Officer in any subsequent
employment.
k. COVENANT NOT TO COMPETE
(i) IN GENERAL. Officer agrees that while he is employed by Employer
during the term of this Agreement and for a period of one year after
the termination of such employment for whatever reason, other than (x)
any termination by Employer, either for Cause or other than for Cause
or (y) resignation by Officer for Good Reason (the "Non-Compete
Period"), he shall not, within North America:
(A) engage in any business, whether as an employee, consultant,
partner, principal, agent, representative or stockholder (other
than as a stockholder of less than a one percent (1%) equity
interest) or in any other corporate or representative capacity
with any other business whether in corporate, proprietorship, or
partnership form or otherwise, where such business is engaged in
any activity which competes with the business of Employer (or its
subsidiaries or affiliates) as conducted on the date Officer's
employment terminated or which will compete with any proposed
business activity of Employer (or its subsidiaries or affiliates)
in the planning stage on such date;
(B) solicit business from, or perform services for, any company or
other business entity which at any time during the two-year period
immediately preceding Officer's termination of employment with
Employer was a client of Employer (or its subsidiaries or
affiliates) (including without limitation any lessee, vendor or
supplier); or
(C) offer, or cause to be offered, employment, either on a full-time,
part-time or consulting basis, to any person who was employed by
Employer (or its subsidiaries or affiliates) on the date Officer's
employment terminated, unless Officer shall have received the
prior written consent of Employer.
(ii) CONSIDERATION. The consideration for the foregoing covenant not to
compete, the sufficiency of which is hereby acknowledged, is
Employer's agreement to continue to employ Officer and provide
compensation and benefits pursuant to this Agreement, including but
not limited to Section 5(d).
(iii) EQUITABLE RELIEF AND OTHER REMEDIES. Officer acknowledges and agrees
that Employer's remedies at law for a breach or threatened breach of
any of the provisions of this Section would be inadequate and, in
recognition of this fact,
11
<PAGE>
Officer agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, Employer, without posting
any bond, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be
available.
(iv) REFORMATION. If the foregoing covenant not to compete would otherwise
be determined invalid or unenforceable by a court of competent
jurisdiction, such court shall exercise its discretion in reforming
the provisions of this Section to the end that Officer be subject to a
covenant not to compete, reasonable under the circumstances,
enforceable by Employer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYER
By: \s\ Michael W. Perry
---------------------
Name: Michael W. Perry
Title: President and Chief Operating
Officer
OFFICER
\s\ Richard H. Wohl
-------------------
in his individual capacity
12
<PAGE>
APPENDIX A
ANNUAL INCENTIVE PLAN
1997 DISCRETIONARY INCENTIVE AWARD
----------------------------------
1. Potential Discretionary Incentive Award for Legal Affairs, Compliance and
-------------------------------------------------------------------------
Contract Administration: From $0 up to $75,000, based on your manager's
-----------------------
evaluation of your performance.
2. Potential Discretionary Incentive Award for Product Development, Seller Guide
-----------------------------------------------------------------------------
and Policies and Procedures:
---------------------------
<TABLE>
<CAPTION>
Maximum Potential Performance Percentage:
Goal/Objective Discretionary Excellent/Good/Satisfactory/
-------------- Incentive Amount Poor
---------------- ----
<S> <C> <C>
a. Develop and implement new and $50,000 100% / 75% / 50% / 0%
enhanced products according to plan
that lead to significant volumes (8
new/10 enhanced)
b. Automate Indy Mac Seller/Servicer $15,000 100% / 75% / 50% / 0%
Guide
c. Complete major administrative $10,000 100% / 75% / 50% / 0%
policies and procedures, maintain and -------
implement electronic format
Total: $75,000
-----
</TABLE>
The Potential Discretionary Incentive Award for Product Development, Seller
Guide and Policies and Procedures shall be calculated by (1) multiplying (x)
the Performance Percentage for each Goal/Objective times (y) the Maximum
-----
Potential Discretionary Incentive Amount for such Goal/Objective, and (2)
adding all sums determined pursuant to the preceding clause (1) for each
Goal/Objective. The Maximum Potential Discretionary Incentive Award for
Product Development, Seller Guide and Policies and Procedures for 1997 shall
be $75,000.
<PAGE>
APPENDIX B
ANNUAL INCENTIVE PLAN
INCENTIVE MATRIX*
ANNUAL INCENTIVE EARNED ($000)
<TABLE>
<CAPTION>
PERCENT CHANGE IN EPS OVER PRIOR YEAR
- --------------------------------------------------------------------------------
-30% 30% OR
EPS ACHIEVED OR LESS -20% -10% 0% 10% 20% MORE
- ------------------ ------- ----- ----- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than $1.10 0 0 0 0 0 0 0
$1.10 $ 0 $ 20 $ 50 $ 80 $110 $140 $170
$1.30 10 30 60 90 120 150 180
$1.50 20 40 70 100 130 160 190
$1.70 30 50 80 110 140 170 200
$1.90 40 60 90 120 150 180 210
$2.10 50 70 100 130 160 190 220
$2.30 60 80 110 140 170 200 230
$2.50 60 90 120 150 180 210 240
$2.70 60 100 130 160 190 220 260
$2.90 60 100 140 170 200 240 280
$3.10 60 100 150 180 220 260 300
$3.30 or more 60 100 160 190 240 280 320
- --------------------------------------------------------------------------------
</TABLE>
- ---------------------------------
* Interpolate between indicated amounts.
<PAGE>
APPENDIX C
A "Change in Control" shall mean the occurrence during the term of the
Agreement, of any one of the following events:
A. An acquisition (other than directly from Employer) of any common stock
or other "Voting Securities" (as hereinafter defined) of Employer by
any "Person" (as the term person is used for purposes of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty five percent (25%) or more of the then
outstanding shares of Employer's common stock or the combined voting
power of Employer's then outstanding Voting Securities; provided,
however, in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. For purposes of this Agreement, (1)
"Voting Securities" shall mean Employer's outstanding voting
securities entitled to vote generally in the election of directors and
(2) a "Non-Control Acquisition" shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof) maintained
by (A) Employer or (B) any corporation or other Person of which a
majority of its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by Employer (for purposes
of this definition, a "Subsidiary"), (ii) Employer or any of its
Subsidiaries, (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined) or (iv) Countrywide Credit
Industries, Inc. or any of its affiliates or subsidiaries
("Countrywide Credit").
B. The individuals who, as of the date of the Agreement are members of
the Board (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds of the members of the Board; provided, however,
that if the election, or nomination for election by Employer's common
stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the Incumbent
Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
<PAGE>
Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
C. The consummation of:
(i) A merger, consolidation or reorganization involving Employer,
unless such merger, consolidation or reorganization is a "Non-
Control Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of Employer into, with or
involving Countrywide Credit, Holdings or where:
a. the stockholders of Employer, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation
or reorganization, at least seventy percent (70%) of the
combined voting power of the outstanding Voting Securities
of the corporation resulting from such merger, consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization;
b. the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least two-thirds of the members of the board
of directors of the Surviving Corporation, or in the event
that, immediately following the consummation of such
transaction, a corporation beneficially owns, directly or
indirectly, a majority of the Voting Securities of the
Surviving Corporation, the board of directors of such
corporation; and
c. no Person other than (i) Employer, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a part
thereof) maintained by Employer, the Surviving Corporation,
or any Subsidiary, (iv) Countrywide Credit, or (v) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty five
percent (25%) or more of the combined voting power of the
Surviving Corporation's then outstanding Voting Securities
or its common stock;
(ii) A complete liquidation or dissolution of Employer; or
<PAGE>
(iii) The sale or other disposition of all or substantially all of
the assets of Employer to any Person (other than a transfer to
a Subsidiary or Countrywide Credit).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding common stock or Voting
Securities as a result of the acquisition of common stock or Voting Securities
by Employer which, by reducing the number of shares of common stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person; provided, however, that if a Change of
Control would occur (but for the operation of this sentence) as a result of the
acquisition of common stock or Voting Securities by Employer, and after such
share acquisition by Employer, the Subject Person becomes the Beneficial Owner
of any additional common stock or Voting Securities which increases the
percentage of the then outstanding common stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 20,797
<SECURITIES> 400,177
<RECEIVABLES> 4,077,091
<ALLOWANCES> (21,401)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,476,664
<CURRENT-LIABILITIES> 29,412
<BONDS> 3,874,076
0
0
<COMMON> 541
<OTHER-SE> 572,635
<TOTAL-LIABILITY-AND-EQUITY> 4,476,664
<SALES> 0
<TOTAL-REVENUES> 33,559 <F1>
<CGS> 0
<TOTAL-COSTS> 7,003
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,900
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,656
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,656
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
<FN>
<F1>includes 55,931 of interest expense related to mortgage loan activities.
</FN>
</TABLE>
